Q4 2020 Newage Inc Earnings Call
Greetings and welcome to the New age, Inc, fourth quarter and full year 2020 conference call.
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Question and answer session will follow the formal presentation.
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Now I'll turn the conference over to your host Ryan Zimmer you may begin.
Thank you good morning, and thank you for joining new age Inc's fourth quarter and full year 2020 financial results Investor Conference call.
I'm, Brian Hey, Timur Global head of Investor Relations at New age and I'm pleased to be with you. All today on today's call. We have Brent Willis, our Chief Executive Officer, and Mark Wilson, Our group President.
I'd like to remind everyone that this conference call may contain certain forward looking statements, reflecting management's current expectations regarding future results of operations economic performance financial condition and achievements of the company.
Forward looking statements specifically those concerning future performance are subject to certain risks and uncertainties.
Factors that could cause these results to differ materially are set forth in our annual report on form 10-K.
And 10-Q filed with the SEC.
Any forward looking statements that we may make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
Also during this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings release, which is available on our website. The transcript of todays conference call also be available on the company's website within the investors section at new age Dot com.
I'll now turn the call over to Brent Willis.
Our C E O.
Thank you Riley and good morning, everyone.
Do age is now a half a billion dollar company and pro forma revenue from.
Really just an idea four and a half years ago.
Essentially from near zero to in mid 2016 to this scale right at $500 million.
In a relatively short period of time and now our first profitable quarter with $2 $9 million of EBITDA.
And we said all along that as we reach the initial scan we intended which we've now heard that the profitability will come.
And that this commitment has now materialized. So we expect to methodically and systematically improve on this profit base from this point forward.
Why will the Bottomline further improve from here.
It's just the math financially now we have the scale and the associated resources, we don't need more SG&A and we believe we have the right infrastructure for a multibillion dollar size from multinational we have the market breadth and access we've got the people the systems everything you need to capture.
The benefit of.
More scale, whereby a disproportionate amount of that growth will accrue to EBITDA margin and bottom line performance.
So even though we have the scale and profitability as a result, much of our success still depend on the quality of our team and people.
It always does but with historically smaller companies like ours.
It depends on them and their unwavering perseverance for success to that end I have with me on the call. This morning long term industry veteran Mark Wilson, Our group President of our direct social selling division, who leads all of our regions and commercial operations I think mark is.
By far and away one of the best in the industry, if not the best and he will discuss the progress in details of our operational performance and provide more color on the operating results in our key geographies.
Now when you start out these.
Start up.
And if you are be grudgingly public REIT, we inherited you articulate your expectations of what you will do.
And if four and a half years ago, we would've said, we're going to add $500 million of revenue and become EBITDA positive and cash flow generating no. One would have believed is let's face. It. So we're just not going to communicate our next milestones.
Well, we will say however is.
We are methodically going to build our business for consistent topline and consistent bottom line EBITDA free cash and EBITDA margin improvement and we are confident that we have both the business structure and the financial structure to do it.
Net leading to that methodical performance is one of my mentors used to say is our focus on what matters to this and that.
Divestiture of BW are that frankly cost us more than $7 million at the EBITDA level a year was the right move that happened at the end of Q3, we really.
Loved our retail brands, but the economics and the retail brand beverage sector, just changed and we did not have the scale or the leverage to do anything about it.
So we made the decision to divest them and the end result is at least 7 million more in EBITDA per year.
And this move enables an even greater focus on building out our direct route to market with.
On a competitively advantaged social selling tools, which we see as a major trend and frankly, a must have for CPG companies to survive and thrive we have over 70% gross margin in this sector of the business.
And tremendous industry tailwind behind us.
And with all of the both organic and external growth opportunities in front of it is critical to our success is focusing both those financial resources against the opportunity and our human resources. So when we look at to where we expect to be in the next few years.
This is why we are continuing to strengthen our management team with the right skill set to lead to a multibillion dollar multinational we recently just hired a chief people officer is building a high performance company and culture is critical to our success and will continue to make additional changes to the management team.
Bringing on those leaders that will both embody the culture, we're building and have the bandwidth for the opportunities in front of US book, what we saw.
