MNLX Miniluxe Holding Corp

MiniLuxe Holding Corp. (TSXV: MNLX) today announced its financial results for the 52 weeks ended December 31, 2023 (“FY2023”). The fiscal year of MiniLuxe is a 52-week reporting cycle ending on the Sunday closest to December 31, which periodically necessitates a fiscal year of 53 weeks. FY2022 consisted of a 53-week period while all other fiscal years referred to in this release consist of 52-week periods. Unless otherwise specified, all amounts are reported in U.S. dollars.

MiniLuxe is pleased to announce strong, organic, year-over-year growth as FY2023 revenue increased 14% over FY2022 (17% when compared on a like-for-like 52-week basis1) at $24.6M with gross profit of $10.1M, an 8% increase from FY2022 (10% on 52-week basis). The company uses the growth of gross profit as one of its leading indicators of moving to cash generative operations and overall profitability. The final record topline result of $24.6M is approximately 8% higher than guidance given in early January when preliminary full-year results were shared.

Overall, the Company saw continued progress through the year in the translation of revenue into profit, which, in conjunction with material cost-savings initiatives previously disclosed and discussed further herein, should lead to growing aggregate profitability in the near term.

As in past periods, the majority of the Company’s growth came organically from same-store MiniLuxe Studios that have been operating for 1+ years. This core base of studios continued a consistent, multi-year trend of growth in FY2023 as revenue increased 10% over FY2022 (12% YoY on a like-for-like 52-week basis). Additionally, the Company saw a strong finish to the 2023 year with Q4 holiday sales exceeding management’s internal expectations and as indicated in a previous January release a majority of MiniLuxe’s owned-and-operated studios were able to break all-time record performance, including all-time revenue highs during the holiday period (November 24, 2023 through December 31, 2023). Accordingly, overall AUV (average unit volume) increased across the store base and two of MiniLuxe’s studios achieved a TTM level of store level revenue of $2M+, implying annual sales over $1,300 per studio square foot. The holiday season also saw the continued positive sales of the Company’s new launch of an innovative nail press-on offering with several SKUs selling out.

Key drivers of revenue growth and gross profit growth in 2023 came from positive momentum on the demand side (new client and loyal client growth with) and supply side (talent ecosystem growth to deliver on service demand). Noteworthy is that MiniLuxe’s most loyal client base – those visiting 20+ times per year – grew 22% year-over-year between 2023 and 2022.

1FY 2023 was a 52-week year while FY2023 was a 53-week year; therefore, some year-over-year comparables have been adjusted to compare on a 52-week basis.

As was disclosed previously in the Q3 2023 MD&A, a material change in Q3 2023 was the transition of the business’s CEO leadership from Ms. Zoe Krislock to Company Co-Founder and Chairman of the Board of Directors, Mr. Anthony Tjan. Subsequent to this transition, additional personnel changes were implemented as part of a reconfiguration of the SG&A expenses and commitment to move the business on a more accelerated path to profitability with a more focused set of growth initiatives. Further key actions taken from transition to the end of 2023 include:

• Accelerating business contribution - Studio level focus on key performance indicators including peak day staffing, high-margin premium service mix and control of indirect labor
• Material cost reduction - Internal review of all SG&A, leading to approximately a 33% reduction on a pro-forma basis and continued investigation for further SG&A efficiencies, with particular focus on non-labor  
• Financial and human capital – Appointment of Kelley Morrell (Wonder, ex-Blackstone) as independent Board member; Sean Bock (Dry Bar, Hey Dey) as Franchise Development Officer to lead capital-light franchising expansion opportunities, and completion of multiple material fundraises through the date of this news release and as further discussed below.

Fourth Quarter Highlights, Subsequent Events and 2024 Outlook

During and subsequent to year end, the Company has continued to analyze its cost structure and revenue initiatives while also completing the following further material actions to bolster the strength of its liquidity:

