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MAV BEAUTY BRANDS REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS

August 11, 2022
  • Total revenue of $25.4 million versus $28.3 million in Q2 2021
  • Adjusted EBITDA of $3.5 million versus $3.8 million in Q2 2021(1)
  • Net income of $0.3 million versus $4.1 million in Q2 2021
  • Cash provided by operating activities of $1.3 million versus $2.5 million in Q2 2021

VAUGHAN, ON, Aug. 11, 2022 /CNW/ - MAV Beauty Brands Inc. ("MAV Beauty Brands" or the "Company"), a global personal care company, today announced its financial results for the three and six months ended June 30, 2022. Unless otherwise indicated, all amounts are expressed in U.S. dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures (see "Non-IFRS Measures" below).

"Our sales results continue to be impacted by net distribution losses from two of our brands, which offset the positive performance of our other two brands," said Serge Jureidini, President & CEO of MAV Beauty Brands. "Inflationary pressures also remain a headwind, partially offset by select price increases implemented and operational efficiencies initiatives for longer-term margin expansion. In addition, our team has been hard at work on product innovation and building the awareness and desirability of our brands as we aim to deliver improved and more consistent financial performance."

Selected Financial Highlights(1)(2)(3)

(in thousands of US dollars except per share amounts) (unaudited)

Q2 2022

Q2 2021

YTD 2022

YTD 2021






Revenue

25,373

28,332

46,510

56,330

Gross profit

10,757

10,899

20,074

23,851

Net income (loss) for the period

264

4,077

(368)

5,652

Earnings (loss) per Share (basic)

0.01

0.11

(0.01)

0.15

Adjusted EBITDA

3,477

3,799

6,350

10,232

Cash flow from operating activities

1,292

2,530

5,020

4,275

Adjusted Free Cash Flow

1,253

2,266

4,934

3,901

Adjusted Net Income

540

732

626

3,351

Adjusted Earnings per Share (diluted)

0.01

0.02

0.01

0.08

 

(1)

EBITDA (used below), Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow, Adjusted Net Income, Adjusted Earnings per Share, and Net Debt (used below) are each non-IFRS measures and are not earning measures recognized by IFRS. Further information about non-IFRS measures and definitions of the non-IFRS measures used in this press release can be found under the heading "Non-IFRS Measures" in this press release. Reconciliations of non-IFRS measures to the relevant reported measures prepared in accordance with IFRS can be found in this press release under the headings "Q2 2022 Compared to Q2 2021". See also the heading "How We Assess the Performance of Our Business" on page 8, and the heading "Non-IFRS Measures" on page 10 of our Management's Discussion and Analysis for the three- and six-month periods ended June 30, 2022.

(2)

Certain comparative figures have been revised to reclassify compliance charges that were previously recorded in selling and administrative expenses to revenue to conform with IFRS 15 and the financial presentation adopted for the current period.

(3)

Earnings per share (basic) calculation does not include the impact of 2,463,963 common shares of the Company issuable upon the exchange of the units issued as part of The Mane Choice acquisition .

Q2 2022 Business and Financial Review 

Q2 2022 total revenue was $25.4 million, compared to $28.3 million in Q2 2021. For the Canada/US region, revenue decreased by 12.6% to $22.9 million in Q2 2022, compared to $26.2 million in Q2 2021. This year-over-year decrease mainly reflects previously disclosed net distribution losses. For the International region, revenue increased by 15.9% to $2.5 million in Q2 2022, compared to $2.1 million in Q2 2021, reflecting growth in certain emerging regions.

Gross profit was $10.8 million in Q2 2022, similar to the $10.9 million reported in Q2 2021. Gross profit margin was 42.4% in Q2 2022, an increase from 38.5% in Q2 2021. The gross margin improvement over the prior year is mainly attributable to a more profitable sales mix and lower inventory provisions. The Company is closely monitoring the impact of inflation on supply chain input costs and has implemented select pricing actions in concert with procurement cost saving initiatives.

Adjusted EBITDA(1) decreased to $3.5 million in Q2 2022, from $3.8 million in Q2 2021 due to lower revenue.

In Q2 2022, the Company reported net income of $0.3 million, versus net income of $4.1 million in Q2 2021. The net income year on year decrease in the quarter principally reflects the variance in Integration, restructuring and other expenses which reported a remeasurement gain in Q2 2021 on the deferred consideration for The Mane Choice acquisition.

