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MAV Beauty Brands Reports First Quarter 2019 Financial Results

May 13, 2019
  • MAV Beauty successfully expanded shelf, drove revenue and increased gross margin through new innovation launches across the brand portfolio
  • Revenue of $24.1 million for the quarter, up 51% over Q1 2018
  • Adjusted EBITDA of $6.2 million for the quarter, up 27% over Q1 2018
  • Gross Profit Margin of 49.6% for the quarter, consistent with Q1 2018
  • Net Income of $1.1 million ($0.03 per share), up from a net loss of $1.9 million ($0.18 loss per share) in Q1 2018
  • Tim Bunch appointed President and Chief Revenue Officer

CONCORD, ON, May 13, 2019 /CNW/ - MAV Beauty Brands Inc. ("MAV Beauty Brands" or the "Company"), a high-growth global personal care company, today announced its financial results for the three months ended March 31, 2019. Unless otherwise indicated, all amounts are expressed in U.S. dollars. Certain metrics, including those expressed on an adjusted or pro forma basis, are non-IFRS measures (see "Non-IFRS Measures" below).

"We are off to a solid start to fiscal 2019 as our brands continue to perform well and exceed the industry average growth rate.  We have proven our ability to deliver on our core growth strategies of expanding our brands at current retail partners, cross-selling our portfolio of brands and expanding into new territories," said Marc Anthony Venere, Founder and Chief Executive Officer of MAV Beauty Brands.

Tim Bunch, President and Chief Revenue Officer, added: "We continue to demonstrate the power of our global operating platform as we have built significant growth through innovation and cross-selling of our portfolio. Looking ahead to the balance of 2019, we anticipate an acceleration of the business as we continue to achieve the full scale and benefit of the global operating platform." 

Selected Financial Information(1)



Reported

Reported

Pro Forma

(in thousands of US dollars except per share amounts) 


Q1 2019

Q1 2018

Q1 2018

(unaudited)










Revenue


24,104

15,959

24,549

Gross profit


11,959

7,959

12,077

Net (loss) income and comprehensive


1,105

(1,873)

2,136

(loss) income for the period





Earnings per Share (basic)


0.03

(0.18)

0.06

EBITDA


4,085

1,743

5,242

Adjusted EBITDA


6,209

4,885

7,307

Adjusted Net Income


2,687

468

3,674

Adjusted Earnings per Share (basic)


0.07

0.04

0.10

(1)

Includes unaudited pro forma consolidated financial information for the three months ended March 31, 2018. Pro forma results reflect (i) the acquisition of all of the membership interests of Renpure, LLC (the "Renpure Acquisition"); (ii) the entry in the New Credit Facility and the repayment of the Company's existing indebtedness; (iii) the completion of the IPO and the concurrent changes to the share capital, as if they each occurred on January 1, 2017. See "Non-IFRS Measures".

 

Q1 2019 Business and Financial Review 

Delivering on its primary growth strategy, MAV Beauty Brands used strong innovation to further expand shelf and door presence for all three brands with existing retail partners in Q1 2019. Innovation remains a key differentiator for MAV Beauty Brands and its strategy to increase distribution, and the early results from 2019 new launches are promising.

  • Marc Anthony True Professional launched a new collection of Dream Big Volume masstige hair products. This collection has launched in more than 20,0000 retail locations globally.
  • Renpure's new "Plant Based Beauty" collection was launched with new packaging, formulations and a global-reaching social media, influencer and PR campaign. With a differentiated positioning of natural-based products that are sold at a fair price, Renpure's Plant Based Beauty line can be found across major North American retailers including premium natural retailers that set the standard for natural products.
  • Cake Beauty's core SKUs were supplemented with innovation to build out the portfolio in launches across our exclusive partners in the U.S. and Canada.
  • Both Renpure and Cake Beauty launched innovation in the adjacent body lotion/wash category, the largest segment of global beauty.

