Q3 2026 Covalon Technologies Ltd Earnings Call

August 27, 2026

Operator 3: Good morning, ladies and gentlemen, and welcome to Covalon's Q3 fiscal 2026 conference call and webcast. My name is Christine, and I will be your conference operator today. As a reminder, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, you can submit your typed question via the webcast. Alternatively, if you would like to ask a question over the telephone, press star one on your telephone keypad. If you would like to withdraw your question, press star one again. If at any time during this call you require immediate assistance, please press star zero for the operator. At this time, I would like to turn the conference over to Mr. Brent Ashton, Chief Executive Officer.

Operator: Good morning, ladies and gentlemen, and welcome to Covalon's Q3 fiscal 2026 conference call and webcast. My name is Christine, and I will be your conference operator today. As a reminder, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, you can submit your typed question via the webcast. Alternatively, if you would like to ask a question over the telephone, press star one on your telephone keypad. If you would like to withdraw your question, press star one again. If at any time during this call you require immediate assistance, please press star zero for the operator. At this time, I would like to turn the conference over to Mr. Brent Ashton, Chief Executive Officer.

Speaker #1: As a reminder, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.

Speaker #1: If you would like to ask a question, you can submit your typed question via the webcast. Alternatively, if you would like to ask a question over the telephone, press *1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, press *1 again. If, at any time during this call, you require immediate assistance, please press *0 for the operator.

Speaker #1: At this time, I would like to turn the conference over to Mr. Brent Ashton, Chief Executive Officer.

Speaker #2: Hi. Thanks, Christine, and good morning to all of you on the call today. We really appreciate you connecting in. Kim Crooks, our Chief Operating Officer, and Katie Martinovic, our Chief Financial Officer, have both joined me on the call here today.

Brent Ashton: Hi. Thanks, Christine, and good morning to all of you on the call today. We really appreciate you connecting in. Kim Crooks, our Chief Operating Officer, and Katie Martinovich, our Chief Financial Officer, have both joined me on the call here today. Saleha Assadzada from Covalon is also helping to coordinate the conference call and the webcast today. She'll now provide us with some instructions.

Speaker #2: And Celia Azazada from Covalon is also helping to coordinate the conference call and the webcast today. She'll now provide us with some instructions.

Speaker #3: Thank you, Brent. Good morning, everyone. My name is Celia Azazada, and I'm the Executive Assistant to Covalon's Chief Executive Officer. I'd like to thank everyone for taking the time this morning to attend our conference call.

Saleha Assadzada: Thank you, Brent. Good morning, everyone. My name is Saleha Assadzada, and I'm the executive assistant to Covalon's Chief Executive Officer. I'd like to thank everyone for taking the time this morning to attend our conference call. Before we begin the discussion, I would like to remind participants that this call and webcast are covered by Covalon's Safe Harbor statement. Please read the Safe Harbor statement on this slide. This is also available on our website. I will now turn the call back over to Brent Ashton, Covalon's Chief Executive Officer.

Saleha Assadzada: Thank you, Brent. Good morning, everyone. My name is Saleha Assadzada, and I'm the Executive Assistant to Covalon's Chief Executive Officer. I'd like to thank everyone for taking the time this morning to attend our conference call. Before we begin the discussion, I would like to remind participants that this call and webcast are covered by Covalon's Safe Harbor statement. Please read the Safe Harbor statement on this slide. This is also available on our website. I will now turn the call back over to Brent Ashton, Covalon's Chief Executive Officer.

Speaker #3: Before we begin the discussion, I would like to remind participants that this call and webcast are covered by Covalon's Safe Harbor Statement. Please read the Safe Harbor Statement on the slide.

Speaker #3: This is also available on our website. I will now turn the call back over to Brent Ashton, Covalon's Chief Executive Officer.

Speaker #2: Hey, thank you, Celia. I'm really glad to be with all of you today. I hope that each of you has had a great summer so far, and thanks again for taking the time to be with us today.

Brent Ashton: Hey, thank you, Saliyah, and really glad to be with all of you today. I hope that each of you has had a great summer so far, and thanks again for taking the time to be with us today. This was a very strong quarter for Covalon. Over the course of the next 15 or 20 minutes, I really hope that you get a feel for what has made this so and why we're so optimistic about the journey that we're on. During our time today, I'm hoping to accomplish four things. First, I'm going to walk you through the Q3 numbers and the nine-month year-to-date view, giving you some color behind those numbers as well. Second, I'm going to go a little deeper into some of the metrics and buzz around Covalon's contamination protection solution, because that's where a great deal of the acceleration is coming from.

Brent Ashton: Hey, thank you, Saleha, and really glad to be with all of you today. I hope that each of you has had a great summer so far, and thanks again for taking the time to be with us today. This was a very strong quarter for Covalon. Over the course of the next 15 or 20 minutes, I really hope that you get a feel for what has made this so and why we're so optimistic about the journey that we're on. During our time today, I'm hoping to accomplish four things. First, I'm going to walk you through the Q3 numbers and the nine-month year-to-date view, giving you some color behind those numbers as well. Second, I'm going to go a little deeper into some of the metrics and buzz around Covalon's contamination protection solution, because that's where a great deal of the acceleration is coming from.

Speaker #2: This was a very strong quarter for Covalon. Over the course of the next 15 or 20 minutes, I really hope that you get a feel for what has made this so, and why we're so optimistic about the journey that we're on.

Speaker #2: During our time today, I'm hoping to accomplish four things. First, I'm going to walk you through the third-quarter numbers and the nine-month year-to-date view, giving you some color behind those numbers as well.

Speaker #2: Second, I'm going to go a little deeper into some of the metrics and buzz around Covalon's contamination protection solution, because that's where a great deal of the acceleration is coming from.

Speaker #2: Third, I'll show you some broader insights into our vascular access and surgical consumables business, and some of the performance metrics behind that. Then I'll wrap up and share a bit more on the value creation journey and where we're heading.

Brent Ashton: Third, I'll show you some broader insights into our vascular access and surgical consumables business and some of the performance metrics behind that. Then I'll wrap up and share a bit more on the value creation journey and where we're heading. After that, we'll open it up for questions. As always, we'll prioritize questions that are submitted through the webcast interface first, so please enter those as we go along here. Let's start with the quarter. In short, it was an excellent one. Revenue was CAD 10 million. That's up 20% from the same quarter last year. We had growth from all three of our sales channels, US advanced wound care, the US vascular access and surgical consumables, and our international sales channel. The US vascular side led the growth this quarter at 51%, which is about 10 times the underlying market growth rate.

Speaker #2: After that, we'll open it up for questions. As always, we'll prioritize questions that are submitted through the webcast interface first, so please enter those as we go along here.

Speaker #2: So let's start with the quarter. In short, it was an excellent one. Revenue was $10 million, up 20% from the same quarter last year.

Speaker #2: We had growth from all three of our sales channels: US Advanced Wound Care, US Vascular Access and Surgical Consumables, and our international sales channel.

Speaker #2: The US Vascular side led the growth this quarter at 51%, which is about 10 times the underlying market growth rate—not double, not triple—both of which would have been good in their own right, but 10 times.

