- Revenue increases 30% year-over-year to
$31.4 million - Adjusted EBITDA grows 34% to
$8.3 million - Net Income of
$1.2 million and Adjusted Net Income of$3.6 million , a 35% increase over Q1 2019
VAUGHAN, ON,
"We thank our dedicated team and extended partners for their efforts in recent months. It has been a difficult period, but we have and will continue to do our best to serve our consumers and retail partners," said
"While we operate in a resilient category, we expect that industry-wide haircare sales will be affected in the near term from reduced retail traffic and other factors. As we navigate this period, we will continue to take appropriate steps to mitigate the impacts to our operations and financial results."
Selected Financial Highlights(1)(2)
(in thousands of US dollars except per share amounts) (unaudited) | Q1 2020 | Q1 2019 | |
Revenue | 31,382 | 24,104 | |
Gross profit | 14,394 | 11,959 | |
Net income (loss) for the period | 1,235 | 1,105 | |
Earnings per Share (basic) | 0.03 | 0.03 | |
Adjusted EBITDA | 8,314 | 6,209 | |
Free Cash Flow | (2,925) | 337 | |
Adjusted Net Income | 3,619 | 2,687 | |
Adjusted Earnings per Share (basic) | 0.10 | 0.07 |
(1) | See "Non-IFRS Measures" |
(2) | Basic Earnings per Share and Adjusted Earnings per Share calculations do not include the impact of 2,463,963 shares issuable upon the exchange of the units issued as part of The Mane Choice acquisition. |
Q1 2020 Financial Review
Revenue for Q1 2020 increased by 30% over the prior year to
Revenue from
Revenue from international markets was
Q1 2020 gross profit, as reported, was
Q1 2020 Adjusted EBITDA increased by 34% to
In Q1 2020, the Company reported net income of
Free Cash Flow was
COVID-19 Response
- To ensure the health and safety of our employees, we have moved to a virtual working environment. Team productivity and morale remain strong even through these difficult times.
- Our products are manufactured in
North America through a diverse set of third-party suppliers, many of which continue to be deemed essential workplaces. Our operations team has taken steps to minimize potential supply chain disruptions, including identifying and readying additional suppliers, increasing the inventory of finished goods and components, and temporarily increasing finished goods inventory on core SKUs. We have experienced some delays in the availability of packaging and components for Cake Beauty; however, there were no material effects in the first quarter. We continue to monitor the supply chain closely to mitigate potential risks to our business. - In light of the near-term sales impact from COVID-19, at the end of the first quarter, we swiftly reduced operating expenses, particularly discretionary expenses, which will be evident beginning in Q2 2020. In addition, our capital expenditures are expected to be significantly lower in 2020.
- While e-commerce represents a small part of our business today, the current crisis has led to a strong acceleration in e-commerce sales. We have invested in our capabilities in recent years and will continue to add resources and investments as required to support profitable sales growth. For Q1 2020, e-commerce sales more than doubled over the prior year.
Q1 2020 Financial Statements and Management's Discussion and Analysis
The Company's unaudited consolidated interim financial statements for the three-month period ended
Conference Call & Webcast
About
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 Net Income", "Free Cash Flow" 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 MD&A. Such reconciliations can also be found in this press release under the headings "Q1 2020 Compared to Q1 2019".
"Adjusted EBITDA" represents, for the applicable period, EBITDA 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) shareholder fees and related costs; (iii) purchase accounting adjustments; (iv) share–based compensation; and (v) unrealized foreign exchange (gain) loss.
"Adjusted Net Income" represents, for the applicable period, net income (loss) and comprehensive 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) shareholder fees and related costs; (iii) purchase accounting adjustments; (iv) share–based compensation; (v) unrealized foreign exchange (gain) loss; and (vi) tax impacts of the aforementioned adjustments (based on annual effective tax rate).
