The company increases its net sales margin to $ 340 million – $ 370 million for 2021
Offers 2021 net income outlook range of $ 1M – $ 5M &
2021 Adjusted EBITDA outlook ranges from $ 28 million to $ 32 million
Announces new loan of $ 16.5 million
Conference call on Tuesday, February 2, 2021 at 8:30 a.m. ET
NEW YORK, February 2, 2021 (GLOBE NEWSWIRE) – Mohawk Group Holdings, Inc. (Nasdaq: MWK) (“Mohawk” or the “Company”) today announced the assets of e-commerce company Healing Solutions, LLC (“Healing Solutions”), a leading online essential oil retailer. Healing Solutions unaudited sales and operating income after twelve months with no inventory liquidation were approximately $ 65.2 million and $ 12.7 million as of October 31, 2020, respectively.
Yaniv Sarig, Company Co-Founder and Chief Executive Officer, commented, “Our mission to build the leading e-commerce platform for consumer brands today has taken another significant step forward. We are excited to enter the essential oils category, which further diversifies our e-commerce brand portfolio. Consumables with recurring purchases and subscription income that complement our hardware brands were on our radar. Our strategy of creating a supply chain and technology platform for running e-commerce brands across a wide range of categories on a large scale continues to bear fruit. We are still in the early stages of realizing our ambitious goals and look forward to developing new products for the brands we acquire and expanding their reach internationally. “
In consideration for the Healing Solutions assets, Mohawk paid approximately $ 15.3 million in cash and issued approximately 1.4 million common shares of Mohawk. The cash and common stock payments reflect approximately 3.8 times the subsequent twelve month operating income of Healing Solutions excluding liquidations as of October 31, 2020. Mohawk will also issue approximately 170,000 common shares of Mohawk in consideration for inventory purchased from Healing Solutions, the number of shares of which will be subject to adjustment (up to a maximum of 280,000 shares) based on actual inventory levels determined upon completion. In addition, subject to certain cost reduction metrics being achieved, Mohawk has agreed to issue Healing Solutions and certain consultants up to a maximum of approximately 736,912 common shares (total) of Mohawk within the next 15 months. In connection with the Transaction, Healing Solutions is subject to certain trading restrictions on all shares to be issued in connection with the Transaction and has signed a six month lock-up, voting and standstill agreement.
Increased sales outlook for 2021 and setting of net income for 2021 and adjusted EBITDA outlook
For full year 2021, the company expects net sales in the range of $ 340 to $ 370 million from $ 290 to $ 320 million, reflecting the addition of the healing solutions business. The company estimates net income for the year ended December 31, 2021, which is expected to be between $ 1 million and $ 5 million, primarily driven by quarterly interest expense, net expense, and stock-based compensation expense. The company also has an Adjusted EBITDA estimate for the fiscal year ended December 31, 2021 that is expected to range between $ 28 million and $ 32 million.
The most directly comparable GAAP financial measure for Adjusted EBITDA is net income. The company has not aligned its expectations for forward-looking Adjusted EBITDA with net income, the most directly comparable GAAP measure, because certain items are beyond the control of the company or cannot be reasonably predicted, including historical revenue and operating income Company’s healing solutions business is subject to completion of the Company’s standard procedures for the preparation and completion of its annual financial statements and completion of an audit by the Company’s independent, registered accounting firm. Accordingly, a reconciliation of the forward-looking adjusted EBITDA to the net result is not possible without undue effort.
New loan with a term of $ 16.5 million
Mohawk also announced today that it has issued a Senior Secured Note to an institutional lender. The company received gross proceeds of $ 14.0 million in exchange for the senior secured bond with a total face value of $ 16.5 million and a term of 24 months. The new Senior Secured Note has an interest rate of zero percent. In connection with the Senior Secured Note, the Company issued warrants to the institutional lender to purchase a total of 469,931 common shares of the Company at an exercise price of $ 25.10.
