Announces Continued Double-Digit Growth with Same-Studio Revenue +23% vs. Pre-COVID (2019) Results
Toronto, Ontario, Aug. 28, 2023 (GLOBE NEWSWIRE) -- MiniLuxe Holding Corp. (TSXV: MNLX) today announced its financial results for the 13 weeks ended July 2, 2023 (“Q2 2023”) and the 26 weeks ended July 2, 2023 (“H1 2023”). The fiscal year of MiniLuxe is a 52-week reporting cycle ending on the Sunday closest to December 31, which periodically necessitates a fiscal year of 53 weeks. FY2022 consisted of a 53-week period while all other fiscal years referred to in this release consist of 52-week periods. All quarters referred to in this release consist of 13-week periods. Unless otherwise specified, all amounts are reported in U.S. dollars.
MiniLuxe is pleased to announce continued double-digit growth in year-over-year (“YOY”) revenue as the team continues to drive the business towards cashflow positive operations. Entering 2023, MiniLuxe built a strategy in its first full post-Covid year to leverage its core studio business (fleet of company-owned MiniLuxe locations) and its continued positive contribution while identifying and testing opportunities for diversification of revenue across new growth channels.
Strength in the core studio base business
Similar to previous periods, MiniLuxe continued its trend of double-digit growth in Q2 2023 as total company revenue increased 16% over Q2 2022 to $6.4M (all figures in US dollars). The continued growth reflects well vs. pre-pandemic (2019) comparatives as revenue increased 23% on a same-studio basis vs. Q2 2019. Q2 2023 gross profit increased 9% over Q2 2022 to $2.7M. As in past periods, the majority of this growth came organically from the studio base business as did the gross profit. The Company views gross profit dollar growth as a key indicator of MiniLuxe’s positive trajectory towards long-term profitability. Key drivers of revenue growth and gross profit growth in the core studio base came from positive momentum on the demand side (new customer and loyal customer growth) and supply side (talent ecosystem growth to deliver service demand).
- New and loyal customer growth: MiniLuxe continues to see robust growth in new customer count across the studios with an average new customer rate of ~15%. MiniLuxe’s loyal customer base remains robust and growing, with ~10,000 studio clients that average over 10 visits per year, a 7% increase year-over-year. The top 30 percent of these loyal clients visit MiniLuxe more than 20 times per year and have an average annual spend of ~$2000.
- Growth in attracting talent: On the supply side, MiniLuxe’s current and future success comes from the continued growth, development, and scaling of the MiniLuxe Talent Ecosystem. Beauty professionals who are part of MiniLuxe’s Talent Ecosystem are part of a Career Path Program – from Apprentice, Junior Designer, Studio Designer to Artistic and Expert Designer Levels. Total beauty professionals across MiniLuxe’s Talent Ecosystem ended Q2 2023 18% higher than year-end and 27% higher than Q2 2022. The MiniLuxe studio fleet total staffed hours grew at double-digit rates vs. Q2 2022 with a focus of staffing on peak (high traffic) days, leading to similar growth rates in fleet appointment hours.
Continued progress but greater selectivity in other new growth channels
While new growth channels demonstrated continued progress, results were more mixed in terms of the ability to have near-term term impact on profitability. Outside of the studio base of business for MiniLuxe, new growth channels include its Anywhere off-premise services as well as MiniLuxe product revenue through e-commerce and wholesale channels. Given foreseeable macro-economic headwinds, the MiniLuxe Board and Management hold the view of prioritizing quality of revenue over quantity of revenue and are in the process of realigning resources to more selectively pull-back and / or double down in each of these growth channels.
MiniLuxe Anywhere Refocus: As previously shared, MiniLuxe has been exploring strategies to introduce and offer off-premise services to the self-care marketplace, referred to as MiniLuxe Anywhere. Throughout the past eighteen months, the Company has tested and explored multiple formats and opportunities, from development of a platform for on-demand mobile services, to 1:1 home and office visits, to corporate/events services offerings. While MiniLuxe Anywhere exhibited some good positive initial results in its test markets, the Company has narrowed its focus to “Store-in-Store” channel opportunities and selective events which have been more profitable and scalable versus delivering in individual homes and offices. Density of service delivery (i.e., where MiniLuxe has more locations and more talent) will be an important factor on future decisions regarding priority markets.