Adjusted Net Income(1) decreased to $0.5 million, compared with Adjusted Net Income(1) of $0.7 million in Q2 2021, due to the factors discussed above. Adjusted Earnings Per Share (Diluted)(1) was $0.01 per share in Q2 2022, compared with $0.10 per share in Q2 2021.

Cash flow from operations was $1.3 million in Q2 2022, down from $2.5 million in Q2 2021, and Adjusted Free Cash Flow(1) decreased to $1.3 million in Q2 2022, compared to $2.3 million in Q2 2021. At quarter end, Net Debt(1) was $117.5 million, a decrease from $118.7 as at March 31, 2022 and $121.5 million as at December 31, 2021, and cash was $11.2 million. 

Financial Statements and Management's Discussion and Analysis

 The Company's unaudited condensed consolidated interim financial statements and Management's Discussion and Analysis for the three- and six-month periods ended June 30, 2022 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 2022 second quarter financial results at 8:30 a.m. EDT on August 11, 2022. To participate in the call, dial 647-484-0478 or 877-502-9276 using the conference ID 2688326. 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 (TSX:MAV)

MAV Beauty Brands is a global personal care platform focused on acquiring great independent brands and helping these brands to scale and win market share through product innovation, marketing and expanded distribution, Today, MAV Beauty Brands markets a diversified portfolio of four complementary personal care brands – Marc Anthony True Professional, Renpure, Cake Beauty and The Mane Choice – offering premium quality hair care, face and body care beauty products. These products are sold in over 25 countries around the world and in many major retailers.

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 Earnings Per Share (Diluted)", "Adjusted EBITDA", "Adjusted Free Cash Flow", "Adjusted Net Income", "EBITDA", "Free Cash Flow" and "Net Debt". 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 prepared in accordance with IFRS can be found under the headings "Non-IFRS Measures" and "Q2 2022 Compared to Q2 2021" in this press release. See also our Management's Discussion and Analysis under the headings "How We Assess the Performance of Our Business" on page 8, and "Non-IFRS Measures" on page 10.

"Adjusted Earnings Per Share (Diluted)" is computed similarly to basic earnings per share except that the weighted average number of shares outstanding is increased to include additional shares for the assumed conversion of preference shares, proportionate voting shares, and exchangeable shares and exercise of stock options, if dilutive. The average number of shares is calculated by assuming that outstanding conversions were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting period. We believe Adjusted Earnings Per Share (Diluted) is a useful measure to assess the performance of our Company as it provides meaningful operating results per diluted share and facilitates period-to-period operating comparisons.

"Adjusted EBITDA" represents, for the applicable period, EBITDA before 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) purchase accounting adjustments; (iii) share–based compensation; (iv) impairment of goodwill; and (v) unrealized foreign exchange (loss) gain. We believe Adjusted EBITDA is a useful measure to assess the performance of our Company as it provides meaningful operating results and facilitates period-to-period operating comparisons.

"Adjusted Free Cash Flow" is calculated as Free Cash Flow adjusted to add back acquisition related costs which are included in cash provided by operating activities. We believe Adjusted free cash flow is a useful measure to assess the Company's ability to repay debt, finance strategic business acquisitions and investments, pay dividends and repurchase shares. It also facilitates period-to-period comparisons.

"Adjusted Net Income" represents, for the applicable period, net 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)  purchase accounting adjustments; (iii) share–based compensation; (iv) impairment of goodwill; (v) unrealized foreign exchange loss (gain); and (vi) tax impacts of the aforementioned adjustments (based on annual effective tax rate). We believe Adjusted Net Income is a useful measure to assess the performance of our Company as it provides meaningful operating results and facilitates period-to-period operating comparisons.

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

''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 used by the investing community that measures the Company's ability to repay debt, finance strategic business acquisitions and investments, pay dividends and repurchase shares.

"Net Debt" is calculated as long-term debt before unamortized deferred financing costs less cash as reported in the consolidated statements of financial position. We believe Net Debt is a useful measure is an important measure as it reflects the principal amount of debt owing by the Company as at a particular date.

