Mene Inc. Reports Financial Results for Second Quarter 2020

TORONTO--()--Menē Inc. (TSX-V:MENE) (US:MENEF) (“Menē” or the “Company”), an online 24 karat jewelry brand, today announced financial results for the second quarter ended June 30, 2020 (“Q2 2020”). All amounts are expressed in Canadian dollars unless otherwise noted.

FINANCIAL HIGHLIGHTS:

  • IFRS Revenue of $3.4 million, an increase of $1 million (40%) year-over-year (“YoY”). Non-IFRS Adjusted Revenue2 of $3.7 million, a $1.1 million (41%) increase YoY.
  • IFRS Gross Profit of $0.9 million, a 53% increase YoY. Gross Profit Percentage of 27%, compared to 24% in the previous year.
  • Reduced Operating Expenses to 37% of revenue, compared to 74% in the same quarter last year.
  • IFRS Operating Loss decreased by $0.9 million, or 70% YoY to $0.4 million, a new record low for the Company.
  • Sold 4,915 units of jewelry through 2,790 customer orders during the quarter.
  • Average Order Value of $1,353, an increase of 125% YoY.
  • At June 30, 2020, the Company has $12.7 million in Tangible Common Equity5, including $4.3 million in cash and cash equivalents, $10.2 million in inventory and $17.4 million in short-term investments.

OPERATIONAL HIGHLIGHTS:

  • Introduced 22 new product designs during the quarter, including a new “Saints” collection featuring four classic symbols of faith.
  • Cumulative units of jewelry sold reached 58,530 as of quarter end and nearly half a tonne of precious metal weight.
  • Sales to Returning Customers attributed to 67% of total sales in Q2 2020.
  • Inventory Level of 131 Gold Equivalent Kilograms. The YoY decrease is due to higher than anticipated growth in sales.
  • Outstanding customer order waitlist of approximately $7.9 million as of July 16, 2020.
  • Featured in ELLE Magazine as one of the “23 Fine Jewelry Brands Worth Investing In”.
  • Registered more than 16,400 independent customer reviews on mene.com/reviews.
IFRS Consolidated Income Statement Data &
Key Performance Indicators (KPIs)1
FY 2020 FY 2019 FY 2018
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
Revenue (CAD)

3,439,038

5,156,994

4,653,601

3,218,281

2,456,930

2,733,596

3,266,663

1,985,711

Gross profit (CAD)

917,721

1,012,923

458,201

1,000,210

600,719

678,814

740,130

208,408

Gross profit (%)

27%

20%

10%

31%

24%

25%

23%

10%

Net loss

(1,029,300)

(1,855,303)

(3,449,094)

(1,535,114)

(672,663)

(1,107,752)

(2,668,276)

(1,644,097)

Total comprehensive loss

(1,448,394)

(808,093)

(3,991,270)

(1,405,212)

(868,786)

(1,166,288)

(2,703,205)

(1,691,124)

Non-IFRS Adjusted Revenue (CAD)2

3,678,069

5,611,286

5,095,968

3,445,952

2,601,569

2,914,297

3,704,403

2,346,622

Non-IFRS Adjusted Gross Profit (CAD)3

981,507

1,102,154

501,757

1,070,968

636,083

723,686

839,309

246,287

Non-IFRS Adjusted Loss4

(303,428)

(577,147)

(867,349)

(442,016)

25,252

(476,561)

(473,170)

(1,093,533)

Total Shareholders' Equity (CAD)

12,720,633

14,321,528

15,127,316

17,399,693

18,423,043

17,833,109

18,494,246

10,077,520

Inventory balance (kg of gold)5

131

132

212

249

255

222

244

135

Customer orders

2,790

4,157

4,548

2,998

5,167

4,437

6,729

3,994

Units of jewelry sold

4,915

6,641

7,225

5,164

7,183

8,182

9,111

6,168

Jewelry weight sold (total kg)

39

69

65

44

42

43

51

35

(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, accretion, revaluation of metal loan and translation gain or loss. 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.

