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Menē Inc. Reports Financial Results for the Fourth Quarter and Fiscal Year 2019

TORONTO–(BUSINESS WIRE)–$MENE #earnings–Menē Inc. (TSX-V:MENE) (US:MENEF) (“Menē” or the “Company”), an online 24 karat jewelry brand, today announced financial results for the fourth quarter and fiscal year ended December 31, 2019. All amounts are expressed in Canadian dollars unless otherwise noted.

FOURTH QUARTER FINANCIAL HIGHLIGHTS:

  • Record IFRS Revenue of $4.7 million, an increase of $1.4 million, or 42.5% Year-over-Year (“YoY”). Non-IFRS Adjusted Revenue was also a Company record of $5.1 million.
  • Consolidated IFRS Gross Profit of $0.5 million, compared to $0.7 million in the prior year quarter.
  • Generated Operating Cash Flow of $1.8 million during Q4 2019.

2019 FISCAL YEAR FINANCIAL HIGHLIGHTS:

  • Record IFRS Annual Revenue of $13 million, an increase of 70% YoY.
  • Record IFRS Gross Profit of $2.7 million, versus $1.3 million in 2018, an increase of 103% YoY.
  • Reduced operating expenses from 85% of revenue in 2018 to 69% of revenue in 2019.
  • Reduced Non-IFRS Adjusted Loss by $1.6 million (38%) YoY.
  • Sold 27,754 units of jewelry through 17,150 customer orders in 2019, a 45% and 22% increase respectively compared to 2018.
  • Average Order Value of $1,199 in Q4 2019, an increase of $542, or 82% compared to the prior year .
  • Gold Weight Sold increased 51%, Platinum Weight Sold increased 131% from the previous year.
  • At December 31, 2019, Menē has $15.1 million in Tangible Common Equity(5), including $13.0 million in cash and cash equivalents and $12.5 million in inventory.

OPERATIONAL AND BUSINESS HIGHLIGHTS:

  • Introduced 400 new product designs over the course of 2019, including 91 new designs in Q4. Sales of new designs accounted for 34% of total sales in 2019.
  • Sales to Returning Customers attributed to 61% of total sales in 2019, compared to 46% in 2018.
  • Ramped up production output by producing 363.7 kg of gold and platinum in 2019, an increase of 59% from the prior year.
  • Launched two new product series: Woven and Sundials.
  • Collaborated with The Easton Foundation to launch “Menē x Louis Bourgeois” jewelry collection featuring three pendant designs of the most iconic sculptures of the artist.
  • Menē was among the earliest few merchants featured on the official @shop account of Instagram, a social media network with more than one billion monthly active users.
  • Opened its first-ever pop-up shop at the Selfridges flagship mall in London as a part of an exclusive event organized by Instagram.
  • Unveiled “Menē Around the World”, a web-based tool that transparently illustrates the growth of the Menē community across the globe. Menē has sold to more than 60 countries, including customers in every Canadian province and U.S. state.
  • Registered more than 14,000 independent customer reviews on mene.com/reviews.
IFRS Consolidated Income Statement Data &
Key Performance Indicators (KPIs) 1
 

FY 2019

 

FY 2018

 

Q4

 

Q3

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

Q1

Revenue (CAD) 2  

4,653,601

 

3,218,281

 

2,456,930

 

2,733,596

 

3,266,663

 

1,985,711

 

1,392,867

 

1,038,947

Gross profit (CAD)  

458,201

 

1,000,210

 

600,719

 

678,814

 

740,130

 

208,408

 

229,461

 

170,486

Gross profit (%)  

10%

 

31%

 

24%

 

25%

 

23%

 

10%

 

16%

 

16%

Net loss  

(3,449,094)

 

(1,535,114)

 

(672,661)

 

(1,107,752)

 

(2,668,276)

 

(1,644,097)

 

(1,164,185)

 

(1,494,104)

Total comprehensive loss  

(3,991,270)

 

(1,405,212)

 

(868,784)

 

(1,166,288)

 

(2,703,205)

 

(1,691,124)

 

(919,106)

 

(1,348,026)

Non-IFRS Adjusted Revenue (CAD) 2  

5,095,968

 

3,445,952

 

2,601,569

 

2,914,297

 

3,704,403

 

2,346,622

 

1,891,608

 

1,162,777

Non-IFRS Adjusted Gross Profit (CAD) 3  

501,757

 

1,070,968

 

636,083

 

723,686

 

