MISSISSAUGA, ON, May 11, 2021
/CNW/ - Aegis Brands Inc. (the "Company" or "Aegis Brands")
(TSX: AEG) today reported financial results for the first quarter
ended March 27, 2021.
Highlights
- The sale of Second Cup was consummated on April 23, 2021.
- Consolidated Net Loss including Second Cup for Q1 was
$1,801,000 or $0.08 per share compared with $2,897,000 or $0.13
per share one year ago.
- Bridgehead's Q1 Net Income was $17,000 compared to a Net Loss of $560,000 last year.
- Hemisphere revenue rose by 38% in Q1 vs the previous
quarter.
- Hemisphere's Net Loss was $356,000 in Q1 compared to $1,120,000 in Q4 of 2020.
Aegis Brands Inc.
The sale of Second Cup Coffee Co. to Foodtastic was completed on
April 23, 2021. The proceeds from the
transaction were $14 million (subject
to certain closing adjustments) of which $12
million was received at closing. As a result, the Company
significantly strengthened its financial ability to carry out its
strategic objectives in consolidation while growing the Bridgehead
and Hemisphere Cannabis brands.
"With the sale complete, we are now able to focus on the future
of Aegis Brands," said Steven
Pelton, President and CEO of Aegis Brands. "We look forward
to seeking out new strategic growth and development opportunities
with entrepreneurs who are poised to take advantage of this pivotal
time for the company."
Moving forward with a clean balance sheet, Aegis continues to
seek out acquisition. In the wake of the disruption and innovation
as a result of the pandemic, the Company sees a broad array of
opportunities.
Bridgehead
Bridgehead exceeded management expectation in the first quarter
and continued to see strong e-commerce and wholesale sales, now
selling coffee in Costco, Whole Foods, and Farm Boy locations in
addition to several local Ottawa
vendors. Diversifying its presence across multiple revenue
channels, Bridgehead is now available to consumers through
e-commerce, wholesale (retail grocery) and traditional brick and
mortar coffeehouses.
Bridgehead retail sales have been impacted as a result of the
third wave of COVID-19 but looks forward to an eventual steady
increase in traffic and sales at its stores, as COVID restrictions
alleviate.
Bridgehead's Same Store Sales were -29.41% compared with -38.52%
in the fourth quarter of 2020, indicating a slow recovery as
restrictions lifted in the latter part of the quarter in the
Ottawa area. 16 out of 20 stores
were open consistent with Q4 of 2020.
In 2020 the wholesale revenue channel grew by 48%. This
year-to-date wholesale revenue is up 106% year over year.
E-commerce revenue climbed over $800,000 in 2020. In 2021, the Company expects
e-commerce revenue to continue to outperform pre-pandemic level by
four times.
"We have pivoted to provide additional points of distribution
for our brand beyond our Ottawa
coffeehouses," said Kate Burnett,
COO of Bridgehead. "These added revenue channels are here to stay
and will allow Bridgehead to reach many more coffee lovers across
the country."
Bridgehead will open a new location at Carleton University in the fall of 2021, as it
continues to explore expansion opportunities for the brand.
Hemisphere Cannabis Co.
Hemisphere's revenue increased by 38% from Q4 of 2020 to Q1 this
year. Currently operating four stores in Ontario, Hemisphere will have ten locations
open by the end of 2021 including one in Alberta.
"We began opening Hemisphere locations in some of the hardest
hit parts of Ontario during the
pandemic in July 2020," said
Jenn Juby, Vice President of Retail
for Hemisphere. "Having said that, we have received very strong
responses to our brand and marketing efforts in Q1 and the start of
Q2, including our 4/20 (cannabis holiday) promotion. We have plans
to further leverage partnerships and create additional value-added
offers throughout the year. We also expect a significant lift in
sales when restrictions are lifted."
About Aegis Brands Inc.
Aegis Brands Inc. owns and
operates a Bridgehead Coffee and Hemisphere Cannabis Co. The
Company's vision is to build a portfolio of amazing brands that can
grow and flourish with access to our resources and expertise. The
Company is committed to letting each brand operate independently
while providing shared expertise to help them
thrive.
For more information, please visit www.aegisbrands.ca or
find the Company on Facebook and Twitter.
