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• Yerbaé reported Q3 financials that missed our expectations due to an overall slowdown in growth. As such, we are reducing our 2024E estimates and target price to $2.00/share.
• However, the miss seems to already be priced into the stock, with YERB.U being down 50% from its highs in August.
• YERB.U has reported various strong updates subsequent to the quarter including bringing on Aaron Rodgers as a lead investor.
On Wednesday evening, Yerbaé Brands Corp. (YERB.U:TSXV, YERBF:OTC) reported Q3 financial results that missed our estimates. The miss was driven by an overall slowdown in growth as compared to the results seen in Q2; however, we believe the poor quarter is already baked into the stock price with it down ~50% from the highs in August. We are recalibrating our model to reflect the reduced growth, however, we remain confident that with the recent celebrity financings (Aaron Rodgers, Brock Purdy, Nolan Arenado), YERB.U will be able to re-accelerate growth in 2024. We are maintaining our BUY rating and decreasing our target price to $2.00/share (previously $2.75/share) based on 6.0x 2024E sales.
Key Highlights
• YERB.U reported $3.0M in net revenue in the quarter, compared to our estimate of $4.5M and $1.9M in Q2/22, representing 57% YoY growth. The miss was attributed to our overconfidence in the Q2 run-rate and timing issues with Costco shipments which will be realized in early 2024. The Company highlighted that volume also grew 57% due to higher velocities in retail and increased points of distribution.
• Gross revenue came in at $3.4M vs. our estimate of $4.8M with the promotional rate at 12% compared to our estimate of 6%.
• SPINS retail data showed Yerbaé sales up 75% YTD compared to 16% YTD for the energy drinks category.
• Gross margin for the quarter came in at 53% compared to our estimate of 55% and 56% last quarter. We remind readers that this compares to Monster at 53% and Celsius at 50% in Q3.
• Adj. EBITDA for the quarter came in at ($3.1M) vs. our estimate of ($2.0M) due to continued spending on growth and marketing initiatives.
• Yerbaé ended the quarter with $1.6M in cash and $4.5M in debt (not including its recent financing).
YERB.U: Recalibrating Our Model After Soft Q3 Financials
What you need to know:• Yerbaé reported Q3 financials that missed our expectations due to an overall slowdown in growth. As such, we are reducing our 2024E estimates and target price to $2.00/share.
• However, the miss seems to already be priced into the stock, with YERB.U being down 50% from its highs in August.
• YERB.U has reported various strong updates subsequent to the quarter including bringing on Aaron Rodgers as a lead investor.
On Wednesday evening, Yerbaé Brands Corp. (YERB.U:TSXV, YERBF:OTC) reported Q3 financial results that missed our estimates. The miss was driven by an overall slowdown in growth as compared to the results seen in Q2; however, we believe the poor quarter is already baked into the stock price with it down ~50% from the highs in August. We are recalibrating our model to reflect the reduced growth, however, we remain confident that with the recent celebrity financings (Aaron Rodgers, Brock Purdy, Nolan Arenado), YERB.U will be able to re-accelerate growth in 2024. We are maintaining our BUY rating and decreasing our target price to $2.00/share (previously $2.75/share) based on 6.0x 2024E sales.
Key Highlights
• YERB.U reported $3.0M in net revenue in the quarter, compared to our estimate of $4.5M and $1.9M in Q2/22, representing 57% YoY growth. The miss was attributed to our overconfidence in the Q2 run-rate and timing issues with Costco shipments which will be realized in early 2024. The Company highlighted that volume also grew 57% due to higher velocities in retail and increased points of distribution.
• Gross revenue came in at $3.4M vs. our estimate of $4.8M with the promotional rate at 12% compared to our estimate of 6%.
• SPINS retail data showed Yerbaé sales up 75% YTD compared to 16% YTD for the energy drinks category.
• Gross margin for the quarter came in at 53% compared to our estimate of 55% and 56% last quarter. We remind readers that this compares to Monster at 53% and Celsius at 50% in Q3.
• Adj. EBITDA for the quarter came in at ($3.1M) vs. our estimate of ($2.0M) due to continued spending on growth and marketing initiatives.
• Yerbaé ended the quarter with $1.6M in cash and $4.5M in debt (not including its recent financing).
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ACT360 Solutions Ltd.
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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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