MAV Beauty Brands Reports Fourth Quarter & Full-Year 2019 Financial Results

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MAV Beauty Brands Reports Fourth Quarter & Full-Year 2019 Financial Results

Canada NewsWire

  • MAV delivers revenue of $108.5 million in 2019 and $30.8 million in Q4 2019, up 15% and 6%, respectively, over the prior year
  • Full-year Adjusted EBITDA increases to $29.5 million and Q4 2019 Adjusted EBITDA to $8.5 million, up 12.5% and 15.4% over the prior year
  • 2019 Adjusted Net Income increases to $11.4 million and Net Income to $4.1 million
  • 2019 Adjusted Free Cash Flow of $9.8 million and Free Cash Flow of $7.6 million
  • Expanded and diversified brand portfolio with acquisition of 'The Mane Choice'

VAUGHAN, ON, March 25, 2020 /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 12 months ended December 31, 2019. 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).

"MAV Beauty Brands delivered double-digit revenue and profit growth in 2019, leading the relevant competitive set in our industry," said Tim Bunch, President & CEO of MAV Beauty Brands. "We continued to demonstrate our ability to leverage our operating platform and innovation engine to expand the distribution of our brands. In addition, with the fourth quarter acquisition of The Mane Choice, we added a complementary brand in the fast-growing natural, textured hair market, and we move forward now as the 8th largest haircare company in the U.S. market with a diversified portfolio. In 2019, as evidenced by double-digit demand growth, our business was in a solid position."

"As we look ahead, we must now consider new risks and challenges to our business posed by the COVID-19 public health crisis. Our operations team is working diligently to help minimize potential supply disruptions and is closely monitoring the situation. On the demand side, like many companies, we simply don't know the extent of the impact to product sales at this point. We compete in what has historically been a recession-resilient category and the majority of our North American retail partners – in the food, drug and mass channels – are currently expected to stay open during this time period. We are hopeful these factors will help mitigate the impacts to our business during unprecedented and challenging times."  

Selected Financial Highlights(1)(2)  

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

FY 2019

FY 2018

Q4 2019

Q4 2018







Revenue


108,496

94,039

30,788

29,032

Gross profit


51,814

42,817

13,374

13,451

Net income (loss) for the period

4,072

(10,402)

(1,189)

1,109

Earnings per Share (basic)


0.11

(0.43)

(0.03)

0.03

EBITDA


19,688

8,227

3,824

5,235

Adjusted EBITDA


29,487

26,200

8,501

7,365

Free Cash Flow


7,648

(7,212)

1,160

556

Adjusted Free Cash Flow


9,783

2,773

3,034

576

Adjusted Net Income (Loss)


11,372

2,989

2,295

2,696

Adjusted Earnings per Share (basic)

0.31

0.12

0.06

0.07



(1)

See "Non-IFRS Measures"

(2)

The financial results of the Company for FY 2018 include the results of Cake Beauty Inc. and Renpure LLC as of their acquisition dates on January 23, 2018 and March 8, 2018, respectively.  The financial results of the Company for FY 2019 include the results of The Mane Choice Hair Solutions, LLC as of its acquisition date on November 12, 2019.

(3)

Basic Earnings per Share and Adjusted Earnings per Share calculations do not include the impact of 2,463,963 shares issuable upon the exchange of the units issued as part of The Mane Choice acquisition.

Q4 2019 Business and Financial Review 

In Q4 2019, MAV Beauty Brands delivered revenue of $30.8 million, an increase of 6% over Q4 2018, driven by the initial contribution from The Mane Choice, which was acquired on November 12, 2019. Q4 2019 revenue was impacted by several factors, as previously disclosed in the Company's Q3 2019 earnings release. For the full year 2019, revenue increased by 15.4% to $108.5 million. Revenue from North America was $101.0 million in 2019, up 18.0% from $85.6 million in 2018, based on the continued growth of the Company's brands within existing North American retailer partners, the full year contribution of the Cake Beauty and Renpure brands and the recent acquisition of The Mane Choice. International revenue, which represented 6.9% of total 2019 revenue, decreased by 10.4% over 2018 to $7.5 million. While the Company expanded into new markets in 2019, these gains were offset by a decline in one of its larger international markets. The Company has shifted its international strategy, from regional expansion to a focus on large core markets.

