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Jamieson Wellness Inc. Reports First Quarter 2020 Financial Results

Maintains Fiscal 2020 Guidance

Jamieson Wellness Inc. ("Jamieson Wellness" or the "Company") (TSX: JWEL) today reported financial results for its first quarter ended March 31, 2020. 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 First Quarter 2020 Results versus First Quarter 2019 Results

  • Revenue increased 16.5% to $84.5 million;
  • Jamieson Brands revenue increased by 24.5%;
  • Adjusted EBITDA increased 15.2% to $16.7 million;
  • Net income was $8.0 million and adjusted net income increased 20.6% to $7.8 million; and
  • Earnings per diluted share were $0.20 and adjusted earnings per diluted share were $0.19.

"We generated strong growth in revenue, net income and adjusted EBITDA during the first quarter, driven by our Jamieson Brands segment in both Canada and international markets," said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. "We saw an acceleration of consumer purchases throughout the quarter, as health and wellness became even more top of mind amid the COVID-19 pandemic. The entire Jamieson team has been working safely and diligently to ensure our consumers have access to the products they rely on and we appreciate how each of our valued team members has risen to the recent challenges. This new environment in which we are working is not easy and we continue to be proud of the way our people have adapted to take care of our customers, consumers, and each other. We remain confident in our 2020 outlook and are on track to execute each of our growth initiatives this year."

First Quarter 2020 Results

Revenue increased 16.5% to $84.5 million in the first quarter of 2020 compared to $72.6 million in the first quarter of 2019 and was driven by 24.5% growth in Jamieson Brands partially offset by an anticipated 10.9% decline in Strategic Partners.

Revenue in the Jamieson Brands segment increased by $13.8 million to $69.8 million in the first quarter of 2020, due in large part to COVID-19 accelerating consumer demand in March. The Company’s domestic Jamieson Brands sales increased by 21.9%, or $11.2 million, reflecting the continued success of its consumer and trade programs, as well as the increase in sales due to the impact of higher demand for immunity and general health supplements. The Company’s international business continues to grow, increasing 51.3%, or $2.6 million versus prior year, led by strong growth in multiple geographies as demand for immunity products increased significantly, particularly in China and Europe.

Gross profit increased by $4.1 million in the first quarter of 2020, driven by revenue growth and segment mix. Gross profit margin decreased by 50 basis points to 37.0%. Gross profit margin in the Jamieson Brands segment decreased by 40 basis points to 41.9% due to physical distancing initiatives in the Company’s production facilities in response to COVID-19. These initiatives reduced throughput and offset operational efficiencies that normally accompany higher volumes. Gross profit margin in Strategic Partners decreased by 770 basis points to 13.4%, primarily driven by customer mix, the billing change of a key customer and the timing of volume related efficiencies.

Selling, general and administrative ("SG&A") expenses increased by 6.9%, or $1.1 million, to $17.6 million in the first quarter of 2020. Excluding the impact of lower non-recurring costs of $0.7 million, SG&A expenses increased by $1.8 million due to higher domestic marketing program costs, plus the investment in resources for e-commerce and international growth, including in the United States.

Earnings from operations increased 24.7% to $12.4 million in the first quarter of 2020 and operating margin increased by 90 basis points to 14.6% as a result of higher revenue and gross profit, partially offset by higher share-based compensation expenses and increased SG&A expenses as discussed above.

Adjusted EBITDA increased 15.2% to $16.7 million in the first quarter of 2020 from $14.5 million in the first quarter of 2019 and adjusted EBITDA margin was 19.7% compared to 20.0% in the prior year period, mainly due to higher volumes in the Jamieson Brands segment offset by lower volumes and gross profit margins in the Strategic Partners segment.

Interest expense and other financing costs decreased by $0.5 million to $1.9 million in the first quarter of 2020 mainly due to lower interest rates as a result of the Company’s amended and restated credit agreement.

Net income for the first quarter of 2020 was $8.0 million compared to $5.4 million in the first quarter of 2019. Adjusted net income, which excludes all non-operating expenses and foreign exchange gains or losses, increased to $7.8 million in the first quarter of 2020 from $6.5 million in the first quarter of 2019.

Adjusted net income for the first quarter of 2020 excludes costs associated with share-based compensation, foreign exchange gains, 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 $2.9 million in cash from operations during the first quarter of 2020 compared to cash used in operating activities of $9.9 million in the prior year. Cash from operating activities before working capital considerations of $12.6 million was higher by $3.5 million primarily due to increased earnings in the current quarter. Lower cash used in working capital reflected an increase in safety stocks in the prior year period that did not recur in the first quarter of 2020.

