Full Press Release Details
Technologies Inc. Announces
Half-Year Financial Results in 2022
of 47.9% / Total Gross Margin 26.6%
York - December 9, 2022 - MEDIROM Healthcare Technologies Inc. (Nasdaq CM: MRM), a holistic healthcare company based in
Japan (the "Company"), today announced its preliminary unaudited financial results for the interim half-year ended June 30,
2022, prepared in accordance with U.S. GAAP. These
preliminary financial results and management's estimates included in this press release are unreviewed, unaudited, and preliminary,
and are based solely on information available to the management of the Company and management's assumptions and expectations as
of the date of this press release, which remain subject to change. Actual results for the six months ended June 30, 2022 remain subject
to the completion of management's final reviews and the Company's other financial closing procedures, and may differ from
these estimated preliminary results due to the completion of the Company's financial closing procedures, final adjustments, and
other developments that may arise during the review process. Accordingly, you should not place undue reliance on this preliminary information.
See "Important Notice Regarding these Preliminary Financial Results and Management's Estimates" below.
working to complete the financial review and will provide an update when the review is completed.
Interim Half-Year 2022 Overview:
| (in thousands, except change % data and Adjusted EBITDA margin ) | Six months ended June 30, | |||||||||||
| Consolidated Statement of Income Information: | 2022( ) | 2021( ) | 2020( ) | |||||||||
| Revenues: | ||||||||||||
| Relaxation Salon | 2,816,323 | 2,110,561 | 1,344,503 | |||||||||
| Luxury Beauty | 288,684 | |||||||||||
| Digital Preventative Healthcare | 42,038 | 16,918 | 11,774 | |||||||||
| Total revenue | 3,147,045 | 2,127,479 | 1,356,277 | |||||||||
| Cost of revenues and operating expenses: | ||||||||||||
| Cost of revenues | 2,308,553 | 1,768,907 | 1,269,220 | |||||||||
| Selling, general and administrative expenses | 1,000,648 | 840,760 | 521,364 | |||||||||
| Impairment loss on long-lived assets | 1,173 | |||||||||||
| Total cost of revenues and operating expenses | 3,310,374 | 2,609,667 | 1,790,584 | |||||||||
| Operating loss | (163,329 | ) | (482,188 | ) | (434,307 | ) | ||||||
| Other income (expenses): | ||||||||||||
| Dividend income | 2 | 2 | 2 | |||||||||
| Interest income | 357 | 506 | 674 | |||||||||
| Interest expense | (5,707 | ) | (6,683 | ) | (6,076 | ) | ||||||
| Gain from bargain purchases | 1,014 | 1,624 | ||||||||||
| Other, net | 1,386 | 20,798 | 14,142 | |||||||||
| Total other income | (3,962 | ) | 15,637 | 10,366 | ||||||||
| Income tax (benefit) expense | 22,687 | 55,219 | 19,030 | |||||||||
| Net loss | (189,978 | ) | (521,770 | ) | (442,971 | ) | ||||||
| Adjusted EBITDA* | (52,510 | ) | (291,601 | ) | (374,224 | ) | ||||||
| Adjusted EBITDA margin* | (1.7 | )% | (13.7 | )% | (27.6 | )% |
define Adjusted EBITDA as net income (loss), adjusted to exclude: (i) dividend and interest income, (ii) interest expense, (iii) gain
from bargain purchases, (iv) other, net, (v) income tax expense, (vi) depreciation and amortization, (vii) losses on sales of directly-owned
salons to franchisees, (viii) losses on disposal of property and equipment, and other intangible assets, net, (ix) impairment loss on
long-lived assets and (x) stock-based compensation expense. Management considers Adjusted EBITDA to be a measurement of performance which
provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or
other measurements under U.S. GAAP. Adjusted EBITDA is not calculated identically by all companies and, therefore, our measurements of
Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. See reconciliation below.
| Reconciliation of non-GAAP measures: | Six months ended June 30, | |||||||||||
| (in thousands, except Adjusted EBITDA margin | 2022( ) | 2021( ) | 2020( ) | |||||||||
| Net loss | (189,978 | ) | (521,770 | ) | (442,971 | ) | ||||||
| Dividend income and interest income | (359 | ) | (508 | ) | (676 | ) | ||||||
| Interest expense | 5,707 | 6,683 | 6,076 | |||||||||
| Gain from bargain purchases | (1,014 | ) | (1,624 | ) | ||||||||
| Other, net | (1,386 | ) | (20,798 | ) | (14,142 | ) | ||||||
| Income tax expense (benefit) | 22,687 | 55,219 | 19,030 | |||||||||
| Operating income | (163,329 | ) | (482,188 | ) | (434,307 | ) | ||||||
| Depreciation and amortization | 100,851 | 39,631 | 33,105 | |||||||||
| Losses on sales of directly-owned salons to franchisees | 49 | 65 | ||||||||||
| Losses on disposal of property and equipment, net and other intangible assets, net | 8,795 | 1,967 | 26,913 | |||||||||
| Impairment loss on long-lived assets | 1,173 | |||||||||||
| Stock-based compensation expense | 148,940 | (374,224 | ) | |||||||||
| Adjusted EBITDA | (52,510 | ) | (291,601 | ) | (374,224 | ) | ||||||
| Adjusted EBITDA margin | (1.7 | )% | (13.7 | )% | (27.6 | )% |
Indicators, or KPIs, for the Six Months Ended June 30, 2022:
The Company reported
major Key Performance Indicators, or KPIs, for the half-year ended June 30, 2022. Data is provided for all salons for which comparative
financial and customer data is available and excludes certain salons where such information is not available.
