MAV BEAUTY BRANDS REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

• Total revenue of $20.7 million versus $25.4 million in Q2 2022
• Adjusted EBITDA⁽¹⁾ of $2.7 million versus $3.5 million in Q2 2022
• Net loss of $2.2 million compared to net income of $0.3 million in Q2 2022
• Adjusted Net Income (Loss) ⁽¹⁾ of ($1.2) million versus Adjusted Net Income of $0.5 million in Q2 2022
• Previously announced strategic review process remains ongoing

VAUGHAN, ON, Aug. 9, 2023 /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 six months ended June 30, 2023. 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).

"Previous distribution losses continue to weigh on our overall sales and earnings results," said Serge Jureidini, President & CEO of MAV Beauty Brands. "We are continuing work to strengthen each of our brands with innovation and marketing plans, and we are encouraged by the progress to date with our operational improvements and costs savings initiatives."

Selected Financial Highlights⁽¹⁾⁽²⁾

(in thousands of US dollars except per share amounts) (unaudited)	Q2 2023	Q2 2022	YTD 2023	YTD 2022
Revenue	20,671	25,373	39,926	46,510
Gross profit	9,315	10,757	17,154	20,074
Net income (loss) for the period	(2,216)	264	(6,085)	(368)
Earnings (loss) per share (basic)	(0.06)	0.01	(0.17)	(0.01)
Adjusted EBITDA	2,728	3,477	4,010	6,350
Cash flow from operating activities	2,001	1,292	1,938	5,020
Free Cash Flow	1,931	1,253	1,826	4,934
Adjusted Net Income (Loss)	(1,211)	540	(3,597)	626

(1)

EBITDA (used below), Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share (diluted), 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 "Q2 2023 Compared to Q2 2022". See also the heading "How We Assess the Performance of Our Business" on page 8, and the heading "Non-IFRS Measures" on page 10 of our Management's Discussion and Analysis for the three-month period ended June 30, 2023.

(2)

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.

Q2 2023 Financial Review 

Q2 2023 total revenue was $20.7 million, compared to $25.4 million in Q2 2022. For the Canada/US region, revenue decreased by 17.7% to $18.9 million in Q2 2023, compared to $22.9 million in Q2 2022. For the International region, revenue was $1.8 million, compared to $2.5 million in Q2 2022. The revenue decrease year over year principally reflects the impact of previously disclosed reduced distribution in the US mass and drug channels.

Gross profit was $9.3 million in Q2 2023 (45.1% margin), compared to $10.8 million (42.4% margin) reported in Q2 2022. The increase in gross profit margin is primarily attributable to proceeds of $0.6 million from business interruption insurance received in Q2 2023 relating to a cyber security breach at the Company's primary third-party logistics partner in February 2022. The Company continues to closely monitor the impact of inflation on supply chain input costs and has implemented various operational cost saving initiatives. 

Adjusted EBITDA⁽¹⁾ decreased to $2.7 million in Q2 2023, from $3.5 million in Q2 2022, mainly due to lower revenue.

In Q2 2023, the Company reported a net loss of $2.2 million, versus net income of $0.3 million in Q2 2022. The reduced profitability year over year reflects lower revenue and gross profit, as well as higher interest and accretion expense due to an increase in variable rates and incremental payment-in-kind interest added as part of the sixth amendment to the Company's credit facility in March 2023. In addition, the Company incurred additional expenses related to the strategic review process launched in Q2 2023. The strategic review process remains ongoing. See "Forward-Looking Information".

Adjusted Net Income (Loss) ⁽¹⁾ for Q2 2023 was ($1.2) million, compared with Adjusted Net Income of $0.5 million in Q2 2022, due to the factors discussed above.

Cash from operating activities was $2.0 million in Q2 2023, an increase from $1.3 million in Q2 2022. Free Cash Flow⁽¹⁾ increased to $1.9 million in Q2 2023, compared with $1.3 million in Q2 2022.

At quarter end, Cash was $8.2 million and Net Debt⁽¹⁾ was $115.8 million, compared with $115.0 as at December 31, 2022.

Financial Statements and Management's Discussion and Analysis

 The Company's unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2023 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 2023 second quarter financial results at 8:30 a.m. EDT on August 9, 2023. To participate in the call, dial 416-764-8650 or 888-664-6383 using the conference ID 67530471. 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 managing great independent brands to scale and win market share through product innovation, marketing and expanded distribution. Today, MAV Beauty Brands markets 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, face and body care beauty products. These products are sold in over 25 countries around the world and in many 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 Net Income (Loss) Per Share (Diluted)", "Adjusted EBITDA", "Adjusted Free Cash Flow", "Adjusted Net Income (Loss)", "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 "Q2 2023 Compared to Q2 2022" 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 8, and "Non-IFRS Measures" on page 10.

"Adjusted Net Income (Loss) 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 Net Income (Loss) 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 Net Income (Loss)" 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 (Loss) 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 to strengthen its brands with innovation and marketing plans, to achieve ongoing progress with operational improvements and costs savings initiatives, and to identify and solicit strategic alternatives as part of the strategic review process, relating to the realization of any strategic transaction and the timing and terms thereof, generally 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.

