MAV MAV Beauty Brands Inc

• Total revenue of $24.7 million versus $31.7 million in Q3 2020
• Adjusted EBITDA of $3.1 million versus $8.7 million in Q3 2020
• Free cash flow of $1.8 million, versus $4.4 million in Q3 2020
• Net loss of $103.1 million, including impairment of goodwill of $129.0 million
• Adjusted Net Income of $0.3 million versus $4.2 million in Q3 2020
• Amendments to credit facilities allowing for additional flexibility

VAUGHAN, ON, Nov. 8, 2021 /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 nine months ended September 30, 2021. 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 disappointed with the Q3 financial results, including the non-cash goodwill impairment. Third-quarter net sales decreased versus the prior year as we continued to experience the negative impact of net distribution losses from retailer planogram resets, as well as the subsequent customer inventory adjustments," said Serge Jureidini, President & CEO of MAV Beauty Brands.

"From a financing perspective, the recent amendments to our credit facilities were an important step for the organization, providing additional flexibility while we manage through these near-term headwinds. With the benefits of the integration of The Mane Choice steadily materializing and multiple process improvement initiatives underway, the organization is gradually improving operational execution across the platform. We are hard at work on initiatives across all areas of the business with this goal in mind. In a market that continues to show signs of recovery, we remain confident in the fundamental strengths of our business – the unique and complementary brand portfolio, the efficiency of a common operating platform, the team's expertise, and our entrepreneurial culture – as we strive to achieve improved and consistent results for our stakeholders."

Selected Financial Highlights⁽¹⁾⁽²⁾ 

Q3 2021 Business and Financial Review 

Q3 2021 revenue decreased by 22.1% to $24.7 million, compared to $31.7 million in Q3 2020. For the Canada/US region, revenue decreased by 23.6% to $22.9 million in Q3 2021, compared to $30.0 million in Q3 2020. The year-over-year decrease mainly reflects the impact of previously disclosed net distribution decreases for two brands, which took effect in the first half of 2021, as well as the resulting retailer inventory adjustments. For the International region, revenue increased by 5.9% to $1.8 million, in Q3 2021 compared to $1.7 million in Q3 2020 due to the continued recovery from COVID-19 in key international markets.

Gross profit decreased 34.3% to $10.3 million in Q3 2021, compared to $15.7 million in Q3 2020. Gross profit margin was 41.8% in Q3 2021, compared to 49.6% in Q3 2020 and 40.1% in Q2 2021. The year-over-year decline in gross profit and gross profit margin was driven by several factors, including increased promotional spend, an increase in supply chain input costs and increased sales of non-core products at lower gross margin. Over time, the Company expects to adjust its pricing to offset some of these higher product input and supply chain costs should they persist.

Adjusted EBITDA decreased to $3.1 million in Q3 2021, from $8.7 million in Q3 2020, mainly due to lower revenues and lower gross profit margin.

In Q3 2021, the Company reported a net loss of $103.1 million, versus net income of $3.6 million in Q3 2020. The Q3 2021 results include a $129.0 million non-cash charge for impairment of goodwill. The Company determined that an indication of impairment existed as of September 30, 2021 and assessed goodwill and indefinite-life intangibles for impairment. Additional details regarding the Company's methodology and assumptions are disclosed in Note 8 to the unaudited condensed consolidated interim financial statements for Q3 2021.

Adjusted Net Income decreased to $0.3 million in Q3 2021, compared with Adjusted Net Income of $4.2 million in Q3 2020, due to the factors discussed above. Adjusted Earnings Per Share (Diluted) was $0.01 per share in Q3 2021, compared with $0.10 per share in Q3 2020, reflecting the factors discussed above (see "Non-IFRS Measures" below).

Adjusted Free Cash Flow was $1.8 million in Q3 2021, compared to $4.4 million in Q3 2020 (see "Non-IFRS Measures" below). The Company used the Free Cash Flow to reduce Net Debt by $1.5 million during the quarter. At quarter end, Net Debt was $121.6 million, and cash was $11.9 million. 

Amendment to Credit Facilities

The Company's existing credit facilities were further amended pursuant to a third amendment thereto, dated as of September 30, 2021, to, among other things, amend the financial covenants and provide for the repayment of the term facility at a rate of 5% per annum, in quarterly installments commencing on March 31, 2022. The terms of the amended credit facilities are available under the Company's profile on SEDAR at www.sedar.com.

Q3 2021 Financial Statements and Management's Discussion and Analysis

The Company's unaudited consolidated financial statements for the three- and nine-month periods ended September 30, 2021, 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.

Conference Call & Webcast

MAV Beauty Brands will host a conference call to discuss its Fiscal 2021 third quarter financial results at 8:30 a.m. EDT on November 8, 2021. To participate in the call, dial 647-792-1240 or 800-437-2398 using the conference ID 3921705. 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 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 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 can be found in our Management's Discussion and Analysis. Such reconciliations can also be found in this press release under the headings "Q3 2021 Compared to Q3 2020".

"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.

"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; and (iv) 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) 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).

"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 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.

Forward-Looking Information

Certain information in this press release, including the anticipated benefits of the credit facilities amendment, improved operational execution across the Company's platform, the ability to achieve improved and consistent results for our stakeholders, the ability to adjust pricing to offset higher product input and supply chain costs, and the benefits of The Mane Choice integration, 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 30, 2021 for the year ended December 31, 2020, the "Risk Factors" section of the Company's Q3 2021 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.

Q3 2021 Compared to Q3 2020

(1)  See "Non-IFRS Measures".

SOURCE MAV Beauty Brands