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Jamieson Wellness Inc. Reports First Quarter 2019 Financial Results and Reiterates 2019 Guidance

May 08, 2019

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its first quarter ended March 31, 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 First Quarter 2019 Results versus First Quarter 2018 Results

  • Revenue increased 8.7% to $72.6 million;
  • Adjusted EBITDA increased 14.1% to $14.5 million;
  • Net Income was $5.4 million and Adjusted Net Income increased 12.3% to $6.5 million;
  • Earnings per diluted share were $0.14 and Adjusted earnings per diluted share were $0.16.

“We are pleased to report a strong start to fiscal 2019, generating 8.7% revenue growth and 14.1% adjusted EBITDA growth,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “We experienced robust international sales momentum in China and Eastern Europe, as our new on-the-ground resources helped drive nearly 30% growth during the quarter. Our Strategic Partners business grew over 60% reflecting the successful launch of several new programs in 2018. Domestic Jamieson business continues to realize strong consumer off-take in-line with our expectations, and Specialty Brands saw continued improvement from our increased focus on customer, consumer and culture. All of our 2019 initiatives are executing as planned, including our domestic innovation rollouts, expansion internationally especially in China, and the integration of the Specialty Brands business. We are confident in our ability to achieve our full year targets.”

First Quarter 2019 Results

Revenue increased 8.7% to $72.6 million in the first quarter of 2019 from $66.8 million in the first quarter of 2018 and was driven by a 62.0% growth in Strategic Partners, with slightly lower Jamieson Brands revenue quarter-over-quarter as expected. The increase in Strategic Partners was mainly driven by new contracts and increased demand for our customers’ branded products. The decrease in Jamieson Brands of 0.9% was primarily driven by timing, as Jamieson domestic sales decreased by 3% due to strong customer purchases ahead of the Company’s 2018 price increase. Consumer purchases have outpaced shipments leading to a decline in retailer inventories. This was partially offset by a 29.3% increase in international sales driven by highly effective marketing collaborations with our international partners resulting in strong consumer demand. Specialty Brands volumes experienced a lower quarter-over-quarter decline of 3.9% due to improved retailer engagement as a result of the Company’s customer, consumer and culture initiatives.

Gross profit increased by $1.6 million in Q1 2019 mainly driven by revenue growth and operating efficiencies. Gross profit margin decreased by 90 basis points to 37.5% in Q1 2019 impacted by the proportion of Strategic Partners revenue with inherently lower margins partially offset by margin improvements within Jamieson Brands.

Gross profit margin in the Jamieson Brands increased by 150 basis points to 42.3% in Q1 2019 due to favourable mix, production efficiencies and timing of sales promotional incentives. Gross profit margin in Strategic Partners decreased by 400 basis points to 21.1% in Q1 2019 primarily due to customer and product mix.

SG&A expenses decreased by 1.8%, or $0.3 million, to $16.5 million in Q1 2019. Excluding the impact related to business integration, international market expansion, termination benefits and other non-recurring costs of $0.6 million, SG&A increased $0.3 million due to investments in resources for e-commerce and international growth.

Operating income increased 18.1% to $9.9 million in the first quarter of 2019 from $8.4 million in the first quarter of 2018 and operating margin increased by 110 basis points to 13.7% from 12.6% in the same respective periods.

Adjusted EBITDA increased 14.1% to $14.5 million in the first quarter of 2019 from $12.7 million in the first quarter of 2018 and Adjusted EBITDA margin was 20.0% compared to 19.0% in the prior year period.

Interest expense and other financing costs were $2.4 million in the first quarter of 2019 compared to $2.2 million in the first quarter of 2018, mainly due to higher prevailing rates and the impact of our adoption of IFRS 16, “Leases”, which includes the recognition of interest expense on our lease liabilities.