Q4 2019 gross profit, as reported, was $13.4 million, consistent with the prior year. Gross profit margins were 43% in Q4 2019, compared with 46% in Q4 2018. Excluding the purchase accounting adjustments for The Mane Choice acquisition in Q4 2019 and for the Cake Beauty and Renpure acquisitions in 2018, gross profit margin was 48% for Q4 2019 compared to 46% in the prior period. For the full year, reported gross profit margin was 48% (Adjusted: 49%), compared with reported gross margin of 46% (Adjusted: 48%) in 2018.

Q4 2019 Adjusted EBITDA increased by 15.4% to $8.5 million (27.6% of revenue), compared with Adjusted EBITDA of $7.4 million in Q4 2018 (25.4% of revenue) reflecting higher revenue and gross profit (see "Non-IFRS Measures" below). For 2019, the Company generated Adjusted EBITDA of $29.5 million, an increase of 12.5% from 2018.

In Q4 2019, the Company reported a net loss of $1.2 million, compared to net income of $1.1 million in Q4 2018. Adjusted net income decreased to $2.3 million in Q4 2019, compared with Adjusted net income of $2.7 million in Q4 2018. Adjusted earnings per share (basic) was $0.06 per share in Q4 2019, compared with $0.07 per share in Q4 2018, reflecting the factors discussed above (see "Non-IFRS Measures" below). For the full year 2019, the Company reported net income of $4.1 million (Adjusted net income: $11.4 million), up significantly from a net loss of $10.4 million (Adjusted net income: $3.0 million) in 2018 for the reasons set forth above.

Free Cash Flow increased to $1.2 million in Q4 2019, compared with $0.6 million in Q4 2018 (see "Non-IFRS Measures" below). Adjusted for one-time costs related to the acquisition of The Mane Choice, Free Cash Flow would have been $3.0 million in Q4 2019. Adjusted Free Cash Flow (see "Non-IFRS Measures" below) increased to $9.8 million in 2019, compared with $2.8 million in 2018. On a Pro Forma basis, assuming The Mane Choice was acquired at the start of Fiscal 2019, the Company's Net Debt-to-Adjusted EBITDA ratio was approximately 4.0 times at year end.

2020 Outlook

Due to uncertainty related to the rapidly evolving COVID-19 pandemic, MAV Beauty Brands will not provide a future financial outlook in the near term. It is anticipated that the effects of the COVID-19 situation, including reduced in-store retail activity, will have an impact on MAV Beauty Brands, however, it is challenging to quantify the potential impact at this time. MAV Beauty Brands' products sell mainly through food, drug, and mass (FDM) channels and some select beauty specialty retailers. At this time, the majority of FDM retailers are expected to remain open to consumers although we have seen many beauty specialty stores close physical locations. The Company's products are also available in the e-commerce channel through various websites operated by its retail partners, third-party operators such as Amazon, and directly through the Cake Beauty and The Mane Choice websites.

The Company's products are manufactured in North America through a diverse set of leading third-party suppliers. Working closely with these suppliers, the Company's operations team has taken multiple steps to minimize potential supply chain disruptions.

Q4 2019 Financial Statements and Management's Discussion and Analysis

The financial information contained herein is unaudited and has been prepared by management. The Company's audited annual consolidated financial statements as at December 31, 2019 and for the year then ended along with its' Management's Discussion and Analysis will be made available under the Company's profile on SEDAR at www.sedar.com and on MAV Beauty Brands' investor relations website at investors.mavbeautybrands.com on or about March 30, 2019.

Also included on the Company's investor relations website are the simplified unaudited consolidated financial statements as at December 31, 2019 and for the year then ended.

