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MAV Beauty Brands Reports Second Quarter 2018 Financial Results

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MAV Beauty Brands Reports Second Quarter 2018 Financial Results

Canada NewsWire

  • Revenue increased to $22.9 million on 34% organic growth
  • Adjusted EBITDA increased to $6.7 million
  • Net Loss of $3.0 million and Adjusted Net Income of $1.1 million
  • Company reaffirms full-year 2018 financial guidance

CONCORD, ON, Aug. 14, 2018 /CNW/ - MAV Beauty Brands Inc. ("MAV Beauty Brands" or the "Company"), a high-growth global personal care company, today announced its financial results for the three and six months ended June 30, 2018. Unless otherwise indicated, all amounts are expressed in U.S. dollars. Certain metrics, including those expressed on an adjusted or pro forma basis, are non-IFRS measures (see "Non-IFRS Measures" below).

In Q1 2018, the Company completed the acquisitions of Cake Beauty Inc. on January 23, 2018 (the "Cake Acquisition") and Renpure, LLC on March 8, 2018 (the "Renpure Acquisition" and together with the Cake Acquisition, the "Acquisitions"). The unaudited consolidated financial statements for the 2018 fiscal year to date include the results of Cake Beauty and Renpure as of their respective acquisition dates. The Company's reported results for the comparable periods in 2017 do not include these acquired companies.

Selected IFRS and Pro Forma Financial Information

To assist readers in assessing year-over-year performance, the Company has also included selected unaudited pro forma consolidated financial information for the three months ended June 30, 2018 and June 30, 2017 which gives effect to: (i) the Renpure Acquisition as if it occurred on January 1, 2017; and (ii) the entry into the New Credit Facility and the re‑payment of the Company's existing indebtedness.


Reported

Reported

Proforma

Proforma

(in thousands of US dollars) (unaudited)

Q2 2018

Q2 2017

Q2 2018

Q2 2017

Consolidated statements of operations and






comprehensive (loss) income:





Revenue 

22,873

9,224

22,873

16,946

Gross profit 

9,809

5,756

11,738

8,703

Net (loss) income and comprehensive (loss)






income for the period & pro forma






net income and






comprehensive income for the period

(2,963)

(39)

2,511

1,427

EBITDA

1,168

2,849

5,760

4,162

Adjusted EBITDA

6,679

3,229

6,679

5,432

Adjusted Net Income

1,143

225

3,196

2,374

 

"Our recent public listing marked the beginning of an exciting new chapter for MAV Beauty Brands and will support our vision of becoming a leading multi-brand, global personal care company," said Marc Anthony Venere, Founder, President and Chief Executive Officer of MAV Beauty Brands. "Our second-quarter results – our first as a public company – highlight the strong organic growth of our brands and profitability of our business model. With the Renpure and Cake acquisitions now on our platform, we have a portfolio of complementary, high-growth brands that offer our retailers an even more compelling value proposition.  MAV Beauty Brands is well positioned to capitalize on key growth trends, including demand for independent brands, natural products, and the rising influence of millennials. In addition to continuing to win shelf space with existing retailers, our outlook for accelerated growth reflects the tremendous opportunities to cross-sell our brands through our global distribution platform, as well as extend our international reach. We have made encouraging early progress with these strategies and are well positioned to deliver on our growth plan."   

Q2 2018 Pro forma Financial & Operating Highlights

  • Revenue increased by 35% to $22.9 million, compared with pro forma revenue of $16.9 million (reported: $9.2 million) due to strong growth in SKUs and points of distribution across the Company's North American retailer partners and international distributors.

  • Pro forma gross profit increased by 35% to $11.7 million (reported: $9.8 million), compared with pro forma gross profit of $8.7 million (reported: $5.8 million) in Q2 2017.

  • Pro forma net income increased by 76% to $2.5 million (reported: loss of $3.0 million), compared with pro forma net income of $1.4 million (reported: loss of $0.04 million) in Q2 2017.

  • Adjusted EBITDA increased by 23% to $6.7 million, compared with pro forma Adjusted EBITDA of $5.4 million in Q2 2017.