The Company’s cash at March 31, 2020 was $5.2 million compared to $3.3 million on March 31, 2019. The Company ended the quarter with $107.2 million in cash and available operating lines and total debt of $173.0 million. On February 20, 2020, the Company declared a quarterly dividend of $0.11 per common share to holders of record as of February 28, 2020 and paid such dividend on March 13, 2020. The dividend payment was approximately $4.3 million in the aggregate.

Three months ended
March 31
($ in 000's, except as otherwise noted)

2020

2019

$ Change% Change
 
Cash, beginning of period

198

 

12,445

 

(12,247

)

(98.4

%)

Cash flows from (used in):
Operating activities

2,877

 

(9,942

)

12,819

 

128.9

%

Investing activities

(2,411

)

(1,970

)

(441

)

(22.4

%)

Financing activities

4,563

 

2,781

 

1,782

 

64.1

%

Cash, end of period

5,227

 

3,314

 

1,913

 

57.7

%

 

Fiscal 2020 Outlook

The Company is maintaining its outlook for fiscal 2020 and anticipates net revenue in a range of $364 to $376 million, representing growth of 5.5% to 9.0%. The Company anticipates adjusted EBITDA in a range of $80 to $84 million and adjusted diluted earnings per share in a range of $1.02 to $1.10.

This outlook reflects the following assumptions:

  • Jamieson Brands segment growth of 6% to 9%, including:
    • 3% to 5% domestic growth, and
    • 25% to 35% international growth
  • Strategic Partners segment growth of 5% to 10%
  • Normalized SG&A expense increases of 6% to 9% to invest in marketing to drive international growth and additional resources to support e-commerce initiatives
  • A forecasted annual CAD/USD average exchange rate of $1.35
  • Interest expense of between $7.0 million to $7.5 million
  • Effective income tax rate of approximately 28.0%
  • A fully diluted share count of between 40.0 and 40.5 million shares.

Considering the recent outbreak of COVID-19 and physical distancing measures taken around the world, there exists the risk of a second wave and further escalation in measures required to control the outbreak including prolonged retail and manufacturing closures that could impact our estimates for 2020.

While physical distancing in Canada has significantly impacted certain industries, the Company’s industry and supply chain are considered essential. The Company has not seen significant retail closures and its products remain widely available in retail and e-commerce channels. Consumer response to COVID-19 has resulted in the acceleration of demand for both immunity and general health supplements. Higher demand will be slightly constrained while the Company experiences a temporary increase in absenteeism and manages the impact of physical distancing measures in its facilities. In support of its employees, the Company has increased sanitation, maximized physical distancing and, where possible, established shift gaps to avoid congestion during shift changeovers. The Company has adapted rapidly to the changing environment to minimize the risk of business interruption due to COVID-19 while ensuring a steady supply of products to its consumers. The extent of 2020 gross profit margin pressures will be a function of the depth and duration of recommended physical distancing policies in the weeks and months to come.

For additional details on the Company’s fiscal 2020 outlook, including guidance for the second quarter of 2020, refer to the "Outlook" section in the management’s discussion and analysis of financial condition and results of operations ("MD&A") for the three months ended March 31, 2020.

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 March 31, 2020 and related 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 first quarter 2020 results at 5:00 p.m. ET today, May 13, 2020. The call can be accessed live over the telephone by dialing 1-800-263-0877 from Canada and the U.S. or 1-323-794-2094 from international locations. Due to increased volumes of conference calls this quarter, please dial the conference call number 15 minutes prior to the start time. 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 7836063 and it will be available until Wednesday, May 27, 2020.

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=139408. 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 Smart Solutions by Lorna Vanderhaeghe, the #1 women's natural health focused brand in Canada. 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 results and its outlook for its 2020 revenue, adjusted EBITDA and adjusted diluted earnings per share. Words such as "expect,", "anticipate", "intend,", "may,", "will", "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 27, 2020 and under the "Risk Factors" section in the Company’s MD&A filed May 13, 2020. 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 ended
March 31

2020

 

2019

 

 
Revenue

84,523

 

72,578

 

Cost of sales

53,267

 

45,378

 

Gross profit

31,256

 

27,200

 

 
Gross profit margin

37.0

%

37.5

%

 
Selling, general and administrative expenses

17,632

 

16,489

 

Share-based compensation

1,265

 

800

 

Earnings from operations

12,359

 

9,911

 

 
Operating margin

14.6

%

13.7

%

 
Foreign exchange (gain) loss

(749

)

26

 

Other income

-

 

(3

)

Interest expense and other financing costs

1,928

 

2,422

 

Income before income taxes

11,180

 

7,466

 

Provision for income taxes

3,169

 

2,082

 

Net income

8,011

 

5,384

 

Adjusted net income

7,800

 

6,469

 

 
EBITDA

15,964

 