Net income for the first quarter of 2019 was $5.4 million compared to $4.6 million in the first quarter of 2018. Adjusted Net Income, which excludes all non-operating expenses, increased to $6.5 million in the first quarter of 2019 from $5.8 million in the first quarter of 2018.

Adjusted Net Income for the first quarter of 2019 excludes costs associated with share-based compensation, foreign exchange loss, termination benefits and related costs, 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 invested $9.9 million in cash for operations during the first quarter of 2019 compared to $5.2 million in the prior year. Cash generated from operating activities before working capital considerations of $9.1 million was $2.3 million higher than the prior year primarily due to increased earnings in the quarter. Cash invested in working capital of $19.0 million was $14.1 million higher than the prior quarter due to the timing of tax payments and increased inventories to smooth our seasonal production demand, to support the Company’s new strategic partner programs and to improve customer fill rates. In the prior comparable period, the Company had deferred compensation payments of $7.0 million associated with a previous acquisition in 2017. The Company’s cash at March 31, 2019 was $3.3 million compared to $12.4 million on December 31, 2018. On February 26, 2019, the Company declared a quarterly dividend of $0.09 per common share to holders of record as of March 7, 2019 and paid such dividend on March 15, 2019. The dividend payment was approximately $3.4 million in the aggregate.

  Three months ended    
March 31
($ in 000's, except as otherwise noted) 2019     2018  

 

$ Change

% Change

 
 
Cash, beginning of period 12,445 4,833 7,612 157.5 %
Cash flows from (used in):
Operating activities (9,942 ) (5,159 ) (4,783 ) (92.7 %)
Investing activities (1,970 ) (3,066 ) 1,096 35.7 %
Financing activities 2,781   5,765     (2,984 ) (51.8 %)
Cash, end of period 3,314   2,373     941   39.7 %
 

Outlook

The Company is reiterating 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 continues to anticipate revenue in the range of $336.0 to $348.0 million, representing growth of 5% to 9% over $319.8 million in 2018. The Company anticipates Adjusted EBITDA in a range of $73.0 to $76.0 million and Adjusted Diluted Earnings per Share in a range of $0.90 to $0.95. This outlook is based, in part, on a forecasted CAD/USD exchange rate of $1.33, the potential for higher interest rates 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 March 31, 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 first quarter 2019 results at 5:00 p.m. ET on May 8, 2019. The call can be accessed live over the telephone by dialing 1-888-204-4368 from Canada and the U.S. or 1-323-994-2082 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 9100915 and it will be available until Wednesday, May 22, 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/player/index.php?id=134365. 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. 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 ended
March 31
2019   2018
 
Revenue 72,578 66,779
Cost of sales 45,378   41,159  
Gross profit 27,200 25,620
 
Gross profit margin 37.5 % 38.4 %
 
Selling, general and administrative expenses 16,489 16,799
Share-based compensation 800   427  
Earnings from operations 9,911 8,394
 
Operating margin 13.7 % 12.6 %
 
Foreign exchange loss 26 200
Other income (3 ) (12 )
Interest expense and other financing costs 2,422   2,176  
Income before income taxes 7,466 6,030
Provision for income taxes 2,082   1,404  
Net income 5,384   4,626  
Adjusted net income 6,469   5,760  
 
EBITDA 12,463   10,339  
Adjusted EBITDA 14,481   12,686  
 
Adjusted EBITDA margin 20.0 % 19.0 %
 
Weighted average number of shares
Basic 38,305,895 37,831,159
Diluted 39,659,791 39,666,424
 
Earnings per share attributable to common shareholders:
Basic, earnings per share 0.14 0.12
Diluted, earnings per share 0.14 0.12
Adjusted Diluted, earnings per share 0.16 0.15
 

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Financial Position

In thousands of Canadian dollars

   

