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Good day, and welcome to the MAV Beauty Brands Fourth Quarter 2021 Earnings Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Mr. Craig Armitage. Please go ahead, sir.
Thank you, John, and good morning, everyone. Just a quick note before we get started that our remarks today may provide certain information regarding our expectations, future plans and intentions that may constitute forward-looking statements. I refer you to the most recently filed MD&A or the AIF, both of which are available on our website and on SEDAR. These include a summary of the significant assumptions underlying these forward-looking statements and certain risks that could affect the company's performance and the ability to deliver on these forward-looking statements.
You'll find the Q4 earnings release, financial statements and the MD&A on the IR section of the website as well. I'd also highlight that in the financial discussion today, the comparisons are Q4 2021 versus Q4 2020, or full year 2021 versus full year 2020, unless otherwise stated.
With that, I'll turn the call over to Serge. Go ahead, Serge.
Thank you, Craig. Good morning, and welcome to MAV's fourth quarter conference call. I'm joined by Laurel Mackay-Lee, our Chief Financial Officer. Today, I will mainly discuss the recent brand performance and our progress with the operational and strategic priorities we introduced in Q3 before Laurel goes a bit deeper on the financial results. We will then take your questions.
Revenue for the fourth quarter increased by 14.5% over last year to $26.7 million. There were multiple performance highlights from the portfolio, including the sustained growth of the Marc Anthony and Cake brands, which I will discuss in a moment. Nonetheless, it was a challenging quarter and year overall as we saw the impact of the same headwinds and variables we discussed last quarter. Net distribution losses continued to weigh on sales results, while our margin and profitability have been significantly impacted by the ongoing supply chain cost pressures and other factors.
For the full year, revenue was down 7% compared to 2020, mainly due to the distribution losses in Renpure and The Mane Choice, partially offset by POS and e-commerce growth within Marc Anthony and Cake. Our stated medium and long-term objective is to move the combined portfolio back to above category growth rates. Each of our brands has a unique voice and expertise, and our strategy is to leverage the benefits of the shared operating platform to allow each brand to scale efficiently and profitably.
Our outlook is underpinned by the growth and resilience of the category. In 2021, the total hair care category in the U.S., our largest market, grew at 3%. And growth for the category in the first 2 months of 2022 has increased to 5%, led by styling and treatments. Unfortunately, mass portfolio fell short of this benchmark for 2021 as the above -- the category bad performance of 2 of our brands was more than offset by the year-on-year decreases of our other 2 brands.
Marc Anthony, the largest branded portfolio had a great year and fourth quarter, building on a 25-plus-year heritage of professional expertise brought to the mass and drug channels. The brand delivered double-digit POS growth in each period, and this performance has been accelerating in recent periods, exceeding 20% in the U.S. market in Q4. These gains reflect expansion in the mass channel, highlighted by the brick-and-mortar rollout of the Strictly Curls and Grow Long collections as well as the sustained growth in e-commerce.
We believe the brand is well positioned for growth in 2022 and beyond. One tailwind is the growing texture hair market. Close to 2/3 of the U.S. population has textured hair, and we believe Marc Anthony's strong equity and history in curls creates a compelling opportunity for line extensions and innovation to capture a greater share of this segment.
Cake continued its double-digit growth for Q4 as the full year performance was driven by expansion with its key customer in U.S. drug and rapid growth in e-commerce. We expect POS growth to moderate in 2022 as the brand anniversaries its significant 2021 POS gain with its flagship U.S. drug customer. Distribution losses from our other 2 brands offset these successes in 2021, as we discussed in the last earnings call, leading to an overall decline of the MAV portfolio.
Renpure distribution was significantly reduced in 2021, principally from discontinuations among the advanced hair care range. Renpure's brand positioning built on naturally inspired, efficacious, sustainable clean beauty is more relevant than ever, and we're taking actions to elevate, modernize and harmonize the Renpure brand. Our objective is for these steps to allow for renewed growth in the brand in what remains a highly attractive segment of the market.
It was also a difficult year for The Mane Choice as a result of reduced distribution in the U.S. mass and drug channels. In Q4 and on to 2022, we have seen growth resume from e-commerce channels following the relaunch of the D2C platform. In addition, now that the brand is benefiting from the integration into the MAV operating platform, we are turning our attention to building core collections around the brand's star products.
As with our other brands, we will lead with accretive innovation and continue to focus on the productivity of our assortments. In combination with sustained engagement with our social media community, we are confident these efforts will, in time, reenergize the brand and help restore overall momentum.
We continue to believe each of our brands has a unique voice and brand equity that we can strengthen to drive sustained growth. At the same time, we recognize there is much work to be done to improve our day-to-day execution and generate better results for our margins, net income, EBITDA and free cash flow. Our broad objective in 2022 is to stabilize the business and gradually close the gap with market performance. Central to this objective is a refocus on product innovation across brands and collections.
Building on strong 2021 e-commerce results, we plan to sustain accelerated digitization. Simultaneously, we will strengthen our efforts to build awareness and desirability by prudently and gradually increasing our marketing investments. We also aim to heighten the performance with consistent execution. There's a lot of activity on the way on this front, which should, over time, improve customer service and achieve substantial efficiencies and cost savings. Some tangible benefits are beginning to materialize.