Brent Ashton: Not double, not triple, both of which would have been good in their own right, but 10 times. We will dive deeper there in a few minutes. Gross profit was CAD 6.7 million, up more than 70% from a year ago. Gross margin was 67.2%, and last year's Q3 was 46.5%. That is a huge improvement, and two things drove the bulk of this. The first is the vascular access acceleration. Our US vascular business carries high margins, and as that accelerates faster than the rest of the company, we see gross margin benefit. The second is the comparison itself. Last year's Q3 carried a significant inventory write-down, and this quarter carried a small inventory provision reversal. So probably helpful, let me give you the cleaner comparison. Adjusted gross margin was 66.4% this quarter against 55.6% a year ago. Still, more than 1,000 basis points of increase.

Speaker #2: We'll dive deeper there in a few minutes. Gross profit was $6.7 million, up more than 70% from a year ago. Gross margin was 67.2%, compared to 46.5% in last year's third quarter.

Speaker #2: That's a huge improvement, and two things drove the bulk of this. The first is the vascular access acceleration. Our U.S. Vascular business carries high margins, and so as that accelerates faster than the rest of the company, we see a gross margin benefit.

Speaker #2: The second is the comparison itself. Last year's third quarter carried a significant inventory write-down, and this quarter carried a small inventory provision reversal. So, probably helpful.

Speaker #2: Let me give you the cleaner comparison. Adjusted gross margin was 66.4% this quarter, compared to 55.6% a year ago. Still, more than 1,000 basis points of increase—a very strong result.

Brent Ashton: A very strong result. Operating expenses were CAD 4 million, essentially flat to last year at up 1%. Now sit with those three numbers for a moment. Revenue up 20%, gross profit up 73%, operating expenses up only 1%. That is what it looks like when a business scales efficiently. Net income was CAD 2.8 million. A year ago, it was CAD 65,000. Adjusted EBITDA in our Q3 here was CAD 3.03 million, and that is more than triple the amount we reported a year ago. Add it all up, and earnings per share were CAD 0.10 compared to CAD 0.00 a year ago. CAD 0.10 this quarter is more than the sum of our last five quarters combined. So a big step forward for EPS. Here to tweak on the Q3 slide a little bit, you can see our excitement around these results.

Speaker #2: Operating expenses were $4 million, essentially flat to last year, up 1%. Now, sit with those three numbers for a moment: revenue, up 20%.

Speaker #2: Gross profit is up 73%. Operating expenses are up only 1%. That's what it looks like when a business scales efficiently. Net income was $2.8 million. A year ago, it was $65,000.

Speaker #2: Adjusted EBITDA in our third quarter was $3.0 million, which is more than triple the amount we reported a year ago. Add it all up, and earnings per share were $0.10, compared to $0.00 a year ago.

Speaker #2: And 10 cents this quarter is more than the sum of our last five quarters combined, so a big step forward for EPS. And so, here to tweak on this stuff, the Q3 slide a little bit.

Speaker #2: You can see our excitement around these results. The five financial metrics in green—these are all the highest that Covalon has posted in at least the last five years in any quarter.

Brent Ashton: The five financial metrics in green, these are all the highest that Covalon has posted in at least the last five years in any quarter. Revenue, gross profit, gross margin, adjusted gross margin, and adjusted EBITDA. A very strong quarter. Of course, a lot of things had to come together really well, and I am extremely proud of the work that the full Covalon team has done to achieve this. This was not just the work in the quarter. This is the work over the past few years, where we have been really transforming the company. The nine-month view through the end of June. Revenue was almost CAD 26 million, up 6% from the prior year. Similar to the quarter, all three of our sales channels had growth. Vascular access in the US leading the way, up 35% for the nine months.

Speaker #2: Revenue, gross profit, gross margin, adjusted gross margin, and adjusted EBITDA—a very strong quarter. Of course, a lot of things had to come together really well.

Speaker #2: And I'm extremely proud of the work that the full Covalon team has done to achieve this. This wasn't just the work in the quarter.

Speaker #2: This is the work over the past few years where we've been really transforming the company. Now, the nine-month view through the end of June.

Speaker #2: Revenue was almost $26 million, up 6% from the prior year. And similar to the quarter, all three of our sales channels had growth, with vascular access in the US leading the way.

Speaker #2: Up 35% for the nine months. Gross profit was $16.1 million, up about 23% from last year. Gross margin was 62.8% for the year to date.

Brent Ashton: Gross profit was CAD 16.1 million, up about 23% from last year, and gross margin was 62.8% for the year to date, up from 54%. On an adjusted gross margin basis, we are at 63.4% against 57.2% last year, so a little more than 600 basis points higher. Similar to the quarter, the accelerating sales of the higher margin US vascular access and surgical consumables sales channel helped to drive this. Operating expenses were CAD 12.4 million, up about 8%. Most of that increase is related to product testing in support of our regulatory submission work, along with higher amortization on assets we placed into service this year. Net income for the nine months was CAD 4 million, more than double the CAD 1.7 million from last year to date. Earnings per share, CAD 0.15 against CAD 0.06 last year to date.

Speaker #2: Up from 54%. On an adjusted gross margin basis, we're at 63.4%, compared to 57.2% last year—so a little more than 600 basis points higher.

Speaker #2: Similar to the quarter, the accelerating sales of the higher-margin U.S. Vascular Access and Surgical Consumables sales channel helped to drive this. Operating expenses were $12.4 million.

Speaker #2: Up about 8%. Most of that increase is related to product testing in support of our regulatory submission work, along with higher amortization on assets we placed into service this year.

Speaker #2: Net income for the nine months was $4 million, more than double the $1.7 million from last year to date. Earnings per share were 15 cents, compared to 6 cents last year to date.

Speaker #2: And adjusted EBITDA was $4.7 million, up more than 50% from the $3.0 million last year to date. And just one more word on the year-to-date view.

Brent Ashton: Adjusted EBITDA was CAD 4.7 million, up more than 50% from the CAD 3.0 million last year to date. Just one more word on the year-to-date view. The soft first quarter that we had is still within these numbers. We told you on our first quarter call that Q1 was not indicative of how we saw our broader performance operating. We backed this up with a solid second quarter, and the third quarter has now set it in a way that is hard to misread. A few words on the balance sheet. Cash at the end of June was CAD 19.4 million, up from CAD 17.4 million at our fiscal 2025 year-end back in September. We carry no bank debt. We generated CAD 7.4 million of cash from operations in the first nine months. Last year to date, that number was CAD 3.0 million, and we put that cash to work.

Speaker #2: The soft first quarter that we had is still within these numbers. We told you on our first quarter call that Q1 was not indicative of how we saw our broader performance operating.

Speaker #2: We backed ourselves up with a solid second quarter, and the third quarter has now set it in a way that is hard to misread.

Speaker #2: A few words on the balance sheet. Cash at the end of June was $19.4 million, up from $17.4 million at our fiscal 2025 year-end back in September.

Speaker #2: We carry no bank debt. We generated $7.4 million of cash from operations in the first nine months. Last year to date, that number was $3.0 million.

Speaker #2: And we put that cash to work. Earlier this fiscal year, we paid out $4.1 million to shareholders in the first dividend in this company’s history.

