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• Yerbaé posted Q1/23 financial results including net revenue of $3.5M vs. our estimate of $3.5M, representing 130% YoY growth and 88% QoQ growth.
• Gross margin came in at 50% in Q1 vs. our estimate of 56% due changing sales mix as well as inflationary pressures.
• YERB.U is trading at 3.5x 2024E sales compared to high-growth peers at 7.0x, despite having superior sales growth and gross margins.
Yerbaé Brands Corp. (YERB.U:TSXV) reported Q1/23 financial results yesterday evening that were in line with our expectations for revenue but missed on profitability. The quarter again reaffirmed our confidence in the investment thesis outlined in our initiation report on April 19th. We are maintaining our BUY rating and $2.25/share target price on Yerbaé Brands.
Key Highlights
• YERB.U reported $3.5M in net revenue in Q1, compared to our estimate of $3.5M and $1.5M in Q1/22 (+130% YoY and +88% QoQ). We remind readers that Yerbaé pre-announced Jan & Feb 2023 revenue of $2.8M (both were record months). This was driven by 130% volume growth based on higher velocities in retail, increased points of distribution (i.e., expansion into 131 Costcos), and increased adoption of plant-based energy drinks.
• Gross revenue came in at $3.7M vs. our estimate of $3.8M with the promotional rate at 5% compared to our estimate of 7%.
• Nielsen consumer behaviour data showed Yerbaé sales up 356% for the last 13 weeks and up 277% in Q1/23, compared to 13% and 15% for the energy drink category respectively.
• Gross margin for Q1 came in at 50% compared to our estimate of 56%. While this is still above the industry average of 40%, there is some variability in gross margin based on what products/channels dominate the mix in the quarter (i.e., variety packs and club format in Q1) as well as inflationary pressures. As such, we are revising down our gross margin expectations as YERB.U finds its footing with its newly expanded distribution network and increased output.
• Adj. EBITDA for the quarter came in at ($2.6M) vs. our estimate of ($1.9M) due to the gross margin miss as well as increased SG&A for growth initiatives. This represents a (74%) EBITDA margin compared to (148%) last quarter and (97%) in Q1/22, illustrating the benefits of scale.
• Yerbaé ended the quarter with $0.3M in cash and $1.3M in debt (not including its recent $4.0M convertible debenture financing).
YERB.U: Record Q1 Financials & Positive Outlook
What you need to know:• Yerbaé posted Q1/23 financial results including net revenue of $3.5M vs. our estimate of $3.5M, representing 130% YoY growth and 88% QoQ growth.
• Gross margin came in at 50% in Q1 vs. our estimate of 56% due changing sales mix as well as inflationary pressures.
• YERB.U is trading at 3.5x 2024E sales compared to high-growth peers at 7.0x, despite having superior sales growth and gross margins.
Yerbaé Brands Corp. (YERB.U:TSXV) reported Q1/23 financial results yesterday evening that were in line with our expectations for revenue but missed on profitability. The quarter again reaffirmed our confidence in the investment thesis outlined in our initiation report on April 19th. We are maintaining our BUY rating and $2.25/share target price on Yerbaé Brands.
Key Highlights
• YERB.U reported $3.5M in net revenue in Q1, compared to our estimate of $3.5M and $1.5M in Q1/22 (+130% YoY and +88% QoQ). We remind readers that Yerbaé pre-announced Jan & Feb 2023 revenue of $2.8M (both were record months). This was driven by 130% volume growth based on higher velocities in retail, increased points of distribution (i.e., expansion into 131 Costcos), and increased adoption of plant-based energy drinks.
• Gross revenue came in at $3.7M vs. our estimate of $3.8M with the promotional rate at 5% compared to our estimate of 7%.
• Nielsen consumer behaviour data showed Yerbaé sales up 356% for the last 13 weeks and up 277% in Q1/23, compared to 13% and 15% for the energy drink category respectively.
• Gross margin for Q1 came in at 50% compared to our estimate of 56%. While this is still above the industry average of 40%, there is some variability in gross margin based on what products/channels dominate the mix in the quarter (i.e., variety packs and club format in Q1) as well as inflationary pressures. As such, we are revising down our gross margin expectations as YERB.U finds its footing with its newly expanded distribution network and increased output.
• Adj. EBITDA for the quarter came in at ($2.6M) vs. our estimate of ($1.9M) due to the gross margin miss as well as increased SG&A for growth initiatives. This represents a (74%) EBITDA margin compared to (148%) last quarter and (97%) in Q1/22, illustrating the benefits of scale.
• Yerbaé ended the quarter with $0.3M in cash and $1.3M in debt (not including its recent $4.0M convertible debenture financing).
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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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