MAV Beauty Brands Inc., a global personal care company, announced its financial results for the three months ended 31st March, 2020.
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“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. Our first-quarter sales and Adjusted EBITDA showed strong year-over-year increases from healthy organic growth and the addition of The Mane Choice. First-quarter sales reflect the positive impact of 2020 shelf gains, and we believe also benefited from consumers stocking up on essential items as the majority of our North American food, drug, and mass retailers have remained open during lockdowns. These positive drivers, combined with higher e-commerce sales, offset headwinds we experienced in the quarter, including the initial impact of store closures in specialty beauty and softness in our international business,” said Tim Bunch, President & CEO of MAV Beauty Brands.
“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,” continued Tim.
Revenue for Q1 2020 increased by 30% over the prior year to $31.4 million, driven by the continued organic growth of the company’s brands within existing North American retailer partners. These factors offset lower international sales and the initial impact of COVID-19 on certain retail partners, among other factors.
Revenue from North America was $30.2 million in Q1 2020, up 34% from $22.5 million in Q1 2019. The company continues to leverage its operating platform and innovation engine to support the success of its brands. Recent highlights include: Cake Beauty’s expanded distribution at its flagship U.S. drug retailer with a second shelf and its launch in a U.S. specialty beauty retailer; The Mane Choice launched in a key mass retailer in Canada and a U.S. specialty beauty retailer; and Renpure broadened its distribution footprint in Canada.
Revenue from international markets was $1.2 million, down from $1.6 million in the prior period due primarily to the impact of COVID-19 in March, which immediately delayed product shipments.
Q1 2020 gross profit, as reported, was $14.4 million, compared with $12.0 million last year, and gross profit margins were 45.9% in Q1 2020. Excluding the purchase accounting adjustments for The Mane Choice acquisition, gross profit margin was 51.1% for Q1 2020, compared to 49.6% in the prior period.
Q1 2020 Adjusted EBITDA increased by 34% to $8.3 million (26.5% of revenue), from Adjusted EBITDA of $6.2 million in Q1 2019 (25.8% of revenue), reflecting higher revenue and gross profit.
In Q1 2020, the company reported net income of $1.2 million, compared to net income of $1.1 million in Q1 2019. Adjusted net income increased by 35% to $3.6 million, compared with Adjusted net income of $2.7 million in Q1 2019, in line with the growth of Adjusted EBITDA. Adjusted earnings per share (basic) was $0.10 per share in Q1 2020, compared with $0.07 per share in Q1 2019.
Free Cash Flow was $2.9 million in Q1 2020, compared with $0.3 million in Q1 2019. Free cash flow for Q1 2020 reflects increased working capital requirements in the period, principally higher receivables as a result of year-over-year revenue growth and temporary delays in customer invoicing following the implementation of a new ERP system at the start of 2020.
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Management believes this is a one-time issue related to the ERP implementation. This has been addressed and the company is seeing improvements in the second quarter. In addition, the company took proactive steps to ensure healthy inventory levels across the portfolio to avoid potential supply shortages due to COVID-19.