"EBITDA" represents net income (loss) and comprehensive net income (loss) for the period before: (i) income tax (recovery) expense; (ii) interest; 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
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 statements relating to the expected impact of the COVID-19 public health crisis on the Company's operations and ability to serve its consumers and retail partners, the impact to industry-wide haircare sales, the impact of COVID-19 on e-commerce sales, the expected impact on the supply of the Company's products to its retail partners. 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
Q1 2020 Compared to Q1 2019
(in thousands of US dollars) (unaudited) | Q1 2020 | Q1 2019 | $ Change | % Change | |||||
Consolidated statements of operations: | |||||||||
Revenue | 31,382 | 24,104 | 7,278 | 30.2% | |||||
Cost of sales | 16,988 | 12,145 | 4,843 | 39.9% | |||||
Gross profit | 14,394 | 11,959 | 2,435 | 20.4% | |||||
Expenses | |||||||||
Selling and administrative | 8,291 | 6,899 | 1,392 | 20.2% | |||||
Amortization and depreciation | 1,029 | 847 | 182 | 21.5% | |||||
Interest and accretion | 2,042 | 1,902 | 140 | 7.4% | |||||
Foreign exchange gain | (471) | (83) | (388) | nmf | |||||
Integration, restructuring, and other | 1,460 | 1,058 | 402 | 38.0% | |||||
12,351 | 10,623 | 1,728 | 16.3% | ||||||
Income before income taxes | 2,043 | 1,336 | 707 | 52.9% | |||||
Income tax expense | |||||||||
Current | 84 | — | 84 | nmf | |||||
Deferred | 724 | 231 | 493 | 213.4% | |||||
808 | 231 | 577 | 249.8% | ||||||
Net income for the period | 1,235 | 1,105 | 130 | 11.8% | |||||
EBITDA (1) | 5,114 | 4,085 | 1,029 | 25.2% | |||||
Adjusted EBITDA (1) | 8,314 | 6,209 | 2,105 | 33.9% | |||||
Adjusted Net Income (1) | 3,619 | 2,687 | 932 | 34.7% |
(1) | See "Non-IFRS Measures". |
(in thousands of US dollars) (unaudited) | Q1 2020 | Q1 2019 | |||||
Consolidated net income: | 1,235 | 1,105 | |||||
Income tax expense | 808 | 231 | |||||
Interest and accretion | 2,042 | 1,902 | |||||
Amortization and deprecation | 1,029 | 847 | |||||
EBITDA | 5,114 | 4,085 | |||||
Integration, restructuring, and other | (1) | 1,460 | 1,058 | ||||
Purchase accounting adjustments | (2) | 1,657 | — | ||||
Share-based compensation | (3) | 629 | 1,093 | ||||
Unrealized foreign exchange gain | (546) | (27) | |||||
Adjusted EBITDA | 8,314 | 6,209 |
(in thousands of US dollars) (unaudited) | Q1 2020 | Q1 2019 | |||||
Consolidated net income: | 1,235 | 1,105 | |||||
Integration, restructuring, and other | (1) | 1,460 | 1,058 | ||||
Purchase accounting adjustments | (2) | 1,657 | — | ||||
Share-based compensation | (3) | 629 | 1,093 | ||||
Unrealized foreign exchange gain | (546) | (27) | |||||
Tax impact of the above adjustments | (816) | (542) | |||||
Adjusted Net Income | 3,619 | 2,687 |
(1) Refer to Note 9 to the unaudited condensed consolidated interim 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) | Q1 2020 | Q1 2019 | $ Change | % Change | ||||
Cash, beginning of period | 5,672 | 5,841 | (169) | -2.89% | ||||
Cash flows (used in) | ||||||||
Operating activities | (2,647) | 850 | (3,497) | nmf | ||||
Investing activities | (1,814) | (1,289) | (525) | 40.73% | ||||
Financing activities | 3,000 | (1,085) | 4,085 | nmf | ||||
Cash, end of period | 4,211 | 4,317 | (106) | -2.46% | ||||
Free cash flow and Adjusted free cash flow (1) | (2,925) | 337 | (3,262) | nmf |
(1) | See "Non-IFRS Measures". |
SOURCE
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