One of the areas we identified is improving service levels as measured by customer fill rates. Based on the work done today, service levels improved in Q4 and our 2022 new product innovations were launched on time and in full. As for the noncompliance charges, which were significant in 2021, we have identified the key root causes and now implementing a mitigation plan to address them. We expect to see benefits materializing in the second half of 2022.
Better inventory management is also top of mind in 2022 as we look to avoid and reduce the magnitude of the inventory provisions and write-offs of 2021. We aim to continue to lower total inventory levels while improving inventory quality. In Q4, we reduced inventory by close to $2.5 million compared to the prior year.
Another important area of focus is to mitigate the sustained impact of inflation on COGS and transportation. There are 2 primary strategy on this front. First, we're working with our third-party manufacturers, logistic partners and other vendors on potential -- on operation procurement mitigation initiatives. Simultaneously, we're undertaking strategic SKU-level value analysis and rationalization. Our second strategy beginning this year has been adjusting pricing on select products to partially offset some of these higher input costs.
Lastly and most importantly, one of our priorities for 2022 is to strengthen the team. Like many other businesses, we have seen attrition over the last year in a competitive market for human resources. We have attracted strong talent and are confident in the team's ability to lead the business forward with creativity, expertise and an entrepreneurial mindset. As we fill open roles in 2022, we will intentionally operate with a leaner organization.
Apart from our growth priorities, I wanted to share 2 important events related to the first quarter of 2022. First, we have suspended distribution to Russia as a result of the tragic and heartbreaking conflict in Ukraine. Second, as mentioned in our earnings release this morning, we experienced a setback in late February with a cyber attack on our primary third-party logistics provider for the U.S. and Canada. The attack first halted then slowed down their operations.
Our partner is a large multinational provider, and we are in continuous communication as the services are gradually restored. Upon learning of the cyber attack, we also immediately put in place a remediation plan to ensure continuity of business through our alternate partners in the U.S. and Canada.
While we anticipate an unfavorable impact in our Q1 revenue, primarily resulting in a shift of shipment to Q2, we also anticipate a return to pre-incident operating levels as of April. In a growth-oriented hair care market, we remain confident in the fundamental strength of our business and believe the actions I've outlined will help us stabilize the business in 2022 and, over time, achieving proven consistent results for our stakeholder.
Laurel will now take you through some additional financials.
Thank you, Serge. Good morning, and thank you for joining us today. Our full filings are available online, so my comments will concentrate on the key issues and metrics for Q4, particularly margins. As Serge highlighted, net sales for Q4 increased by 14.5% over the prior year to $26.7 million, mainly reflecting improved production and logistics service levels.
In North America, revenue increased 12.2% to $24.4 million. And for the international region, revenue increased 47.1% to $2.3 million. North American growth reflects improved production and logistics service levels, while international growth reflects continued recovery from COVID-19-related disruptions. Of note, as Serge mentioned, as a result of the tragic situation with Ukraine, we have suspended business with Russia. In 2021, Russia accounted for less than 1% of revenue.
As you will see in the earnings release, certain comparative figures have been revised to reclassify noncompliance charges from selling and administrative expenses to revenue to conform with IFRS 15 and the financial presentation adopted for the current period. While total EBITDA dollars remain the same, the reclassification slightly dilutes the gross margin percentage.
Gross profit increased by 14.7% to $10.4 million compared to $9.1 million in Q4 2020. Gross profit margin was 38.9% in Q4 2021, up slightly from 38.8% in Q4 2020. The year-over-year change primarily reflects a favorable sales mix, offset by the continued negative impact of increased supply chain input costs.
While Q4 margins were consistent year-over-year, we experienced a material decline for full year 2021 versus 2020. This comes back to the factors we discussed with our Q3 results, increased supply chain input costs, trade spend and noncompliance charges as well as higher inventory provision, write-offs and carrying costs. Serge touched on several of the actions we are taking, including better managing trade spend, procurement cost savings initiatives and price increases.
Excluding share-based compensation, selling and administrative expense for Q4 2021 was $7.2 million or 27% of revenue compared to $5.7 million and 24.3% in Q4 2020. The increase primarily reflects higher compensation and marketing investment in the current period, partially offset by lower administrative costs. Q4 adjusted EBITDA decreased 7% from $3.4 million last year to $3.2 million in the current period, reflecting gross margin weakness and the variance in selling and admin expense.
We reported a modest net loss of $0.1 million in Q4 2021 versus net income of $0.1 million in Q4 2020, and adjusted net income decreased to effectively 0 compared with a positive $0.8 million in Q4 2020. Diluted adjusted earnings per share was $0.00 per share this quarter compared with $0.02 per share in the same period last year.
Cash flow from operations was $1.7 million versus $1.9 million in Q4 2020. Adjusted free cash flow decreased to $0.2 million from $4.8 million in last year's Q4. This decrease mainly reflects a noncash working capital variance due to the timing of payables and receivables, offset by decreased inventory levels, as Serge highlighted. At year-end, our net debt stood at $121.5 million, net of cash of $12 million.
