Report Highlights
- Earlier this month, DHB completed a 1:10 share consolidation.
- Q2-FY2025 (ended December 2024) revenue grew 34% YoY, 4% below our estimate, driven by orders from large customers, and a stronger US$. We had projected a Q2 rebound, as Q1 revenue was unusually low due to order timing mismatches.
- Management remains confident in achieving YoY revenue growth this year, following four consecutive years of growth: 2% in FY2021 and FY2022, 20% in FY2023, and 26% in FY2024.
- DHB’s products are available at 30k+ distribution points, including established retail/pharmacy chains such as Shoppers Drug Mart, Walmart (NYSE: WMT), and Kroger (NYSE: KR). DHB sells sleep aid products through its Dream Water brand, and pain relief products through its LivRelief and LivRelief Infused brands. In Q2, 75% of sales came from the U.S., and the Middle East (Q1-FY2025: 79%), and 25% from Canada.
- Higher marketing expenses weighed on EBITDA, EPS, and free cash flows. Marketing costs rose 5 pp YoY to 21% of revenue in Q2, reflecting management’s optimism for the coming quarters. We believe recent marketing campaigns should drive growth in H2.
- We expect FY2025 revenue to be driven by organic growth and new products like Dream Water Sleep Gummies and Dream Water Immunity Shots, supported by increasing awareness of sleep’s role in physical and mental health.
- Upcoming catalysts include new product launches, geographical expansion, and the potential launch of LivRelief in the U.S.
- DHB’s valuation remains attractive, trading at just 0.25x revenue, while comparable Personal Care companies trade at 1.20x on average, a 79% discount.
*This report and research coverage is paid for and commissioned by Delivra Health Brands Inc. – See the bottom of this report for other important disclosures rating, and risk definitions. All figures in C$ unless otherwise specified.