MAV Beauty Brands also continues to make meaningful progress with its core strategy to cross-sell its brands to existing retailer partners. Cake Beauty launched nationally with two U.S. retailers in the second half of 2018 – resulting in an approximately 15-fold increase in the brand's distribution – and early results from these launches have been encouraging. In addition, the Renpure brand broke through with new distribution at a lead Canadian retailer, leveraging the long-standing relationships of MAV Beauty Brands. Globally, distribution of the Renpure and Cake Beauty brands was expanded through cross-selling into core regions as Renpure launched into Mexico, a top ten international market for hair care, and Cake expanded into Columbia.

MAV Beauty Brands is positioned for significant expansion in the International market as the core brand growth remains strong and the Company has invested in a global sales structure. In the past nine months, the Company has added a regional lead for Latin America, a regional lead for Asia-Pacific and a Global Marketing manager. In 2018, MAV Beauty Brands significantly expanded its international footprint, entering 10 new markets, bringing the total international reach to 29 countries outside of North America at the beginning of 2019. While international revenue was slightly down year-over-year in Q1 2019, the Company continued to expand its global footprint with launches in Turkey and Ecuador. MAV Beauty Brands also continued to experience strong results from its new e-commerce business in China. In addition to further geographic expansion, the Company expects to increase sales in existing markets throughout 2019 based on distribution gains for all three core brands.  

In Q1 2019, MAV Beauty Brands delivered revenue of $24.1 million, an increase of 51% over Q1 2018. Q1 2019 revenue of $24.1 million was in line with pro forma Q1 2018 and consistent with the Company's expectations. Q1 2018 revenue was exceptionally strong due to pipeline shipments that expanded the brands into new channels.  

Q1 2019 gross profit was $12.0 million, compared with pro forma gross profit of $12.1 million in Q1 2018.

Q1 2019 results benefitted from improved gross profit margins, which increased to 49.6% in Q1 2019, compared to pro forma gross margin of 49.2% in Q1 2018, and up from 46.3% in Q4 2018, reflecting the initial impact of new innovations with enhanced margin profiles, as well as product mix. Management expects continued improvements in gross margins during 2019 based on additional efficiencies and economies of scale in its manufacturing and supply chain and the impact of new innovations, product collections and formulations.

Adjusted EBITDA was $6.2 million in Q1 2019, compared with pro forma Adjusted EBITDA of $7.3 million in Q1 2018. The year-over-year change is primarily due to planned increases in operating expenses to support the Company's public listing and growth plans and growing organization as a public company. The Company expects strong organic growth and increasing Adjusted EBITDA in fiscal 2019, well in excess of the category average for consumer personal care companies (see "Non-IFRS Measures" below).

Adjusted net income was $2.7 million in Q1 2019, compared with pro forma Adjusted net income of $3.7 million in Q1 2018. Adjusted earnings per share (basic), was $0.07 per share in Q1 2019, compared with pro forma $0.10 per share in Q1 2018 (see "Non-IFRS Measures" below).

Free cash flow was $0.3 million in Q1 2019, compared to $0.1 million in Q1 2018. The increase in free cash flow in Q1 2019 reflects increased cash from operating activities of $0.6 million, offset by higher capital expenditures resulting from the construction of new corporate offices. Free cash flow is expected to increase during the year, particularly in the second half of 2019 (see "Non-IFRS Measures" below).

Executive Appointment

MAV Beauty Brands also announced that Tim Bunch is appointed President & Chief Revenue Officer, effective immediately. Mr. Bunch joined MAV Beauty Brands in January 2017 as the Chief Revenue Officer and has led sales, marketing and operations. With 20 years in the Beauty and Personal Care Industry, Tim has served in senior executive roles across Fortune 500 and entrepreneurial businesses. 

"Tim has been an outstanding business leader and key contributor, working closely on everything from innovation to integration, and we are excited to see him take on expanded role," added Mr. Venere. 

2019 Annual General Meeting

The Company will hold its first annual general meeting of shareholders on June 12, 2019 at 9:00 a.m. (Toronto time) at its new offices located at 100 New Park Place, 8th Floor in Vaughan, Ontario. At the meeting, shareholders of the Company will be asked to consider and, if deemed advisable, approve the election of the Company's directors, the appointment of Ernst & Young LLP to act as the Company's auditor and any other business that may properly come bore the meeting.