MiniLuxe Product Opportunities: Given industry-wide changes in paid social media, MiniLuxe took a conservative marketing spend approach to best generate marketing efficiency and positive e-commerce DTC (direct-to-consumer) growth. While the base of e-commerce remains modest, Q2 2023 e-commerce orders grew 63% from Q2 2022 and new customer counts increased 64% year-over-year with positive marketing-efficiency (i.e., positive return on spend) give management confidence of product potential. Hero SKUs – those products that have the highest sales velocity – remain in the categories of self-care products for hand and foot-care and seasonal polish colors.
Updates on M&A and Paintbox Integration
M&A remains an important part of MiniLuxe’s longer term growth plans. The MiniLuxe management team continues to assess opportunities for accretive growth via acquisitions. The current macro-economic environment offers with it more reasonable multiples for targets for service or product revenue acquisition candidates.
MiniLuxe’s planned growth initiatives for its Paintbox brand, which was acquired in Fall 2022, continue with further activities taken over the past several months. As a reminder, Paintbox, based in New York City and founded in 2014, has been re-defining the nail-care industry through its proprietary nail art designs. The two principal areas of focus for Paintbox are exploring “store-in-store” growth opportunities – which have included a test of the format in MiniLuxe’s Boston South End studio. The footprint of less than 200 square feet presents the opportunity for a capital-light model to scale in the future – with the largest opportunity being national channel partners.
- Asset-light store-in-store opportunities: The Company also launched a test for a second Paintbox “store-in-store” concept in collaboration with a New York fashion house that explores a model where a MiniLuxe or Paintbox outpost can serve as a traffic-generating amenity in exchange for in-kind “rent” and various revenue share models.
- Ready-to-Wear Nail rollout: MiniLuxe and Paintbox will also partner during New York Fashion Week (NYFW) this September. Some of the iconic fashion brands that the brands will partner with include 3.1 Phillip Lim and Tory Burch, where Paintbox will launch and feature a new product offering with “Ready-to-Wear Nail Art.” This latest Paintbox innovation represents the brand’s reinvention of press-on nails - curated in design and with some of the highest quality fit and finish qualities in the industry. To provide some perspective, press-on nails market sales exceeded wet polish sales industry wide in 2023.
“While the macro-economic environment still presents challenges, the core studio and its services remain strong, and we need to continue to compound the cash contribution from that base business while making the right bets on products, partnerships and M&A. We’ve seen a greater number of inbound opportunities that give us confidence on the strength of our brand in the industry, but most exciting this quarter has been the strong growth of both new customers and our most loyal customers,” said Tony Tjan, Executive Chairman and Co-founder of MiniLuxe.
Go-forward focus
With 3+ million services completed to date, a growing talent ecosystem of empowered beauty professionals, and expanded offerings across our product channels, MiniLuxe is well-positioned to continue building its market presence and creating long-term shareholder value.
In closing, MiniLuxe’s Board and Executive Team are focused on delivering a plan to achieve long-term cashflow generative operations through execution of three key pillars:
(1) Continued compounding of studio economics, particularly studio contribution, across the core base fleet business,
(2) Realignment of MiniLuxe’s infrastructure and cost base to focus on key priorities and achieve material fixed cost leverage in the near term, and
(3) Identifying and executing on a focused set of growth investments that have breakout growth potential.
As previously mentioned and subsequent to the end of Q2 2023, MiniLuxe completed an initial reconfiguration of its overhead, which should yield fixed cost leverage benefits in H2 2023. In addition to these actions, MiniLuxe is in the process of assessing and executing on further revenue and cost initiatives with the goal of providing a faster path to cashflow positive operations. The Company looks forward to sharing further updates throughout the remainder of the year.