Brent Ashton: Earlier this fiscal year, we paid out CAD 4.1 million to shareholders in the first dividend in this company's history. We also invested a little more than CAD 1 million in property, plant, and equipment, most of it to drive efficiency and capacity work in our Mississauga operation. Think about what that means together. We funded a sizable dividend, we funded sizable capital investment, and we still finished June with more in cash than we started the fiscal year with, over CAD 2 million more. That's a rare combination for a company of our size, and it gives us meaningful financial flexibility going forward. Now to one of the bigger stories behind those numbers. I shared earlier that our US vascular access and surgical consumables sales channel grew at 51% in the quarter, which was ten times the underlying market growth rate. That growth was led by our contamination protection solution.

Speaker #2: We also invested a little more than $1 million in property, plant, and equipment—most of it to drive efficiency and capacity work in our Mississauga operation.

Speaker #2: Think about what that means together. We funded a sizable dividend. We funded sizable capital investment. And we still finished June with more cash than we started the fiscal year with—over $2 million more.

Speaker #2: That's a rare combination for a company of our size, and it gives us meaningful financial flexibility going forward. Now, to one of the bigger stories behind those numbers.

Speaker #2: I shared earlier that our U.S. Vascular Access and Surgical Consumables sales channel grew at 51% in the quarter, which was 10 times the underlying market growth rate.

Speaker #2: And that growth was led by our contamination protection solutions. Now, for those who are on the call who might be new to following Covalon, or for those who want a quick refresher on this amazing solution, let me give you a bit of a primer.

Brent Ashton: Now, for those who are on the call who might be new to following Covalon or for those who want a quick refresher on this amazing solution, let me give you a bit of a primer. Vascular access is everywhere in modern care. Something like 90% of hospitalized patients have one or more IV catheters implanted in them during their stay. Most people on this call have probably had one or many throughout their lifetime. The reality of bedside care is it's messy. Patients vomit, diapers leak, wounds drain, drinks get spilled. When any of that reaches an IV connection or an IV dressing, what should have been just a routine cleanup becomes an urgent intervention. Lines have to get rebuilt, dressings have to get changed, and sometimes the IV catheter itself has to be replaced.

Speaker #2: Vascular access is everywhere in modern care. Something like 90% of hospitalized patients have one or more IV catheters implanted during their stay. And most people on this call have probably had one or many throughout their lifetime.

Speaker #2: And the reality of bedside care is, it's messy. Patients vomit, diapers leak, wounds drain, drinks get spilled. When any of that reaches an IV connection or an IV dressing, what should have been just a routine cleanup becomes an urgent intervention. Lines have to get rebuilt, dressings have to get changed.

Speaker #2: And sometimes the IV catheter itself has to be replaced. Every single one of these events costs precious nursing time, requires expensive supplies, and puts a patient at risk for complications.

Brent Ashton: Every single one of these events costs precious nursing time, it costs expensive supplies, and it puts a patient at risk for complications, including bloodstream infections, which kill hundreds of thousands of patients every year and cost health systems billions. Covalon's solution has two complementary product lines. VALGuard Line Guard protects IV line connections and access points from contamination, and CovaClear IV dressings protect the primary IV dressing from contamination and disruption. Together, these incredible products from Covalon address different weak points on the same clinical pathway. The customer benefit is significant, and it runs three ways. First, a reduced risk of patient complications. Second, reduced reactive nursing time, which then hands that time back for proactive patient care. Third, reduced facility spend on replacement IV therapy components and supplies. It's a really rare triple winner for hospitals.

Speaker #2: Including bloodstream infections, which kill hundreds of thousands of patients every year and cost health systems billions. Covalon's solution has two complementary product lines. VALGUARD LineGuard protects IV line connections and access points from contamination.

Speaker #2: And CovaClear dressings protect the primary IV dressing from contamination and disruption. Together, these incredible products from Covalon address different weak points on the same clinical pathway.

Speaker #2: The customer benefit is significant, and it runs three ways. First, a reduced risk of patient complications. Second, reduced reactive nursing time, which then hands that time back for proactive patient care.

Speaker #2: And third, reduced facility spend on replacement IV therapy components and supplies. It's a really rare triple winner for hospitals. And for this strong solution from Covalon, our revenues in the U.S. from these two products grew 68% over the same quarter last year.

Brent Ashton: For this strong solution from Covalon, our revenues in the US from these two products grew 68% over the same quarter last year, and it grew 34% over the second quarter of this year. 34% sequential growth in a single quarter tells you the pace we are operating at here. This slide is here to show you that adoption of Covalon's contamination protection solution is not just a bunch of impressive growth numbers, but the products that make up the solution are showing up more and more in large, well-regarded children's and acute care hospitals all over the US. You have seen the names we have shared after our first and second quarter calls this year. Mayo Clinic, Nationwide Children's Hospital, Texas Children's Hospital, Seattle Children's, Stanford Health Care. The list goes on. On the right side, you can see the institutions that have come on board in just the past few months.

Speaker #2: And it grew 34% over the second quarter of this year. Thirty-four percent sequential growth in a single quarter tells you the pace we're operating at here.

Speaker #2: This slide is here to show you that adoption of Covalon's contamination protection solution is not just a bunch of impressive growth numbers, but the products that make up the solution are showing up more and more in large, well-regarded children's and acute care hospitals all over the U.S.

Speaker #2: You've seen the names we've shared after our first and second quarter calls this year: Mayo Clinic, Nationwide Children's, Texas Children's, Seattle Children's, Stanford Health Care—the list goes on.

Speaker #2: And on the right side, you can see the institutions that have come on board in just the past few months: University of Virginia Health, Children's Health, Orlando Health—you can see all of them in front of you.

Brent Ashton: UVA Health, Children's Health, Orlando Health. You can see all of them in front of you. These are not small, unknown facilities. These are institutions with strong bedside nursing teams that are trying to do the best job possible in really challenging conditions. They have rigorous value analysis committees that are put in place to separate out the hype from products that earn their place on the shelf. Some of the largest companies in healthcare would be delighted to be winning accounts like these at the pace we are racking up wins. We have barely scratched the surface. Every one of these hospitals starts somewhere. For some, it starts with an initial order for more than CAD 100,000 worth of product for a house-wide implementation, as was the case for one customer this past quarter. For others, it can start with one product, one unit, one site.

Speaker #2: And these aren't small, unknown facilities. These are institutions with strong bedside nursing teams that are trying to do the best job possible in really challenging conditions.

Speaker #2: They have rigorous value analysis committees that are put in place to separate out the hype from products that earn their place on the shelf.

Speaker #2: Some of the largest companies in healthcare would be delighted to be winning accounts like these at the pace we're racking up wins—and we've barely scratched the surface.

Speaker #2: Every one of these hospitals starts somewhere. For some, it starts with an initial order for more than $100,000 worth of product for a house-wide implementation, as was the case for one customer this past quarter.

Speaker #2: For others, it can start with one product, one unit, one site, and what we typically see, whether they start with a little or a lot, is that the hospital extends to more products, more units, and it goes on from there.

Brent Ashton: What we typically see, whether they start with a little or a lot, is that the hospital extends to more products, more units, and it goes on from there. We will go a little deeper on this theme in a couple of slides. I am sitting here in our Mississauga offices telling you that this is working and that we are winning, but I also want you to be able to hear what we hear every day, the incredible feedback on the use of our products from the people that are actually using it. One nurse leader told us their nurses are loving the product, and it is likely saved hundreds of unplanned dressing changes so far. Another wrote, and I am quoting, "Please, please stock these.

