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Jamieson Wellness Inc. Reports Third Quarter 2019 Financial Results

November 6, 2019

TORONTO--(BUSINESS WIRE)--Nov 6, 2019--

Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its third quarter ended September 30, 2019. All amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures. See “Non-IFRS Financial Measures” below.

Highlights of Third Quarter 2019 Results versus Third Quarter 2018 Results

“We generated healthy third quarter results with growth across each of our branded business segments and channels,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “During the third quarter we continued to see increasing consumer demand for the Jamieson brand, both in Canada and internationally. In China, we began shipping into domestic channels during the quarter, including 15 registered products to a global mass retail partner, adding to our strong cross-border e-commerce trends. In addition, our focus on Specialty Brands led to improved growth of 4% in that segment with further acceleration expected during the fourth quarter. Given this outcome and our favorable margin outlook, we are increasing the midpoint of our fiscal 2019 guidance for adjusted EBITDA and adjusted EPS. We are proud of our year to date performance and anticipate a strong finish to fiscal 2019.”

Third Quarter 2019 Results

Revenue increased 11.2% to $88.6 million in the third quarter of 2019 compared to $79.7 million in the third quarter of 2018 and was driven by 13.6% growth in Jamieson Brands and 2.8% growth in Strategic Partners. The increase in the Jamieson Brands segment was driven by a 14.8% increase in domestic sales due to timing of shipments related to Q3 and Q4 promotions combined with strong consumer demand and expanded distribution; a 23.9% increase in international sales led by strong growth in China attributable to an initial shipment of registered products for domestic retail and strong demand in cross-border e-commerce; as well as a 4.0% increase in Specialty Brands as result of continued focus on sales execution, rollout of innovation and improved promotional activity. The growth in the Strategic Partners segment was impacted by a key partner transitioning from a tolling to a turnkey arrangement. Excluding the impact of the billing change, third quarter Strategic Partner revenue decreased by 10.3%.

Gross profit increased by $5.5 million in the third quarter of 2019, driven by both revenue growth and operating efficiencies. Gross profit margin increased by 260 basis points to 37.7% in the third quarter of 2019 compared to the same period in the prior year, due to margin improvements in both segments.

Gross profit margin in the Jamieson Brands segment increased by 130 basis points to 43.8% in the third quarter of 2019 due to production efficiencies gained from the addition of volume through our facilities and an increase in packaging capacity. Gross profit margin in Strategic Partners increased by 520 basis points to 14.5% in the third quarter of 2019, primarily due to volume related operating efficiencies, while considering the offsetting impact of the change from a tolling to a turnkey arrangement in the current year and a one-time cost that affected gross profit in the prior year.

SG&A expenses increased by 32.4%, or $4.6 million, to $18.9 million in the third quarter of 2019. Excluding the impact of higher business integration, international market expansion, termination benefits and other non-recurring costs of $1.0 million, SG&A expenses increased by $3.6 million due to the timing of variable compensation and marketing programs, plus investments in resources for e-commerce and international growth.

Earnings from operations increased 4.7% to $13.3 million in the third quarter of 2019 from $12.7 million in the third quarter of 2018. Operating margin decreased by 90 basis points to 15.0%, primarily due to the timing of SG&A expenses, including marketing and variable compensation adjustments in the prior year, offsetting gross margin increases noted above.

Adjusted EBITDA increased 8.6% to $19.4 million in the third quarter of 2019 from $17.9 million in the third quarter of 2018 and adjusted EBITDA margin was 21.9% compared to 22.4% in the prior year period.

Interest expense and other financing costs increased by $0.3 million to $2.5 million in the third quarter of 2019 2019 mainly due to higher prevailing rates, along with the impact of the adoption of IFRS 16, which includes the recognition of interest expense on lease liabilities.