AGP / Alliance Global Partners acted as the sole agent in the debt transaction.
Conference call details
Management will host a conference call on Tuesday, February 2, 2021 at 8:30 a.m. ET to discuss the acquisition. Investors and analysts interested in attending the conference call are asked to call (877) 295-1077 (Domestic) or (470) 495-9485 (International) and provide Conference ID: 1076569. The conference call is also available to those interested via a live webcast at https://ir.mohawkgp.com.
About Mohawk Group Holdings, Inc.
Mohawk Group Holdings, Inc., together with its subsidiaries (“Mohawk”), is a rapidly growing technology-based consumer products company that uses machine learning, natural language processing, and data analysis to design, develop, market and sell products. Mohawk operates mostly through online retail channels such as Amazon and Walmart. In addition to Healing Solutions, Mohawk has eleven brands of its own and sells products in a variety of categories including household and kitchen appliances, kitchen appliances, environmental devices (i.e. dehumidifiers and air conditioners), beauty products and, to a lesser extent, products. Consumer electronics. Mohawk was founded on the premise that a company selling packaged consumer goods today would employ artificial intelligence and machine learning, the synthesis of massive amounts of data and the use of social evidence to validate high-profile product offerings as opposed to excessive applications – trust in brand equity and others traditional marketing tactics.
Forward-Looking Statements
All statements contained in this press release, other than historical facts, relating to activities, events or developments that we expect, believe or expect to occur in the future, are forward-looking statements, including but not limited to statements relating to this acquisition . Our M&A strategy, the potential for recurring purchase or subscription revenue related to the Healing Solutions business, our goal to create a supply chain and technology platform that will power e-commerce brands across a wide range of categories As well as any future acquisitions of additional companies, our ability to achieve significant leverage and efficiencies in integrating companies we acquire, including leveraging our team’s expertise, supply chain economies of scale, and the automation that driven by our platform, our expectations for future growth internationally and through the development and launch of products under our brands and the acquisition of additional brands, our net sales prospects for 2021, including all expected effects of this acquisition, and the statements about our exp Full Year 2021 Net Income and Adjusted EBITDA These forward-looking statements are based on statements made by management. Current expectations and beliefs are subject to uncertainties and factors, all of which are difficult to predict, and many of which are beyond our control and could cause the Actual results differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those associated with this acquisition; those relating to our ability to achieve leverage and efficiency in integrating companies we acquire, including leveraging our team’s expertise, our supply chain economies of scale, and the automation powered by our platform; those related to our ability to grow internationally and launch products under our brands and acquire additional brands; those related to the impact of COVID-19, including its impact on consumer demand, our cash flows, financial condition, and sales growth rate; completing our normal audit procedures and reviewing the healing solutions business or other acquired business; our supply chain including sourcing, manufacturing, storage and fulfillment; our ability to efficiently manage expenses, working capital and investments; our business model and technology platform; our ability to disrupt the consumer goods industry; our ability to increase market share in existing and new product categories, including PPE; our ability to generate profitability and shareholder value; international tariffs and trade measures; Inventory management, product liability claims, recalls, or other safety and regulatory concerns; Trust in third party online marketplaces; seasonal and quarterly fluctuations in our sales; Acquisitions of other companies and technologies, our ability to continue to access debt and equity, and the extent of our leverage and other factors discussed in the “Risk Factors” section of our most recent periodic filings with the Securities and Exchange Commission (SEC) ”), All of which are available free of charge from the SEC’s website at www.sec.gov.
While we believe that the expectations contained in our forward-looking statements are reasonable, we do not know whether our expectations will prove to be correct. You are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of publication, even if they are later made available by us on our website or otherwise. We do not assume any obligation to update, change or clarify these forward-looking statements as a result of new information, future events or for other reasons, unless this is required by applicable securities laws.
Investor contact: Ilya Grozovsky, Mohawk Group 917-905-1699