Speaker #2: We'll go a little deeper on this theme in a couple of slides. So, I'm sitting here in our Mississauga offices, telling you that this is working and that we're winning.

Speaker #2: But I also want you to be able to hear what we hear every day: the incredible feedback on the use of our products from the people who are actually using them.

Speaker #2: One nurse leader told us their nurses are loving the product, and it's likely saved hundreds of unplanned dressing changes so far. Another wrote—and I'm quoting—"Please, please, please stock these."

Speaker #2: These are infinitely better than the previous product that they were using. And then this one, which I think could be the most important line on the page.

Brent Ashton: These are infinitely better than the previous product that they were using." Then this one, which I think could be the most important line on the page. "I am glad you are addressing contamination, because now I can actually do something about it instead of ignoring it. So thank you." The context there is, for years, contamination of vascular access connections and access points was something that nurses simply managed around with jury-rigged solutions or nothing at all. There was no good product answer. What has changed is not that contamination started magically happening. What has changed, though, is that there is finally something that nurses can do about it with the amazing products from Covalon. Excuse me. I thought that it would also be helpful to visualize how much progress has been made on the contamination protection solution.

Speaker #2: I am glad you are addressing contamination, because now I can actually do something about it instead of ignoring it. So, thank you. And really, the context there is, for years, contamination of vascular access connections and access points was something that nurses simply managed around with jury-rigged solutions or nothing at all.

Speaker #2: There was no good product answer. What has changed is not that contamination started magically happening; what's changed, though, is that there's finally something nurses can do about it with the amazing products from Covalon.

Speaker #2: Excuse me. I thought that it would also be helpful to visualize how much progress has been made on the contamination protection solution. On the left is our hospital location base at the start of our 2024 fiscal year.

Brent Ashton: On the left is our hospital location base at the start of our 2024 fiscal year, and on the right is where we sit here today. Almost a 3x increase in less than three years. Even with all that expansion, there is a ton of fertile ground to hunt moving forward. There are something like 6,000 hospitals in the US, and you could try to count all the dots on the screen, but I will save you the effort. Our solution, it is in a couple hundred of them. While our single largest hospital account is on track to spend more than CAD 600,000 with us this year on this solution, other hospitals represented by the dots on this page are, by definition, smaller, with a ton of room to grow themselves.

Speaker #2: And on the right is where we sit here today—almost a 3x increase in less than three years. And even with all that expansion, there is still a ton of fertile ground to hunt moving forward.

Speaker #2: There are something like 6,000 hospitals in the U.S., and you could try to count all the dots on this screen, but I'll save you the effort.

Speaker #2: Our solution, it's in a couple hundred of them. And while our single largest hospital count is on track to spend more than $600,000 this year on this solution, other hospitals represented by the dots on this page are by definition smaller, with a ton of room to grow themselves.

Speaker #2: On the last call, and through some follow-up, we had some requests to show some of the data around the hospital metrics that we've shared in the past.

Brent Ashton: On the last call and through some follow-up, we had some requests to show some of the data around the hospital metrics that we have shared in the past. As you might recall, the three main priorities for our US vascular access and surgical consumables sales channel are retain, grow existing and add new. Simple, but highly effective. Just for clarity, the lens for this data is our entire US vascular access and surgical consumables sales channel, not just the contamination protection solution. So one step up. On retention, we held 100% of our top 50 hospital system customers from fiscal 2025. Every single one of them. In a medical consumables business, that is a really important metric to watch closely because it tells you that our products are working and the clinical teams want to keep using them.

Speaker #2: So, as you might recall, the three main priorities for our U.S. vascular access and surgical consumables sales channel are: retain, grow existing, and add new.

Speaker #2: Simple, but highly effective. And just for clarity, the lens for this data is our entire U.S. vascular access and surgical consumables sales channel, not just the contamination protection solution.

Speaker #2: So, one step up. And on retention, we held 100% of our top 50 hospital system customers from fiscal 2025—every single one of them.

Speaker #2: And in a medical consumables business, that's a really important metric to watch closely because it tells you that our products are working, and the clinical teams want to keep using them.

Speaker #2: On growing existing accounts, revenue from that same top 50 group was up 46% in the third quarter this year, compared to the third quarter last year.

Brent Ashton: On growing existing accounts, revenue from that same top 50 group was up 46% in the Q3 this year against the Q3 last year. 46% from customers that we already had. On the next slide, you will see something even more incredible. On adding new, we brought on 58 new hospital customer locations in the past nine months. Critical because we know that once they start buying something, one product, 1,000 products, one unit, 10 units, it quickly expands from there. So let me spend a minute on this slide because it may be one of the most important commercial data points in the deck. What you are looking at here is our five largest hospital customers in the US vascular access and surgical consumables channel, and what each of them have grown on a fiscal year to date basis.

Speaker #2: 46% from customers that we already had. And on the next slide, you'll see something even more incredible. In terms of adding new customers, we brought on 58 new hospital customer locations in the past nine months.

Speaker #2: Critical, because we know that once they start buying something—one product, a thousand products, one unit, ten units—it quickly expands from there. So let me spend a minute on this slide, because it may be one of the most important commercial data points in the deck.

Speaker #2: What you're looking at here is our five largest hospital customers in the U.S. vascular access and surgical consumables channel, and what each of them have grown on a fiscal year-to-date basis.

Speaker #2: So, comparing the first three quarters of this year against the first three quarters of last year, four of the five customers are growing north of 50%.

Brent Ashton: Comparing the first three quarters of this year against the first three quarters of last year. Four of the five customers are growing north of 50%. Our number one largest account is up 54%. Number two, 67%. Number four, 83%, and number five, 53%. Every single one of them up double digits. I want to be clear about why this matters, because growth percentages can be easy to dismiss. If we told you that we had tripled a brand new account in a community hospital, maybe a hospital that was going from CAD 1,000 a quarter to CAD 3,000, well, rightfully so, you would nod politely and move on. What is on this slide is the opposite of that. These are our largest accounts. Collectively, they are on track to drive over CAD 2.5 million of revenue for us this year. That is over half a million dollars per account.

Speaker #2: Our number one largest account is up 54%. Number two, 67%. Number four, 83%. And number five, 53%. Every single one of them is up double digits.

Speaker #2: And I want to be clear about why this matters, because growth percentages can be easy to dismiss. If we told you that we had tripled a brand-new account in a community hospital—maybe a hospital that was going from $1,000 a quarter to $3,000—well, rightfully so, you would nod politely and move on.

Speaker #2: What is on this slide is the opposite of that. These are our largest accounts. Collectively, they're on track to drive over $2.5 million of revenue for us this year.

Speaker #2: That's over half a million dollars per account. By every normal rule of this industry, these are the accounts that are the mature part of the book—maybe growing single digits, maybe not even.

Brent Ashton: By every normal rule of this industry, these are the accounts that are the mature part of the book, maybe growing single digits, maybe not even. In nearly 20 years in med tech across two very large diversified companies, and visibility to a lot of smaller companies that we took looks at over the years, I honestly can't recall seeing a top five account list that was compounding at this rate. It generally just doesn't happen. When it does, it's telling you something specific. Not a single product sitting in a single unit as a trial. It's a product expanding to multiple products. It's expanding across departments and across service lines. That's what these numbers represent. It's depth inside of accounts that already know us well, which in some ways can be the hardest kind of growth to manufacture, but by far the most durable.