CONSOLIDATED HIGHLIGHTS: CONTINUING OPERATIONS OF BRIDGEHEAD,
HEMISPHERE CANNABIS CO. AND AEGIS CORPORATE
The following table sets out selected IFRS and certain non-IFRS
financial measures of the Company and should be read in conjunction
with the Unaudited Condensed Interim Financial Statements of the
Company for the 13 weeks ended March 27,
2021 and March 28, 2020.
(In thousands of
Canadian dollars, except same café
sales, number of
cafés, per share amounts, and
number of common
shares.)
|
13 weeks
ended
March 27,
2021
|
13 weeks
ended
March 28,
2020
|
|
|
|
System
sales1
|
$3,292
|
$3,221
|
|
|
|
Same store
sales1,2
|
(29.4%)
|
-
|
|
|
|
Number of
cafés/locations - end of period
|
24
|
19
|
|
|
|
Total
revenue
|
$3,292
|
$3,221
|
|
|
|
Operating costs and
expenses
|
$3,879
|
$4,280
|
|
|
|
Operating
(loss)1
|
($587)
|
($1,059)
|
|
|
|
EBITDA1
|
$170
|
($443)
|
|
|
|
Adjusted
EBITDA1
|
$170
|
($79)
|
|
|
|
Net loss and
comprehensive loss
|
($661)
|
($824)
|
|
|
|
Adjusted net loss and
comprehensive loss1
|
($661)
|
($557)
|
|
|
|
Basic and diluted
earnings (loss) per share as reported
|
($0.03)
|
($0.04)
|
|
|
|
Adjusted basic and
diluted loss per share1
|
($0.03)
|
($0.03)
|
|
|
|
Total assets - end of
period
|
$23,424
|
$25,537
|
|
|
|
Number of weighted
average common shares issued
and
outstanding
|
22,916,028
|
22,656,636
|
1See the
section "Definitions and Discussion on Certain non-IFRS Financial
Measures" for further analysis.
|
2Same café
& store sales represent the percentage change, on average, in
sales at cafés & stores operating system-wide that have been
open for more than 12 months. This metric is limited to the
Bridgehead brand, as the Hemisphere brand started in mid-July of
fiscal 2020, and as such, there is no comparative information
available.
|
CONSOLIDATED HIGHLIGHTS: DISCONTINUED OPERATIONS OF SECOND
CUP
The following table sets out selected IFRS and certain non-IFRS
financial measures of the Company and should be read in conjunction
with the Unaudited Condensed Interim Financial Statements of the
Company for the 13 weeks ended March 27,
2021 and March 28, 2020.
(In thousands of
Canadian dollars, except same café
sales, number of
cafés, per share amounts, and
number of common
shares.)
|
13 weeks
ended
March 27,
2021
|
13 weeks
ended
March 28,
2020
|
|
|
|
System sales of
cafés1
|
$13,150
|
$27,667
|
|
|
|
Same café
sales1,2
|
(38.1%)
|
(9.7%)
|
|
|
|
Number of cafés - end
of period
|
215
|
242
|
|
|
|
Total
revenue
|
$3,357
|
$5,572
|
|
|
|
Operating costs and
expenses
|
$4,345
|
$7,708
|
|
|
|
Operating
(loss)1
|
($988)
|
($2,136)
|
|
|
|
EBITDA1
|
($318)
|
($1,815)
|
|
|
|
Adjusted
EBITDA1
|
($318)
|
($1,392)
|
|
|
|
Net loss and
comprehensive loss
|
($1,140)
|
($2,073)
|
|
|
|
Adjusted net loss and
comprehensive loss1
|
($1,140)
|
($1,434)
|
|
|
|
Basic and diluted
earnings (loss) per share as reported
|
($0.05)
|
($0.09)
|
|
|
|
Adjusted basic and
diluted loss per share1
|
($0.05)
|
($0.06)
|
|
|
|
Total assets - end of
period
|
$75,821
|
$97,333
|
|
|
|
Number of weighted
average common shares issued and outstanding
|
22,916,028
|
22,656,636
|
1See the
section "Definitions and Discussion on Certain non-IFRS Financial
Measures" for further analysis.
|
2Same café
& store sales represent the percentage change, on average, in
sales at cafés & stores operating system-wide that have been
open for more than 12 months.