  • Early success with cross-selling brands to existing retail partners mid-year, including Marc Anthony's launch into the US dollar channel and Cake Beauty on-track in US and International distribution in the back-half of 2018.

  • Continued to expand international distribution, highlighted by new distribution relationships in new markets including Turkey, Argentina and India.

  • Subsequent to quarter end, the Company closed its initial public offering and its common shares commenced trading on the Toronto Stock Exchange under the symbol "MAV";

  • Subsequent to quarter end, the Company entered into a new $107.5 million non‑revolving term loan credit facility together with a $20 million revolving facility (collectively, the "New Credit Facility") and reduced total debt by $85.3 million, compared with $192.8 million of total debt as at June 30, 2018.

Q2 2018 Financial Review (Based on IFRS Reported Results)

Revenue increased by 148.0% to $22.9 million in Q2 2018, compared with $9.2 million in Q2 2017. The year-over-year increase includes $10.6 million in revenue from the Acquisitions, as well as organic growth of $3.1 million or 33.7%, driven by higher SKUs and points of distribution within numerous retailers and distributors.

Gross profit increased by 70.4% to $9.8 million in Q2 2018, compared with $5.8 million in Q2 2017, primarily due to increased points of distribution resulting from the Company's organic sales growth and the Acquisitions, partially offset by $2.0 million in one-time purchase accounting adjustments related to the Acquisitions and non-recurring charges, which are reflected in cost of sales for the period. Gross profit margin was 42.9% in Q2 2018, or 51.7% excluding the  adjustments, compared with 62.4% in the prior year. The year-over-year change in margin principally reflects the effect from the consolidation of the Acquisitions, which currently have different gross margin profiles than the Marc Anthony True Professional business. In addition, the Company experienced strong sales growth of several newly introduced SKUs in Q2 2018, including the body wash, which contributed to top line revenue growth and gross margin dollars, but currently carry lower gross margin percentages. As these products continue to scale, management expects to improve the cost of goods sold and margins. 

Overall, management believes the investments made in 2018 in new product and package design innovations will position the Company for increased sales and profitability in the future. As sales volumes increase and the Company further benefits from efficiencies and economies of scale in manufacturing and supply chain, cost of sales as a percentage of revenue is expected to decrease and gross profit margin percentage is expected to increase.

Selling & administrative expense increased to $6.7 million in Q2 2018, compared with $2.8 million in Q2 2017, due to the inclusion of the selling & administrative expenses from the Acquisitions and the impact of the significant investments the Company made throughout 2017 to build its infrastructure, senior management team, systems and processes and advertising and marketing initiatives to support future growth. The Q2 2018 selling & administrative expense was also impacted by $1.5 million of transaction‑related costs related to the IPO in addition to expenses related to Acquisitions, non‑recurring charges and stock-based compensation. Excluding these one-time transaction related costs, non-recurring charges and share based compensation, selling and administrative expense as a percentage of revenue was 22.5% in Q2 2018, a 4.8% decrease from 27.3% in Q2 2017.

Adjusted EBITDA increased by 106.8%, to $6.7 million in Q2 2018, compared with $3.2 million in Q2 2017.

Net loss for Q2 2018 was $3.0 million compared with $0.04 million in Q2 2017 and Adjusted Net Income was $1.1 million, or $0.01 per diluted share, compared with $0.2 million, or $0 per diluted share, in Q2 2017.  Assuming the pre-closing capital changes described in the Company's final prospectus dated June 28, 2018 occurred on June 30, 2018, Adjusted Net Income per share would have been $0.03 per diluted share in Q2 2018.

2018 Outlook

MAV Beauty Brands reiterated its 2018 financial guidance that was included in its final prospectus dated June 28, 2018 in respect of its IPO. For full-year fiscal 2018, the Company is expecting:

  • Revenue in the range of $81.4 million to $86.4 million ($90 million to $95 million pro forma for ownership of Renpure as of January 1, 2018, up from $75.7 million on a pro forma basis in fiscal 2017, representing year-over-year growth of 18.9% to 25.5%);

  • Adjusted EBITDA to be approximately $26.6 million ($29 million pro forma for ownership of Renpure as of January 1, 2018, up from $26.3 million on a pro forma basis in fiscal 2017, representing year-over-year growth of 10.2%).

