MAV Beauty Brands Reports Fourth Quarter & Full-Year 2020 Financial Results

• Business demonstrates resilience during 2020
• Full-year revenue of $116.5 million (2019: $108.5 million)
• Adjusted EBITDA of $28.5 million (2019: $29.5 million)
• Net income of $6.5 million (2019: $4.1 million)
• Adjusted Free Cash Flow of $13.4 million (2019: $9.8 million) 
• Q4 2020 results in line with previously reported Q4 2020 preliminary results, impacted by COVID-related factors
• Q4 revenue of $23.8 million (2019: $30.8 million)
• Adjusted EBITDA of $3.4 million (2019: $8.5 million)
• Net income of $0.1 million (2019: net loss of $1.2 million) Adjusted Free Cash Flow of $4.8 million (2019: $3.0 million)
• Subsequent to year end, Company initiated a strategic review process to identify, review and evaluate potential strategic alternatives   
• MAV announces resignation of Judy Adam, Chief Financial Officer, effective May 10, 2021 and Interim CFO transition plan

VAUGHAN, ON, March 31, 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 twelve months ended December 31, 2020. 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).

"Despite an uncertain and extraordinary environment in retail, our business remained solidly profitable and generated healthy free cash flow in 2020," stated Tim Bunch, Chief Executive Officer of MAV Beauty Brands. "Although COVID negatively impacted our results, as it did the total market, the resilience of our business underscores the durability of our categories, the strength and diversification of MAV's portfolio, and the benefit of our asset-light operating model. We were able to quickly react to capitalize on robust online demand, resulting in sales from e-commerce channels more than doubling over 2019."     

Mr. Bunch added: "As we reported with our preliminary Q4 2020 results, a combination of COVID-related factors had a more pronounced impact on the fourth-quarter results. Sales stabilized and improved in the first quarter, especially in January and February, however, we experienced some impact from the severe weather across major parts of the U.S. in March. While we will continue to monitor and adjust to the market conditions, we are optimistic that 2021 will present a more favorable operating environment for our retail partners as vaccination rates increase and the economy opens up. We have a diversified portfolio of four on-trend brands that we expect will deliver above-category growth over time." 

Selected Financial Highlights⁽¹⁾⁽²⁾ 

(in thousands of US dollars except per share amounts) (unaudited)	Q4 2020	Q4 2019	FY 2020	FY 2019
Revenue	23,782	30,788	116,543	108,496
Gross profit	9,518	13,374	54,186	51,814
Net income (loss) for the period	108	(1,189)	6,506	4,072
Earnings per share (basic)	0.00	(0.03)	0.18	0.11
Adjusted EBITDA	3,397	8,501	28,470	29,487
Cash flow from operations	1,874	3,803	18,145	17,250
Adjusted Free Cash Flow	4,837	3,034	13,438	9,783
Adjusted Net Income	800	2,295	12,637	11,372
Adjusted Earnings per Share (diluted)	0.02	0.06	0.30	0.28

(1)	See "Non-IFRS Measures"
(2)	Basic Earnings per Share 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

Q4 2020 Business and Financial Review 

Q4 2020
Revenue for Q4 2020 decreased to $23.8 million from $30.8 million last year, reflecting the COVID-19 related factors previously disclosed in the Company's preliminary results, including a category-wide decrease in haircare sales and temporary disruptions in its third-party warehousing and manufacturing operations. The overall haircare category in U.S. food, drug, and mass ("FDM") retailers experienced a single digit sales decline in Q4 2020, the largest decline of any quarter in 2020⁽¹⁾. Sales in the drug channel, where MAV over-indexes in sales and distribution, were most severely impacted with a low double-digit sales decline during the same period⁽¹⁾, reflecting what we believe to be reduced retail foot traffic particularly in front of store, due to COVID-related restrictions and lockdowns, among other factors. These declines resulted in decreased and delayed retailer replenishment as retailers adjusted inventory levels to reflect lower sell-through. Partly offsetting these factors, the Company's e-commerce results remain robust, led by strong Amazon sales of several of the Company's brands. In addition, revenue from international customers increased by 72.8% to $1.6 million, compared to $0.9 million in Q4 2019 in Q4.

Q4 2020 gross profit decreased year over year to $9.5 million, from $13.4 million in the same period last year, reflecting the same COVID-19 related factors mentioned above. Q4 2020 gross profit margin was 40.0%, compared to 43.4% in Q4 2019 (or 47.8%, excluding the impact of the purchase accounting adjustments for The Mane Choice acquisition in Q4 2019). The year-over-year decline was primarily driven by additional costs associated with annual retailer shelf resets, which resulted in higher-than-normal markdowns and discontinuations that partly reflect shifting consumer preferences during the pandemic. In terms of SKU distribution, the markdowns were largely offset by new SKU introductions, which management believes will perform better than the SKUs that were replaced.