839,309

 

246,287

 

311,623

 

190,806

Non-IFRS Adjusted Loss 4  

(904,338)

 

(1,014,832)

 

(310,197)

 

(476,562)

 

(870,654)

 

(1,093,533)

 

(998,123)

 

(1,387,954)

Total Shareholders’ Equity (CAD)  

15,176,016

 

17,399,693

 

18,423,043

 

17,833,109

 

18,494,246

 

10,077,520

 

11,251,166

 

11,878,195

Inventory balance (kg of gold) 5  

212

 

249

 

255

 

222

 

244

 

135

 

131

 

90

Customer orders  

4,548

 

2,998

 

5,167

 

4,437

 

6,729

 

3,994

 

2,389

 

951

Units of jewelry sold  

7,225

 

5,164

 

7,183

 

8,182

 

9,111

 

6,168

 

2,920

 

941

Jewelry weight sold (total kg)  

65

 

44

 

42

 

43

 

51

 

35

 

23

 

16

(1) The Company’s financial statements for fiscal year-ending 2019 and 2018 are audited by an external assurance firm.

(2) The Company adjusts its revenue by adding back the value of jewelry that was returned by customers, and discounts given to customers. These adjustments are made to assess the gross revenue before deducting these items from revenue per IFRS. See Non-IFRS Measures for a full reconciliation.

(3) The Company adjusts its gross profit by adjusting for revenue and cost of sales to be added back for the value of jewelry that was returned by customers, and discounts given to customers. See Non-IFRS Measures for a full reconciliation.

(4) The Company adjusts its total comprehensive loss by adjusting for Non-IFRS Adjusted Gross Profit, and removing the impact of non-cash expenses, consisting of depreciation and amortization, stock-based compensation and other non-cash expenses. See Non-IFRS Measures for a full reconciliation.

(5) Inventory balances in kilograms of gold are calculated by taking the total Canadian Dollar (CAD) inventory value at each quarter-end date, and dividing the value by the CAD gold spot price per gram.

IMPACT OF COVID-19 SUBSEQUENT TO Q4 2019:

While the COVID-19 pandemic weighed on the economy and subdued consumer spending globally, it has increased demand for safe-haven assets and accelerated the shift of retail from brick and mortar stores to e-commerce. Menē is uniquely positioned to continue to reach clients online during this challenging time and help them protect their financial wealth by owning jewelry crafted from 24K gold and platinum bullion. During the first quarter of 2020, the Company introduced a number of initiatives with a focus on supporting its clients, ensuring the wellbeing of its staff and community, while safeguarding the long-term financial strength of the business:

  • Transitioned global staff to remote work.
  • Temporarily suspended operations at its U.S. manufacturing facilities.
  • Optimized the Menē buyback program to help customers who need liquidity to materialize the gains on their Jewelry.
  • Adjusted the Menē fee percentage to reflect higher operational costs while remaining full transparency.
  • Drove cost reductions by minimizing non-essential operating and marketing expenses.

As at the time of this press release, the Company has begun the phased reopening of its manufacturing facilities while taking into considerations of the guidance of local authorities. Menē has implemented extensive health and safety measures designed to protect its people while working to meet the rising demand from its clients.

STATEMENT FROM FOUNDER & CEO ROY SEBAG:

I am pleased to be reporting our second year of annual results since launching Menē in January 2018. Fiscal 2019 was another memorable year for our business and we feel optimistic about our Company’s future. I would like to draw your attention to three points relating to fiscal 2019 which give management these reasons for optimism.

  1. The Company’s growth rate and customer satisfaction reached new highs. We now count over 30,000 satisfied customers who own over 40,000 pieces of jewelry. These customers reside all over the world which can be seen in real-time by visiting: mene.com/about/stats. We believe that our business is still in its infancy with respect to its long-term potential and we see how our disruptive investment jewelry concept is converting many traditional jewelry buyers each and every day.
  2. Given how we have architected our business model, Covid-19 has had a negligible impact on our business so far. While we have had to shut down production and have seen inventory levels decline since April, we believe the worst is behind us with production returning to normal rates now. Consequently, we believe Q3 and Q4 2020 will be show strong results and this is confirmed by our current wait list which is at time of writing $5 million (a new record).
  3. The last point is technical but also important. As our Company has evolved, additional noncash charges have been determined to be appropriate for the purposes of the IFRS presentation. These charges do not, in management’s view, reflect the core business activity in Q4 2019. As with any company in its early growth phase, accounting treatments which do not distinguish clearly between cash, non-cash, ordinary, and extraordinary items result in a blurry picture of the core operations. A small but instructive example can be seen in our Q4 2019 margins. As any customer who purchased our jewelry in Q4 2019 may attest, we did not reduce our margins to 10%. Rather, IFRS accounting treatment required us to take charges on cost of goods sold that corresponded to items from inception rather than the flow of goods sold in the quarter. I would ask investors to consider our top-line non-IFRS revenue, our cash flow generation in Q4 (first time ever!), unit volumes, and customer satisfaction. In any event, we believe the next few quarters will make this clear.