The Company expects to achieve its financial guidance through: its strategic positioning in fast-growing personal care categories; driving market share for each of its brands within existing retail and distribution partners; cross-selling its complementary brand portfolio; and extending its reach into new international markets. See "Forward-Looking Information" below.

Q2 2018 Financial Statements and Management's Discussion and Analysis

The Company's unaudited interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2018 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 Q2 2018 financial results at 8:30 a.m. EDT on August 14, 2018. The call will be hosted by Marc Anthony Venere, Founder, President & CEO, Tim Bunch, Chief Revenue Officer, and Chris Doyle, CFO. To participate in the call, dial (416) 764-8682 or (888) 390-0549 using the conference ID 10872358. 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.

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" and "Adjusted Net Income". 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 heading "Selected Consolidated Financial Information".

The pro forma information set forth in this news release should not be considered to be what the actual financial position or other results of operations would have necessarily been had the Renpure Acquisition and the entry into the New Credit Facility and the re‑payment of the Company's existing indebtedness had been completed, as, at, or for the periods stated.

"Adjusted EBTIDA" 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 non‑recurring and not indicative of our ongoing operating performance, including: (i) transaction‑related costs; (ii) shareholder fees and related costs; (iii) non‑recurring charges; (iv) purchase accounting adjustments; (v) share‑based compensation; and (vi) unrealized foreign exchange (gain) loss.

"Adjusted Net Income" represents, for the applicable period, net income 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 non‑recurring and not indicative of our ongoing operating performance, including: (i) transaction‑related costs; (ii) shareholder fees and related costs; (iii) non‑recurring charges; (iv) purchase accounting adjustments; (v) share‑based compensation; (vi) unrealized foreign exchange (gain) loss; and (vii) tax impact 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.

 ''Pro Forma Adjusted EBITDA'' represents, for the applicable period, Adjusted EBITDA, after giving effect to: (i) the acquisition of Renpure, LLC as if it occurred on January 1, 2017; and (ii) the entry into the New Credit Facility and the re-payment of the Company's existing indebtedness.

''Pro Forma Adjusted Net Income'' represents, for the applicable period, Adjusted Net Income, after giving effect to: (i) the acquisition of Renpure, LLC as if it occurred on January 1, 2017; and (ii) the entry into the New Credit Facility and the re-payment of the Company's existing indebtedness.

About MAV Beauty Brands

MAV Beauty Brands is a high-growth global personal care company dedicated to providing consumers with premium quality, authentic and differentiated products. Our innovation-focused, next generation platform consists of complementary and rapidly growing personal care brands: Marc Anthony True Professional, Renpure and Cake Beauty. Our products include a wide variety of hair care, body care and beauty products such as shampoo, conditioner, hair styling products, treatments, body wash, and body and hand lotion across multiple collections that each serve a different and personalized consumer need. Our products are sold in over 25 countries around the world, in over 100 major retailers and through over 60,000 doors.

Forward-Looking Information

Certain information in this press release, including statements relating to winning shelf space, cross-selling our brands through our global distribution platform, extending our international reach, delivering on our growth plan, increasing sales and profitability in the future, expected changes to the Company's margin profile, achieving economies of scale and supply chain efficiencies, decreasing our gross margin percentage and our financial guidance for Fiscal 2018, 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.

