MAV BEAUTY BRANDS REPORTS FIRST QUARTER 2022 FINANCIAL RESULTS

• Total revenue of $21.1 million versus $28.0 million in Q1 2021
• Adjusted EBITDA of $2.9 million versus $6.4 million in Q1 2021⁽¹⁾
• Net loss of ($0.6) million compared with net income of $1.6 million in Q1 2021
• Adjusted Free Cash Flow of $3.7 million versus $1.6 million in Q1 2021⁽¹⁾
• Cash provided by operating activities of $3.7 million versus $1.7 million in Q1 2021

VAUGHAN, ON, May 12, 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 months ended March 31, 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).

"As we work to stabilize our business results in 2022, it was unfortunate to experience a significant cyber security induced disruption to our third-party logistics network, which had a meaningful negative impact on our revenue in the period," said Serge Jureidini, President & CEO of MAV Beauty Brands. "Our team responded quickly and cohesively to navigate the issue and restore normal operating levels. While Q1 sales results were affected by this event as well the continued below market performance, we were encouraged by the sequential improvements in gross margin and free cash flow. Looking ahead, our focus returns entirely to enhanced execution across the business and building the desirability of our brands. We move forward with confidence in the fundamental strengths of our platform and believe the steps we are taking will, over time, translate to improved and more consistent performance." 

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

(in thousands of US dollars except per share amounts) (unaudited)	Q1 2022	Q1 2021
Revenue	21,137	27,998
Gross profit	9,317	12,952
Net income (loss) for the period	(632)	1,575
Earnings (loss) per Share (basic)	(0.02)	0.04
Adjusted EBITDA	2,873	6,433
Cash flow from operating activities	3,728	1,745
Adjusted Free Cash Flow	3,681	1,635
Adjusted Net Income	86	2,619
Adjusted Earnings per Share (diluted)	0.00	0.06

(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 "Q1 2022 Compared to Q1 2021". See also the heading "How We Assess the Performance of Our Business" on page 7, and the heading "Non-IFRS Measures" on page 9 of our Management's Discussion and Analysis for the three-month periods ended March 31, 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.

Q1 2022 Business and Financial Review 

Q1 2022 total revenue was to $21.1 million, compared to $28.0 million in Q1 2021. For the Canada/US region, revenue decreased by 25.4% to $19.9 million in Q1 2022, compared to $26.6 million in Q1 2021. The revenue decrease over Q1 2021 reflects the impact of net distribution losses in combination with retail velocity variances and inventory adjustments. A portion of the year-over-year revenue decrease  also reflects the previously disclosed impact from a cyber security breach at the Company's primary third-party logistics partner in February 2022. This significantly affected order outflow capabilities in the quarter and resulted in a shift of shipments into Q2 2022, as well as the loss of certain sales orders. The Company immediately put in place a remediation plan to ensure continuity through alternate partners in the U.S. and Canada, and, as of April 2022, the Company has returned to pre-incident operating levels. For the International region, revenue decreased by 8.1% to $1.3 million in Q1 2022, compared to $1.4 million in Q1 2021.

Gross profit declined to $9.3 million in Q1 2022, compared to $13.0 million in Q1 2021, as a result of lower revenue. Gross profit margin was 44.1% in Q1 2022, a decrease from 46.3% in Q1 2021; however, gross margins improved sequentially from 38.9% reported in Q4 2021. The decline in gross profit margin relative to the comparable period in 2021 primarily reflects an increase in supply chain input costs and trade spend, including non-compliance charges. To mitigate the impact of these, the Company recently implemented price increases on certain products and is also pursuing procurement cost saving initiatives.

Adjusted EBITDA⁽¹⁾ decreased to $2.9 million in Q1 2022, from $6.4 million in Q1 2021. In Q1 2022, the Company reported a net loss of ($0.6) million, versus net income of $1.6 million in Q1 2021. Adjusted Net Income⁽¹⁾ decreased to $0.1 million, compared with Adjusted Net Income⁽¹⁾ of $2.6 million in Q1 2021, due to the factors discussed above. Adjusted Earnings Per Share (Diluted)⁽¹⁾ was $0.00 per share in Q1 2022, compared with $0.06 per share in Q1 2021.

