MAV MAV Beauty Brands Inc

• Total revenue up 12% year-over-year to $31.7 million and revenue from North America increases 15% to $30.0 million
• Company reports record Adjusted EBITDA of $8.7 million, Adjusted Free Cash Flow of $4.4 million
• Net income increases 21% year-over-year to $3.6 million and earnings per share (basic) increases 25% to $0.10

VAUGHAN, ON, Nov. 13, 2020 /CNW/ - MAV Beauty Brands Inc. ("MAV Beauty Brands" or the "Company") (TSX: MAV), a global personal care platform, today announced its financial results for the three and nine months ended September 30, 2020. 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).

"We are pleased to report another quarter of strong results in 2020, particularly in light of the extraordinary operating environment. The results were highlighted by double-digit revenue growth, record Adjusted EBITDA, and robust free cash flow," said Tim Bunch, President & CEO of MAV Beauty Brands. "The third-quarter results add to our strong year-to-date performance across these key financial measures. This speaks to the great efforts of our team and the resilience of the platform, which is increasingly diversified across brands, consumers, segments, and channels. These attributes serve us well in periods of uncertainty, mitigating risk while allowing us to benefit from shifting consumer preferences. The growth of our e-commerce business continues to be a bright spot in 2020, with sales once again more than doubling year over year."  

Selected Financial Highlights⁽¹⁾⁽²⁾  

Q3 2020 Financial Review 

Revenue for Q3 2020 grew by 12% over Q3 2019 to $31.7 million. Growth in the quarter reflected our proven ability to accretively acquire businesses such as The Mane Choice (in November 2019), tempered by COVID-19 headwinds which reduced retail foot traffic and temporarily reduced  promotional activity at key retail partners as many of these retailers re-allocated promotional shelf space to other COVID-related essential items. Revenue from North America (which represents approximately 95% of total revenue) was $30.0 million in Q3 2020, up 15% from $26.0 million in Q3 2019.

For the fiscal year to date, revenue grew both organically and inorganically by 19% over 2019 to $92.8 million, reflecting the same factors mentioned above. In general, performance matched our objective of coupling accretive M&A with organic growth that outpaces the overall category. Despite the uncertain and extraordinary environment in retail in 2020, we believe this revenue growth demonstrates the value of our platform.

Over the past year, we continued to leverage our operating platform to build our brands and drive organic growth, using a four-pronged strategy: 1) expand the distribution footprint; 2) introduce winning innovation; 3) amplify the brands; 4) drive efficiencies. Over the past year, we have effectively executed on each of the strategies. We have secured new distribution for each of our brands and accelerated e-commerce sales; expanded our skin care products through innovation; greatly increased brand impressions through our marketing efforts; and generated efficiencies in cost of goods sold.

Q3 2020 gross profit increased 12% year over year to $15.7 million, and Q3 2020 gross profit margin, at 49.6%, was similar to the prior year period (49.8%). We expect some variability in gross margin quarter to quarter based on product mix and promotional decisions, which impact trade spend. Importantly, we have been successful at generating product cost savings over the past year which has allowed for steady margin improvements, as reflected in our year-to-date gross margin of 51% compared to 49% in the prior year.

Excluding share-based compensation charges of $0.4 million, Q3 2020 selling and administrative expense was $6.9 million, or 22% of sales, compared with $5.6 million, or 20% of sales, in the same period last year, excluding $0.7 million of share-based compensation charges in Q3 2019. While higher than the prior year, primarily as a result of the addition of The Mane Choice, selling and administrative expense has remained relatively constant in 2020.

Q3 2020 Adjusted EBITDA increased by 3% to a record $8.7 million (27.4% of revenue), from Adjusted EBITDA of $8.5 million in Q3 2019 (29.9% of revenue) (see "Non-IFRS Measures" below). Adjusted EBITDA margin in the current period was consistent with the first and second quarters of 2020. In Q3 2020, the Company reported net income of $3.6 million, up 21% from $2.9 million in Q3 2019, and Adjusted Net Income increased by 9% to $4.2 million, compared with Adjusted Net Income of $3.8 million in Q3 2019, reflecting the factors discussed above (see "Non-IFRS Measures" below).

Q3 2020 cash flow from operations was $7.0 million, up 18% from the prior year. In addition, the current quarter reflects increased working capital investment, primarily due to higher receivables as a result of increased revenues, and higher inventory. As a result, the Company generated Adjusted Free Cash Flow of $4.4 million in Q3 2020, compared with $5.6 million in Q3 2019 (see "Non-IFRS Measures" below). On a Pro Forma basis, including the results of The Mane Choice for the trailing 12 months, the Net Debt-to-Adjusted EBITDA ratio was 3.9 times, compared with 4.0 times at the end of Q2 2020 (see "Non-IFRS Measures" below). 

Q3 2020 Financial Statements and Management's Discussion and Analysis

The Company's unaudited consolidated interim financial statements for the three- and nine-month periods ended September 30, 2020 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.

Annual General Meeting

This year, to mitigate risks to the health and safety of our communities, shareholders, employees and other stakeholders resulting from the COVID-19, the Company will hold its annual general meeting of shareholders in a virtual-only format on November 13 at 2:00 p.m. EST. The event can be accessed from MAV Beauty Brands' investor relations website at investors.mavbeautybrands.com or at https://web.lumiagm.com/264999089.

Conference Call & Webcast

MAV Beauty Brands will host a conference call to discuss its fiscal 2020 third quarter financial results at 8:30 a.m. EST on November 13, 2020. The call will be hosted by Tim Bunch, President & CEO, and Judy Adam, CFO. To participate in the call, dial (416) 764-8659 or (888) 664-6392 (using the conference ID 58878160). The audio webcast can be accessed at investors.mavbeautybrands.comhttps://bit.ly/2mutHer. 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. We have built an operating platform to build brands through expanded distribution, innovation, and marketing. Today, we have 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, body care and beauty products. These products are sold in over 30 countries around the world and in more than 100 of the world's largest 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 Net Income", "Free Cash Flow", "Adjusted 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 "Q3 2020 Compared to Q3 2019".

"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, pro forma information regarding The Mane Choice 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 Company's ability to navigate the business environment during the COVID-19 pandemic. 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.

Q3 2020 Compared to Q3 2019

SOURCE MAV Beauty Brands Inc.