In Q4 is the beginning of <unk>.
Something big as we promised it's more than a foundation. It is a springboard we have the scale. We have the profitability we have the market reach and we haven't aligned committed and passionate team of more than 400000 brand partners and customers across more than 50 countries.
We have the organizational capabilities and increasingly stronger management team and we have the financial resources and a whole host of growth opportunities in front of US Rx was and is an organic growth business and it is only accelerated from there since the combination given all the things that have.
Come together for us so far.
Frankly investors are just getting the earliest glimpse of now coupled with all the transformative external growth opportunities that are continue to present themselves well like I said. This is much more than a foundation. This is a springboard if something big So let me pass it over to Mark to give you some insight on.
And what is happening for us operational smart.
Hey, Thanks Brent.
As the group President at New age My focus is to the leadership of our markets all the people around the world and our regions are hundreds of thousands of brand partners and customers and directing our global sales strategy. In addition, I am leading the team that is responsible for the execution of our successful conversion and integration and since.
G capture with the now combined companies and I am happy to report, we are seeing better than expected results in our first 100 days or so the three things are happening that we are pleased to report first we identified around 20 million in synergies that would accrue from the combination of the first 12 months to 18 months coming to GAAP.
We have already captured over $15 million, a lull on an annualized savings in our first hundred days and we know there are additional benefits potential even beyond the 20 million commit but as we dig deeper.
Second we continued to experience organic growth in a number of our regions performed on last year, we did right at $500 million Brent as Brent mentioned in net revenue.
Brent as previously guided us to a high single digit or low double digit revenue growth, which we are confident we can meet and even exceed this guidance oftentimes with merger do you see a slight softening in sales. However, it's been just the opposite for us as we actually see accelerating sales and leaders from <unk>.
Companies join us for even bigger opportunities.
The third thing that I'm pleased to report is that we are coming together as one company and creating a new culture performance and collaboration we now we're operating with one aligned goal and everyone is pulling in that same direction and with the changes that we're making with the management team. This will only serve to facilitate the new culture that we have.
Trading going forward.
Coming from Rx, we know what it takes to run a successful international business profitably. This requires discipline and a scaled approach with higher pay managing spend according to our sales and profit levels.
So our different geographic regions for the most part all function as profit generating segments.
Dan alluded to in his comments, we will focus our efforts operationally on the following first develop a leading presence and increase our market share in core markets of Western Europe, Japan, China and the Americas.
Selectively invest in high potential emerging markets, where we believe we can complement our core markets and help us achieve our overall sales and profitability goals and third have the discipline to either downsize or eliminate markets that don't fit in our performance objectives or fit into work for the growth strategy.
Yeah.
We believe the best strategy is to focus only on high potential markets and opportunities leveraging where we have a competitive advantage. This will provide more time and resources to focus on those markets and opportunities that represent the greatest profitability that represent the most scalable potential and represent the greatest opportunity.
For superior and sustainable organic growth.
Let me quickly dive into some of our business segments and provide some insight to their performance on top of now being the largest Europe is also our fastest growing region that trend has continued post merge and we continue to achieve record sales and growth.
Our success is being driven by strong leadership and growth in the number of customers and brand partners, primarily in the markets of France, Italy, and Spain, our strategy to help our brand partners become influencers utilizing social selling and technology is resonating in the region and we are working to systematize, what we know.
And how they do that in Europe to our other regions around the world.
Switching to greater China. This is one place where the social selling and technology approach similar to Europe will easily translate.
We are already seeing major growth in live streaming wechat sales and other social media platforms in that market.
Bind greater China is more than $100 million in revenue for us and we are attracting new leaders and seeing good growth. This year combined with the strength of the teach in noni brand and encouraging responsiveness to several new product introductions, we see greater China to be a growth region during our 2021.
In Japan, we are experiencing growth as a combined company and in fact Q4 saw growth on the Noni Marin decided the business for the first time in several years reversing this trend is very very encouraging sign to our Japan business on the RF side of the business in Japan, where.