The Company's financial guidance for Fiscal 2018 Revenue to be in the range of $81.4 million to $86.4 million ($90 million to $95 million pro forma for ownership of Renpure as of January 1, 2018) and for Adjusted EBITDA to be approximately $26.6 million ($29 million pro forma for ownership of Renpure as of January 1, 2018) for Fiscal 2018 are based on the following assumptions, among others: continued growth rates for retail sales in the global personal care industry and hair and body care categories in line with the past three years; continued introduction of new products and product extensions that appeal to consumers and our retail and distribution partners; overall shelf space growth of each of our brands continuing in line with the growth rates for these brands over the past three years; overall sales velocity of our products remaining in line with sales velocity for our products over the past three years; retail partners maintaining sales growth and foot traffic in line with their sales growth and foot traffic for the past three years; maintaining our existing retailer and international distribution partners and growing sales to these partners as a result of our cross‑selling initiatives; interest and inflation rates consistent with historical levels; maintaining selling & administrative expenses as a percentage of revenue in the range of 19% and 23%; maintaining our asset‑light business model with minimal annual capital expenditures as a percentage of annual revenue; a U.S. dollar to Canadian dollar exchange rate of 1:1.29; taxation rates consistent with current and currently anticipated levels, including the tax rates anticipated to be implemented in the United States as a result of the Tax Cuts and Job Act; and that we will have access to credit facilities consistent with the terms of the New Credit Facility.

Management currently believes that the achievement of the Company's Fiscal 2018 financial guidance can be reasonably estimated and is based on underlying assumptions that management believes are reasonable in the circumstances, given the time period for such guidance. However, there can be no assurance that we will be able to increase our penetration with existing retailers, either by increasing the number of products that we sell in their stores or by selling our products in more of their stores, or that we will be able to successfully cross‑sell our products or extend our reach into new international markets at levels underlying our financial guidance. Furthermore, actual results or performance in the future may vary from our assumptions referred to above.

The foregoing description of our potential growth opportunities is based on management's current views and strategies, our assumptions and expectations concerning our growth opportunities, and our assessment of the opportunities for our business and the global personal care industry and hair care and body care categories, and has been calculated using accounting policies that are generally consistent with our current accounting policies. The purpose of disclosing our growth guidance is to provide investors with more information concerning the financial impact of our business initiatives and growth strategies described in the Company's final prospectus dated June 28, 2018.

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 final prospectus 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.

Pro forma Q2 2018 Compared to Pro forma Q2 2017 and Pro forma YTD Q2 2018 Compared to Pro forma YTD Q2 2017:



Pro forma

Pro forma

Pro forma

Pro forma

(in thousands of US dollars) (unaudited)


Q2 2018

Q2 2017

YTD Q2 2018

YTD 2017

Consolidated statements of operations and







comprehensive (loss) income:






Revenue 


22,873

16,946

47,422

36,804

Cost of sales 

(3)

11,135

8,243

23,607

19,829

Gross profit 


11,738

8,703

23,815

16,975







Expenses






Selling and administrative 

(1), (4)

5,806

4,441

12,418

9,002

Foreign exchange loss (gain)


169

(64)

(135)

(54)

Amortization and depreciation 

(2)

777

726

1,565

1,449

Finance and other charges 

(1)

1,615

1,684

3,728

3,249



8,367

6,787

17,576

13,646

(Loss) income before income taxes 


3,371

1,916

6,239

3,329

Income (recovery) tax expense






Deferred 

(5)

860

489

1,591

849



860

489

1,591

849

Net (loss) income and comprehensive (loss) income for the period


2,511

1,427

4,648

2,480

EBITDA


5,760

4,162

11,003

7,817

Adjusted EBITDA


6,679

5,432

13,985

11,653

Adjusted Net Income


3,196

2,374

6,870

5,338

 

The unaudited pro forma net income and comprehensive income for Q2 2018, YTD Q2 2018, Q2 2017, YTD Q2 2017, reflect the following transactions:

  • The acquisition by the Company of 100% of the outstanding units of Renpure, LLC on March 8, 2018.

  • The refinancing of credit facilities concurrent with the closing of the initial public offering as described.

The pro forma numbers presented by management to give effect to the above transactions as if they have been consummated on January 1, 2017. Renpure was acquired by the Company on March 8, 2018 and therefore the financial results of Renpure starting March 8, 2018 have been consolidated with the unaudited financial results of the Company starting March 8, 2018.