Speaker #2: And in nearly 20 years in med tech, across two very large, diversified companies, and with visibility to a lot of smaller companies that we took looks at over the years, I honestly can't recall seeing a top five account list that was compounding at this rate.

Speaker #2: It generally just doesn't happen. And when it does, it's telling you something specific. It's not a single product sitting in a single unit as a trial.

Speaker #2: It's a product expanding to multiple products. It's expanding across departments and across service lines. And that's what these numbers represent. It's depth inside of accounts that already know us well, which in some ways can be the hardest kind of growth to manufacture, but by far the most durable.

Speaker #2: And here's the most exciting thing of it all: even at these large accounts, there's still room to grow. And we're not stopping until every patient that can benefit from our amazing products in these accounts is able to use our solution.

Brent Ashton: Here's the most exciting thing of it all. Even at these large accounts, there's still room to grow. We're not stopping until every patient that can benefit from our amazing products in these accounts is able to use our solution. Let me wrap up prepared remarks with three takeaways. First, this was a strong quarter, and it was strong on quality and not just on volume. Revenue was up 20%, adjusted gross margin up more than 1,000 basis points. Operating expenses up just 1%. An adjusted EBITDA of CAD 3 million, more than triple a year ago. Almost CAD 20 million of cash and no bank debt. All three sales channels grew. Revenue, gross profit, gross margin, adjusted gross margin, and adjusted EBITDA were each the highest this company has recorded in any quarter in the last five fiscal years.

Speaker #2: So let me wrap up the prepared remarks with three takeaways. First, this was a strong quarter, and it was strong on quality, not just on volume.

Speaker #2: Revenue was up 20%. Adjusted gross margin was up more than 1,000 basis points. Operating expenses were up just 1%. Adjusted EBITDA of $3 million was more than triple a year ago.

Speaker #2: Almost $20 million of cash and no bank debt. All three sales channels grew. Revenue, gross profit, gross margin, adjusted gross margin, and adjusted EBITDA were each the highest this company has recorded in any quarter in the last five fiscal years.

Speaker #2: Second, we're proud to grow all aspects of the company, but contamination protection is really fueling a lot of excitement here—68% growth year over year.

Brent Ashton: Second, we're proud to grow all aspects of the company, but contamination protection is really fueling a lot of excitement here. 68% growth year-over-year. 34% growth over the prior quarter. You get that from solving a really challenging clinical problem that no one else has been able to do. Third, at Covalon, we're working hard to do a lot of the big and little things right in advancing our company in wound care, in vascular access, and in the surgical space. It's both a sprint and a marathon, and every day matters. Our team wakes up each day driving hard to get our amazing technology in place to benefit patients, nurses, doctors, hospitals, and other providers, and ultimately our shareholders. Clinical value cascades to commercial value, and commercial value cascades to shareholder value.

Speaker #2: 34% growth over the prior quarter. You get that from solving a really challenging clinical problem that no one else has been able to do.

Speaker #2: And third, at Covalon, we're working hard to do a lot of the big and little things right in advancing our company in wound care, in vascular access, and in the surgical space.

Speaker #2: It's both a sprint and a marathon in everyday matters. So, our team wakes up each day, driving hard to get our amazing technology in place to benefit patients, nurses, doctors, hospitals, and other providers, and ultimately our shareholders.

Speaker #2: Clinical value cascades to commercial value, and commercial value cascades to shareholder value. The book on how Covalon's ultimate value gets determined has yet to be fully written, but I like where the story is heading.

Brent Ashton: The book on how Covalon's ultimate value gets determined has yet to be fully written, but I like where the story is headed. The direction is not in doubt here, and we're not finished, we're not satisfied, and we are not slowing down. Let me close by thanking our great employees for the effort behind these results, thank our customers for trusting us with their patients, and thank our shareholders for your continued support. With that, we'll transition to Q&A. For our questions, we'll start with questions that are typed into the Q&A feature here online. We'll take a 30 to 60-second pause to get things in order and then answer your questions. Okay. Hey, thank you very much. We received a lot of questions, which is good. We'll do our best to work through them here.

Speaker #2: The direction is not in doubt here, and we're not finished, we're not satisfied, and we are not slowing down. So, let me close by thanking our great employees for the effort behind these results.

Speaker #2: Thank you to our customers for trusting us with their patients, and thank you to our shareholders for your continued support. With that, we'll transition to Q&A. For our questions, we'll start with those that are typed into the Q&A feature online.

Speaker #2: We'll take a 30 to 60 second pause to get things in order, and then answer your questions. Okay. Thank you very much. We received a lot of questions, which is good.

Speaker #2: We'll do our best to work through them here. Several people had kind of similar questions, so we will do our best to group those together.

Brent Ashton: Several people had similar questions, so we will do our best to group those together. One of the questions was around this is Sergi Mascaró, as well as some others around, hey, is this quarter a blip? Can these numbers be repeated, or should we expect a normalization? Several questions on that front. We have been on a journey here. We are very excited about the quarter, and very excited about the quarter, and we are looking forward to a great future. At this time, it is great to see the work that is progressing in all three of the sales channels and very optimistic on the future. There was also a question around the collagen cycle, and this actually came up in a couple questions. If in this quarter did we receive any unusual orders? Where are we at in the cycle? No.

Speaker #2: And one of the questions was around—so this is Sergi Mascaro—as well as some others around, "Hey, is this quarter a blip? Can these numbers be repeated, or should we expect a normalization?" So, several questions on that front.

Speaker #2: We've been on a journey here—we're very excited about the quarter. Well, not very excited about the quarter, but we're looking forward to a great future.

Speaker #2: At this time, it's great to see the work that's progressing in all three of the sales channels, and we're very optimistic about the future. There was also a question around the college and cycle.

Speaker #2: And this actually came up in a couple of questions. In this quarter, did we receive any unusual orders? Where are we at in the cycle?

Speaker #2: And so no. We operate our business on a consistent basis, quarter to quarter. When we win new accounts, for sure they in the US business, for instance, in the US vascular business, for instance, they will take on product to support the first month or two of implementation.

Brent Ashton: We operate our business on a consistent basis quarter to quarter. When we win new accounts, for sure, in the U.S. business, for instance, in the U.S. vascular business, for instance, they will take on product to support the first month or 2 of implementation. We view that as a positive part of customer adoption. Per the comments on the accounts that grow, we are already seeing recurring orders from initial orders going into recurring monthly revenue, and seeing continued reorder activity across the customer base. The key metric for us is that conversion and it is captured in that slide on the customer metrics, right? How do we retain business? How do we grow the existing customers, and how do we add new? Because we know when we add new that they fuel into the growth. Very sustainable business.

Speaker #2: And so we view that as a positive part of customer adoption. Per the comments on the accounts that grow, we're already seeing recurring orders from initial orders going into recurring monthly revenue.

Speaker #2: And seeing continued reorder activity across the customer base. So the key metric for us is that conversion and how do we—it's kind of captured in that slide on the customer metrics, right?

Speaker #2: How do we retain business? How do we grow existing customers? And how do we add new ones? Because we know that when we add new, they fuel the growth.

Speaker #2: So, very sustainable, very sustainable business. Tobias Sinding has a question—around, we've answered some of it—around kind of the Q4 2027 journey we're on.