Focusing on the efforts of building the continued in e-commerce subscriber side of the business.
And the recent announcement of the planned merger with alive and should add an additional $20 million in revenue and add to what profitability. They bring strong leadership at both the corporate level and in the field. They have excellent government relations and have a unique portfolio of healthy products that we believe will add nicely to the current new age.
Operating.
Finally in the Americas, specifically U S, Canada, and Mexico, we are seeing solid growth.
The level of engagement and motivation among our leaders is at an all time high.
All of our groups here accelerating including the direct source division that had 15% growth prior to the Q4, Mexico that had triple digit growth in our direct social selling group in the U S that also experienced double digit growth.
The credit to our for our success has to really go to our brand partners and their amazing leadership for example partners like Dr. A vertical pena from Mexico. Dr opinion is attracting health care professionals and young professionals looking for new personal financial model in a way to incorporate healthier lifestyles into everything they do.
And this new model by the way is particularly attractive to millennials and Gen Z.
Other partners like Paulo, Mucci from Italy, who has built an easy to duplicate system for his team and create a unique social selling system for his business, which is second to none our partners like beneath from Belgium, and France, whose social selling product experience on lifestyle and lifestyle social selling and.
Conversion media activities are leading the way for us globally.
These are just a few of the hundreds of thousands of talented leaders that are contributing to our success and they are the ones that really deserve the credit.
It's the drive activity in the efforts of these impassion folks in all of our brand partners that are leading our global performance. This is what leads the measured competence that we have quarter by quarter to build on our springboard the combination of new age <unk> represents.
I'm going to now turn it back over to Brent.
Thank you Mark great job and keep it going in.
Let me review some of the detailed financials before we close it up and open it up to questions.
In 2020 in Q4, we reached $94 million in revenue an increase of 53% versus prior year driving the result was the performance in the regions and respective divisions as Mark reviewed and the consolidation of Rx in the last month plus of the year.
Gross margin reached 66, 8% versus 54, 3%.
From the same quarter last year.
This 12 five percentage point increase was driven by higher net revenue from our direct social selling division and the additions of the new businesses, which were all margin accretive.
Net loss was 4.0 million an improvement of 61 8 million compared to a loss of $65 8 million in the fourth quarter, the private year prior year, and we believe our most important and relevant metric was adjusted EBITDA, where we reached $2 9 million for the fourth quarter of 2020 compared with <unk>.
A negative $17 4 million for the fourth quarter of 2019 and improvement in adjusted EBITDA of $22 million for the quarter.
I know, we communicated that we would be around breakeven less than a month ago. So to exceed that more conservative guidance is a step on the right direction.
And we believe this is just the starting point in terms of bottom line profitability.
Only had Rx and the other companies consolidated for a little over a months period of time and going forward. Throughout 2021. We will also have the benefit of all of this synergy and cost reduction capture translating directly to net income and free cash flow.
For the full year for the period ending December 31, 2020, net revenue reached $279 5 million for the year ended.
Versus $253 7 million in 2019, an increase of 10, 2%.
Pro forma combined revenues for the full year was right at $500 million, a near doubling of our scale and almost 10 times the size of scale. We were in 2019, So we would say.
Another step in the right direction.
Gross margin for the year reached $177 5 million or 63, five percentage of net revenue compared with $152 7 million or 62% of net revenue and.
An increase of $24 8 million or three three percentage point gross.
Gross margin increase was driven by higher relative sales the additions of the new businesses as well as the divestment of the low and negative margin retail brands.
Net loss was $39 3 million for the year compared to a net loss of $89 8 million for the year ended December 31 2019 the.
The improvement of $55 million as a result of improved operating performance.
And a significant nonrecurring impairment expense in 2019 related to the now divested retail brands.
Switching to the balance sheet and cash flow statements. We finished the year with $65 2 million in cash of which $11 $5 million with long term restricted 10 million were short term and $43 7 million was unrestricted.
As investors know as a subsequent event we added in another just over $53 million in February to put us in a very strong cash and financially flexible position.
For the period ending December 31, 2020, total assets were $451 2 million, an increase of around $200 million versus prior year.