(in thousands of US dollars)


Pro forma

Pro forma

Pro forma

Pro forma

(unaudited)


Q2 2018

Q2 2017

YTD 2018

YTD 2017

Net (loss) income and







comprehensive (loss) income







for the period


2,511

1,427

4,648

2,480


Income (recovery) tax expense

(5)

860

489

1,591

849


Interest

(1)

1,612

1,520

3,199

3,039


Amortization and depreciation

(2)

777

726

1,565

1,449

EBITDA


5,760

4,162

11,003

7,817


Transaction-related costs

(1)

3

182

1,019

228


Non-recurring charges

(4)

580

341

1,537

804


Purchase accounting adjustments

(3)

18

742

55

2,672


Share-based compensation


133

74

212

122


Foreign exchange (gain) loss


185

(69)

159

10

Adjusted EBITDA


6,679

5,432

13,985

11,653

 

(in thousands of US dollars)


Pro forma

Pro forma

Pro forma

Pro forma

(unaudited)


Q2 2018

Q2 2017

YTD Q2 2018

YTD Q2 2017

Net (loss) income and







comprehensive (loss) income







for the period


2,511

1,427

4,648

2,480


Transaction-related costs

(1)

3

182

1,019

228


Non-recurring charges

(4)

580

341

1,537

804


Purchase accounting adjustments

(3)

18

742

55

2,672


Share-based compensation


133

74

212

122


Foreign exchange (gain) loss


185

(69)

159

10


Tax impact of the above








adjustments

(5)

(234)

(323)

(760)

(978)

Adjusted Net Income


3,196

2,374

6,870

5,338



(1)

Concurrent with the closing of the initial public offering, the Company entered into a new $107,500 term loan credit facility and a $20,000 revolving credit facility available. This refinancing will result in the Company's cost of borrowing reducing to an effective interest rate of approximately 5.63%. The refinancing will result in a reduction of interest expense of $3,494 and $761 for proforma Q2 2018 and Q2 2017 respectively, after considering commitment fees on the unused revolving credit facility and the amortization of the financing costs on the refinanced debt. Financing costs of $1,765 are expected to be incurred as part of the issuance of the New Credit Facility. An additional $2,664 for proforma Q2 2018 has been adjusted for related to transaction costs for the initial public offering and Renpure acquisition incurred by MAV which are non-recurring in nature and would not reflect the expenses of the combined entity on an ongoing basis.



(2)

Adjusted for incremental amortization of $169 for proforma Q2 2017 as a result of the fair value adjustment to customer lists in connection with IFRS 3 accounting.



(3)

In conjunction with the acquisition of Cake Beauty Inc. January 23, 2018 and Renpure, LLC on March 8, 2018, the fair value adjustment of inventory as part of the initial purchase price allocation was amortized.



(4)

Adjusted for related party commissions of $828 and related party salaries and benefits of $29 as a result of these expenses being non-recurring in nature and would not reflect expenses of the combined entity on an ongoing basis.



(5)

Income tax have been reflected at 25.5% of the net adjustments.


 

Q2 2018 Compared to Q2 2017 and YTD Q2 2018 Compared to YTD Q2 2017:


Reported

Reported

Reported

Reported

(in thousands of US dollars) (unaudited)

Q2 2018

Q2 2017

YTD Q2 2018

YTD Q2 2017

Consolidated statements of operations and






comprehensive (loss) income:





Revenue 

22,873

9,224

38,832

19,733

Cost of sales 

13,064

3,468

21,064

7,974

Gross profit 

9,809

5,756

17,768

11,759

Expenses





Selling and administrative 

6,692

2,791

11,676

5,763

Foreign exchange loss (gain)

169

(48)

(151)

(124)

Amortization and depreciation 

777

554

1,437

1,105

Finance and other charges 

6,886

2,446

11,342

4,653


14,524

5,743

24,304

11,397

(Loss) income before income taxes 

(4,715)

13

(6,536)

362

Income tax (recovery) expense





Deferred 

(1,752)

52

(1,700)

158


(1,752)