Brent Ashton: Tobias Sinding has a question around we have answered some of it around the Q4 2027 journey we are on. He has a question around in-house manufacturing and what we are doing there. We have made investments, I think it was more than CAD 1 million so far this year, to support both efficiency and capacity work in our Mississauga facility. The benefits of those will start to show up in this quarter and beyond. Really excited about the work that has taken place to really reimagine our facility in Mississauga for the future, and the good benefits that will come from that. Also has a question on how we should think about the current gross margin level going forward. Similar, right? It was a really good quarter.

Speaker #2: He has a question around in-house manufacturing and what we're doing there. So, yeah, we've made investments—I think it was more than $1 million so far this year.

Speaker #2: To support both efficiency and capacity work in our Mississauga facility. The benefits of those will start to show up in this quarter and beyond.

Speaker #2: I'm really excited about the work that's taken place to reimagine our facility in Mississauga for the future, and the positive benefits that will come from that.

Speaker #2: Also, I have a question on how we should think about the current gross margin level going forward. And it's similar, right? It was a really good quarter.

Speaker #2: And when we think about the mix, and the growth of the vascular access business, I think that's going to fuel us well. Getting margin into the 60s puts us in some pretty rare company.

Brent Ashton: When we think about the mix and the growth of the vascular access business, I think that is going to fuel us well. Getting margin into the 60s puts us in some pretty rare company. I think I have talked in the past about this. There are a lot of med tech companies that are sub 50%, a lot that are in that 50% to 55%, 57% range. Our history over the last little bit and where we see things, that high 50s, low 60s on a consistent basis is a sweet spot. We are always looking to drive our profits forward and going from there. Tobias also has a question around Oh, sorry, that was a repeat. Steven Waldman has a question around investment in regulatory submissions. His question was internationally.

Speaker #2: There's a lot of I think I've talked in the past about this. There's a lot of med tech companies that are sub 50%, a lot that are kind of in that 50 to 55, 57 percent range.

Speaker #2: And so our kind of history over the last little bit and where we see things at high 50s, low 60s on a consistent basis is a sweet spot.

Speaker #2: And we're always looking to drive our profits forward. And going from there—Tobias also has a question around—oh, sorry. That was a repeat.

Speaker #2: Stephen Waldman has a question around investment in regulatory submissions. So, yeah, and his question was kind of international. So, yeah, we routinely make investments in regulatory submissions, both in the US and outside the US.

Brent Ashton: We routinely make investments in regulatory submissions, both in the U.S. and outside the U.S., to support growth of products, as well as catching up on existing products where warranted. His question is: Is it fair to say we haven't seen the revenue benefit yet? I think it's a mix of things, right? When we do regulatory work around existing products, that's kind of the cost of doing business to stay current. But in many cases, our investments, especially internationally, are getting new products onto the registration in various countries and didn't really touch on it, but that's a big part of, on the international side the last few quarters, getting VALGuard and the CovaClear IV product registered. We've really just barely scratched the surface on the sales of those products outside the U.S. And so huge upside opportunity there as well.

Speaker #2: To support growth of products, as well as catching up on existing products where warranted. His question is, is it fair to say we haven't seen the revenue benefit yet?

Speaker #2: Yeah, I think it's a mix of things, right? When we do regulatory work around existing products, that's kind of the cost of doing business to stay current.

Speaker #2: But in many cases, our investments, especially internationally, are getting new products to are getting new products onto the new products onto the registration in various countries.

Speaker #2: And didn't really touch on it, but that's a big part of—on the international side—the last few quarters. Getting Valguard and the CovaClear product registered, we've really just barely scratched the surface on the sales of those products.

Speaker #2: Outside the US. And so huge upside opportunity there as well. Arnold Schell has a question on strategy in regard to the US tariffs. This came up a couple other questions as well.

Brent Ashton: Arnold Shell has a question on strategy in regard to the U.S. tariffs. This came up, a couple other questions as well. We're really happy with where the current situation is playing out for Covalon at least. It's a bit of a tricky world these days for many companies that navigate more challenging situations than Covalon. The vast majority, I think something like 99% of our revenue in the United States, enters the United States, is either made in the United States and therefore is tariff free or, in the case of our product that flows out of our Mississauga facility, that enters tariff free. We still see it as a competitive advantage. The majority on the collagen side, the majority of our competitive base comes out of either the UK, Germany, or China, which have tariffs in the double digits plus.

Speaker #2: And we're really happy with where the current situation is playing out for Covalon, at least. I mean, it's a bit of a tricky world these days for many companies that navigate more challenging situations than Covalon.

Speaker #2: The vast majority, I think something like 99% of our revenue in the United States, either is made in the United States and therefore is tariff free, or, in the case of our product that flows out of our Mississauga facility, that enters tariff free.

Speaker #2: We still see it as a competitive advantage. On the collagen side, the majority of our competitive base comes out of either the UK, Germany, or China, which have tariffs in the double digits and up.

Speaker #2: And so, we have seen some benefit there, where our product does not have those tariffs attached. And we'll go from there. Jurrien Hoffman has asked about the advanced wound care business.

Brent Ashton: We have seen some benefit there, where our product does not have those tariffs attached. We'll go from there. Jurien Hoffman has asked about the advanced wound care business, and that's a good one. Really, I could be here for hours talking about it. It's an amazing business for us, and it's doing very well. Like I said, it's been growing both year to date and in the quarter. The actions we're taking, working with our existing customers, developing the hopper for different products, new products, and new applications is exciting. Because of the nature of the business, we sell to a smaller number of OEM-type accounts. It wouldn't be fair to talk about their business the way we talk about the U.S. vascular business that is our people in the hospitals and driving the accounts. But the U.S.

Speaker #2: And that's a good one. Really, I could be here for hours talking about it. It's an amazing business for us, and it's doing very well.

Speaker #2: Like I said, it's been growing both year-to-date and in the quarter. And the actions we're taking—working with our existing customers, developing the hopper for different products, new products, and new applications—are exciting.

Speaker #2: It's because of the nature of the business, right? We sell to a smaller number of OEM-type accounts. It wouldn't be fair to kind of talk about their business the way we talk about the US vascular business—that is, our people in the hospitals and driving the accounts.

Speaker #2: But the US advanced wound care business is a very strong one for us. Arnold Schell has a question on why we don't seem to be able to sell our products in Canada?

Brent Ashton: advanced wound care business is a very strong one for us. Arnold Shell has a question on why don't we seem to be able to sell our products in Canada? There, we're definitely very bullish on Canada. Just recently, I think it was last quarter, hired a new sales rep, focused on that and some other activities. The reality is, for a lot of med tech companies, the U.S. tends to be a primary focus early and drives a strong return on investment. But we do sell product to Canada. We've got some really interesting trials taking place at some name brand facilities, and looking forward to being able to share more details of that in the coming quarters.

Speaker #2: And there, we're definitely very bullish on Canada. Just recently, I think it was last quarter, we hired a new sales rep focused on that.

Speaker #2: And some other activities. The reality is, for a lot of med tech companies, the US tends to be a primary focus early and drives the strong return on investment.

Speaker #2: But we do sell product to Canada. We've got some really interesting trials taking place at some name-brand facilities and are looking forward to being able to share more details on that in the coming quarters.

Speaker #2: Stephen also has a question. So, looking at the hospital count and the logos on the slide, his question was, hey, we may have seen the same logo a year ago.

