Mohawk Group Holdings, Inc. (Nasdaq: MWK) (“Mohawk” or the
“Company”) today announced it acquired the assets of leading
e-commerce business brands Mueller, Pursteam, Pohl and Schmitt, and
Spiralizer (the “Acquired Brands”) from 9830 Macarthur LLC
(“9830”), ZN Direct LLC, and Reliance Equities Group, LLC. The
Acquired Brand’s unaudited trailing twelve month revenue and
operating income as of September 30, 2020, were approximately $77.5
million and $13.1 million, respectively.
Yaniv Sarig, Co-Founder and Chief Executive
Officer of the Company, commented, “We are excited to announce this
acquisition, which we are confident will achieve key strategic,
financial and growth objectives for Mohawk and furthers our goal of
building the consumer product platform of the future. By acquiring
the assets of these four strong brands, we are demonstrating how
our M&A strategy can be a powerful factor in our growth and
profitability going forward. The 43 new products we are
adding to our portfolio are mainly part of the home and kitchen
small appliances category and will expand our existing large
appliance product portfolio. In the last twelve months, private
equity and venture capital backed companies have raised significant
funding to fuel the acquisition of Amazon brands and we believe our
technology platform and agile supply chain position Mohawk to be a
leader in this space moving forward.”
As consideration for the Acquired Brands, Mohawk
paid $25,000,000 in cash, issued 4,220,000 shares of Mohawk common
stock and issued a promissory note in the amount of approximately
$15.8 million related to inventory acquired from the sellers (such
note amount subject to adjustment following a post closing physical
inspection). Subject to the achievement of certain contribution
margin thresholds during each of the 12 month periods ending
December 31, 2021 and 2022, Mohawk also granted 9830 (for the
benefit of all sellers) the right to certain earn out payments
related to sales of products under the Acquired Brands. The cash
and common stock payment reflect an approximate 4x multiple on the
trailing twelve month operating income of the Acquired Brands as of
September 30, 2020. In connection with the transaction, 9830 agreed
to a six month lockup and to five year voting and standstill
terms.
Refinancing of Term LoanMohawk
today also announced the refinancing of its existing term loan
credit facility through the issuance of a Senior Secured Note to an
institutional lender. The Company received gross proceeds of $38
million in exchange for the Senior Secured Note with an aggregate
principal amount of $43 million. The new loan will be repaid over
24 equal monthly cash payments of $1.8 million. In connection with
the Senior Secured Note, the Company issued to the institutional
lender warrants to purchase an aggregate of 2,864,133 shares of the
Company’s common stock at a strike price of $9.01, which represents
a 27.6% premium to the closing price on November 30, 2020.
A.G.P. / Alliance Global Partners acted as sole
placement agent on the debt transaction.
Increased 2020 Outlook For full
year 2020, the Company expects net revenue to be in the range of
$180.0 million to $190.0 million, up from $175.0 million to $185.0
million, reflecting the addition of the Acquired Brands. The
Company continues to expect to generate positive Adjusted EBITDA in
the fourth quarter of 2020, excluding one-time items for
transaction-related costs of the acquisition, and for the full year
basis 2020.
The most directly comparable GAAP financial
measure for Adjusted EBITDA is net loss and we expect to report a
net loss for the three months ending December 31, 2020, and for the
twelve months ending December 31, 2020, due primarily to quarterly
interest expense, net and stock-based compensation expense.
The historical revenue and operating income of
the Acquired Brands are subject to the completion of the Company’s
standard procedures for the preparation and completion of its
financial statements and completion of an audit by the Company’s
independent registered public accounting firm.
2021 Preliminary OutlookFor
full year 2021, the Company expects net revenue to be in the range
of $290.0 million to $320.0 million.
Conference Call
DetailsManagement will host a conference call on
Wednesday, December 2, 2020 at 8:30 a.m. ET to discuss the
acquisition. Investors and analysts interested in participating in
the call are invited to dial (877) 295-1077 (domestic) or (470)
495-9485 (international) and provide the conference ID: 7385844.
The conference call will also be available to interested parties
through a live webcast at https://ir.mohawkgp.com.
About Mohawk Group Holdings,
Inc.Mohawk Group Holdings, Inc., together with its
subsidiaries (“Mohawk”), is a rapidly growing technology-enabled
consumer products company that uses machine learning, natural
language processing, and data analytics to design, develop, market
and sell products. Mohawk predominantly operates through online
retail channels such as Amazon and Walmart. In addition to the
Acquired Brands, Mohawk has seven owned and operated brands: hOme,
Vremi, Xtava, Truweo, Holonix, Aussie Health and RIF6. Mohawk sells
products in multiple categories, including home and kitchen
appliances, kitchenware, environmental appliances (i.e.,
dehumidifiers and air conditioners), beauty-related products and,
to a lesser extent, consumer electronics. Mohawk was founded on the
premise that if a company selling consumer packaged goods was
founded today, it would apply artificial intelligence and machine
learning, the synthesis of massive quantities of data and the use
of social proof to validate high caliber product offerings as
opposed to over-reliance on brand value and other traditional
marketing tactics.
Forward Looking Statements
All statements other than statements of
historical facts included in this press release that address
activities, events or developments that we expect, believe or
anticipate will or may occur in the future are forward-looking
statements including, in particular, the statements regarding this
acquisition, our M&A strategy, our goal of building the
consumer products company of the future, the potential for our
company to be a leader in the acquisition of Amazon businesses, the
potential acquisition of additional businesses in the future, our
ability to create significant operating leverage and efficiency
when integrating companies that we acquire, including through the
use of our team’s expertise, the economies of scale of our supply
chain and automation driven by our platform, our expectations
regarding future growth through the launch of products under our
brands and the acquisition of additional brands, our expected 2020
net revenue and preliminary 2021 outlook, including any expected
impact that this acquisition may have thereon, and the statements
about our expected Adjusted EBITDA and net loss for the fourth
quarter of 2020 and full year 2020. These forward-looking
statements are based on management’s current expectations and
beliefs and are subject to uncertainties and factors, all of which
are difficult to predict and many of which are beyond our control
and could cause actual results to differ materially and adversely
from those described in the forward-looking statements. These risks
include, but are not limited to, those related to this acquisition;
those related to our ability to create operating leverage and
efficiency when integrating companies that we acquire, including
through the use of our team’s expertise, the economies of scale of
our supply chain and automation driven by our platform; those
related to our ability to grow through the launch of products under
our brands and the acquisition of additional brands; those related
to the impact of COVID-19, including its impact on consumer demand,
our cash flows, financial condition and revenue growth rate; our
supply chain including sourcing, manufacturing, warehousing and
fulfillment; our ability to manage expenses, working capital and
capital expenditures efficiently; our business model and our
technology platform; our ability to disrupt the consumer products
industry; our ability to grow market share in existing and new
product categories, including PPE; our ability to generate
profitability and stockholder value; international tariffs and
trade measures; inventory management, product liability claims,
recalls or other safety and regulatory concerns; reliance on third
party online marketplaces; seasonal and quarterly variations in our
revenue; acquisitions of other companies and technologies and other
factors discussed in the “Risk Factors” section of our most recent
periodic reports filed with the Securities and Exchange Commission
(“SEC”), all of which you may obtain for free on the SEC’s website
at www.sec.gov.
Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we do
not know whether our expectations will prove correct. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof, even if
subsequently made available by us on our website or otherwise. We
do not undertake any obligation to update, amend or clarify these
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws.
Investor Contact:
Ilya Grozovsky, Mohawk Group
ilya@mohawkgp.com
917-905-1699
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