Cash flow from operations was $3.7 million in Q1 2022, up from $1.7 million in Q1 2021, and Adjusted Free Cash Flow⁽¹⁾ increased to $3.7 million in Q1 2022, compared to $1.7 million in Q1 2021. The year-over-year improvement was mainly attributable to the increase in cash flow from operating activities. At quarter end, Net Debt⁽¹⁾ was $118.7 million, a decrease of $2.8 million from $121.5 million as at December 31, 2021, and cash was $13.2 million. 

Financial Statements and Management's Discussion and Analysis

 The Company's audited condensed consolidated interim financial statements and Management's Discussion and Analysis for the three-month period ended March 31, 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 first quarter financial results at 8:30 a.m. EDT on May 12, 2022. To participate in the call, dial 647-794-4605 or 888-204-4368 using the conference ID 5900167. 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, Renpure, Cake Beauty and The Mane Choice – offering premium quality hair care, body care and beauty products. These products are sold in over 25 countries around the world and many 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 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 "Q1 2022 Compared to Q1 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 7, and "Non-IFRS Measures" on page 9.

"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, the ability to build the desirability 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 Q1 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.

Q1 2022 Compared to Q1 2021

(in thousands of US dollars) (unaudited)	Q1 2022		Q1 2021		$ Change		% Change
Consolidated statements of operations:
Revenue (1)	21,137		27,998		(6,861)		(24.5)		%
Cost of sales	11,820		15,046		(3,226)		(21.4)		%
Gross profit	9,317		12,952		(3,635)		(28.1)		%
Expenses
Selling and administrative (1)	6,725		6,721		4		0.1		%
Amortization and depreciation	1,100		1,079		21		1.9		%
Interest and accretion	1,691		1,778		(87)		(4.9)		%
Foreign exchange loss	68		133		(65)		(48.9)		%
Integration, restructuring, and other	615		1,067		(452)		(42.4)		%
	10,199		10,778		(579)		(5.4)		%
Income (loss) before income taxes	(882)		2,174		(3,056)		nmf
Income tax expense (recovery)
Current	—		73		(73)		nmf
Deferred	(250)		526		(776)		nmf
	(250)		599		(849)		nmf
Net income (loss) for the period	(632)		1,575		(2,207)		nmf
EBITDA (2)	1,909		5,031		(3,122)		(62.1)		%
Adjusted EBITDA (2)	2,873		6,433		(3,560)		(55.3)		%
Adjusted Net Income (2)	86		2,619		(2,533)		(96.7)		%

(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 "Q1 2022 Compared to Q1 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 7, and "Non-IFRS Measures" on page 9.

 

(in thousands of US dollars) (unaudited)		Q1 2022		Q1 2021
Consolidated net income (loss):		(632)		1,575
Income tax expense		(250)		599
Interest and accretion		1,691		1,778
Amortization and deprecation		1,100		1,079
EBITDA		1,909		5,031
Integration, restructuring, and other	(1)	615		1,067
Share-based compensation	(2)	263		303
Unrealized foreign exchange loss		86		32
Adjusted EBITDA		2,873		6,433

 

(in thousands of US dollars) (unaudited)		Q1 2022		Q1 2021
Consolidated net income (loss):		(632)		1,575
Integration, restructuring, and other	(1)	615		1,067
Share-based compensation	(2)	263		303
Unrealized foreign exchange loss		86		32
Tax impact of the above adjustments		(246)		(358)
Adjusted Net Income		86		2,619

(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)		Q1 2022				Q1 2021
Cash provided by operating activities			3,728				1,745
Less: purchase of property and equipment			(47)				(110)
Free Cash Flow and Adjusted Free Cash Flow			3,681				1,635

 

SOURCE MAV Beauty Brands

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