Brent Ashton: Stephen also has a question on looking at the hospital count and the logos on the slide. His question was, "Hey, we may have seen the same logo a year ago. What does that mean when it's repeated?" We had shown slides maybe 2, 3 years ago with logos of customers. In the slides that I have shown here today, that represents it could be a customer that we had on, say, IV Clear 2, 3 years ago and still today. If they are on the slide that I showed today, it means they have adopted one or both of VALGuard or the CovaClear, so that solution itself, within the quarter, or in this case, this quarter, it is within the last few months. That gives a little bit of an explanation why you might see the same hospital show up twice.

Speaker #2: What does that mean when it's repeated? And so, yeah, we had shown slides maybe two, three years ago with logos of customers. And so in the slides that I've shown here today, that represents it could be a customer that we had on, say, IV Clear two or three years ago, and still today.

Speaker #2: But if they're on the slide excuse me that I showed today, it means they've adopted one or both of Valguard or the CovaClear. So that solution itself within the quarter or in this case, this quarter, it's within the last few months.

Speaker #2: So that gives a little bit of an explanation why you might see the same hospital show up twice. Quite a few questions around—I'm just trying to figure out who all asked them.

Brent Ashton: Quite a few questions around, I am just trying to figure out who all asked them. One was from Dwayne McMullen. I think this was repeated by about 2 or 3 other people, and that was around cash. Significant cash, and do we want to put it to use on a dividend or a share buyback or whatnot? The dividend that we paid out in Q1 of our fiscal year this year was the first in the company's history. It was a board decision that reflected where the balance sheet had gotten to and how to use that strong cash position. Whether there is another one, in what form, all things are on the table. Those are board decisions, and they will get evaluated against other ways of returning cash to shareholders, investing in M&A, operating performance, growth investment, and just general cash needs.

Speaker #2: So one was from Dwayne McMullin. I think this was repeated by about two or three other people, and that was around cash—hey, significant cash.

Speaker #2: And do we want to put it to use on dividend or share buyback or whatnot? And so, the dividend that we paid out in the first quarter—first quarter of our fiscal year this year—was the first in the company’s history.

Speaker #2: It was a Board decision that reflected where the balance sheet had gotten to, and how to use that strong cash position. Whether there’s another one and in what form—all things are on the table.

Speaker #2: Those are board decisions, and they'll get evaluated against other ways of returning cash to shareholders: investing in M&A, operating performance, growth investment, and just general cash needs.

Brent Ashton: I guess I could reiterate what we did with the cash this year. Paid out over CAD 4 million to shareholders, many of whom used those proceeds to buy back stock. We appreciate that. It turned into a bit of a share buyback program by some of the shareholders. We invested over CAD 1 million in property, plant, and equipment and still ended the 9 months with CAD 2 million more cash than we started with. Successful recipe there. I think we have captured the bulk. I am just going to go back through here. I will probably take a 30-second pause just to go through and make sure, because there were a lot of questions that were kind of similar. As we have been sorting through here, this was a question we have not answered. Steven, another good question from Steven. Sales and marketing expense was CAD 200,000 less than the previous quarter.

Speaker #2: I guess I could reiterate what we did with the cash this year, right? Paid out over $4 million to shareholders, many of whom used those proceeds to buy back stock.

Speaker #2: So, we appreciate that. It turned into a bit of a share buyback program by some of the shareholders. We invested over $1 million in property, plant, and equipment.

Speaker #2: And still ended the nine months with $2 million more cash than we started with. Successful recipe there. I think we've captured the bulk. I'm just going to go back through here.

Speaker #2: I'll probably take a 30-second pause just to go through and make sure, because there were a lot of questions that were kind of similar.

Speaker #2: Okay. So as we've been sorting through here, this was a question we haven't answered. So, Stephen, another good question from Stephen. Sales and marketing expense was $200,000 less than the previous quarter.

Speaker #2: Let's talk about the new marketing materials. Do we market directly to nurses? And can we also discuss the upcoming AVA Association of Vascular Access Scientific Meeting?

Brent Ashton: Talk about new marketing materials. Do we market directly to nurses, and can we talk about the upcoming AVA, Association for Vascular Access, scientific meeting and how our approach might differ from a year ago? Great question. Thanks, Steven. We have been really smart and efficient on the sales and marketing side over the last several quarters. I would say we are doing more, we are making a bigger impact, and we are doing it at a lower cost than we have in the past. We have added to our sales force in the last year. On the brochures or marketing side, we are getting more and more content out there. Content is king. Yes, we do market directly to nurses. Nurses and infection preventionists tend to be our primary target. As far as AVA goes, we will issue a separate press release on that.

Speaker #2: And how might our approach differ from a year ago? Great question. Thanks, Stephen. We've been really smart and efficient on the sales and marketing side over the last several quarters.

Speaker #2: I would say we're doing more we're making a bigger impact, and we're doing it at a lower cost than we have in the past.

Speaker #2: We've added to our Salesforce in the last year. And so, on the brochures or marketing side, yeah, we're getting more and more content out there.

Speaker #2: Content is king. And yes, we do market directly to nurses. Nurses and infection preventionists tend to be our primary target. As far as AVA goes, we'll issue a separate press release on that.

Speaker #2: That's coming up in October, so you'll probably see something from us in mid-September or so. But we're really excited about that. We've got another podium talk along with several posters.

Brent Ashton: That is coming up in October, so you will probably see something from us in mid-September or so. We are really excited about that. We have got another podium talk, along with several posters, and our booth experience is going to be really exciting, really focused around contamination protection, and continuing to generate the buzz around that. So very exciting. There is a question around portions of revenue coming from different clients. I tried to give a little color of that in the U.S. Vascular. You saw the performance of our top five customers there. Outside of that, we do have a solid and strong business in the Middle East that moves and generates through one strong partner there. The U.S. Advanced Wound Care business as well. As I have commented before, small numbers, single-digit number of OEM customers there.

Speaker #2: And our booth experience is going to be really exciting, really focused around contamination protection, and continuing to generate the buzz around that. So, very exciting.

Speaker #2: Okay. There's a question around portions of revenue coming from different clients, so I tried to give a little color on that in the U.S. vascular, right?

Speaker #2: You saw the performance of our top five customers there. Outside of that, we do have a solid and strong business in the Middle East.

Speaker #2: That moves and generates through one strong partner there. And then the U.S. Advanced Wound Care business as well. Like I've commented before, it's a small number, single-digit number of OEM customers there.

Speaker #2: All really strong companies that are really excited to take our collagen product in the U.S. and help their customers—their customers, the clinicians, the patients.

Brent Ashton: All really strong companies that are really excited to take our collagen product in the U.S. and help their customers, the clinicians, the patients. There is good growth coming there as well. I think that pretty much wraps it up. We have talked about Sergey had another question on Chinese competition. So tariffs, but more specific to Chinese competition. I would say, both in terms of the economics of bringing product into the U.S. has certainly changed. We are seeing some different things happening with the Chinese competitors. On the tariff side, I think, to be perfectly honest, the biggest thing I am hearing is the uncertainty. I am looking at Katie, the current tariff is more than 10%. It has jumped, it has been 50%. I think when distributors and customers are thinking about their source of supply, it is really two things.