Conference Call & Webcast

MAV Beauty Brands will host a conference call to discuss its Fiscal 2019 fourth quarter and full-year financial results at 8:30 a.m. EDT on March 25, 2020. The call will be hosted by Tim Bunch, President & Chief Executive Officer, and Judy Adam, CFO. To participate in the call, dial (416) 764-8659 or (888) 664-6392 using the conference ID 82220768. 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 company dedicated to providing consumers with premium quality, authentic and differentiated products. Our innovation-focused, next generation platform consists of complementary and growing personal care brands: Marc Anthony True Professional, Renpure, Cake Beauty and The Mane Choice. 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 and in more than 100 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 EBITDA", "Adjusted Free Cash Flow", "Adjusted Net Income", "Free Cash Flow" and "Net debt-to-Adjusted EBITDA". 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 "Q4 2019 Compared to Q4 2018".

"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 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) 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).

"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.

''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.

"Net debt and Net debt-to-Adjusted EBITDA" net debt is calculated as long-term debt before unamortized deferred financing costs less cash as reported in the consolidated statements of financial position. Net debt-to-Adjusted EBITDA is calculated as net debt divided by Adjusted EBITDA for the four trailing quarters. Net debt is an important measure as it reflects the principal amount of debt owing by the Company as at a particular date. Net debt-to-Adjusted EBITDA is an important measure of the Company's liquidity. References to such calculation on a pro forma basis gives effect to the acquisition of The Mane Choice as if it occurred on January 1, 2019.

In addition, financial information regarding The Mane Choice set forth in this news release has not been audited, and the related pro forma information should not be considered to be what the actual financial position or other results of operations of the Company would have necessarily been had The Mane Choice acquisition been completed, as, at, or for the periods stated.

Forward-Looking Information

Certain information in this press release, including statements relating to the expected impact of the COVID-19 public health crisis on the Company's operations, the impact to the Company's food, drug and mass retailers, the impact of COVID-19 on e-commerce sales and the impact on the supply of the Company's products to its retail partners 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 on or about March 30, 2020 for the year ended December 31, 2019 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.

Q4 2019 Compared to Q4 2018 & F2019 Compared to F2018


(in thousands of US dollars) (unaudited)


Q4 2019



Q4 2018



$ Change



% Change



Consolidated statements of operations and

   comprehensive income (loss):


















Revenue



30,788




29,032




1,756




6.0

%


Cost of sales



17,414




15,581




1,833




11.8

%


Gross profit



13,374




13,451




(77)




-0.6

%




















Expenses


















Selling and administrative



6,833




7,008




(175)




-2.5

%


Amortization and depreciation



953




787




166




21.1

%


Interest and accretion



1,910




1,684




226




13.4

%


Foreign exchange loss (gain)



389




(423)




812



nmf



Integration, restructuring, and other



2,328




1,631




697




42.7

%





12,413




10,687




1,726




16.2

%


Income (loss) before income taxes



961




2,764




(1,803)




-65.2

%


Income tax expense (recovery)


















Current



(586)







(586)



nmf



Deferred



2,736




1,655




1,081




65.3

%





2,150




1,655




495




29.9

%


Net income (loss) for the period



(1,189)




1,109




(2,298)



nmf



EBITDA (1)



3,824




5,235




(1,411)



-27.0

%


Adjusted EBITDA (1)



8,501




7,365




1,136




15.4

%


Adjusted Net Income (1)



2,295




2,696




(401)




-14.9

%

 


(in thousands of US dollars)


Fiscal 2019



Fiscal 2018



$ Change



% Change



Consolidated statements of operations and

   comprehensive income (loss):


















Revenue



108,496




94,039




14,457




15.4

%


Cost of sales



56,682




51,222




5,460




10.7

%


Gross profit



51,814




42,817




8,997




21.0

%




















Expenses


















Selling and administrative



27,127




22,325




4,802




21.5

%


Amortization and depreciation



3,645




3,007




638




21.2

%


Interest and accretion



7,392




17,430




(10,038)




-57.6

%


Foreign exchange loss (gain)



485




(570)




1,055



nmf



Integration, restructuring, and other



4,514




12,835




(8,321)




-64.8

%





43,163




55,027




(11,864)




-21.6

%


Income (loss) before income taxes



8,651




(12,210)




20,861



nmf



Income tax expense (recovery)


















