MAV Beauty Brands Inc., a global personal care platform, announced its financial results for the three and nine months ended 30th September, 2020.
“We are pleased to report another quarter of strong results in 2020, particularly in light of the extraordinary operating environment. The results were highlighted by double-digit revenue growth, record Adjusted EBITDA, and robust free cash flow,” said Tim Bunch, President & CEO of MAV Beauty Brands.
“The third-quarter results add to our strong year-to-date performance across these key financial measures. This speaks to the great efforts of our team and the resilience of the platform, which is increasingly diversified across brands, consumers, segments, and channels. These attributes serve us well in periods of uncertainty, mitigating risk while allowing us to benefit from shifting consumer preferences. The growth of our e-commerce business continues to be a bright spot in 2020, with sales once again more than doubling year over year,” continued Tim.
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
Revenue for Q3 2020 grew by 12% over Q3 2019 to $31.7 million. Growth in the quarter reflected the group’s proven ability to accretively acquire businesses such as The Mane Choice (in November 2019), tempered by COVID-19 headwinds which reduced retail foot traffic and temporarily reduced promotional activity at key retail partners as many of these retailers re-allocated promotional shelf space to other COVID-related essential items. Revenue from North America (which represents approximately 95% of total revenue) was $30.0 million in Q3 2020, up 15% from $26.0 million in Q3 2019.
For the fiscal year to date, revenue grew both organically and inorganically by 19% over 2019 to $92.8 million, reflecting the same factors mentioned above. In general, performance matched its objective of coupling accretive M&A with organic growth that outpaces the overall category. Despite the uncertain and extraordinary environment in retail in 2020, the group believes this revenue growth demonstrates the value of its platform.
Over the past year, the group continued to leverage its operating platform to build brands and drive organic growth, using a four-pronged strategy: 1) expand the distribution footprint; 2) introduce winning innovation; 3) amplify the brands; 4) drive efficiencies. Over the past year, MAV Beauty Brands have effectively executed on each of the strategies. It has secured new distribution for each of its brands and accelerated e-commerce sales; expanded skin care products through innovation; greatly increased brand impressions through our marketing efforts; and generated efficiencies in cost of goods sold.
Q3 2020 gross profit increased 12% year over year to $15.7 million, and Q3 2020 gross profit margin, at 49.6%, was similar to the prior year period (49.8%). It is expected some variability in gross margin quarter to quarter based on product mix and promotional decisions, which impact trade spend. Importantly, the group has been successful at generating product cost savings over the past year which has allowed for steady margin improvements, as reflected in year-to-date gross margin of 51% compared to 49% in the prior year.
Excluding share-based compensation charges of $0.4 million, Q3 2020 selling and administrative expense was $6.9 million, or 22% of sales, compared with $5.6 million, or 20% of sales, in the same period last year, excluding $0.7 million of share-based compensation charges in Q3 2019. While higher than the prior year, primarily as a result of the addition of The Mane Choice, selling and administrative expense has remained relatively constant in 2020.
Q3 2020 cash flow from operations was $7.0 million, up 18% from the prior year. In addition, the current quarter reflects increased working capital investment, primarily due to higher receivables as a result of increased revenues, and higher inventory. As a result, the company generated Adjusted Free Cash Flow of $4.4 million in Q3 2020, compared with $5.6 million in Q3 2019. 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 3.9 times, compared with 4.0 times at the end of Q2 2020.