Q2 2023 Financial Highlights ($USD)
- Total revenue of $6.4M, a YoY increase of 16%
- Gross profit of $2.7M, a 9% increase from prior year
- Full Company Adjusted EBITDA1 of ($2.2M) compared to ($2.4M) for Q2 2022; decreased loss attributable to lower SG&A and initial commencement of fixed cost leverage
- Fleet Adjusted EBITDA1 in line with prior year ($0.5M)
H1 2023 Financial Highlights ($USD)
- Total revenue of $11.6M, a YoY increase of 17%
- Gross profit of $4.9M, a 12% increase from prior year
- Full Company Adjusted EBITDA1 of ($4.8M) compared to ($4.7M) for H1 2022; slightly lower EBITDA than prior year attributable to lag in SG&A related cost adjustments
- Fleet Adjusted EBITDA1 in line with prior year ($0.6M)
Other Items of Note
- During Q2 2023, the Company completed construction and commenced operations in a new studio location in West Central Florida, at the Water Street Development in downtown Tampa Bay, FL. The grand opening of the studio occurred on May 11, 2023, as MiniLuxe celebrated its 21st studio location opening, the first since the pandemic.
- During H1 2023, the Company signed a lease to open a new studio in Dedham, Massachusetts at the Legacy Place Development. The lessor has not yet made the studio available for use.
Q2 and H1 2023 Results
Selected Financial Measures
MiniLuxe notes a change in accounting policy to more accurately reflect revenue generated from talent and product revenue streams to more align with how management analyzes the Company. The change has been retrospectively applied and does not have any effect on revenue recognition principles utilized or total overall revenue recognized.
| Thirteen weeks ended | YoY Change | |||||||||||
| July 2, | June 26, | $ Change | % Change | |||||||||
| 2023 | 2022 | |||||||||||
| Talent | 6,237,148 | 5,433,252 | 803,896 | 15 | % | |||||||
| Product | 148,130 | 52,865 | 95,265 | 180 | % | |||||||
| Total Revenue | 6,385,278 | 5,486,117 | 899,161 | 16 | % | |||||||
| Gross Profit ($) | 2,705,756 | 2,489,408 | 216,348 | 9 | % | |||||||
| Gross Margin (%) | 42 | % | 45 | % | ||||||||
| Twenty-six weeks ended | YoY Change | |||||||||||
| July 2, | June 26, | $ Change | % Change | |||||||||
| 2023 | 2022 | |||||||||||
| Talent | 11,333,473 | 9,775,230 | 1,558,243 | 16 | % | |||||||
| Product | 269,778 | 117,788 | 151,990 | 129 | % | |||||||
| Total Revenue | 11,603,251 | 9,893,018 | 1,710,233 | 17 | % | |||||||
| Gross Profit ($) | 4,915,173 | 4,398,657 | 516,516 | 12 | % | |||||||
| Gross Margin (%) | 42 | % | 44 | % | ||||||||
| Non-IFRS Metrics | Thirteen weeks ended | Twenty-six weeks ended | ||||||||||
| July 2, | June 26, | July 2, | June 26, | |||||||||
| In thousands | 2023 | 2022 | 2023 | 2022 | ||||||||
| Adjusted EBITDA | ($ | 2,172 | ) | ($ | 2,449 | ) | ($ | 4,803 | ) | ($ | 4,732 | ) |
| Fleet Adjusted EBITDA | $ | 468 | $ | 510 | $ | 585 | $ | 575 | ||||
Results of Operations
The following table outlines the consolidated statements of loss and comprehensive loss for the fiscal quarters ended July 2, 2023, and June 26, 2022:
| Thirteen weeks ended | Twenty-six weeks ended | ||||||||||||
| July 2, | June 26, | July 2, | June 26, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Revenue | $ | 6,385,278 | $ | 5,486,117 | $ | 11,603,251 | $ | 9,893,018 | |||||
| Cost of sales | 3,679,522 | 2,996,709 | 6,688,078 | 5,494,361 | |||||||||
| Gross profit | 2,705,756 | 2,489,408 | 4,915,173 | 4,398,657 | |||||||||
| General and administrative expense | 4,395,229 | 4,373,114 | 8,776,434 | 8,019,734 | |||||||||
| Depreciation and amortization expense | 872,100 | 727,659 | 1,701,884 | 1,491,027 | |||||||||
| Operating loss | (2,561,573 | ) | (2,611,365 | ) | (5,563,145 | ) | (5,112,104 | ) | |||||