Q4 2020 Adjusted EBITDA decreased to $3.4 million (14.3% of revenue), from Adjusted EBITDA of $8.5 million in Q4 2019 (27.6% of revenue) (see "Non-IFRS Measures" below), reflecting lower sales and gross margins in the period. In Q4 2020, the Company reported net income of $0.1 million, compared with a loss of $1.2 million in Q4 2019, and Adjusted Net Income was $0.8 million, compared with Adjusted Net Income of $2.3 million in Q4 2019, reflecting the factors discussed above (see "Non-IFRS Measures" below).

Adjusted Free Cash Flow increased to $4.8 million in Q4 2020, compared with $3.0 million in Q4 2019 reflecting lower working capital investment in the quarter which offset lower cash from operations (see "Non-IFRS Measures" below).

Full-Year 2020
For the full year 2020, revenue increased by 7.4% to $116.5 million, which mainly reflects the addition of The Mane Choice (acquired at the end of fiscal 2019). Revenue from North America was $110.5 million in 2020 (which represented approximately 95% of total revenue in 2020), up 9.5% from 2019, partially offset by a 20.0% decline in sales from international markets, which were predominantly affected by COVID-19 related closures.  

For the full year, gross profit increased by 4.6% to $54.2 million, compared to $51.8 million in 2019. Gross profit margin, as reported, was 46.7% in 2020 compared to 47.8% in 2019.  Excluding the impact of purchase accounting adjustments from The Mane Choice acquisition, gross profit margin was 48.5% in 2020 compared to 49.0% in 2019.

Despite the headwinds from COVID-19, the Company remained solidly profitable in 2020. For the full year 2020, Adjusted EBITDA decreased by 3.4% to $28.5 million (24.4% of revenue) compared to $29.5 million (27.2% of revenue) in 2019. The Company reported net income of $6.5 million in 2020 (Adjusted Net Income: $12.6 million), up from $4.1 million (Adjusted Net Income: $11.4 million) in 2019 for the reasons set forth above.

Adjusted Free Cash Flow grew to $13.4 million in 2020, compared with $9.8 million in 2019 (see "Non-IFRS Measures" below). On a Pro Forma basis, including the results of The Mane Choice for the trailing 12 months, the Net Debt-to-Adjusted EBITDA ratio was 4.4 times at year-end, due to the Q4 2020 business impacts as described above, compared with 3.9 times at the end of Q3 2020 (see "Non-IFRS Measures" below). 

(1)  Source: AC Nielsen

Executive Transition

The Company has announced that, effective May 10, 2021, Judy Adam will resign her position as Chief Financial Officer of the Company, and Niv Majar, the Vice President of Finance, will assume the position of Interim Chief Financial Officer until a replacement is found. Mr. Majar is a Chartered Professional Accountant, began his career at Ernst & Young and has leadership experience at public companies serving in various finance and controller roles. He earned an Honours Bachelor of Administrative Studies degree in Accounting from York University.

Strategic Review Process

As previously announced on February 18, 2021, the Board has initiated a strategic review process to identify, review and evaluate potential strategic alternatives that may be available to the Company.

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, on the recommendation of the special committee, or otherwise determines that disclosure is necessary or appropriate. The initiation of the strategic review process is not in response to any proposed transaction and there are 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.

Q4 2020 Financial Statements and Management's Discussion and Analysis

The Company's audited annual consolidated financial statements for the three-month and 12-month periods ended December 31, 2020 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 2020 fourth quarter and full-year financial results at 8:30 a.m. EDT on March 31, 2021. The call will be hosted by Tim Bunch, President & Chief Executive Officer, and Judy Adam, Chief Financial Officer. To participate in the call, dial [phone] or [phone] using the conference ID 47144796. The audio webcast can be accessed at investors.mavbeautybrands.com. 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 True Professional, 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 EBITDA", "Adjusted Free Cash Flow", "Adjusted Net Income", "EBITDA", "Free Cash Flow" and "Net debt and Net debt-to-Adjusted EBITDA". 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 "Q4 2020 Compared to Q4 2019".

"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) unrealized foreign exchange loss (gain); and (v) 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 and Net debt-to-Adjusted EBITDA" net debt is calculated as long-term debt before unamortized deferred financing costs less cash as reported in the consolidated statements of financial position. Net debt-to-Adjusted EBITDA is calculated as net debt divided by Adjusted EBITDA for the four trailing quarters. Net debt is an important measure as it reflects the principal amount of debt owing by the Company as at a particular date. Net debt-to-Adjusted EBITDA is an important measure of the Company's liquidity. References to such calculation on a pro forma basis gives effect to the acquisition of The Mane Choice as if it occurred on January 1, 2019.

In addition, pro forma information regarding The Mane Choice should not be considered to be what the actual financial position or other results of operations of the Company would have necessarily been had The Mane Choice acquisition been completed, as, at, or for the periods stated.

Forward-Looking Information
Certain information in this press release, including trends and expectations regarding sales in the first quarter of 2021, statements regarding the 2021 operating environment, expectations regarding the Company's growth, ongoing factors related to the COVID-19 pandemic that may affect the performance of the Company, statements relating to the Company's ability to mitigate such factors and navigate the business environment during the COVID-19 pandemic and the Company's ability to identify, solicit and realize strategic alternatives as part of the strategic review process and the timing and terms of any strategic transaction, 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 on or about March 30, 2021 for the year ended December 31, 2020 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.