1. As discussed in the Q3 2023 interim financial materials, on November 8, 2023 MiniLuxe filed with the TSXV its application to raise capital via an offering of a convertible note at 11.5% simple paid-in-kind interest and with warrants (15% warrant coverage). On November 30, 2023, the Company announced that it had completed an initial tranche of a non-brokered convertible debenture unit offering, with an immediate closing of gross proceeds of approximately ~US$ 2.6 million and, on January 22, MiniLuxe completed ~US$ 1.2 million of additional incremental investment in the same convertible debenture (for a total of ~US$ 3.8 million). Warrants associated with the Initial Offering were issued at a strike price of US$0.52.
2. Subsequent to year end, on March 12, 2024 MiniLuxe filed with the TSXV a new application to raise capital on the same terms as the Initial Offering. On April 26, 2024 the Company completed the closing of the non-brokered convertible debenture unit offering, with an immediate closing of gross proceeds of approximately US$500,000 that came as a “top-up” round from value-add advisors and individuals. Along with the Initial Offering, a total of approximately US$4.2 million was raised in the convertible note offerings with all associated warrants issued at a strike price of US$0.52.
3. On April 9, 2024, MiniLuxe announced that it had completed a re-financing of its Senior Term Loan, extending maturity for 24 months for the base US$2.5 million and adding an additional US$2.0 million of new capital, all of which will now mature in May 2027. The Senior Term Loans are held by Flow Capital Corp. (TSXV: FW), a leading provider of flexible growth capital and alternative debt solutions. The Senior Term Loans shall pay 15.0% cash-pay interest along with 2.0% simple, paid-in-kind interest that accrues until maturity. As part of the transaction, the Company issued to Flow Capital warrants to purchase 1,692,308 Subordinate Voting Shares of the Company at a strike price of US$0.52 per share for a period of three years from the date of issuance. The warrants are subject to a hold period of four months and one day from the issuance date in accordance with applicable securities laws.

In total, the Company has been successful in raising a total of over US$6.2 million in gross proceeds as of the date of this MD&A. The Company intends to use the gross proceeds to bridge to profitability, while focusing on a narrower set of growth investments in the areas of fleet expansion (via M&A and franchising) and recent product innovation of its Paintbox press-on nails. The Company continues to evaluate financing opportunities through its own outreach and inbound interest and may consider an equity-based financing within the next 12 months. With that said, based on the material cost reductions and other restructurings completed by the Company over the last few quarters along with the new investment proceeds disclosed to date, MiniLuxe now believes that the Company is in a position to continue to operate for the next 12+ months and has a more focused path to profitable operations.

“Our team has pulled together to focus on and accelerate a clear set of priorities driving stronger gross profit and studio-level contribution. New growth initiatives such as franchising, M&A and commercial brand partnerships also saw material momentum coming in to 2024. We are also pleased with the ability to continue to attract new primary capital from a strong set of value-add investors.” said Tony Tjan, Chief Executive Officer and Co-founder of MiniLuxe.

FY2023 Financial Highlights

• Record total revenue of $24.6M, a YoY increase of 14% (17% when compared on a like-for-like 52-week basis1)
• Gross profit of $10.1M, an 8% increase from FY2022 (10% on 52-week basis1)
• Full Company Adjusted EBITDA of ($9.0M) compared to ($9.4M) for FY2022; decreased loss attributable to lower SG&A and initial commencement of fixed cost leverage
• Fleet Adjusted EBITDA of $1.3M compared to $1.5M for FY2022; decrease primarily due to restructuring of indirect labor (studio leadership)

Other Items of Note – New Studios

• During 2023, the Company completed construction and commenced operations in two new MiniLuxe-branded studio locations, one in downtown Tampa Bay, Florida and one at Legacy Place in Dedham, MA  

1FY 2023 was a 52-week year while FY2023 was a 53-week year; therefore, some year-over-year comparables have been adjusted to compare on a 52-week basis.

FY 2023 Results

Selected Financial Measures

MiniLuxe notes a change in accounting policy to more accurately reflect revenue generated from talent and product revenue streams to more align with how management analyzes the Company. The change has been retrospectively applied and does not have any effect on revenue recognition principles utilized or total overall revenue recognized.

Results of Operations

The following table outlines the consolidated statements of loss and comprehensive loss for the fiscal years ended December 31, 2023 and January 1, 2023:

Cash Flows

The following table presents cash and cash equivalents as at December 31, 2023 and January 1, 2023:

Non-IFRS Measures and Reconciliation of Non-IFRS Measures

This press release references certain non-IFRS measures used by management. These measures are not recognized under International Financial Reporting Standards (“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 the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The non-IFRS measures referred to in this press release are “Adjusted EBITDA” and “Fleet Adjusted EBITDA”.

Adjusted EBITDAManagement believes Adjusted EBITDA most accurately reflects the commercial reality of the Company's operations on an ongoing basis by adding back non-cash expenses. Additionally, the rent-related adjustments ensure that studio-related expenses align with revenue generated over the corresponding time periods.

Adjusted EBITDA is calculated by adding back fixed asset depreciation, right-of-use asset amortization under IFRS 16, asset disposal, and share-based compensation expense to IFRS operating income, then deducting straight-line rent expenses3 net of lease abatements. IFRS operating income is revenue less cost of sales (gross profit), additionally adjusted for general and administrative expenses, and depreciation and amortization expense.