Speaker #2: And so there's good growth coming there as well. I think that pretty much wraps it up. Yep, we've talked about Sergey—Sergey had another question on Chinese competition.

Speaker #2: So, tariffs, but more specifically related to Chinese competition. And, yeah, I would say that both in terms of the economics of bringing product into the U.S. has certainly changed.

Speaker #2: And so we are seeing some different things happening with the Chinese competitors. And then on the tariff side, I think, to be perfectly honest, the biggest thing I'm hearing is the uncertainty.

Speaker #2: I'm looking at Katie, the current tariff is like more than 10%. It's jumped. It's been 50%. And so I think when distributors and customers are thinking about their source of supply, it's really two things.

Speaker #2: It's the unpredictability on what wake up in the morning and there might be a Twitter or I guess X now post on a new tariff for China or something.

Brent Ashton: It is the unpredictability on what. Wake up in the morning and there might be a Twitter, or I guess X now, post on a new tariff for China or something. It is also the supply chain, right? I think a lot of companies, a lot of health systems learned in COVID that the supply chain from Asia, a little more challenging than the North American supply chain. We have seen that be a strength to us for our business for sure. Sergey has another question on risks and opportunities. I think I have certainly laid the case out for opportunity across all our businesses. We are on an amazing journey and really optimistic of where we are going. In terms of risks, I guess what I think about a lot is that balance between investment, right?

Speaker #2: But it's also the supply chain, right? I think a lot of companies, a lot of health systems, learned in COVID that the supply chain from Asia is a little more challenging than the North American supply chain.

Speaker #2: And so, we've seen that be a strength to us for our business for sure. Sergey has another question on risks and opportunities, and I think I've certainly laid the case out for opportunity.

Speaker #2: Across all our businesses, we've got some amazing—we're on an amazing journey and really optimistic about where we're going. In terms of risks, what I think about a lot is that balance between investment, right?

Speaker #2: We've done a, I think we've done a masterful job the last, I think it's 10 quarters, turning a profit. Obviously, this quarter was very high levels of that and other metrics.

Brent Ashton: I think we have done a masterful job the last, I think it is 10 quarters, turning a profit. Obviously, this quarter was very high levels of that and other metrics. Are we investing at the right pace, right? We do not want to go back to investing CAD 4 million or CAD 5 million next quarter to do this or that and run the risk of negative. It is really a balancing act of investing to drive the growth, but doing it in a way that also balances off and makes sure that we are delivering high levels of income and generating lots of cash, of course. So that is what I think about a lot. I answered the question, maybe not fully on the benefits of the automation. We will see the benefits of those kicking in here, this quarter.

Speaker #2: And so, are we investing at the right pace, right? We don't want to go back to investing four or five million dollars next quarter to do this or that.

Speaker #2: And run the risk of negative. So it's really a balancing act of investing to drive the growth, but doing it in a way that also balances off and make sure that we're delivering high levels of income and generating lots of cash, of course.

Speaker #2: So that's what I think about a lot. I answered the question—maybe not fully on the benefits of the automation. So, we'll see the benefits of those kicking in here this quarter.

Speaker #2: There was a question from Jake on what's the story behind the top five customers growing 12%. Yeah, I mean, that was in the context of the four other ones growing, I think it was more than 50%.

Brent Ashton: There was a question from Jake on, "What's the story behind the top 5 customer growing 12%?" That was in the frame-up of the four other ones growing, I think it was more than 50%. So 12% is still twice the growth rate of the market. So that's a good growth account. It's just, it doesn't look as big as the phenomenal growth at 50% plus. That's just growth that I've never seen of a book of business, top 5 customers. So, that's a great account for us. We partner with them very closely and I think it's just relative to the comparator. Some more questions have come in, so just let me. Serge asked another question around acquisitions. Kind of took that on around the use of cash, right?

Speaker #2: So 12% is still twice the growth rate of the market. So that's a good growth account. It's just it doesn't look as big as the phenomenal growth at 50% plus.

Speaker #2: It's just growth that I've never seen from a kind of book of business—top five customers. So that's a great account for us. We partner with them very closely.

Speaker #2: And I think it's just relative to the comparator. Some more questions have come in, so just let me—Sergey asked another question around acquisitions.

Speaker #2: We kind of took that on around the use of cash, right? So, we're always spending time on business development—looking at acquisitions, mergers, partners, and sales relationships.

Brent Ashton: We're always spending time on business development, looking at acquisition, mergers, partners, sales relationships, and always something that I think is an exciting part of any company's growth plan. Of course, the nuance to that is, if something material takes place, we will communicate that out immediately. Until then, not really something we can talk about until there's a definitive event. So I think that's been the questions. And I think there was a lot around Q4 next year. You're seeing the trajectory for our growth. 6 months ago, we indicated we were on track for a strong FY 2026. That absolutely remains the case. You can see by what we're doing and what we're seeing that we have a really strong view to where we can be, not just next quarter, but next year and well into the future.

Speaker #2: And so, always something that I think is an exciting part of any company's growth plan. Of course, the nuance to that is, if something material takes place, we will communicate that out immediately.

Speaker #2: Until then, not really something we can talk about until there's a definitive event. So, yeah, I think that's been the questions. And, yeah, I think there was a lot around kind of Q4 next year.

Speaker #2: You're seeing the trajectory for our growth. Six months ago, we indicated we were on track for a strong fiscal 2026. That absolutely remains the case.

Speaker #2: You can see by what we're doing and what we're seeing that we have a really strong view of where we can be, not just next quarter, but next year and well into the future.

Speaker #2: And we're definitely building something really special here. So, with that, I will transition to just a few wrap-up comments. First of all, thanks to everyone for joining us today.

Brent Ashton: And we're definitely building something really special here. So with that, I'll transition to just a few wrap-up comments. First of all, thanks to everyone for joining us today. Really appreciate the thoughtful questions and the shareholder support. We delivered a strong quarter for sure. We talked about that. All the metrics that were the company's highest in the last 5 years, and really came with operating expenses that have been more or less flat over the last, call it last 2 and a half years. This is not a one-quarter trick or just a lucky quarter. This is what happens when the work of the past few years starts to compound. We've got a lot of work ahead, and we're not taking a single thing for granted.

Speaker #2: Really appreciate the thoughtful questions and the shareholder support. We delivered a strong quarter, for sure—we talked about that. All the metrics were the company's highest in the last five years.

Speaker #2: And really, we've had operating expenses that have been more or less flat over the last, call it, last two and a half years. This is not a one-quarter trick or just a lucky quarter.

Speaker #2: This is what happens when the work of the past few years starts to compound. We've got a lot of work ahead, and we're not taking a single thing for granted.

Speaker #2: But I've been in this industry a long time, and I know what it looks like when the company moves from promise to proof. What I hope came through loud and clear today is that Covalon isn't just reporting a strong quarter.

Brent Ashton: But I've been in this industry a long time, and I know what it looks like when the company moves from promise to proof. What I hope came through loud and clear today is that Covalon isn't just reporting a strong quarter. We're building something much larger, and that I'm really proud of what we've accomplished to date and couldn't be more excited about our future prospects. So thanks again for your time today. We appreciate your continued support.

Speaker #2: We're building something much larger, and I'm really proud of what we've accomplished to date. I couldn't be more excited about our future prospects.

Speaker #2: So, thanks again for your time today. We appreciate your continued support.

Operator 3: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.