As we previously disclosed, during the third quarter, we worked with our lending syndicate to amend our credit facilities. The key change was an adjustment to the primary financial covenant total net leverage ratio to provide additional headroom to implement the changes we discuss today and see the positive impact on operating earnings and free cash flow. We are in compliance at year-end and continue to be in close communication with our lenders on the business progress.
I will now turn the call back to Serge for closing comments. Serge?
Thank you, Laurel. In closing, while it was a challenging 2021, we're heads down on operational execution and remain confident this will gradually translate to improved performance. We're seeing early progress in returns on several of our initiatives to stabilize the business and close the gap between MAV and the broader hair care category.
We appreciate the high engagement and commitment of the MAV team as well as your continued support as we execute on this plan. We look forward to reporting our progress in May with Q1 results. Now John, could you please open up the call to questions?
[Operator Instructions] We will take our first question from Matthew Lee of Canaccord.
Can you maybe give us an idea of what levels of gross and EBITDA margins you're expecting for 2022?
Thank you for getting your report out so early. Yes, as usual, I mean, we're not going to be providing any forward guidance at this time.
Can you maybe give us some ballpark of what you're thinking maybe like increase-decrease? Anything of that type or color just to help us with our models.
I think a couple of things we can say. First of all, we saw an improvement of mix in the fourth quarter. We continue to anticipate the same favorability in terms of mix going forward. At the same time, we have the headwinds that we mentioned, with cost inflation and the various initiatives we alluded to in order to really mitigate that. So we think that that's all the elements that are going to impact our gross margin in the coming year.
Great. And then maybe just a bigger picture question. I wanted to kind of ask you if you thought about any type of potential divestitures, maybe to give yourself a little bit more flexibility going forward.
This is not really in the plan right now. But of course, if we had any serious offer for any of the brands, we will definitely bring it to the Board for an assessment. And again, start -- thank you for starting your day pretty early and issuing your reports so promptly.
We'll move on to our next question from Stephanie Wissink of Jefferies.
This is Grace on for Steph. I'm wondering if you can touch on the shelf space trends that you're seeing. Any gains or losses that are coming through?
Thank you for the question. Our current view on the year-on-year comparison for the brand portfolio is a mid-single-digit decrease in POS that we think can be offset by productivity, velocity gains as well as from continued growth in e-commerce.
That's helpful. And then as a follow-up, wondering if you can give some color on the price increases in terms of what's already been taken and then what you're planning to take in the future.
We think that if we're looking at '22, as we mentioned, we started taking price increases earlier this year. I think on a weighted average, we're looking at mid- to high-single digits impact on -- for the year. And at this point, there's one price increase that we have anticipated to take. We're monitoring, like everybody else, the inflation, but that's where we stand at this point.
[Operator Instructions] We will take our first question from Nick Corcoran of Acumen Capital.
I just want to get a little bit more color on the impact of the cyber attack. Can you maybe give a little bit of color on that?
Nick, thank you for your question. So I would say, on the cyber attack, the situation is certainly kind of unfortunate, and it was somewhat unexpected. It's difficult to quantify the impact at this time. I can say that the company really displayed its ability to really respond quite swiftly and mitigate not only working with our partner through the cyber attack, but also within weeks, we were able to build alternate channels of distribution for our brands in the U.S. as well as in Canada.
So at this time, as a result of those activities, we now have 2 partners in each country, and we're focusing on processing backlog orders. We are anticipating a shift of revenue from March to April. So we estimate, at this time, the impact in potential lost revenue for Q1 could be in the range of $1.5 million and roughly double that in terms of a timing shift from Q1 to Q2. We also have notified our insurance, and we expect to be filing a claim in Q2.
We'll move on to our next question from Arthur Nagorny of MAV Beauty (sic) [ RBC ]
This is Arthur Nagorny on for Saba at RBC. Just my first question was a follow-up on the price increases that you guys took. I was just wondering, have you seen any impact on customer demand so far?
It's really very early on with these price increases between the moment, Art, they're communicated, implemented. There's a bit of a lag. So we're just starting to see this at point of sale, and it's a bit too early to tell.
Now I think we've seen these price increases across not only our brand, but also the category, our competitors and the market in general. So we do not anticipate that, that should have a material negative impact on consumption.
All right. And then just on the supply chain disruptions. I was just wondering if you can maybe quantify the impact that, that's having on your business?
We -- the supply chain, you're talking about the logistics partner situation?
Yes.
In terms of -- yes. So Laurel, just covered that. So obviously, very unfortunate events. And I think we -- the good news is that we now have alternate routes operational. We shipped actually yesterday our first orders with our new partner in Canada. So we think that we'll be able to restore activity as early as April to pre-incident levels.
Again, at this point, it's still early and it's still difficult to quantify. But our current view is that we'll probably lose $1.5 million of revenue as a result of the incident, and we'll see roughly twice this amount shift from Q1 to Q2.
And it appears we have no further questions over the audio, sir. I'd like to turn the conference back for any additional or closing remarks.
Thank you for joining us today on today's call, and have a good day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.