|
Held for Sale and Discontinued Operations
On February 7, 2021, the Company
entered into a definitive agreement to sell substantially all of
the assets comprising Second Cup to an affiliate of Quebec-based Foodtastic Inc. The sale price is
$14 million in cash payable on
closing (subject to customary closing adjustments) as well as a
post-closing earn-out based on royalties earned from certain Second
Cup cafés opened following completion of the sale. The sale was
approved by 99.62% of the votes cast by the Company's common
shareholders at a special meeting of common shareholders on
April 7, 2021 and was completed at
end of business on April 23, 2021. In
accordance with International Financial Reporting Standards
("IFRS") Non-Current Assets Held for Sale and Discontinued
Operations, the Company has classified this disposal group of
assets as held for sale as its carrying amount will be recovered
principally through a sale transaction rather than through
continuing use.
As the disposal group represents a major line of business, and
the Company has a single coordinated plan to dispose of this
separate major line of business, the Company has presented the
after-tax loss from discontinued operations as a single amount in
the condensed interim consolidated statement of operations and
comprehensive loss.
First Quarter – Aegis Brands Inc.
System sales of cafés and stores
System sales
of cafés and stores for the 13 weeks ended March 27, 2021 were $3,292,000 compared to $3,221,000 in the prior year, representing an
increase of $71,000 or 2.2%. Sales in
2021 included $1,088,000 attributed
to the Hemisphere business (2020 - $nil). The decrease in
café sales of Bridgehead is primarily due to temporary closures and
scaled down nature of operations of those that were open (i.e.
closure of dining room space; operations limited to take out and
delivery, and shorter hours) as a direct impact of the COVID-19
pandemic.
Same café and store sales
During the Quarter,
same café sales at Bridgehead locations decreased by 29.4%, as
cafés continued to be impacted by the ongoing economic impacts of
the COVID-19 pandemic, including temporary closures and significant
restrictions on store operations, such as the closure of dining
room space and operations limited to take-out, delivery and shorter
hours.
Analysis of revenue
The Company generated
revenue for the Quarter of $3,292,000
(2020 - $3,221,000), an increase of
$71,000 from its Company-owned and
operated locations.
Sales of $1,088,000 were generated
through retail cannabis products and accessories at Hemisphere
locations. The Company opened its first two recreational retail
cannabis locations in the third Quarter of fiscal 2020 and added
two locations in the fourth Quarter 2020.
Company-owned cafés and product sales at Bridgehead for the
Quarter were $2,204,000 (2020 -
$3,221,000), a decrease of
$1,017,000. Revenues and business
performance from company owed cafés were significantly impacted by
the economic consequences of COVID19.
As per preceding discussions, sales across both brands continued
to be weighed down by drop in consumer foot traffic as a direct
result of restrictions from the COVID-19 pandemic.
Operating costs and expenses
Operating costs
and expenses include the costs of Company-owned stores and product
sales, general and administrative expenses, loss on disposal of
assets, and depreciation and amortization. Total operating costs
and expenses for the Quarter totaled $3,879,000 (2020 - $4,280,000) a decrease of $401,000. Operating costs in the Quarter were
partially reduced by the amount of the financial relief that the
Company applied for in connection with the Canada Emergency Wage Subsidy and the
Canada Emergency Rent Subsidy
programs introduced by the Federal Government in response to the
ongoing COVID-19 pandemic.
Company-owned stores and product related expenses for the
Quarter were $2,514,000 (2020 -
$2,647,000) - $1,158,000 is attributable to Hemisphere (2020 -
$33,000) and $1,356,000 (2020 - $2,614,000) attributable to Bridgehead. For
the Quarter, Bridgehead applied for $495,000 and $412,000 in subsidies provided by the CEWS and
CERS government programs, respectively.
General and administrative expenses were $608,000 (2020 - $653,000) for the Quarter, of which $186,000 attributable to Bridgehead and
$422,000 is attributable to Aegis.
The decrease of $45,000 is primarily
due to a reduction in remuneration.
Depreciation and amortization expense was $757,000 (2020 - $616,000), of which $216,000 is attributable to Hemisphere,
$531,000 attributable to Bridgehead
and $9,000 is attributable to Aegis
Corporate. Total amortization of right-of-use assets was
$499,000 and the amortization on
fixed and intangible assets came to $258,000.