Net income for the third quarter of 2019 was $4.9 million compared to $7.2 million in the third quarter of 2018 and included the cost of $3.4 million for refinancing our amended and restated credit agreement. Adjusted net income, which excludes all non-operating expenses and refinancing costs, increased to $9.5 million in the third quarter of 2019 from $8.9 million in the third quarter of 2018.

Adjusted net income for the third quarter of 2019 excludes costs associated with share-based compensation, foreign exchange loss, international market expansion, business integration, other non-recurring expenses and related tax effects. A detailed reconciliation of reported net income to non-IFRS adjusted net income is included in the tables accompanying this release under the heading Non-IFRS Financial Measures.

Balance Sheet & Cash Flow

The Company generated $6.7 million in cash for operations during the third quarter of 2019 compared to $2.2 million in the prior year. This increase is mainly due to a reduction of cash used in working capital of $3.7 million and lower cash used in operating activities before working capital considerations of $0.6 million. The Company’s cash at September 30, 2019 was $4.2 million compared to $2.8 million on September 30, 2018. On August 20, 2019, the Company declared a quarterly dividend of $0.10 per common share to holders of record as of August 30, 2019 and paid such dividend on September 13, 2019. The dividend payment was approximately $3.9 million in the aggregate.

 Three months ended
 September 30
($ in 000's, except as otherwise noted) 

2019

2018

$ Change

% Change

  
Cash, beginning of period 

5,268

 

7,470

 

(2,202

)

(29.5

%)

Cash flows from (used in): 
Operating activities 

6,741

 

2,184

 

4,557

 

208.7

%

Investing activities 

(1,678

)

(1,392

)

(286

)

(20.5

%)

Financing activities 

(6,178

)

(5,447

)

(731

)

(13.4

%)

Cash, end of period 

4,153

 

2,815

 

1,338

 

47.5

%

Outlook

The Company is narrowing its outlook for fiscal 2019, which was initially provided when the Company reported fourth quarter and full year 2018 results on February 27, 2019. The Company now anticipates revenue in the range of $339.0 to $345.0 million, representing growth of 6% to 8% over $319.8 million in 2018. The Company anticipates adjusted EBITDA in a range of $74.5 to $76.0 million and adjusted diluted earnings per share in a range of $0.94 to $0.96. This outlook is based, in part, on a forecasted CAD/USD average annual exchange rate of $1.33 and a fully diluted share count of approximately 40.0 million shares.

Consolidated Financial Statements and Management’s Discussion and Analysis

The Company’s unaudited condensed consolidated interim financial statements and accompanying notes as at and for the three months ended September 30, 2019 and related management’s discussion and analysis of financial condition and results of operations (“MD&A”) are available under the Company’s profile on SEDAR at www.sedar.com and on the Investor Relations section of the Company’s website at https://investors.jamiesonwellness.com.

Conference Call

Management will host a conference call to discuss the Company’s third quarter 2019 results at 5:00 p.m. ET on November 6, 2019. The call can be accessed live over the telephone by dialing 1-888-394-8218 from Canada and the U.S. or 1-323-794-2588 from international locations. A replay will be available shortly after the call and can be accessed by dialing 1-844-512-2921 from Canada and the U.S. or 1-412-317-6671 from international locations. The passcode for the replay is 7351513 and it will be available until Wednesday, November 20, 2019.

Interested parties may listen to a simultaneous webcast of the conference call by logging on via the Investor Relations section of the Company’s website at https://investors.jamiesonwellness.com or directly at http://public.viavid.com/index.php?id=136663. A replay of the webcast will be available for approximately 30 days following the call.

About Jamieson Wellness

Jamieson Wellness is dedicated to improving the world’s health and wellness with its portfolio of innovative natural health brands. Established in 1922, Jamieson is the Company’s heritage brand and Canada’s #1 consumer health brand. Jamieson Wellness manufactures and markets sports nutrition products and specialty supplements under its Progressive, Precision and Iron Vegan brands. The Company also markets products by Lorna Vanderhaeghe Health Solutions (LVHS), the #1 women’s natural health focused brand in Canada. In 2019, Jamieson Wellness was named as one of the top ten most reputable Canadian companies by the Reputation Institute. For more information please visit jamiesonwellness.com.