Now on all of the financials, we will we are still working to finish our 10-K with our auditors Deloitte.
And given we closed in the end of November and completed the audit and filed our 8-K a on the combination in the beginning of February.
Just not enough time to complete all of the required testing and procedures. So we will likely be filing at 12 would be five.
To provide us that additional time needed to complete the work and the final testing and procedures.
So to summarize here is what we believe are the most important takeaways from todays call. There are six of them and we'd like to just give you the facts as we see them.
Number one.
We are becoming an organic growth company with industry, leading net revenue growth we.
We see the trends that are happening in Q4 carrying over to what looks to be shaping up to be an excellent Q1 as do the underlying drivers of those trends.
Two we have exposure to growth markets and category segments and have a direct to consumer home route to market and are confident that these tail winds will continue to support industry leading growth.
Number three we have a clear vision to become a social selling machine and we have.
<unk> advantage of more than 400000 brand partner distributors that we are arming with what we believe is differentiated and competitively advantage sales tools number four we are now profitable and free cash flow generating and will continue to build EBITDA margin from here accruing.
From the core existing business.
Number five beyond the core we can do more we see an incredibly target rich environment in what is a very unconsolidated sector, where there are few if any players that either know how to effectively consolidate and integrate or have the financial wherewithal to do so.
The decisions we made in 2020, both in terms of additions and Subtractions are normal course of business in these types of companies at this stage in their journey. It was exactly the same at a previous companies to work for AB Inbev and finally number six we have the real financial flexibility and the investment capital to put us on.
On a position to address that.
Truly plethora of both organic and external growth opportunities in front of us like I said no. One would have believed this four years ago. If we said we're going to add in the $5 billion in revenue and get to over 65% gross margin with positive EBITDA and despite that track record and performance no. One is going to believe our next threshold.
No problem, we're just going to methodically grow our top and bottom lines, showing consistent improvement year over year and quarter versus quarter and organic revenue and EBITDA.
We're going to take advantage of what we see.
It's a very attractive set of opportunities in front of us and know we know we have the right direct to consumer business model and increasingly strong management team the portfolio of healthy products and the execution capabilities to capture our fair share of the opportunity and deliver on.
Superior return for our value added shareholders, our brand partners and the new age associates and with that I'd like to open up to questions with the operator.
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One moment, please while we pull for questions.
Our first question is from David Bain with B Riley. Please proceed with your question.
Fantastic and congratulations on a strong <unk> execution.
The first question I had you know obviously, Brian you just laid out.
No your intent to become the largest social selling distribution company and I guess.
Obviously, you have the organic growth, which you pointed to and you did speak to some opportunities in front of you.
Assuming there are some potential acquisitions I mean, we look at the <unk>.
The traditional comps not social.
And they are selling over 10 times on 22 on the.
The last announced acquisition looks like it was done at one times I mean, I guess I'm trying to understand maybe that wasn't outlier or not sure but.
How can you or can you consistently close additional targets below trading multiples and outside of.
Price what do you look for in terms of dynamics in an acquisition is it geographic diversity number of reps growth can you help us.
Capsulate that.
Yeah that.
Is a multifaceted.
It's a multi day.
Day part question, Dave but that book.
We have both a set of financial criteria and that our board has been really stringent upon and a set of strict teach strategic criterion.
And there's about seven or eight components and each one of those and on the financial side. The fundamental answer is number one it has to be accretive for shareholders pre synergies and the synergy capture that we frankly I think we've got the competitive advantage and how to develop that frankly, we learned from the <unk>.
Group.
That is incremental benefit on top for shareholders. So from a financial criterion standpoint.
We're really stringent upon.
<unk> metrics to ensure accretion for shareholders and.
Potentially alive and at one times EBITDA is an outlier potentially Miranda.
That we did in 2018 and it's essentially when it was all said and done a little bit more than one times EBITDA potentially those are outliers, but the bottom line is a lot of these companies in a sea of increasingly choppy COVID-19 waters need a bigger boat and they need.
Safer Harbor, and we represent that right and they all want access to the growth and the potential and the new age stock right. So we're going to be very careful I think going forward in terms of.