| Finance costs | (340,231 | ) | (336,802 | ) | (677,242 | ) | (685,707 | ) | |||||
| Other income | 6,680 | 3,248 | 3,166,240 | 167,470 | |||||||||
| Unrealized loss | (51,170 | ) | - | (51,170 | ) | - | |||||||
| Income (loss) before taxes | (2,946,294 | ) | (2,944,919 | ) | (3,125,317 | ) | (5,630,341 | ) | |||||
| Income tax expenses | (23,501 | ) | (17,492 | ) | (35,711 | ) | (42,011 | ) | |||||
| Net and comprehensive income (loss) | $ | (2,969,795 | ) | $ | (2,962,411 | ) | $ | (3,161,028 | ) | $ | (5,672,352 | ) | |
| Earnings per share | |||||||||||||
| Subordinate voting shares (basic) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.04 | ) | |||||
| Proportionate voting shares (basic) | (20.19 | ) | (20.29 | ) | (21.49 | ) | (38.84 | ) | |||||
| Subordinate voting shares (diluted) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.04 | ) | |||||
| Proportionate voting shares (diluted) | (20.19 | ) | (20.29 | ) | (21.49 | ) | (38.84 | ) | |||||
Cash Flows
The following table presents cash and cash equivalents as at July 2, 2023 and June 26, 2022:
| Twenty-six weeks ended | ||||||
| July 2, | June 26, | |||||
| 2023 | 2022 | |||||
| Cash, cash equivalents and restricted cash, beginning of period | $ | 8,343,375 | $ | 19,120,111 | ||
| Net cash provided by (used in): | ||||||
| Operating activities | (1,291,397 | ) | (4,405,761 | ) | ||
| Investing activities | (1,254,475 | ) | (423,451 | ) | ||
| Financing activities | (943,599 | ) | (772,608 | ) | ||
| Net decrease in cash and cash equivalents | (3,489,471 | ) | (5,601,820 | ) | ||
| Cash, cash equivalents and restricted cash, end of period | $ | 4,853,904 | $ | 13,518,291 | ||
Non-IFRS Measures and Reconciliation of Non-IFRS Measures
This press release references certain non-IFRS measures used by management. These measures are not recognized under International Financial Reporting Standards (“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 the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The non-IFRS measures referred to in this press release are “Adjusted EBITDA” and “Fleet Adjusted EBITDA”.
Adjusted EBITDA
Adjusted EBITDA is used by management as a supplemental measure to review and assess operating performance. Management believes Adjusted EBITDA most accurately reflects the commercial reality of the Company's operations on an ongoing basis by adding back non-cash expenses. Additionally, the rent-related adjustments ensure that studio-related expenses align with revenue generated over the corresponding time periods.
Adjusted EBITDA is calculated by adding back fixed asset depreciation, right-of-use asset depreciation under IFRS 16, asset disposal, and share-based compensation expense to IFRS operating income, then deducting straight-line rent expenses1 net of lease abatements. IFRS operating income is revenue less cost of sales (gross profit), additionally adjusted for general and administrative expenses, and depreciation and amortization expense.
The Company also uses Fleet Adjusted EBITDA to evaluate its fleet performance. This metric is calculated in a similar manner, starting with Talent revenue and adjusting for non-fleet Talent revenue and cost of sales, further adjusted by fleet SG&A and finally subtracting the same straight line rent expense used in the full company Adjusted EBITDA (as the fleet holds all real estate leases). The Company believes that this metric most closely mirrors how management views the fleet portion of the business.
The following table reconciles Adjusted EBITDA to net loss for the periods indicated:
| Thirteen weeks ended | Twenty-six weeks ended | ||||||||||||
| July 2, | June 26, | July 2, | June 26, | ||||||||||