Jamieson Wellness’ head office is located at 1 Adelaide Street East Suite 2200, Toronto, Ontario, Canada.

Forward-Looking Information

This press release may contain forward-looking information within the meaning of applicable securities legislation. Such information includes, but is not limited to, statements related to the Company’s anticipated growth opportunities and its outlook for its 2019 revenue and adjusted EBITDA. Words such as “expect,” “anticipate,” “intend,” “attempt,” “may,” “plan,” “will”, “can”, “believe,” “seek,” “estimate,” and variations of such words and similar expressions are intended to identify such forward-looking information. This information reflects the Company’s current expectations regarding future events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under “Risk Factors” in the Company’s Annual Information Form dated March 11, 2019. This information is based on the Company’s reasonable assumptions and beliefs in light of the information currently available to it and the statements are made as of the date of this press release. The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law or regulatory authority.

We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect the Company’s results. Readers are urged to consider the risks, uncertainties and assumptions associated with these statements carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. See “Forward-looking Information” and “Risk Factors” within the Company’s MD&A for a discussion of the uncertainties, risks and assumptions associated with these statements.

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Operations

In thousands of Canadian dollars, except share and per share amounts

 
 Three months endedNine months ended
 September 30September 30
 

2019

2018

2019

2018

  
Revenue 

88,558

 

79,659

 

241,728

 

220,631

 

Cost of sales 

55,146

 

51,736

 

151,537

 

140,452

 

Gross profit 

33,412

 

27,923

 

90,191

 

80,179

 

  
Gross profit margin 

37.7

%

35.1

%

37.3

%

36.3

%

  
Selling, general and administrative expenses 

18,867

 

14,252

 

52,305

 

48,206

 

Share-based compensation 

1,280

 

1,007

 

2,770

 

1,789

 

Earnings from operations 

13,265

 

12,664

 

35,116

 

30,184

 

  
Operating margin 

15.0

%

15.9

%

14.5

%

13.7

%

  
Foreign exchange loss 

346

 

127

 

177

 

519

 

Other expense 

3,400

 

87

 

3,403

 

234

 

Interest expense and other financing costs 

2,521

 

2,249

 

7,406

 

6,610

 

Income before income taxes 

6,998

 

10,201

 

24,130

 

22,821

 

Provision for income taxes 

2,070

 

2,988

 

5,632

 

6,194

 

Net income 

4,928

 

7,213

 

18,498

 

16,627

 

Adjusted net income 

9,492

 

8,853

 

23,862

 

21,516

 

  
EBITDA 

12,221

 

14,771

 

39,691

 

36,077

 

Adjusted EBITDA 

19,394

 

17,856

 

50,269

 

44,695

 

  
Adjusted EBITDA margin 

21.9

%

22.4

%

20.8

%

20.3

%

  
Weighted average number of shares 
Basic 

38,538,319

 

38,081,264

 

38,389,489

 

37,956,484

 

Diluted 

39,576,781

 

39,858,357

 

39,363,585

 

39,727,134

 

  
Earnings per share attributable to common shareholders: 
Basic, earnings per share 

0.13

 

0.19

 

0.48

 

0.44

 

Diluted, earnings per share 

0.12

 

0.18

 

0.47

 

0.42

 

Adjusted Diluted, earnings per share 

0.24

 

0.22

 

0.61

 

0.54

 

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Financial Position

In thousands of Canadian dollars

 
 September 30,
2019
December 31,
2018
Assets 
Current assets 
Cash 

4,153

 

12,445

 

Accounts receivable 

89,591

 

82,227

 

Inventories 

96,064

 

72,079

 

Derivatives 

168

 

3,124

 

Prepaid expenses and other current assets 

2,020

 

2,163

 