As of October 2022, the Company has
shown further improvement in salon operations since June 30, 2022:
following graphs show more long-term trend of our KPIs.
Since October 1, 2022, the Company
has started trial renewal of its primary service lines at six of its directly-operated salons to test market acceptance of a new
pricing structure, which reflects increases in wages and other operating expenses. We are targeting to implement the new pricing at
all of our directly-operated salons under Re.Ra.Ku brand in the first half of 2023.
been continuously selling its directly-owned salons to investors under the new business model, and between June 30 and November 30, 2022,
the Company sold seven salons for an aggregate of proceeds of JPY327 million. In addition, the Company has signed the contracts to sell
two additional salons for an aggregate of proceeds of JPY128 million, which sales are expected to close on December 31, 2022, and is
under negotiation to sell two more salons.
of enormous efforts to develop and prepare for manufacturing of our MOTHER Bracelet , the Company expects to become ready
for large-scale production of MOTHER Bracelet in the near future. The Company received a purchase order of 10,000 units
of MOTHER Bracelets from a Japanese nursing service company, and expects that shipments will begin by December 31, 2022,
subject to the manufacturing capacity of our subcontractor.
Management Discussion
of the MEDIROM Healthcare Technologies, said, "We are pleased with the revenue growth, improved gross margins and Adjusted EBITDA,
and increased operating profitability achieved during the half-year ended June 30, 2022. Our directly operated salons and our franchised
salons contributed in very complementary ways to the strong operational results during the period. SAWAN and ZACC, the acquisitions of
which were completed in 2021, also have contributed significantly to our revenue growth in the first half of 2022. Our new business model
to transform the company from a salon asset holder into an operator of salons for investors contributed to our revenue growth, profitability,
as well as capital efficiency. Although COVID-19 continued to have an impact in the first half of 2022, the entire MEDIROM team coalesced
around our goals and were able to mitigate the worst of it. Moreover, the Company has been seeing improvement in salon operations in
the latter half of this year, which further enhances price negotiation power in our sales of directly-owned salons under the new business
model. Management expects that the Company's operating results for 2022 will show improvement over the prior two years, which were
adversely impacted by the COVID-19 pandemic. We are working to finalize the review of the interim financial results for the half-year
ended June 30, 2022 as soon as possible, and we hope to accelerate our financial closing process for the year ending December 31, 2022
Important Notice Regarding these
Preliminary Financial Results and Management's Estimates
financial results and management's estimates included in this press release are unreviewed, unaudited, and preliminary, and do
not present all information necessary for an understanding of the Company's results of operations for the six months ended June
30, 2022. These preliminary financial results for the six months ended June 30, 2022 and management's estimates presented in this
press release are based solely on information available to the management of the Company and management's assumptions and expectations
as of the date of this press release, which remain subject to change. Actual results for the six months ended June 30, 2022 remain subject
to the completion of management's final reviews and the Company's other financial closing procedures, and may differ from
these estimated preliminary results due to the completion of the Company's financial closing procedures, final adjustments, and
other developments that may arise during the review process. These estimates should not be viewed as a substitute for the Company's
full interim or annual financial statements prepared in accordance with U.S. GAAP. Accordingly, you should not place undue reliance on
this preliminary information.
preliminary results are not necessarily indicative of any future period and should be read in conjunction with "Item 3D. Risk Factors"
and "Item 5. Operating and Financial Report and Prospects" and the consolidated financial statements and related notes thereto
included in the Company's Annual Report on Form 20-F filed with the SEC on November 14, 2022.
financial results for the six months ended June 30, 2022 included in this press release have been prepared by and are the responsibility
of the Company's management. The Company's independent auditor has not audited, reviewed, compiled, or performed any procedures
with respect to the preliminary financial results presented in this press release. Accordingly, the Company's independent auditor
does not express an opinion or any other form of assurance with respect thereto.
About MEDIROM Healthcare
healthcare company, operates 313 (as of October 31, 2022) relaxation salons across Japan, Re.Ra.Ku ,
being its leading brand, and provides healthcare services. In 2015, MEDIROM entered the health tech business, and launched new healthcare
programs using on-demand training app called "Lav ", which is developed
by the company. MEDIROM also entered the device business in 2020 and is developing a smart tracker "MOTHER Bracelet" (formerly
known as "MOTHER Tracker "). MEDIROM hopes that its diverse health related
services and products offering will help it collect and manage healthcare data from users and customers and enable it to become a leader
in big data in the healthcare industry. For more information, visit https://medirom.co.jp/en
in this press release are forward-looking statements for purposes of the safe harbor provisions under the U.S. Private Securities Litigation
Reform Act of 1995. Forward-looking statements may include estimates or expectations about the Company's possible or assumed operational
results, financial condition, business strategies and plans, market opportunities, competitive position, industry environment, and potential
growth opportunities. In some cases, forward-looking statements can be identified by terms such as "may," "will,"
"should," "design," "target," "aim," "hope," "expect," "could,"
"intend," "plan," "anticipate," "estimate," "believe," "continue,"
"predict," "project," "potential," "goal," or other words that convey the uncertainty
of future events or outcomes. These statements relate to future events or to the Company's future financial performance, and involve
known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance,
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown
risks, uncertainties and other factors which are, in some cases, beyond the Company's control and which could, and likely will,
materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company's
current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to the Company's
operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these
forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in
these forward-looking statements, even if new information becomes available in the future.