That word dilution.
And we have a range of vehicles at our disposal all from our cash balance that we have that opportunities earn out opportunities.
And selectively stock.
And equity to enable these companies to attractively come into the fold, but we also think we've got the processes down where we can really bring them on and integrate them and from the strategic standpoint, we are focused on those on those core markets.
Western Europe.
On China, and Japan, and the Americas So.
Those are those are probably where we look first from the from a market standpoint.
And we also look at further penetration to those few emerging markets, where we are investing which includes kind of the southern tip of Africa or the southern cone of Africa potentially the CIS countries potentially.
Mexico on parts of Latin America, and potentially Korea. So we look at the emerging market opportunities, where we believe we can develop a scale and competitive advantage position that would be accretive for us and then on the brand side will just never compromise on brand new product side in terms of healthy products, It's what we stand for.
And and it's where we believe we've got some competitive advantage to in terms of our functional differentiation across our three product platform. So those are some of the criteria that we look for it but.
There are a wealth of external growth opportunities, but I think as you see and we expect investors will see the organic growth opportunities boy. They are really coming in and Mark and team have just done a superb job of capturing that organic.
Growth opportunity and realizing it.
That doesn't always happen when you bring these companies together, but.
All of the brand partners in all the regions are just doing a superb job on their organic growth opportunities and we're going to continue in investing those.
Yes.
Hopefully that's going to be my one follow up.
That's one thing we're excited about it as sort of that.
Transformation from face to face direct selling to the social selling platform that you've discussed having an acute focus on.
You know when you look at that as early innings, what what.
And Mark spoke to this but I'm, hoping we can get a little bit more specific.
When you have a 400000 IPC for some <unk>.
All over the world.
I know that the demographic shift is younger and they're more acclimated to the technology, but how do you work on the different geographies and attacking the technology and the opportunities are as an organization.
How specific is it the geographies.
So it's something that you see that you're willing to reveal that youre doing different than some of the other platforms that are that have reported.
Mark do you want to try to hit it first.
I would love to so great question.
With social selling and social commerce. There are so many platforms. So many different options out there you really need to kind of specialized to the demographics and the regional where for example, we're approaching China's slightly different because of the wechat and other platforms that are more popular there versus some markets are you.
Is it more of an Instagram TIK talked in a little bit of Facebook still and so we're we're making sure that we're.
Diversified in those areas and making sure that we're attracting to the kind of predisposition that our leaders would have the we will be announcing and we're working on some new tools that will be coming out in the next few months. So we have in the next several weeks, we'll be launching some platforms to.
It easier for the average person to be social selling to be advising individuals to take a look at their products.
<unk> attracted consumers because one of our goals here is to have certainly we want hundreds of thousands of of great Influencers and leaders, if not millions, but tens of millions of customers and the whole game now is to make sure that you make it easy for them to attract those customers through the <unk>.
Actual selling we are also working on a new program that will come out.
Probably late second quarter will be kind of rolling it out and that will make it even easier and the new approach in social selling so we will talk more about that in the coming months in and I think that's going to drive we're budgeting that to be close to 20% of our growth through the end of the year.
On social selling and it's just an easier way to to attract individuals who are interested in this new model.
Thanks Mark.
Yes.
Add to it is different as you know Dave.
The social selling and platforms in tact that is used in China.
And it's much more direct versus I would say more lifestyle in western Europe and in North America. So not only is some of the technology different but the level of overt net selling is also very different but we.
At the same time, recognizing those differences we believe that there are a lot of things that we can rinse and repeat and.
And when we say, we intend to be the world's leading social selling and distribution company.
Our direct selling route to market is just our route to market. It is not the entire company right. So the social selling technology much more etsy marketplace in and some of the leading social selling and E. Commerce companies is much more of what is driving the company going forward.
And think about it converting.
Converting this competitive advantage of these 400000 plus brand partners that we have.
Converting them all to the Influencers that they are becoming and giving them all of that as mark talked about new tools and new social selling tech.