Income taxes recoverable 

1,006

 

-

 

 

193,002

 

172,038

 

Non-current assets 
Property, plant and equipment 

63,543

 

50,234

 

Goodwill 

122,975

 

122,975

 

Intangible assets 

198,896

 

201,371

 

Deferred income tax 

2,372

 

2,403

 

Total assets 

580,788

 

549,021

 

  
Liabilities 
Current liabilities 
Accounts payable and accrued liabilities 

91,049

 

83,481

 

Income taxes payable 

-

 

4,454

 

Current portion of long-term debt 

-

 

14,625

 

Current portion of other long-term liabilities 

1,879

 

-

 

 

92,928

 

102,560

 

Long-term liabilities 
Long-term debt 

174,063

 

151,287

 

Post-retirement benefits 

3,170

 

2,923

 

Deferred income tax 

50,814

 

51,529

 

Other long-term liabilities 

9,752

 

-

 

Total liabilities 

330,727

 

308,299

 

  
Shareholders' equity 
Share capital 

242,668

 

239,404

 

Contributed surplus 

9,827

 

9,037

 

Deficit 

(3,200

)

(10,670

)

Accumulated other comprehensive income 

766

 

2,951

 

Total shareholders' equity 

250,061

 

240,722

 

Total liabilities and shareholders' equity 

580,788

 

549,021

 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 

Jamieson Brands

 Three months ended
September 30
 

2019

2018

$ Change

% Change

  
Revenue 

70,184

 

61,787

 

8,397

13.6

%

  
Gross profit 

30,739

 

26,267

 

4,472

17.0

%

Gross profit margin 

43.8

%

42.5

%

-

1.3

%

  
Selling, general and administrative expenses 

16,188

 

12,736

 

3,452

27.1

%

  
Share-based compensation 

1,280

 

1,007

 

273

27.1

%

  
Earnings from operations 

13,271

 

12,524

 

747

6.0

%

Operating margin 

18.9

%

20.3

%

-

(1.4

%)

  
Adjusted EBITDA 

17,785

 

16,645

 

1,140

6.8

%

Adjusted EBITDA margin 

25.3

%

26.9

%

-

(1.6

%)

 Nine months ended
September 30
 

2019

2018

$ Change% Change
  
Revenue 

187,041

 

174,057

 

12,984

7.5

%

  
Gross profit 

80,864

 

73,036

 

7,828

10.7

%

Gross profit margin 

43.2

%

42.0

%

-

1.2

%

  
Selling, general and administrative expenses 

46,368

 

43,163

 

3,205

7.4

%

  
Share-based compensation 

2,770

 

1,789

 

981

54.8

%

  
Earnings from operations 

31,726

 

28,084

 

3,642

13.0

%

Operating margin 

17.0

%

16.1

%

-

0.9

%

  
Adjusted EBITDA 

44,282

 

40,431

 

3,851

9.5

%

Adjusted EBITDA margin 

23.7

%

23.2

%

-

0.5

%

Strategic Partners

 Three months ended
September 30
 

2019

2018

$ Change% Change
  
Revenue 

18,374

 

17,872

 

502

 

2.8

%

  
Gross profit 

2,673

 

1,656

 

1,017

 

61.4

%

Gross profit margin 

14.5

%

9.3

%

-

 

5.2

%

  
Selling, general and administrative expenses 

2,679

 

1,516

 

1,163

 

76.7

%

  
Earnings (loss) from operations 

(6

)

140

 

(146

)

(104.3

%)

Operating margin 

-

 

0.8

%

-

 

(0.8

%)

  
Adjusted EBITDA 

1,609

 

1,211

 

398

 

32.9

%

Adjusted EBITDA margin 

8.8

%

6.8

%

-

 

2.0

%

 Nine months ended
September 30
 

2019

2018

$ Change% Change
  
Revenue 

54,687

 

46,574

 

8,113

17.4

%

  
Gross profit 

9,327

 