Current



41







41



nmf



Deferred



4,538




(1,808)




6,346



nmf






4,579




(1,808)




6,387



nmf



Net income (loss) for the year



4,072




(10,402)




14,474



nmf



EBITDA (1)



19,688




8,227




11,461




139.3

%


Adjusted EBITDA (1)



29,487




26,200




3,287




12.5

%


Adjusted Net Income (1)



11,372




2,989




8,383




280.5

%

 

(1)  See "Non-IFRS Measures"

 


(in thousands of US dollars) (unaudited)


Q4 2019



Q4 2018



Fiscal 2019



Fiscal 2018



Consolidated net income (loss):



(1,189)




1,109




4,072




(10,402)



Income tax expense (recovery)



2,150




1,655




4,579




(1,808)



Interest and accretion



1,910




1,684




7,392




17,430



Amortization and deprecation



953




787




3,645




3,007



EBITDA



3,824




5,235




19,688




8,227



Integration, restructuring, and other

(1)


2,328




1,633




4,514




13,150



Purchase accounting adjustments

(2)


1,354







1,354




2,727



Share-based compensation

(3)


609




1,099




3,422




2,284



Unrealized foreign exchange (gain) loss



386




(602)




509




(188)



Adjusted EBITDA



8,501




7,365




29,487




26,200


 


(in thousands of US dollars) (unaudited)


Q4 2019



Q4 2018



Fiscal 2019



Fiscal 2018



Consolidated net income (loss):



(1,189)




1,109




4,072




(10,402)



Integration, restructuring, and other

(1)


2,328




1,633




4,514




13,150



Purchase accounting adjustments

(2)


1,354







1,354




2,727



Share-based compensation

(3)


609




1,099




3,422




2,284



Unrealized foreign exchange (gain) loss



386




(602)




509




(188)



Tax impact of the above adjustments



(1,193)




(543)




(2,499)




(4,582)



Adjusted Net Income



2,295




2,696




11,372




2,989


 

(1) Refer to Note 12 to the annual audited consolidated interim financial statements for further details.

(2) In conjunction with the acquisition of The Mane Choice Hair Solutions, LLC in 2019 and the acquisition of Cake Beauty Inc. and Renpure LLC in 2018, 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.


(in thousands of US dollars) (unaudited)


Q4 2019



Q4 2018



Fiscal 2019



Fiscal 2018



Cash provided by (used in) operating activities



1,382




657




10,116




(6,903)



Less: purchase of property and equipment



(222)




(101)




(2,468)




(309)



Free cash flow



1,160




556




7,648




(7,212)



Add: Acquisition related costs



1,874




20




2,135




9,985



Adjusted free cash flow



3,034




576




9,783




2,773


 


(in thousands of US dollars) (unaudited)


Q4 2019



Q4 2018



$ Change



% Change



Cash, beginning of period



5,423




5,116




307




6.0

%


Cash flows (used in)


















Operating activities



1,382




657




725




110.4

%


Investing activities



(28,232)




68




(28,300)



nmf



Financing activities



27,099







27,099



nmf



Cash, end of period



5,672




5,841




(169)




-2.89

%


Free cash flow (1)



1,160




556




604




108.63

%


Adjusted free cash flow (1)



3,034




576




2,458




426.74

%

 


(in thousands of US dollars)


Fiscal 2019



Fiscal 2018



$ Change



% Change



Cash, beginning of period



5,841




1,249




4,592




367.7

%


Cash flows (used in)


















Operating activities



10,116




(6,903)




17,019



nmf



Investing activities



(31,254)




(111,528)




80,274



nmf



Financing activities



20,969




123,023




(102,054)



nmf



Cash, end of period



5,672




5,841




(169)




-2.89

%


Free cash flow (1)



7,648




(7,212)




14,860



nmf



Adjusted free cash flow (1)



9,783




2,773




7,010




252.79

%

 

(1)  See "Non-IFRS Measures"

 

SOURCE MAV Beauty Brands Inc.

Cision View original content: http://www.newswire.ca/en/releases/archive/March2020/25/c4385.html

Copyright CNW Group 2020

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