52

(1,700)

158

Net (loss) income and comprehensive






(loss) income for the period

(2,963)

(39)

(4,836)

204

EBITDA

1,168

2,849

2,911

5,910

Adjusted EBITDA

6,679

3,229

11,564

6,776

Adjusted Net Income

1,143

225

1,610

805

 

(in thousands of US dollars)


Reported

Reported

Reported

Reported

(unaudited)


Q2 2018

Q2 2017

YTD 2018

YTD 2017

Net (loss) income and







comprehensive (loss) income







for the period


(2,963)

(39)

(4,836)

204


Income tax (recovery) expense


(1,752)

52

(1,700)

158


Interest


5,106

2,282

8,010

4,443


Amortization and depreciation


777

554

1,437

1,105

EBITDA


1,168

2,849

2,911

5,910


Transaction-related costs

(1)

2,667

182

4,709

228


Non-recurring charges

(2)

580

177

1,159

576


Purchase accounting adjustments

(3)

1,946

-

2,430

-


Share-based compensation

(4)

133

74

212

122


Foreign exchange (gain) loss


185

(53)

143

(60)

Adjusted EBITDA


6,679

3,229

11,564

6,776

 

(in thousands of US dollars)


Reported

Reported

Reported

Reported

(unaudited)


Q2 2018

Q2 2017

YTD 2018

YTD 2017

Net (loss) income and







comprehensive (loss) income







for the period


(2,963)

(39)

(4,836)

204


Transaction-related costs

(1)

2,667

182

4,709

228


Non-recurring charges

(2)

580

177

1,159

576


Purchase accounting adjustments

(3)

1,946

-

2,430

-


Share-based compensation

(4)

133

74

212

122


Foreign exchange (gain) loss


185

(53)

143

(60)


Tax impact of the above








adjustments


(1,405)

(116)

(2,207)

(265)

Adjusted Net Income


1,143

225

1,610

805



(1)

As discussed in the above section "Initial Public Offering", on July 10, 2018 we successfully completed the IPO and our Shares are listed on the Toronto Stock Exchange under the stock symbol "MAV". Costs associated with the IPO of $1,780 have been recorded as Finance and Other Charges in our unaudited condensed consolidated statement of operations and comprehensive (loss) income for the Q2 2018.  During Q2 2018, there were $887 of transaction-related costs of the Company incurred in connection with the offering and the Acquisitions, which have been accounted for in selling and administrative.  YTD 2018, $3,332 of transaction-related costs of the Company have been incurred in connection with the offering and Acquisitions, which have been accounted for as finance and other charges and $1,377 of transaction-related costs of the Company incurred in connection with the IPO and the 2018 Acquisitions, which have been accounted for as selling and administrative expenses.



(2)

Comprised of $522 for Q2 2018 and $881 for YTD Q2 2018 of non-recurring costs representing predominantly expenses incurred in respect of the following matters: (i) recruiting costs incurred as part of the Company's efforts to put in place additional senior management, (ii) consulting fees in respect of finance support and operations relating to transaction-related matters, (iii) severance costs incurred in respect of certain employees and payments related to the termination of certain consulting contracts on acquisition, (iv) salary and wages related to staff integration to operate one salon, and (v) non-recurring private company board expenses, which have been accounted for as Selling and Administrative expenses of the Company. Q2 2018, $58 of non-recurring costs related to salary and wages related to stylist integration to operate one salon, which were accounted for as cost of sales.  YTD Q2 2018, $278 of non-recurring costs have been incurred by the Company in cost of sales, which includes $58 related to the stylist integration and $220 of non-recurring costs related to disposal of raw materials.



(3)

In conjunction with the acquisition of Cake Beauty Inc. January 23, 2018 and Renpure, LLC on March 8, 2018, the fair value adjustment of inventory as part of the initial purchase price allocation was amortized.



(4)

Represents recognition of share-based payments in respect of the options granted to management, which have been accounted for as Selling and Administrative expenses of the Company.

 

SOURCE MAV Beauty Brands Inc.

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