7,143

 

2,184

30.6

%

Gross profit margin 

17.1

%

15.3

%

-

1.8

%

  
Selling, general and administrative expenses 

5,937

 

5,043

 

894

17.7

%

  
Earnings from operations 

3,390

 

2,100

 

1,290

61.4

%

Operating margin 

6.2

%

4.5

%

-

1.7

%

  
Adjusted EBITDA 

5,987

 

4,264

 

1,723

40.4

%

Adjusted EBITDA margin 

10.9

%

9.2

%

-

1.7

%

Non-IFRS Financial Measures

This press release makes reference to certain non‑IFRS measures. Management uses these non‑IFRS financial measures for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of ongoing operations and in analyzing the Company’s business performance and trends. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. We use non‑IFRS measures, including “gross profit”, “gross profit margin”, “operating margin” “EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA margin”, “Adjusted Net Income” and “Adjusted Diluted Earnings per Share” to provide supplemental measures of the Company’s operating performance and thus highlight trends in the Company’s core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also uses non‑IFRS measures in order to prepare annual operating budgets and to determine components of management compensation. Definitions of non-IFRS measures can be found in the Company’s MD&A.

Reconciliation of Adjusted Net Income

In thousands of Canadian dollars

 
 Three months endedNine months ended
 September 30September 30
 

2019

2018

2019

2018

  
Net income 

4,928

 

7,213

 

18,498

 

16,627

 

Adjustments to net income: 
Share-based compensation 

190

 

114

 

571

 

152

 

Foreign exchange loss 

346

 

127

 

177

 

519

 

Termination benefits and related costs 

-

 

26

 

480

 

2,804

 

Purchase consideration accounted for as a compensation expense 

-

 

-

 

-

 

(1,066

)

International market expansion 

498

 

123

 

1,434

 

260

 

Business integration 

495

 

1,212

 

892

 

3,298

 

Other 

4,612

 

590

 

4,942

 

1,014

 

Revaluation of deferred tax liability 

-

 

-

 

(1,032

)

-

 

Related tax effects 

(1,577

)

(552

)

(2,100

)

(2,092

)

Adjusted net income 

9,492

 

8,853

 

23,862

 

21,516

 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 
 Three months endedNine months ended
 September 30September 30
 

2019

2018

2019

2018

  
Net income 

4,928

7,213

18,498

16,627

 

Add: 
Provision for income taxes 

2,070

2,988

5,632

6,194

 

Interest expense and other financing costs 

2,521

2,249

7,406

6,610

 

Depreciation of property, plant, and equipment 

1,778

1,441

5,419

4,019

 

Amortization of intangible assets 

924

880

2,736

2,627

 

  
Earnings before interest, taxes, depreciation, and amortization (EBITDA) 

12,221

14,771

39,691

36,077

 

Add EBITDA adjustments: 
Share-based compensation 

1,280

1,007

2,770

1,789

 

Foreign exchange loss 

346

127

177

519

 

Termination benefits and related costs 

-

26

480

2,804

 

Purchase consideration accounted for as compensation expense 

-

-

-

(1,066

)

International market expansion 

498

123

1,434

260

 

Business integration 

437

1,212

775

3,298

 

Other 

4,612

590

4,942

1,014

 

Adjusted EBITDA 

19,394

17,856

50,269

44,695

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191106005998/en/

CONTACT: Jamieson Wellness

Ruth Winker

416-960-0052

rwinker@jamiesonlabs.com

KEYWORD: NORTH AMERICA CANADA

INDUSTRY KEYWORD: RETAIL HEALTH SPORTS FITNESS & NUTRITION GENERAL SPORTS FOOD/BEVERAGE

SOURCE: Jamieson Wellness Inc.

Copyright Business Wire 2019.

PUB: 11/06/2019 04:05 PM/DISC: 11/06/2019 04:05 PM

http://www.businesswire.com/news/home/20191106005998/en