March 31,
2019

December 31,
2018

Assets
Current assets
Cash 3,314 12,445
Accounts receivable 69,176 82,227
Inventories 85,761 72,079
Derivatives 1,483 3,124
Prepaid expenses and other current assets 1,916 2,163
Income taxes recoverable 469   -  
162,119 172,038
Non-current assets
Property, plant and equipment 57,796 50,234
Goodwill 122,975 122,975
Intangible assets 200,641 201,371
Deferred income tax 2,437   2,403  
Total assets 545,968   549,021  
 
Liabilities
Current liabilities
Accounts payable and accrued liabilities 69,754 83,481
Income taxes payable - 4,454
Current portion of long-term debt 14,625 14,625
Current portion of other long-term liabilities 1,976   -  
86,355 102,560
Long-term liabilities
Long-term debt 157,251 151,287
Post-retirement benefits 3,005 2,923
Deferred income tax 51,025 51,529
Other long-term liabilities 5,342   -  
Total liabilities 302,978 308,299
 
Shareholders' equity
Share capital 241,071 239,404
Contributed surplus 9,148 9,037
Deficit (8,973 ) (10,670 )
Accumulated other comprehensive income 1,744   2,951  
Total shareholders' equity 242,990   240,722  
Total liabilities and shareholders' equity 545,968   549,021  
 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

     
Jamieson Brands
 
Three months ended

March 31

2019 2018

 

$ Change

% Change
 
Revenue 56,041 56,569 (528 ) (0.9 %)
 
Gross profit 23,711 23,058 653 2.8 %
Gross profit margin 42.3 % 40.8 % - 1.5 %
 
Selling, general and administrative expenses 14,915 15,227 (312 ) (2.0 %)
 
Share-based compensation 800 427 373 87.4 %
 
Earnings from operations 7,996 7,404 592 8.0 %
Operating margin 14.3 % 13.1 % - 1.2 %
 
Adjusted EBITDA 12,073 11,352 721 6.4 %
Adjusted EBITDA margin 21.5 % 20.1 % - 1.4 %
 
 
Strategic Partners
 
Three months ended

March 31

2019 2018

 

$ Change

% Change
 
Revenue 16,537 10,210 6,327 62.0 %
 
Gross profit 3,489 2,562 927 36.2 %
Gross profit margin 21.1 % 25.1 % - (4.0 %)
 
Selling, general and administrative expenses 1,574 1,572 2 0.1 %
 
Earnings from operations 1,915 990 925 93.4 %
Operating margin 11.6 % 9.7 % - 1.9 %
 
Adjusted EBITDA 2,408 1,334 1,074 80.5 %
Adjusted EBITDA margin 14.6 % 13.1 % - 1.5 %
 

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 our MD&A.

Reconciliation of Adjusted Net Income

In thousands of Canadian dollars

 
Three months ended
March 31
2019   2018
 
Net income 5,384 4,626
Adjustments to net income:
Share-based compensation 190 -
Foreign exchange loss 26 200
Termination benefits and related costs 480 1,732
Purchase consideration accounted for as compensation expense - (1,066 )
International market expansion 501 -
Business integration 134 961
Other 77 93
Related tax effects (323 ) (786 )
Adjusted net income 6,469   5,760  
 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 
Three months ended
March 31
2019   2018
 
Net income 5,384 4,626
Add:
Provision for income taxes 2,082 1,404
Interest expense and other financing costs 2,422 2,176
Depreciation of property, plant, and equipment 1,660 1,263
Amortization of intangible assets 915 870  
 
Earnings before interest, taxes, depreciation, and amortization (EBITDA) 12,463 10,339
Add EBITDA adjustments:
Share-based compensation 800 427
Foreign exchange loss 26 200
Termination benefits and related costs 480 1,732
Purchase consideration accounted for as compensation expense - (1,066 )
International market expansion 501 -
Business integration 134 961
Other 77 93  
Adjusted EBITDA 14,481 12,686  

Jamieson Wellness
Ruth Winker
416-705-5437
rwinker@jamiesonlabs.com

Source: Jamieson Wellness Inc.

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