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• Yerbaé posted full-year 2022 financial results that beat our estimates. 2022 net revenue came in at $7.2M vs. our estimate of $6.8M, representing 19% YoY growth
• Gross margin came in at 59% in 2022 vs. our estimate of 58%. YERB.U remains the gross margin leader in our peer group
• YERB.U is trading at 3.4x 2024E sales compared to high-growth peers at 6.4x, despite having superior sales growth and gross margins
Yerbaé Brands Corp. (YERB.U:TSXV) reported 2022 financial results on Friday after market close. The results came in ahead of our expectations, reaffirming our confidence in the investment thesis outlined in our initiation report on April 19th. We are fine-tuning our estimates to reflect the additional data points.
Key Highlights
• For the full year, YERB.U reported $7.8M in gross revenue and $7.2M in net revenue, representing +14% YoY and +19% YoY respectively. This came in ahead of our expected $7.1M and $6.8M respectively. The promotional rate came in at 8%, slightly above our estimated 7%.
• For Q4, Yerbaé reported $1.9M in net revenue, beating our estimate of $1.6M. This compares to the $1.9M in net revenue posted last quarter (Q3 is seasonally stronger) and $1.1M posted in Q4/21 (-3% QoQ, +76% YoY).
• We remind readers that YERB.U has pre-announced January and February 2023 net revenue of $2.8M (both were record months) and that we are expecting $3.5M in net revenue for Q1/23 (+89% QoQ, +131% YoY).
• Gross margin for 2022 came in at 59% compared to our estimate of 58% and 58% last quarter. YERB.U remains the gross margin leader in our peer group (which averages 40%), providing a simplistic path to profitability.
• Adj. EBITDA for 2022 came in at ($7.4M) vs. our estimate of ($5.7M) due to increased advertising, salaries, and professional fees tied to growth initiatives.
• Yerbaé ended the quarter with $857K in cash and $5.3M in debt (not including its recent $4M convertible debenture financing).
Hannaford Supermarket Expansion
Subsequent to our initiation report, YERB.U announced that it will be expanding into 185 Hannaford Supermarkets throughout the northeastern United States with its 16oz SKU flavours. While announcements like these are baked into our estimates (we are forecasting 24K retail doors by year-end), it speaks to management’s execution skills and supports the continued revenue growth acceleration.
Valuation
Yerbaé currently trades at 3.4x 2024E sales compared to Monster Beverage at 7.1x and Celsius Holdings at 5.6x, despite posting the leading revenue growth and gross margins in the group. We expect this valuation gap to narrow as YERB.U continues to accelerate revenue growth and reach larger scale. We are maintaining our BUY rating and $2.25/share target price based on 4.5x 2024E sales.
YERB.U: 2022 Financials Beat Expectations
What you need to know:• Yerbaé posted full-year 2022 financial results that beat our estimates. 2022 net revenue came in at $7.2M vs. our estimate of $6.8M, representing 19% YoY growth
• Gross margin came in at 59% in 2022 vs. our estimate of 58%. YERB.U remains the gross margin leader in our peer group
• YERB.U is trading at 3.4x 2024E sales compared to high-growth peers at 6.4x, despite having superior sales growth and gross margins
Yerbaé Brands Corp. (YERB.U:TSXV) reported 2022 financial results on Friday after market close. The results came in ahead of our expectations, reaffirming our confidence in the investment thesis outlined in our initiation report on April 19th. We are fine-tuning our estimates to reflect the additional data points.
Key Highlights
• For the full year, YERB.U reported $7.8M in gross revenue and $7.2M in net revenue, representing +14% YoY and +19% YoY respectively. This came in ahead of our expected $7.1M and $6.8M respectively. The promotional rate came in at 8%, slightly above our estimated 7%.
• For Q4, Yerbaé reported $1.9M in net revenue, beating our estimate of $1.6M. This compares to the $1.9M in net revenue posted last quarter (Q3 is seasonally stronger) and $1.1M posted in Q4/21 (-3% QoQ, +76% YoY).
• We remind readers that YERB.U has pre-announced January and February 2023 net revenue of $2.8M (both were record months) and that we are expecting $3.5M in net revenue for Q1/23 (+89% QoQ, +131% YoY).
• Gross margin for 2022 came in at 59% compared to our estimate of 58% and 58% last quarter. YERB.U remains the gross margin leader in our peer group (which averages 40%), providing a simplistic path to profitability.
• Adj. EBITDA for 2022 came in at ($7.4M) vs. our estimate of ($5.7M) due to increased advertising, salaries, and professional fees tied to growth initiatives.
• Yerbaé ended the quarter with $857K in cash and $5.3M in debt (not including its recent $4M convertible debenture financing).
Hannaford Supermarket Expansion
Subsequent to our initiation report, YERB.U announced that it will be expanding into 185 Hannaford Supermarkets throughout the northeastern United States with its 16oz SKU flavours. While announcements like these are baked into our estimates (we are forecasting 24K retail doors by year-end), it speaks to management’s execution skills and supports the continued revenue growth acceleration.
Valuation
Yerbaé currently trades at 3.4x 2024E sales compared to Monster Beverage at 7.1x and Celsius Holdings at 5.6x, despite posting the leading revenue growth and gross margins in the group. We expect this valuation gap to narrow as YERB.U continues to accelerate revenue growth and reach larger scale. We are maintaining our BUY rating and $2.25/share target price based on 4.5x 2024E sales.
Underlying
ACT360 Solutions Ltd.
Provider
Atrium Research Corporation
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Nicholas Cortellucci, CFA
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