STATEMENT FROM FOUNDER & CEO ROY SEBAG:

In Q2 2020, Menē has reported another successful quarter showing strong year over year growth in revenue, gross profit, and gross margin. Moreover, we continue to demonstrate our operating discipline as evidenced by record low operating expenditures as well as IFRS operating loss. All of this has been achieved in the face of the Covid-19 pandemic and record precious metal prices. To me this reveals the resiliency of our nascent brand, the strength of our business model, and the growing base of passionate customers from around the world who are propelling our company towards a bright future. There are three points to which I would like to draw the attention of our long-term shareholders. First, even in light of our early debt repayment and consequently our debt reduction of $10 million, Menē still owes close to $20 million in debt of which $10 million is denominated in gold weight and owed to Goldmoney Inc. Therefore, it is important in management’s view that long-term shareholders look past the non-operational accounting line items arising from interest expenses and debt revaluations due to a rising gold price. Management is confident in our ability to manage this debt load due to our strong relationship with Goldmoney Inc. as well as formidable interest from investment banks and institutional investors to support our company’s cost of capital. Shareholders should know that management is carefully assessing these line items while trying to maintain the least dilution and greatest integrity to our capital structure. Putting these movements aside, it should be clear that the business model is already break-even and slightly profitable depending on how one views extraordinary items. The second point is that Q2 is always the weakest quarter seasonally for our business while Q3-Q4 are our strongest quarters. Therefore, management generally seeks to sell-down inventory into Q2 at the highest margins recycling capital into the manufacturing of new inventory into the strong sales seasons. While inventory was down to 131 KG at the reporting date, by mid-September our inventory level will be at 200 KG. The third point is that our wait list is an important metric to track and its record setting level of nearly $8 million at the reporting date will, management believes, translate into significant sales in the final two quarters of the year. To that end, both the management team and the board of Menē have developed a revised sales model which will be implemented in several phases between Q3 2020 and Q2 2021. The result of these changes will be that Menē will offer customers the ability to pre-purchase any design coupled with a personalized engraving which will be shipped within weeks of order. We have listened to our customers and this was a feature they desired very much. This enhancement to our service will, in our view, significantly impact our results in the next few years. It will mean that we shorten the time between wait-list demand and revenue recognition while accelerating product churn and revenue growth. The team is very excited about this material improvement to our business model and we are grateful to our customers for having the trust in our brand to catalyze this decision. I should note that within the luxury e-commerce industry, this model is becoming the norm and truly expresses the kind of shift in consumer behaviours towards e-commerce in the last few years.

Looking ahead, we expect a strong end of the year season and are already seeing this in the first two months of Q3. Moreover, as I write this statement, Menē has already reached its 2019 full year IFRS revenue figures in 2020 with the historically strongest four months ahead of us. On the product side, our design team has been busy and is excited to launch several new design categories in Q3 and Q4 of 2020 including heavy chains, pendants, rings, and gifts. We have also been making progress, albeit very slow progress, on the R&D for a new silverware category. We hope to be in a position to launch this category in 2021 adding a third precious metal (silver) to our product library though I must stress this venture is still in its early stages and there is no guarantee we will be successful. We continue to see strong adoption and brand awareness for Menē by leading cultural taste-makers and icons. In the past quarter, we have fielded inbounds from leading celebrities who have purchased jewelry and have even asked to use our products in upcoming media appearances. One specific appearance will be a cover of a leading fashion magazine which is publishing an issue highlighting the leading sustainable brands in luxury. And what is more sustainable than jewelry crafted from 24 karat pure gold which lasts forever?

Finally, I would like to thank our team for their passionate work this quarter, specifically our manufacturing team in New Jersey who have been working around the clock to produce inventory for the holiday season. This performance has been especially moving as an integral member of the Menē family in New Jersey has suffered from the terrible and premature loss of his wife and the mother of three beautiful children. I would also like to thank our shareholders and customers for their continued support in making Menē one of the most successful new jewelry brands in the world.

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, stock-based compensation, accretion, revaluation of metal loan, and translation gain or loss. The closest comparable IFRS measure is total comprehensive loss.

Tangible Common Equity5 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 quarter ended June 30, 2020.

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; an inability to predict and counteract the effects of COVID-19 on the business of the Company, including but not limited to the effects of COVID-19 and other infectious diseases presenting as major health issues on the price of precious metals, capital market conditions, restriction on labour and international travel and supply chains; 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
Head of Investor Relations
ir@mene.com

Adil Sheikh
Chief Financial Officer
Menē Inc.
+1 647 250 7221

#Hashtags

$Cashtags

Contacts

Media and Investor Relations Inquiries:
Renee Wei
Head of Investor Relations
ir@mene.com

Adil Sheikh
Chief Financial Officer
Menē Inc.
+1 647 250 7221