Normal Course Issuer Bid

As previously announced, the Company applied to the Toronto Stock Exchange to commence a normal course issuer bid ("NCIB").  The NCIB was approved by the TSX on March 29, 2019.  Pursuant to the terms of the NCIB, the Company is authorized to purchase up to 812,500 common shares between April 2, 2019 and April 1, 2020.

Q1 2019 Financial Statements and Management's Discussion and Analysis

The Company's unaudited condensed consolidated interim financial statements for the three-month period ended March 31, 2019 and Management's Discussion and Analysis are available under the Company's profile on SEDAR at www.sedar.com and on MAV Beauty Brands' investor relations website at investors.mavbeautybrands.com.

Conference Call & Webcast

MAV Beauty Brands will host a conference call to discuss its Fiscal 2019 first quarter financial results at 8:30 a.m. EDT on May 13, 2019. The call will be hosted by Marc Anthony Venere, Founder & CEO, Tim Bunch, President & Chief Revenue Officer, and Judy Adam, CFO. To participate in the call, dial (416) 764-8688 or (888) 390-0546 using the conference ID 83148319. The audio webcast can be accessed at investors.mavbeautybrands.com. Listeners should access the webcast or call 10-15 minutes before the start time to ensure they are connected.

About MAV Beauty Brands

MAV Beauty Brands is a high-growth global personal care company dedicated to providing consumers with premium quality, authentic and differentiated products. Our innovation-focused, next generation platform consists of complementary and rapidly growing personal care brands: Marc Anthony True Professional, Renpure and Cake Beauty. Our products include a wide variety of hair care, body care and beauty products such as shampoo, conditioner, hair styling products, treatments, body wash, and body and hand lotion across multiple collections that each serve a different and personalized consumer need. Our products are sold in over 30 countries around the world, in over 100 major retailers and through over 60,000 doors.

Non‑IFRS Measures

This press release makes reference to certain non‑IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non‑IFRS measures including "Adjusted EBITDA", "Adjusted Net Income" and "Free Cash Flow". These non‑IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non‑IFRS measures in the evaluation of issuers. Our management also uses non‑IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found in our MD&A. Such reconciliations can also be found in this press release under the headings "Q1 2019 Compared to Q1 2018".

To assist readers in assessing year-over-year performance, the Company has included selected unaudited pro forma consolidated financial information for the three months ended March 31, 2019 and March 31, 2018 which gives effect (as if they occurred on January 1, 2017) to: (i) the Renpure Acquisition; (ii) the entry into the New Credit Facility and the re‑payment of the Company's prior indebtedness; and (iii) the completion of the IPO and concurrent changes to the share capital.

The pro forma information set forth in this news release should not be considered to be what the actual financial position or other results of operations would have necessarily been had the (i) Renpure Acquisition, the (ii) entry into the New Credit Facility and the re‑payment of the Company's existing indebtedness,  and (iii) the IPO and concurrent changes to the share capital completed, as, at, or for the periods stated.

"Adjusted EBITDA" represents, for the applicable period, EBITDA as adjusted to add back or deduct, as applicable, certain expenses, costs, charges or benefits incurred in such period which in management's view are not indicative of continuing operations, including: (i) integration, restructuring, and other costs; (ii) shareholder fees and related costs; (iii) purchase accounting adjustments; (iv) share‑based compensation; and (v) unrealized foreign exchange (gain) loss.

"Adjusted Net Income" represents, for the applicable period, net income (loss) and comprehensive income (loss) as adjusted to add back or deduct, as applicable, certain expenses, costs, charges or benefits incurred in such period which in management's view are not indicative of continuing operations, including: (i) integration, restructuring, and other costs; (ii) shareholder fees and related costs; (iii) purchase accounting adjustments; (iv) share‑based compensation; (v) unrealized foreign exchange (gain) loss; and (vi) tax impacts of the aforementioned adjustments (based on annual effective tax rate).

''Free Cash Flow'' represents, for the applicable period, cash provided by operating activities less cash used to purchase property and equipment. Free cash flow is a key metric that measures the Company's ability to repay debt, finance strategic business acquisitions and investments, pay dividends and repurchase shares.