Menē is a business that was designed to grow and disrupt a large industry over the long-term. Our founding mission was to restore the link between jewelry and savings. Two and a half years in, I believe it is clear that we are delivering on that mission. There remain a few surmountable challenges for our business model to scale to the levels we believe are ultimately attainable. We see our current capital position as adequate to address those challenges. Consequently, we remain focused on growing our brand organically and sustainably. Finally, I would like to extend my sincerest gratitude to our customers, team-members, and shareholders for their continued support and advocacy in fiscal 2019.

Non-IFRS Measures

This news release contains non-IFRS financial measures; the Company believes that these measures provide investors with useful supplemental information about the financial performance of its business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating its business. Although management believes these financial measures are important in evaluating the Company’s performance, they are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed as alternatives to measures of financial performance determined in accordance with IFRS. Moreover, presentation of certain of these measures is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of the adjustments thereto provided herein have an actual effect on the Company’s operating results.

Non-IFRS Adjusted Revenue2 is a non-IFRS measure. The Company adjusts its revenue by adding back the value of jewelry that was returned by customers, and discounts given to customers. These adjustments are made to assess the gross revenue before deducting these items per IFRS revenue. The closest comparable IFRS measure is revenue.

Non-IFRS Adjusted Gross Profit3 is a non-IFRS measure. The Company adjusts its gross profit by adjusting for the additional revenue and associated cost of sales added back for the value of jewelry that was returned by customers, and discounts given to customers. The closest comparable IFRS measure is gross profit.

Non-IFRS Adjusted Loss4 is a non-IFRS measure. Non-IFRS Adjusted Loss is a non-IFRS measure, calculated as total comprehensive loss, plus adjustment for Non-IFRS Adjusted Gross Profit and debt forgiveness, and excluding depreciation and amortization, loss on sale of equipment, (gain)/loss on foreign exchange and foreign currency translation (gain)/loss, stock-based compensation, accretion, listing expense and other adjustments. The closest comparable IFRS measure is total comprehensive loss.

Tangible Common Equity(5) is a non-IFRS measure. It is calculated as total shareholder’s equity excluding intangible assets.

For a full definition of non-IFRS financial measures used herein to their nearest IFRS equivalents, please see the section entitled “Non-IFRS Financial Measures” in the Company’s MD&A for the year ended December 31, 2019.

About Menē Inc.

Menē crafts pure 24 karat gold and platinum jewelry that is transparently sold by gram weight. Through mene.com, customers may buy jewelry, monitor the value of their collection over time, and sell or exchange their pieces by gram weight at prevailing market prices. Menē was founded by Roy Sebag and Diana Widmaier-Picasso with a mission to restore the relationship between jewelry and savings. Menē empowers consumers by marrying innovative technology, timeless design, and pure precious metals to create pieces which endure as a store of value.

For more information about Menē, visit mene.com.

Forward-Looking Statements

This news release contains certain “forward-looking information” within the meaning of applicable Canadian securities laws that are based on expectations, estimates and projections as at the date of this news release. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.

This forward-looking information is based on reasonable assumptions and estimates of management of the Company at the time it was made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, the risks associated with Covid-19 and other infectious diseases presenting as major health issues; failure to comply with environmental and health and safety laws and regulations; operating or technical difficulties in connection with the manufacture, sale and distribution of jewelry; actual audited results differing from reported unaudited results; global economic climate; dilution of the Company’s shares; the Company’s limited operating history; future capital needs and uncertainty of raising capital; the competitive nature of the jewelry industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology and manufacturing change; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; theft and risk of physical harm to personnel; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; and volatile securities markets impacting security pricing unrelated to operating performance. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to revise or update any forward-looking information other than as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts

Media and Investor Relations Inquiries:
Renee Wei

+1 647 250 7221

ir@mene.com

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