Worldwide really will accelerate the kind of company, we expect to be which is much more on the social selling side e-commerce marketplace side as Mark talked about tens of millions of consumer database side. In addition to the hundreds of thousands of brand partners that we have.
No.
We really got that potential to transform the company going forward on top of this.
It is the foundation, but at the same time, it's a huge springboard that's now throwing off the the organic growth and the profitability as we expected.
Yes, no we find that to be really transformational alright. Thanks, so much guys I appreciate it.
Thanks, Dave.
Our next question is from Aaron Grey with Alliance Global Partners. Please proceed with your question.
Good morning. This is Andrew bond on the line for Erinn, great. Thank you for taking our questions.
Can you provide an update on the timing around potential top line synergies from the <unk> acquisition. You had previously previously mentioned timing as it is dependent on product registration inventory levels and system integration just wanted to see if there are any updates to your expectations on when you might be able to realize those benefits. Thank you.
Yes, it's really Mark Fitz, leading all of those initiatives for the company and the entire convergence team that we call. It. The included representatives from both sides. So Mark can you give.
An update on on where we are in both the cost synergies and to Andrew's question.
What's happening to on the revenue synergy side from cross pollination.
Yes sure.
Thank you.
First of all I think as I mentioned earlier, we've already seen 15 million in in realized opportunities, but we're taking a second swipe at that and so youll see rather than one big failed swoop, we're looking at it more by by Department and by region.
We're coming together so during the convergence process, which is going very very well.
We're looking at as offices.
You have your your leases coming up you have opportunities as we're coming together in convergence. We've already started some markets that are already converged together other markets will be converged together.
That'll be the majority of our markets will see a timing around June and some will trail out through the rest of the year. So as those come together, we will continue to realize additional benefits through this convergence process, which will drop through including our operations, where we've already identified.
So many opportunities and working with the operations team of efficiencies everything from shipping to purchasing manufacturing other opportunities that we see that that will contribute to this so as I said previously we're very confident that we'll hit the 20 million net.
We committed to and I would I would not be surprised if we don't go substantially beyond that in the opportunities that we're seeing and for example, just even with even a little company like alive and that we've announced the merger coming together with those will allow us and afford us even greater opportunities in the future moving forward.
As we converge these because the model is getting more and more efficient all the time.
We have our.
Investing a lot in technology right now, we're putting a lot of time and effort in this and in fact programming currently something that's never been done in the industry, where we can literally run multiple compensation plans for a time to allow people the time too.
To get used to us to blend the family at the right time, rather than forcing issues, which is going to afford us some other unique opportunities industry that I've never seen before.
And allow some of those profits to drop through so we're very encouraged with where we're at but stay tuned throughout the year, you're going to see additional.
Profits and revenues coming from the convergence.
I would just add too thanks Mark.
On the further upside.
<unk> of synergies as some of those revenue synergies.
So one of those just one of those products for example, as our Noni plus CBD shots in Japan, where.
And some independent third party research that we were just surprised with this showed that we were the number one selling CBD supplement in all of Japan right. So we had first mover advantage. There we still have first mover advantage and now were translating that to the other components of our different businesses.
Whether it's Rx or is that Noah in Japan.
To enable them to sell that to given its early level of success and that's just one example, but we're doing cross pollination of our different brands to enable all of our different units to to sell those.
To solve that broader portfolio and capture that the benefit of the revenue synergies.
Great great. Thanks for that color and as a follow up I know you just touched on it but just to dig a little deeper could you talk about the integration process with <unk>, specifically around the commission structure and how you are looking to create eventually a uniform commission structure within the umbrella organization. Thank you.
Sure, let me take that Brian.
Yes sure.
So with that we.
It's a very complex process as you can imagine all the different markets and bringing this all together and as I mentioned, we've already taken some of our smaller markets. For example, Brazil, we have several markets around the world that are already starting the integration process, Mexico Columbia. Some of these that we've used as kind of a <unk>.
<unk> test is we're bringing that together the majority of those markets will see some convergence and the timing is around June we're planning insulating for working with our IP on and that would be net we would be converts together into one compensation plan and many of these markets.