EBITDA
EBITDA for the Quarter from continuing operations was
$170,000 compared with EBITDA loss of
$443,000 last year. Adjusted
for asset impairment charges of $364,000 last year (2021 - $nil), EBITDA loss for
last year was $79,000.
Interest and Financing Costs
The Company
reported net interest and financing costs of $180,000 from continuing operations. This is
composed primarily of interest expense recorded on the Company's
lease payments for right-of-use assets recognized in accordance
with IFRS 16.
Net loss
The Company reported a net loss from continuing operations for
the Quarter of $661,000 or
$0.03 per share compared with
$824,000 or $0.04 per share last year. Total net loss
and comprehensive loss came to $1,801,000 or $0.08
per share compared with $2,897,000 or
$0.13 per share last year.
Reconciliations of net income (loss) to EBITDA, adjusted EBITDA,
adjusted net income (loss) and adjusted net income (loss) per share
are provided in the section "Definitions and Discussion of Certain
non-IFRS Financial Measures".
DEFINITIONS AND DISCUSSION ON CERTAIN NON-GAAP FINANCIAL
MEASURES
In this MD&A, the Company reports certain non-GAAP financial
measures such as system sales of cafés and stores, same café and
store sales, operating income (loss), EBITDA, adjusted EBITDA,
adjusted net income (loss) and adjusted net income (loss) per
share. Non-GAAP measures are not defined under IFRS and are
not necessarily comparable to similarly titled measures reported by
other issuers.
System sales of cafés and stores
System sales
of cafés and stores comprise the Gross Revenue from
Company-operated cafés and retail cannabis dispensaries.
Same café and store sales
Same café and store
sales represents the percentage change, on average, in retail sales
at cafés and retail cannabis dispensaries that have been open for
more than 12 months. It is one of the key metrics the Company
uses to assess its performance and provides a useful comparison
between fiscal quarters. The two principal factors that
affect this metric are changes in customer traffic and changes in
average check (the average dollar amount on a single transaction at
the café or store). For comparison, same café sales for Bridgehead
were measured against sales in the prior year before acquisition by
the Company.
Operating income (loss)
Operating income (loss)
represents revenue, less cost of goods sold, less operating
expenses, and less impairment charges. This measure is not defined
under IFRS, although the measure is derived from input figures in
accordance with IFRS. Management views this as an indicator
of financial performance that excludes costs pertaining to interest
and financing, and income taxes.
EBITDA and adjusted EBITDA
EBITDA represents
earnings before interest and financing, income taxes, and
depreciation and amortization. Adjustments to EBITDA are for
items that are not necessarily reflective of the Company's
underlying operating performance. As there is no generally
accepted method of calculating EBITDA, this measure is not
necessarily comparable to similarly titled measures reported by
other issuers. EBITDA is presented as management believes it is a
useful indicator of the Company's ability to meet debt service and
capital expenditure requirements and evaluate liquidity.
Management interprets trends in EBITDA as an indicator of
relative financial performance. EBITDA should not be considered by
an investor as an alternative to net income or cash flows as
determined in accordance with IFRS.
Adjusted net income (loss) and adjusted net income (loss)
per share
Adjustments to net earnings (loss) and net
earnings (loss) per share are for items that are not necessarily
reflective of the Company's underlying operating performance. These
measures are not defined under IFRS, although the measures are
derived from input figures in accordance with IFRS.
Management views these as indicators of financial performance.
