Covalon Technologies Ltd.

Q3 revenue was $8.4 million, up more than 10% sequentially from Q2 and down 9% year over year versus Q3 last year. Gross profit and gross margin were down versus last quarter because of more than $800,000 of charges tied to obsolete/slow-moving inventory and product that did not meet quality standards; excluding those charges, adjusted gross margin was more than 55%, improving versus last quarter. Adjusted EBITDA was almost $1 million, more than 50% higher sequentially, but down $1.5 million from Q3 last year. For year-to-date, revenue was up 8% and adjusted EBITDA was $3 million; trailing 12-month revenue was up 13% and adjusted EBITDA was more than double the prior period. Management said it expects Q4 revenue to be sequentially higher than Q3 and expressed confidence in continued growth into 2026.

Brent Ashton framed the quarter as proof that Covalon is executing on both commercial growth and longer-term transformation. He emphasized patient impact, especially Jaden’s story, and said the company is advancing clinical evidence, market development, innovation, and business development to create a larger future. His tone was notably bullish, pointing to stronger second-half visibility, new international wins, and a new CovaClear use case as signs of momentum.

The CFO commentary focused mainly on the financial bridge behind Q3 results: $8.4 million of revenue, more than $800,000 of inventory-related charges, and adjusted gross margin above 55% excluding those charges. Adjusted EBITDA was almost $1 million, and the company ended with just over $18 million in cash, up almost $9 million from a year ago and higher for the fifth straight quarter. Management also noted operating expenses have remained in the high 40s as a percent of revenue, and that cash provides significant optionality for capex, acquisitions, dividends, or buybacks.

In Q&A, investors asked about progress with Origin Merchant Partners, and management said there has been "a ton of progress" though nothing is ready to announce yet. They also asked about near-term and full-year outlook; management said it is over halfway through the quarter and expects sequential revenue growth in Q4, with continued strong growth into next year. Other questions focused on inventory levels, tariffs, and the new "Mudflap" CovaClear use case; management said inventory is manageable, tariffs are creating a competitive tailwind because 99% of U.S. revenue goes out tariff-free, and the Mudflap application could be a tens-of-millions-of-dollars TAM with strong economics.