During the June July phases, so that will give us some facility to to make things a little simpler and rather than run two separate youre going to run one it brings the teams together, we're seeing a blending of the convergence of our team leadership, we've already had a number of events and meetings bolt on.
Virtual and even a few live events as Covid is starting to kind of.
Open up those opportunities for us to have some in person meetings again and see this blending of these leaders coming together into one and they are very very excited about the Rx compensation plan, becoming.
On the staple as we move forward, but as I mentioned, we're not going to push this we're going to make sure. We take the time and our key is to keep the growth and keep the sales moving forward and to listen to our leaders and work with them. So with the uniqueness of something we've developed in our it.
We're able to run those for whatever time it takes to make sure that they can purchase comes together, so I think Japan and some of the other markets will be probably later in the year.
Towards the end of the year and again, we're going on we're going to take that in baby steps as we move forward.
Andrew It's a really insightful question too because it is one of the hurdles that a lot of let's just say direct selling companies.
It's why they can't.
Consolidate that's why they can't merge because of the differences in the compensation system, but as Mark pointed out.
Group, we think is outstanding.
With some outstanding leadership and people and team in that and that we've been able to figure out how to run multiple compensation systems.
Concurrently and still be Sox compliant right. So that's a real threat to be able to get done, but having that flexibility and allows us to move at the right pace of when our leaders want to do it right. So that's why Mark said, we're just not going to push this we're going to do what's right for our leaders what they want to drive there.
Income, which we're absolutely committed to and.
And our livelihood depends on their success and their motivations. So we're not going to do anything thats going to challenge that.
Great. Thank you for the detail and congrats on the profitable quarter.
Thanks, Andrew.
And our next question is from Mike Grondahl Northland Securities. Please proceed with your question.
Yes, thanks, guys.
Is it possible to break out brand partners for.
For each of the combined companies and kind of how you think they're going to grow over the next year or two.
Uh huh.
Yeah sort of mic, but and it's a really good question because.
With what people don't know is there is about a 93% are square.
The correlation between your numbers of brand partners, the engagement and motivation of those brand partners and net revenue theres lots of things that matter and Theres other correlated factors.
A lot really does come down to today.
The your numbers and so as we go forward we communicate.
400000, or number is actually in terms of brand partners and customers.
In subscribers and affiliates actually substantially larger than that and we expect to build and get to millions of brand partners. In the next few years, because we know how important that is for revenue, but just like Mark said, we want hundreds of thousands, let's say a brand partners, but at the <unk>.
Same time, we are building tens of millions of consumers and a database there so.
And it's hard to break out of how many brand partners. We have on the Rx side versus as you know aside versus language side versus.
Versus the Miranda side, because we don't manage the business that way, it's really in most markets really all one.
And one management team when leadership, driving and communicating with them and.
We're.
Less than six months into the merger really.
A couple of months, a little bit more than 100 days into the merger. So going forward, it's just going to be one team and so we don't really look at it as separate but I don't know what else would you add to it.
Very good question.
And the other thing I'd add is you know.
Certainly as we were going through the merger we were watching this but to <unk> point, we've tried to blend them together and create one team. So for example in North America.
Our area leader here, Rick Redford's done an amazing job of blending the two cultures together, especially at the leadership level, which are now operating under new age and even though you've kind of had your tribal heritage so to speak of.
It came from our XR I came from Lee move where I came from the no or more and they are really coming together and excited about working together as one one group and one force and so.
We just had an event in Florida that kind of.
Showed that and demonstrated the day.
It kind of working together they were on the stage together they were presenting together they broadcast it with their teams around the nation together. So we're really trying to blend that together into one group and as you attract new leaderships groups on a weekly basis, they come from all sorts of backgrounds and companies in the past.
Histories and so.
We as fast as possible try to bring them into the new age culture and that's what we've created on bringing this together rather than this is an Rx culture or this is a miranda culture.
We've done a I think a really good job of blending that together, so I like to kind of bring them all together into one group and.
And keep them that way, so we really don't identify them separately.
Mark can I follow up on Mike's question actually with you is.
Yes.