12,463

 

Adjusted EBITDA

16,687

 

14,481

 

 
Adjusted EBITDA margin

19.7

%

20.0

%

 
Weighted average number of shares
Basic

39,099,112

 

38,305,895

 

Diluted

40,028,774

 

39,659,791

 

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

0.20

 

0.14

 

Diluted, earnings per share

0.20

 

0.14

 

Adjusted Diluted, earnings per share

0.19

 

0.16

 

 

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Financial Position

In thousands of Canadian dollars

 
March 31, 2020December 31, 2019
Assets
Current assets
Cash

5,227

198

 

Accounts receivable

80,788

89,394

 

Inventories

97,710

81,948

 

Derivatives

3,086

1,893

 

Prepaid expenses and other current assets

2,709

-

 

189,520

173,433

 

Non-current assets
Property, plant and equipment

66,938

64,906

 

Goodwill

122,975

122,975

 

Intangible assets

197,742

198,189

 

Deferred income tax

2,290

2,272

 

Total assets

579,465

561,775

 

 
Liabilities
Current liabilities
Accounts payable and accrued liabilities

67,325

67,795

 

Income taxes payable

1,082

2,365

 

Derivatives

-

1,292

 

Current portion of other long-term liabilities

1,959

1,890

 

70,366

73,342

 

Long-term liabilities
Long-term debt

172,956

164,769

 

Post-retirement benefits

4,023

3,923

 

Deferred income tax

52,732

51,107

 

Other long-term liabilities

10,928

9,466

 

Total liabilities

311,005

302,607

 

 
Shareholders' equity
Share capital

245,239

243,224

 

Contributed surplus

11,045

10,727

 

Deficit

9,755

6,061

 

Accumulated other comprehensive income

2,421

(844

)

Total shareholders' equity

268,460

259,168

 

Total liabilities and shareholders' equity

579,465

561,775

 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 
Jamieson Brands
 
Three months ended
March 31

2020

2019

$ Change % Change
 
Revenue

69,794

 

56,041

 

13,753

 

24.5

%

Gross profit

29,275

 

23,711

 

5,564

 

23.5

%

Gross profit margin

41.9

%

42.3

%

-

 

(0.4

%)

 
Selling, general and administrative expenses

16,056

 

14,915

 

1,141

 

7.7

%

 
Share-based compensation

1,265

 

800

 

465

 

58.1

%

 
Earnings from operations

11,954

 

7,996

 

3,958

 

49.5

%

Operating margin

17.1

%

14.3

%

-

 

2.8

%

 
Adjusted EBITDA

15,787

 

12,073

 

3,714

 

30.8

%

Adjusted EBITDA margin

22.6

%

21.5

%

-

 

1.1

%

 
 
Strategic Partners
 
Three months ended
March 31

2020

2019

$ Change % Change
 
Revenue

14,729

 

16,537

 

(1,808

)

(10.9

%)

 
Gross profit

1,981

 

3,489

 

(1,508

)

(43.2

%)

Gross profit margin

13.4

%

21.1

%

-

 

(7.7

%)

 
Selling, general and administrative expenses

1,576

 

1,574

 

2

 

0.1

%

 
Earnings from operations

405

 

1,915

 

(1,510

)

(78.9

%)

Operating margin

2.7

%

11.6

%

-

 

(8.9

%)

 
Adjusted EBITDA

900

 

2,408

 

(1,508

)

(62.6

%)

Adjusted EBITDA margin

6.1

%

14.6

%

-

 

(8.5

%)

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 ended
March 31

2020

2019

 
Net income

8,011

 

5,384

 

Adjustments to net income:
Share-based compensation

144

 

190

 

Foreign exchange (gain) loss

(749

)

26

 

Termination benefits and related costs

-

 

480

 

International market expansion

13

 

501

 

Business integration

166

 

134

 

Other

87

 

77

 

Related tax effects

128

 

(323

)

Adjusted net income

7,800

 

6,469

 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 
Three months ended
March 31

2020

 

2019

 
Net income

8,011

 

5,384

Add:
Provision for income taxes

3,169

 

2,082

Interest expense and other financing costs

1,928

 

2,422

Depreciation of property, plant, and equipment

1,920

 

1,660

Amortization of intangible assets

936

 

915

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

15,964

 

12,463

Add EBITDA adjustments:
Share-based compensation

1,265

 

800

Foreign exchange (gain) loss

(749

)

26

Termination benefits and related costs

-

 

480

International market expansion

13

 

501

Business integration

107

 

134

Other

87

 

77

Adjusted EBITDA

16,687

 

14,481

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200513005850/en/

Contacts

Jamieson Wellness
Ruth Winker
416-960-0052
rwinker@jamiesonlabs.com