Forward-Looking Information

Certain information in this press release, including the Company's expectation for the haircare market, improved operational execution across the Company's platform,  the ability to achieve improved and consistent operating results and financial performance, including by expanding distribution and regaining sales momentum, the ability to build the desirability and awareness of our brands through product innovation, the ability to adjust pricing to offset higher product input and supply chain costs and successfully complete procurement cost savings initiatives, 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 23, 2022 for the year ended December 31, 2021, the "Risk Factors" section of the Company's Q2 2022 MD&A, and the Company's other periodic filings made 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.

 

Q2 2022 Compared to Q2 2021


(in thousands of US dollars) (unaudited)


Q2 2022



Q2 2021



$ Change



% Change



Consolidated statements of operations:


















Revenue (1)



25,373




28,332




(2,959)




(10.4)

%


Cost of sales



14,616




17,433




(2,817)




(16.2)

%


Gross profit



10,757




10,899




(142)




(1.3)

%




















Expenses


















Selling and administrative (1)



7,622




7,244




378




5.2

%


Amortization and depreciation



1,097




1,088




9




0.8

%


Interest and accretion



1,802




1,707




95




5.6

%


Foreign exchange (gain) loss



(144)




71




(215)




(302.8)

%


Integration, restructuring, and other



173




(4,705)




4,878




(103.7)

%





10,550




5,405




5,145




95.2

%


Income (loss) before income taxes



207




5,494




(5,287)




(96.2)

%


Income tax expense (recovery)


















Current






(60)




60




(100.0)

%


Deferred



(57)




1,477




(1,534)




(103.9)

%





(57)




1,417




(1,474)




(104.0)

%


Net income (loss) for the period



264




4,077




(3,813)




(93.5)

%


EBITDA (2)



3,106




8,289




(5,183)




(62.5)

%


Adjusted EBITDA (2)



3,477




3,799




(322)




(8.5)

%


Adjusted Net Income (2)



540




732




(192)




(26.2)

%

 

(1)

Certain comparative figures have been revised to reclassify compliance charges that were previously recorded in selling and administrative expenses to revenue to conform with IFRS 15 and the financial presentation adopted for the current period.



(2)

EBITDA, Adjusted EBITDA and Adjusted Net Income are each non-IFRS measures and are not earning measures recognized by IFRS. For definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found under the headings "Non-IFRS Measures" and "Q2 2022 Compared to Q2 2021" in this press release. See also our Management's Discussion and Analysis under the headings "How We Assess the Performance of Our Business" on page 8, and "Non-IFRS Measures" on page 10.

 


(in thousands of US dollars) (unaudited)


Q2 2022



Q2 2021



YTD Q2 2022



YTD Q2 2021




Consolidated net income (loss):



264




4,077




(368)




5,652




Income tax expense



(57)




1,417




(307)




2,016




Interest and accretion



1,802




1,707




3,493




3,485




Amortization and deprecation



1,097




1,088




2,197




2,167




EBITDA



3,106




8,289




5,015




13,320




Integration, restructuring, and other

(1)


173




(4,705)




788




(3,638)




Share-based compensation

(2)


338




235




601




538




Unrealized foreign exchange (gain) loss



(140)




(20)




(54)




12




Adjusted EBITDA



3,477




3,799




6,350




10,232



 


(in thousands of US dollars) (unaudited)


Q2 2022



Q2 2021



YTD Q2 2022



YTD Q2 2021



Consolidated net income (loss):



264




4,077




(368)




5,652



Integration, restructuring, and other

(1)


173




(4,705)




788




(3,638)



Share-based compensation

(2)


338




235




601




538



Unrealized foreign exchange loss



(140)




(20)




(54)




12



Tax impact of the above adjustments



(95)




1,145




(341)




787



Adjusted Net Income



540




732




626




3,351


 

(1)

Refer to Note 11 to the unaudited condensed consolidated interim financial statements for further details.

(2)

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

 


(in thousands of US dollars) (unaudited)


Q2 2022



Q2 2021



YTD Q2 2022



YTD Q2 2021



Cash provided by operating activities



1,292




2,530




5,020




4,275



Less: purchase of property and equipment



(39)




(264)




(86)




(374)



Free Cash Flow and Adjusted Free Cash Flow



1,253




2,266




4,934




3,901


 

SOURCE MAV Beauty Brands

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