The Board of Directors has previously announced that it initiated a strategic review process to identify, review and evaluate potential strategic alternatives that may be available to the Company, including without limitation, the sale of all or substantially all of the Company's securities and/or its assets, or the raising of additional debt or equity capital. The Board has engaged Piper Sandler & Co. as its financial advisor to assist with identifying and soliciting strategic alternatives. It is the Company's current intention not to disclose developments with respect to the strategic review process unless and until the Board has approved a specific transaction or otherwise determines that disclosure is necessary or appropriate. There can be no assurances or guarantees that the strategic review process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction.

The terms of the credit facilities require the Company to satisfy many affirmative and negative covenants and to meet certain financial tests, including minimum Adjusted EBITDA and minimum liquidity covenants, as more particularly described in the credit facilities. In addition, the Company launched the aforementioned strategic review process in accordance with a plan (including key milestone dates) approved by the lenders in the second quarter. The Company has required several amendments and extensions from its lenders over the past year, and there is no assurance that we will be able to meet the minimum Adjusted EBITDA and minimum liquidity targets that we are required to achieve, and/or to deliver a strategic review plan that is satisfactory to the lenders, in each case, to remain in compliance with the foregoing covenants, among others. There can be no assurances or guarantees that the approved strategic review plan will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction. A failure by us to comply with the covenants specified in the credit facilities could result in an event of default, which would give the lenders the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. If the debt under the credit facilities were to be accelerated, it is unlikely that the Company would be able to repay (or refinance) the accelerated indebtedness (including by way of selling sufficient assets) or fulfill its obligations under certain contracts, and its future financial condition, results of operations, prospects and/or cashflows would be materially adversely affected. In such a situation the Company would need to seek an additional amendment or waiver of such covenants. The lenders under the credit facilities may not consent to any amendment or waiver request that the Company may make, and, if they do consent, they may only do so on terms that are unfavorable or costly to the Company, and shareholders may consequently lose some or all of their investment.

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 most recently filed Annual Information Form, the "Risk Factors" section of the Company's most recently filed 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.

Q2 2023 Compared to Q2 2022

	(in thousands of US dollars) (unaudited)		Q2 2023				Q2 2022				$ Change				% Change
	Consolidated statements of operations:
	Revenue			20,671				25,373				(4,702)				(18.5)	%
	Cost of sales			11,356				14,616				(3,260)				(22.3)	%
	Gross profit			9,315				10,757				(1,442)				(13.4)	%
	Expenses
	Selling and administrative			6,822				7,622				(800)				(10.5)	%
	Amortization and depreciation			772				1,097				(325)				(29.6)	%
	Interest and accretion			2,823				1,802				1,021				56.7	%
	Foreign exchange (gain) loss			31				(144)				175			nmf
	Integration, restructuring, and other			1,083				173				910				526.0	%
				11,531				10,550				981				9.3	%
	Income (loss) before income taxes			(2,216)				207				(2,423)			nmf
	Income tax recovery
	Deferred			—				(57)				57			nmf
				—				(57)				57			nmf
	Net income (loss) for the period			(2,216)				264				(2,480)				nmf
	EBITDA (1)			1,379				3,106				(1,727)				(55.6)	%
	Adjusted EBITDA (1)			2,728				3,477				(749)				(21.5)	%
	Adjusted net income (loss) (1)			(1,211)				540				(1,751)			nmf

(1)

EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss) are each non-IFRS measures and are not earning measures recognized by IFRS. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found under the headings "Non-IFRS Measures" and "Q2 2023 Compared to Q2 2022" 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 8, and "Non-IFRS Measures" on page 10.

 

	(in thousands of US dollars) (unaudited)		Q2 2023				Q2 2022				YTD Q2 2023				YTD Q2 2022
	Consolidated net income (loss):			(2,216)				264				(6,085)				(368)
	Income tax recovery			—				(57)				—				(307)
	Interest and accretion			2,823				1,802				5,208				3,493
	Amortization and depreciation			772				1,097				1,548				2,197
	EBITDA			1,379				3,106				671				5,015
	Integration, restructuring, and other	(1)		1,083				173				1,297				788
	Loss on modification of term loan	(2)		—				—				1,502				—
	Share-based compensation	(3)		191				338				456				601
	Unrealized foreign exchange (gain) loss			75				(140)				84				(54)
	Adjusted EBITDA			2,728				3,477				4,010				6,350

	(in thousands of US dollars) (unaudited)		Q2 2023				Q2 2022				YTD Q2 2023				YTD Q2 2022
	Consolidated net income (loss):			(2,216)				264				(6,085)				(368)
	Integration, restructuring, and other	(1)		1,083				173				1,297				788
	Loss on modification of term loan	(2)		—				—				1,502				—
	Share-based compensation	(3)		191				338				456				601
	Unrealized foreign exchange (gain) loss			75				(140)				84				(54)
	Tax impact of the above adjustments			(344)				(95)				(851)				(341)
	Adjusted net income (loss)			(1,211)				540				(3,597)				626

(1)  Refer to Note 9 to the unaudited condensed consolidated interim financial statements for further details.

(2)  Refer to Note 10 to the unaudited condensed consolidated interim financial statements for further details.

(3)  Represents recognition of share-based compensation, which have been accounted for as selling and administrative expenses.

 

	(in thousands of US dollars) (unaudited)		Q2 2023				Q2 2022				YTD Q2 2023				YTD Q2 2022
	Cash provided by operating activities			2,001				1,292				1,938				5,020
	Less: purchase of property and equipment			(70)				(39)				(112)				(86)
	Free Cash Flow and Adjusted Free Cash Flow			1,931				1,253				1,826				4,934

SOURCE MAV Beauty Brands Inc.

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