Reconciliations of net income (loss) to operating income (loss)
and EBITDA, adjusted net income (loss) and adjusted net income
(loss) per share are provided below ($000's except per share
amounts):
|
|
13 weeks ended
March 27, 20211
|
|
13 weeks ended
March 28, 2020
|
|
|
|
|
|
Net income
(loss)
|
$
|
(1,801)
|
$
|
(2,897)
|
Add
(deduct):
|
|
|
|
|
Net loss from
discontinued operation
|
|
1,140
|
|
2,073
|
Income taxes
(recovery)
|
|
(106)
|
|
(297)
|
Interest and
financing expense
|
|
180
|
|
62
|
Operating loss,
continuing operations
|
$
|
(587)
|
$
|
(1,059)
|
|
|
13 weeks ended
March 27, 20211
|
|
13 weeks ended
March 28, 2020
|
|
|
|
|
|
Net loss
|
$
|
(1,801)
|
$
|
(2,897)
|
Add
(deduct):
|
|
|
|
|
Net loss from
discontinued operations
|
|
1,140
|
|
2,073
|
Income tax
recovery
|
|
(106)
|
|
(297)
|
Interest and
financing expenses
|
|
180
|
|
62
|
Depreciation of
property and equipment
|
|
246
|
|
229
|
Amortization of
intangible assets
|
|
12
|
|
-
|
Amortization of
right-of-use asset
|
|
499
|
|
387
|
EBITDA, continuing
operations
|
|
170
|
|
(443)
|
Add impact of the
following:
|
|
|
|
|
Asset impairment
charges
|
|
-
|
|
364
|
Adjusted EBITDA,
continuing operations
|
$
|
170
|
$
|
(79)
|
|
|
13 weeks ended
March 27, 20211
|
|
13 weeks ended
March 28, 2020
|
|
|
|
|
|
Net loss
|
$
|
(1,801)
|
$
|
(2,897)
|
Add (deduct) impact
of the following:
|
|
|
|
|
Net loss from
discontinued operations
|
|
1,140
|
|
2,073
|
After-tax asset
impairment charges
|
|
-
|
|
267
|
Adjusted net loss,
continuing operations
|
$
|
(661)
|
$
|
(557)
|
|
|
13 weeks ended
March 27, 20211
|
|
13 weeks ended
March 28, 2020
|
|
|
|
|
|
Net loss per
share
|
$
|
(0.08)
|
$
|
(0.13)
|
Add (deduct) impact
of the following:
|
|
|
|
|
Net loss from
discontinued operations
|
|
0.05
|
|
0.09
|
After-tax asset
impairment
|
|
-
|
|
0.01
|
Adjusted net loss per
share, continuing operations
|
$
|
(0.03)
|
$
|
(0.03)
|
1 The
Company's results in fiscal 2021 reflect the consolidated financial
statements of its operating brands including Bridgehead and
Hemisphere.
|
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of Canadian securities laws. These forward-looking
statements contain statements of intent, belief or current
expectations of Aegis. Forward-looking information is often, but
not always identified by the use of words such as "anticipate",
"believe", "expect", "plan", "intend", "forecast", "target",
"project", "may", "will", "should", "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting
an outlook.
The forward-looking statements included in this press
release, including statements regarding the earn-out component of
the purchase price, the nature of Aegis' growth strategy going
forward and execution on any of its potential plans (including with
respect to the growth and development of Bridgehead Coffee and
Hemisphere Cannabis and identification of future acquisition
targets), and the strength of Aegis' balance sheet going forward,
are not guarantees of future results and involve risks and
uncertainties that may cause actual results to differ materially
from the potential results discussed in the forward-looking
statements. In respect of the forward-looking statements and
information included in this press release, Aegis has provided such
in reliance on certain assumptions that it believes are reasonable
at this time, including the ability of the Company to manage the
risks (economic, operational, financial, and other risks)
associated with the COVID-19 pandemic, the ability of the
Company to identify new acquisition opportunities and to
successfully integrate past and future acquisition targets into the
Company's business, and the Company's ability to generally execute
on its strategy going forward. Accordingly, readers should not
place undue reliance on the forward-looking statements and
information contained in this news release.
Risks and uncertainties that may cause such differences
include but are not limited to: risks that the Transaction may have
a negative impact on the market price and liquidity of the common
shares; risks that no amounts on account of the earn-out may ever
be paid; risks related to the Company's strategy going forward;
risks related to the COVID-19 pandemic; and other risks inherent in
the industry in which Aegis operates.
When relying on forward-looking statements to make decisions,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. Readers are
cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could affect
Aegis' operations or financial results are included in reports on
file with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com).
The forward-looking statements in this press release are made
as of the date it was issued and Aegis does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
By their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and risks that
outcomes implied by forward-looking statements will not be
achieved. Aegis cautions readers not to place undue reliance on
these statements.
SOURCE Aegis Brands Inc.