Mohawk Industries (MHK) acquires assets of e-commerce company Healing Solutions
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Mohawk Group Holdings, Inc. (Nasdaq: MWK) (“Mohawk” or the “Company”) today announced it acquired the assets of e-commerce company Healing Solutions, LLC (“Healing Solutions”), a leading online seller of essential oils. Healing Solutions’ unaudited trailing twelve month revenue and operating income excluding inventory liquidations, as of October 31, 2020, were approximately $65.2 million and $12.7 million, respectively.
Yaniv Sarig, Co-Founder and Chief Executive Officer of the Company, commented, “Our mission to build the leading e-commerce consumer brands platform has taken another meaningful step forward today. We are thrilled to enter the essential oils category which further diversifies our e-commerce portfolio of brands. Consumable products with recurring purchases and subscription revenue opportunities that complement our hard goods brands have been on our radar. Our strategy to create a supply chain and technology platform designed to operate e-commerce brands across a wide spectrum of categories at scale continues to bear fruit. We are still at the early stages of executing on our ambitious goals and are looking forward to developing new products for the brands we are acquiring as well as extending their reach internationally.”
As consideration for Healing Solutions’ assets, Mohawk paid approximately $15.3 million in cash and issued approximately 1.4 million shares of Mohawk’s common stock. The cash and common stock payments reflect an approximate 3.8x multiple on the trailing twelve month operating income of Healing Solutions, excluding liquidations, as of October 31, 2020. Mohawk will also issue approximately 170,000 shares of Mohawk’s common stock as consideration related to inventory being acquired from Healing Solutions, which number of shares shall be subject to adjustment (up to a maximum of 280,000 shares) based on actual inventory delivered as determined following the closing. In addition, and subject to the achievement of certain cost reduction metrics within the next 15 months, Mohawk agreed to issue to Healing Solutions and certain consultants up to a maximum of approximately 736,912 shares (in the aggregate) of Mohawk’s common stock. 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 signed a six month lockup, voting, and standstill agreement.
Increased 2021 Revenue Outlook & Establishing 2021 Net Income and Adjusted EBITDA OutlookFor full year 2021, the Company expects net revenue to be in the range of $340 million to $370 million, up from $290 million to $320 million, reflecting the addition of the Healing Solutions business. The Company is establishing a net income estimate for the year ended December 31, 2021, which it expects to be in a range of $1 million to $5 million due primarily to quarterly interest expense, net and stock-based compensation expense. The Company is also establishing an Adjusted EBITDA estimate for the year ended December 31, 2021, which it expects to be in the range of $28 million to $32 million.
The most directly comparable GAAP financial measure for Adjusted EBITDA is net income. The Company has not reconciled its expectations as to forward-looking Adjusted EBITDA to net income, the most directly comparable GAAP measure, because certain items are out of the Company’s control or cannot be reasonably predicted, including that the historical revenue and operating income of the Healing Solutions business are subject to the completion of the Company’s standard procedures for the preparation and completion of its financial statements and completion of an audit by the Company’s independent registered public accounting firm. Accordingly, a reconciliation of forward-looking Adjusted EBITDA to net income is not available without unreasonable effort.
New $16.5 Million Term LoanMohawk today also announced the issuance of a Senior Secured Note to an institutional lender. The Company received gross proceeds of $14.0 million in exchange for the Senior Secured Note with an aggregate principal amount of $16.5 million with a bullet maturity in 24 months. The new Senior Secured Note has a zero percent interest rate. In connection with the Senior Secured Note, the Company issued to the institutional lender warrants to purchase an aggregate of 469,931 shares of the Company’s common stock at a strike price of $25.10.
A.G.P. / Alliance Global Partners acted as sole placement agent on the debt transaction.
Conference Call DetailsManagement will host a conference call on Tuesday February 2, 2021 at 8:30 am ET to discuss the acquisition. Investors and analysts interested in participating in the call are invited to dial (877) 295-1077 (domestic) or (470) 495-9485 (international) and provide the conference ID: 1076569. The conference call will also be available to interested parties through a live webcast at https://ir.mohawkgp.com.
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