Q4 2020 Compared to Q4 2019 & F2020 Compared to F2019

(in thousands of US dollars) (unaudited)	Q4 2020	Q4 2019	$ Change	% Change
Consolidated statements of operations:
Revenue	23,782	30,788	(7,006)	(22.8%)
Cost of sales	14,264	17,414	(3,150)	(18.1%)
Gross profit	9,518	13,374	(3,856)	(28.8%)
Expenses
Selling and administrative	6,446	6,833	(387)	(5.7%)
Amortization and depreciation	1,081	953	128	13.4%
Interest and accretion	1,841	1,910	(69)	(3.6%)
Foreign exchange loss	408	389	19	4.9%
Integration, restructuring, and other	196	2,328	(2,132)	(91.6%)
	9,972	12,413	(2,441)	(19.7%)
Income before income taxes	(454)	961	(1,415)	(147.2%)
Income tax expense (recovery)
Current	(20)	(586)	566	(96.6%)
Deferred	(542)	2,736	(3,278)	(119.8%)
	(562)	2,150	(2,712)	(126.1%)
Net income (loss) for the period	108	(1,189)	1,297	(109.1%)
EBITDA ^(1)	2,468	3,824	(1,356)	(35.5%)
Adjusted EBITDA ^(1)	3,397	8,501	(5,104)	(60.0%)
Adjusted Net Income ^(1)	800	2,295	(1,495)	(65.1%)
(in thousands of US dollars)	Fiscal 2020	Fiscal 2019	$ Change	% Change
Consolidated statements of operations:
Revenue	116,543	108,496	8,047	7.4%
Cost of sales	62,357	56,682	5,675	10.0%
Gross profit	54,186	51,814	2,372	4.6%
Expenses
Selling and administrative	29,819	27,127	2,692	9.9%
Amortization and depreciation	4,209	3,645	564	15.5%
Interest and accretion	7,421	7,392	29	0.4%
Foreign exchange loss	318	485	(167)	(34.4%)
Integration, restructuring, and other	3,808	4,514	(706)	(15.6%)
	45,575	43,163	2,412	5.6%
Income before income taxes	8,611	8,651	(40)	(0.5%)
Income tax expense
Current	—	41	(41)	(100.0%)
Deferred	2,105	4,538	(2,433)	(53.6%)
	2,105	4,579	(2,474)	(54.0%)
Net income for the year	6,506	4,072	2,434	59.8%
EBITDA ^(1)	20,241	19,688	553	2.8%
Adjusted EBITDA ^(1)	28,470	29,487	(1,017)	(3.4%)
Adjusted Net Income ^(1)	12,637	11,372	1,265	11.1%

(1)  See "Non-IFRS Measures".

(in thousands of US dollars) (unaudited)		Q4 2020	Q4 2019	Fiscal 2020	Fiscal 2019
Consolidated net income (loss):		108	(1,189)	6,506	4,072
Income tax expense		(562)	2,150	2,105	4,579
Interest and accretion		1,841	1,910	7,421	7,392
Amortization and deprecation		1,081	953	4,209	3,645
EBITDA		2,468	3,824	20,241	19,688
Integration, restructuring, and other	(1)	196	2,328	3,808	4,514
Purchase accounting adjustments	(2)	—	1,354	2,321	1,354
Share-based compensation	(3)	314	609	2,006	3,422
Unrealized foreign exchange loss		419	386	94	509
Adjusted EBITDA		3,397	8,501	28,470	29,487

(in thousands of US dollars) (unaudited)		Q4 2020	Q4 2019	Fiscal 2020	Fiscal 2019
Consolidated net income (loss):		108	(1,189)	6,506	4,072
Integration, restructuring, and other	(1)	196	2,328	3,808	4,514
Purchase accounting adjustments	(2)	—	1,354	2,321	1,354
Share-based compensation	(3)	314	609	2,006	3,422
Unrealized foreign exchange loss (gain)		419	386	94	509
Tax impact of the above adjustments		(237)	(1,193)	(2,098)	(2,499)
Adjusted Net Income		800	2,295	12,637	11,372

(1)	Refer to Note 12 to the annual audited consolidated financial statements for further details.
(2)	In conjunction with the 2019 Acquisition, the fair value adjustment of inventory as part of the initial purchase price allocation was expensed to cost of sales as the inventories were sold.
(3)	Represents recognition of share-based payments, which have been accounted for as selling and administrative expenses.

(in thousands of US dollars) (unaudited)	Q4 2020	Q4 2019	Fiscal 2020	Fiscal 2019
Cash provided by operating activities	5,066	1,382	14,781	10,116
Less: purchase of property and equipment	(229)	(222)	(1,343)	(2,468)
Free cash flow	4,837	1,160	13,438	7,648
Add: Acquisition related costs	—	1,874	—	2,135
Adjusted free cash flow	4,837	3,034	13,438	9,783

(1)  See "Non-IFRS Measures".

SOURCE MAV Beauty Brands

Craig Armitage, Investor Relations, [email protected], [phone]

Related Links

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