A reconciliation of IFRS operating income to Adjusted EBITDA is included in Selected Consolidated Financial Information.

The Company also uses Fleet Adjusted EBITDA to evaluate the performance of its MiniLuxe Core Studio business (19 MiniLuxe-branded studios operating for 1+ year). This metric is calculated in a similar manner, starting with Talent revenue and adjusting for non-fleet Talent revenue and cost of sales, further adjusted by fleet general and administrative expenses and finally subtracting straight line rent expense (similar to amount used in the full company Adjusted EBITDA, less amounts allocated to locations outside of MiniLuxe’s core studio business, i.e. Paintbox). The Company believes that this metric most closely mirrors how management views the fleet portion of the business. A reconciliation of Talent revenue to Fleet Adjusted EBITDA is included in Selected Consolidated Financial Information.

1Straight-line rent expense for a given payment period is calculated by dividing the sum of all payments over the life of the lease (the figure used in the present value calculation of the right-of-use asset) by the number of payment periods (typically months). This number is then annualized by adding the rent expenses calculated for the payment periods that comprise each fiscal year. For leases signed mid-year, the total straight-line rent expense calculation applies the new lease terms only to the payment periods after the signing of the new lease.

The following table reconciles Adjusted EBITDA to net loss for the periods indicated:

The following table reconciles Fleet Adjusted EBITDA to net loss for the periods indicated:

About MiniLuxe

MiniLuxe, a Delaware corporation based in Boston, Massachusetts. MiniLuxe is a lifestyle brand and talent empowerment platform servicing the beauty and self-care industry. The Company focuses on delivering high-quality nail care and esthetic services and offers a suite of trusted proprietary products that are used in the Company’s owned-and-operated studio services. For over a decade, MiniLuxe has been elevating industry standards through healthier, ultra-hygienic services, a modern design esthetic, socially responsible labor practices, and better-for-you, cleaner products. MiniLuxe’s aims to radically transform a highly fragmented and under-regulated self-care and nail care industry through its brand, standards, and technology platform that collectively enable better talent and client experiences. For its clients, MiniLuxe offers best-in-class self-care services and better-for-you products, and for nail care and beauty professionals, MiniLuxe seeks to become the employer of choice. In addition to creating long-term durable economic returns for our stakeholders, the brand seeks to positively impact and empower one of the most diverse and largest hourly worker segments through professional development and certification, economic mobility, and company ownership opportunities (e.g., equity participation and future franchise opportunities). Since its inception, MiniLuxe has performed over 4 million services.

For further information

Christine MastrangeloInvestor Relations, MiniLuxe Holding Corp.cmastrangelo@MiniLuxe.comMiniLuxe.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-looking statements

This press release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") concerning the Company and its subsidiaries within the meaning of applicable securities laws. Forward-looking information may relate to the future financial outlook and anticipated events or results of the Company and may include information regarding the Company's financial position, business strategy, growth strategies, acquisition prospects and plans, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding the Company's expectations of future results, performance, achievements, prospects or opportunities or the markets in which the Company operates is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budgets", "scheduled", "estimates", "outlook", "forecasts", "projects", "prospects", "strategy", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will" occur. In addition, any statements that refer to expectations, intentions, 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 or circumstances.

Many factors could cause the Company's actual results, performance, or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking information, including, without limitation, those listed in the "Risk Factors" section of the Company's filing statement dated November 9, 2021. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance, or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this press release.

Forward-looking information, by its nature, is based on the Company's opinions, estimates and assumptions in light of management's experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company currently believes are appropriate and reasonable in the circumstances. Those factors should not be construed as exhaustive. Despite a careful process to prepare and review forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. These factors should be considered carefully, and readers should not place undue reliance on the forward-looking information. Although the Company bases its forward-looking information on assumptions that it believes were reasonable when made, which include, but are not limited to, assumptions with respect to the Company's future growth potential, results of operations, future prospects and opportunities, execution of the Company's business strategy, there being no material variations in the current tax and regulatory environments, future levels of indebtedness and current economic conditions remaining unchanged, the Company cautions readers that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which the Company operates may differ materially from the forward-looking statements contained in this press release. In addition, even if the Company's results of operations, financial condition and liquidity, and the development of the industry in which it operates are consistent with the forward-looking information contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.

Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to the Company or that the Company presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made (or as of the date they are otherwise stated to be made). Any forward-looking statement that is made in this press release speaks only as of the date of such statement.