"EBITDA" represents net income (loss) and comprehensive net income (loss) for the period before: (i) income tax (recovery) expense; (ii) interest; and (iii) amortization and depreciation.

''Pro Forma Adjusted EBITDA'' represents, for the applicable period, Adjusted EBITDA, after giving effect to: (i) the Renpure Acquisition as if it occurred on January 1, 2017; (ii) the entry into the New Credit Facility and the re-payment of the Company's existing indebtedness; (iii) the completion of the IPO and concurrent changes to the share capital.

''Pro Forma Adjusted Net Income'' represents, for the applicable period, Adjusted Net Income, after giving effect to: (i) the Renpure Acquisition as if it occurred on January 1, 2017; (ii) the entry into the New Credit Facility and the re-payment of the Company's existing indebtedness; and (iii) the completion of the IPO and concurrent changes to the share capital.

Forward-Looking Information

Certain information in this press release, including statements relating to expansion in the international market, continued improvement in gross margins during 2019, expected organic growth and increasing Adjusted EBITDA in fiscal 2019, increased Free Cash Flow in the second half of 2019, constitutes forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by MAV Beauty Brands as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the "Risk Factors" section of the Company's Annual Information Form dated March 28, 2019 for the year ended December 31, 2018 available at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect MAV Beauty Brands; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and MAV Beauty Brands expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Q1 2019 Compared to Q1 2018


(in thousands of US dollars) (unaudited)


Q1 2019


Q1 2018


$ Change


% Change



Consolidated statements of operations and

   comprehensive income:















Revenue



24,104



15,959



8,145



51.0

%


Cost of sales



12,145



8,000



4,145



51.8

%


Gross profit



11,959



7,959



4,000



50.3

%

















Expenses















Selling and administrative



6,899



4,135



2,764



66.8

%


Amortization and depreciation



847



660



187



28.3

%


Interest and accretion



1,902



2,904



(1,002)



-34.5

%


Foreign exchange gain



(83)



(320)



237



-74.1

%


Integration, restructuring, and other



1,058



2,401



(1,343)



-55.9

%





10,623



9,780



843



8.6

%


Income before income taxes



1,336



(1,821)



3,157


nmf



Income tax expense















Deferred



231



52



179



nmf






231



52



179



nmf



Net income and comprehensive

   income for the period



1,105



(1,873)



2,978



nmf



EBITDA (1)



4,085



1,743



2,342



134.4

%


Adjusted EBITDA (1)



6,209



4,885



1,324



27.1

%


Adjusted Net Income (1)



2,687



468



2,219



474.1

%

(1)

See "Non-IFRS Measures"

 


(in thousands of US dollars) (unaudited)


Q1 2019



Q1 2018


Consolidated statements of operations and

   comprehensive income (loss):



1,105




(1,873)


Income (recovery) tax expense



231




52


Interest and accretion



1,902




2,904


Amortization and deprecation



847




660


EBITDA



4,085




1,743


Integration, restructuring, and other

(1)


1,058




2,621


Purchase accounting adjustments

(2)





484


Share-based compensation

(3)


1,093




79


Unrealized foreign exchange gain



(27)




(42)


Adjusted EBITDA



6,209




4,885

 

(in thousands of US dollars) (unaudited)


Q1 2019



Q1 2018

Consolidated statements of operations and

   comprehensive income (loss):



1,105




(1,873)

Integration, restructuring, and other

(1)


1,058




2,621

Purchase accounting adjustments

(2)





484

Share-based compensation

(3)


1,093




79

Unrealized foreign exchange gain



(27)




(42)

Tax impact of the above adjustments



(542)




(801)

Adjusted Net Income



2,687




468

 

(1)

For Q1 2019 and Q1 2018, represents integration, restructuring, and other costs. For Q1 2018, also includes transaction costs incurred in relation to the 2018 Acquisitions.



(2)

In conjunction with the 2018 Acquisitions, the fair value adjustment of inventory as part of the initial purchase price allocation was expensed to cost of sales as the inventories were sold.



(3)

Represents recognition of share-based payments, which have been accounted for as selling and administrative expenses.

 

SOURCE MAV Beauty Brands Inc.

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