What would you say is really driving that organic growth for us because as you know it doesn't typically happen right. Typically there is a there's a pullback because we've seen in other companies.
But what's.
What's really driving it is it that because rx on in terms of great question right.
The real excitement is several things first of all when you have growth and you have this merger coming together people are field really see an opportunity with our brand partners that not only is it exciting to be part of the public company and the growth and participate in that element of growth along with.
They're growing commissions and their individual businesses, but theyre seeing the convergence coming together offering new markets, it's offering new potential products and brands.
As you are part of an exciting group.
Let me take Europe for example, Europe is growing so well that it just is encouraging new people to take a look at this who may have been on the sidelines watching and so.
You have brand partners now, they're joining us because they see the growth they see the excitement and the success and let's face it people love to hang out with successful people are successful organization do you want to be part of that and when you get that momentum, we're experiencing in France, and Italy and other markets in Europe. It it becomes can.
Hey, just so to speak and the talk is out there. So you become known as that is the new growth opportunity. That's there and I think all of these things combining this with the excitement we've seen this in North America as we coming together our leaders have never been as excited as they are right now with the potential and I think some things are <unk>.
<unk> net with the current economy, the current situation that Covid threw us into.
People were looking for on base business Aside and Hustle. In addition to probably more concerned with health and taking preventative actions than they've ever been so it made it easier for it but I think the combining of everything coming together at the same time. They are so excited about this company and the growth and the potential that they can.
And be a part of versus a company. That's declining in fact, we've seen a whole new group in Miranda that are igniting and kind of re engaging.
That probably were living more of a concern of will where in this decline over time and now that they're part of new age and they're seeing the opportunity to win.
A whole new attitude and I think that's why we're attracting companies like alive and others that wanted to be part of this so I think I think you've only seen the tip of the iceberg on this one.
Got it and then with the live in.
I think thats under an LOI right now is there any update there or any thought when that could go to definitive and when it might close.
Yes.
The definitive agreement is with SEC counsel.
And.
It really mirrors the ROI in terms of consideration no surprises.
So.
I would say imminent mic and we want to bring it in because.
<unk> on who is their leader and founder has just got such tremendous government relationships tremendous leader.
And it's going to be a tremendous ambassador for the combined group.
And we'd love to incorporate and consolidate in that too.
$20 million on revenue and $3 million in <unk>.
EBITDA, so we'd love to consolidate that and as soon as possible, but we've got to get through our 10-K first we've got a lot of stuff that we got to do because the 8-K E on.
The new age or ex merger was just on on the first of February right. So we our hands are busy from.
On compliance and Sox and audit and integration standpoint, but what's nice about our live in is it's really seamless integrate in our and purely our Japan operations. So.
I would say that the definitive agreement is with counsel.
And it mirrors the.
Sure.
The LOI and and I would say it is it is imminent for shareholders should expect that coming I would say.
In March.
Shortly thereafter.
Got it okay. Thank you.
Great questions.
Yeah.
Okay.
And we have reached the end of our question and answer session and I'll now turn the call over to Brent Willis for closing remarks.
Thanks, everybody.
Hopefully everybody can start to hear the excitement that we see in the business and when you have these kinds of growth opportunities. When you have this kind of now financial health and financial performance. When you have these organizational capabilities and people in team and infrastructure.
Share that.
Can really perform thats all focus against one common goal and underpinning all of that you've got the financial flexibility. It gives you a lot of confidence of delivering superior returns for shareholders, which we're on the same boat as shareholders are definitely is given.
80%, 90% of the consideration for that combination is all based on stock and stock price growth. So.
We are all 100% committed to equity price appreciation for shareholders So and.
And we've taken those decisions to achieve that in a very significant way for the for the long term. So we're very pleased with the quarter frankly, we thought our Q1 2021 would be our first profitable quarter. So we're happy to to gain EBITDA profitability.
In Q4, so we're just not going to look back. So thank you very much for the continued support and stay tuned.
Thanks, everybody.
Yes.
And this concludes today's conference you may disconnect your lines at this time.
Thank you for your participation.
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Yeah.
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