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Jamieson Wellness Inc. Reports Second Quarter 2019 Financial Results

August 08, 2019

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its second quarter ended June 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 Second Quarter 2019 Results versus Second Quarter 2018 Results

  • Revenue increased 8.6% to $80.6 million;
  • Adjusted EBITDA increased 15.8% to $16.4 million;
  • Net Income was $8.2 million and Adjusted Net Income increased 14.4% to $7.9 million;
  • Earnings per diluted share were $0.21 and Adjusted earnings per diluted share were $0.20.

“We are pleased with our strong second quarter performance across all segments of the business,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “We generated 8.6% revenue growth and a 15.8% increase in Adjusted EBITDA over the second quarter of 2018. The Jamieson brand normalized after the impact of the prior year price increase with 12% growth in Canada. Our Specialty Brands returned to growth as a result of our ongoing efforts to improve sales force execution while strengthening our customer and consumer relationships. In addition, we grew our EBITDA margin by over 100 basis points realizing a return on our capital investments and increased throughput. Following a successful natural health expo in Shanghai in May, we have begun building distribution in the domestic retail channels in China and have further expanded our product registrations. We remain on-track to establish a platform for expansion in the Chinese market during the second half of 2019, with 15-20 new products available by year end. We continue to have a positive outlook for the second half of 2019 and remain confident in our full year guidance.”

Second Quarter 2019 Results

Revenue increased 8.6%, or $6.4 million, to $80.6 million in Q2 2019. This was mainly driven by 9.2% growth of $5.1 million in Jamieson Brands revenue and 6.9% growth of $1.3 million in Strategic Partners revenue quarter-over-quarter. The increase in revenue in the Jamieson Brands segment was due to strong growth in domestic and international Jamieson brand sales of $4.2 million and $0.8 million respectively, plus a minor increase in Specialty Brands revenue. The Company’s international business continued to grow, increasing by 10.2% versus prior quarter, led by strong demand in Europe and the Middle East. Domestic Jamieson brand sales increased by 11.8% driven by the timing of shipments in 2018 associated with pre-buy ahead of the prior year price increase combined with new distribution channels and increased consumer demand. Specialty Brands volumes increased by 0.6% as a result of expanded distribution in the food and drug channels and growth in e-commerce. Revenue in the Strategic Partners segment increased 6.9%, or $1.3 million, to $19.8 million in Q2 2019. The increase was mainly driven by new contracts with existing customers and the timing of shipments originally planned for the third quarter, partially offset by the transition away from another partner which has brought volume in-house.

Gross profit increased by $2.9 million in Q2 2019 mainly driven by revenue growth and operating efficiencies. Gross profit margin increased by 80 basis points to 36.7% in Q2 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 80 basis points to 43.4% in Q2 2019 due to higher volumes, purchasing efficiencies and production efficiencies gained from the addition of new packaging capacity. Gross profit margin in the Strategic Partners segment increased by 20 basis points to 16.0% in Q2 2019 primarily due to customer mix.

SG&A expenses decreased by 1.2%, or $0.2 million, to $16.9 million in Q2 2019. Excluding the impact of lower business integration, international market expansion, termination benefits and other non-recurring costs of $1.2 million, SG&A expenses increased by $1.0 million due to investments in resources for e-commerce and international growth and $0.2 million due to office expenses in the Jamieson Brands segment. SG&A expenses in the Strategic Partners segment were consistent with the same period in the prior year, excluding the impact of lower business integration and termination benefits of $0.3 million.

Operating income increased by $2.8 million in the second quarter of 2019 mainly driven by an increase in gross profit in both segments and lower fixed costs within the Strategic Partner segment. Operating margin increased by 250 basis points to 14.8%, due to the impact of gross profit margin outlined above and lower SG&A expenses, partially offset by increased share-based compensation in the current quarter.

Adjusted EBITDA increased 15.8% to $16.4 million in the second quarter of 2019 from $14.2 million in the second quarter of 2018 and Adjusted EBITDA margin was 20.3% compared to 19.1% in the prior year period.

Interest expense and other financing costs increased by $0.3 million to $2.5 million in Q2 2019 mainly due to higher prevailing rates and outstanding debt levels, along with the impact of our adoption of IFRS 16, “Leases” (“IFRS 16”) which includes the recognition of interest expense on our lease liabilities.

Net income for the second quarter of 2019 was $8.2 million compared to $4.8 million in the second quarter of 2018. Adjusted Net Income, which excludes all non-operating expenses, increased to $7.9 million in the second quarter of 2019 from $6.9 million in the second quarter of 2018.

Adjusted Net Income for the second quarter of 2019 excludes costs associated with share-based compensation, foreign exchange loss, international market expansion, business integration, revaluation of deferred tax liability, 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 $6.6 million in cash for operations during the second quarter of 2019 compared to $8.5 million in the prior year. Cash generated from operating activities before working capital considerations of $12.0 million was $3.9 million higher than the prior year primarily due to increased earnings in the quarter. This was offset by an investment in cash used in working capital of $5.4 million or a $5.8 million increase due to increased inventories to improve customer fill rates.

The Company’s cash at June 30, 2019 was $5.3 million compared to $7.5 million in the same period prior year. On May 22, 2019, the Company declared a quarterly dividend of $0.09 per common share to holders of record as of May 31, 2019 and paid such dividend on June 14, 2019. The dividend payment was approximately $3.5 million in the aggregate.

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

2019

2018

$ Change % Change
 
Cash, beginning of period

3,314

 

2,373

 

941

 

39.7

%

Cash flows from (used in):
Operating activities

6,601

 

8,547

 

(1,946

)

(22.8

%)

Investing activities

(2,362

)

(2,468

)

106

 

4.3

%

Financing activities

(2,285

)

(982

)

(1,303

)

(132.7

%)

Cash, end of period

5,268

 

7,470

 

(2,202

)

(29.5

%)

 

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 June 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 second quarter 2019 results at 5:00 p.m. ET on August 8, 2019. The call can be accessed live over the telephone by dialing 1-888-599-8686 from Canada and the U.S. or 1-323-994-2093 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 8799933 and it will be available until Thursday, August 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/index.php?id=135516. 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 ended

 

Six months ended

June 30

 

June 30

2019

2018

2019

2018

 
Revenue

80,592

 

74,193

 

153,170

 

140,972

 

Cost of sales

51,013

 

47,557

 

96,391

 

88,716

 

Gross profit

29,579

 

26,636

 

56,779

 

52,256

 

 
Gross profit margin

36.7

%

35.9

%

37.1

%

37.1

%

 
Selling, general and administrative expenses

16,949

 

17,155

 

33,438

 

33,954

 

Share-based compensation

690

 

355

 

1,490

 

782

 

Earnings from operations

11,940

 

9,126

 

21,851

 

17,520

 

 
Operating margin

14.8

%

12.3

%

14.3

%

12.4

%

 
Foreign exchange loss

(195

)

192

 

(169

)

392

 

Other income

6

 

159

 

3

 

147

 

Interest expense and other financing costs

2,463

 

2,185

 

4,885

 

4,361

 

Income before income taxes

9,666

 

6,590

 

17,132

 

12,620

 

Provision for income taxes

1,480

 

1,802

 

3,562

 

3,206

 

Net income

8,186

 

4,788

 

13,570

 

9,414

 

Adjusted net income

7,897

 

6,903

 

14,368

 

12,663

 

 
EBITDA

15,007

 

10,967

 

27,470

 

21,306

 

Adjusted EBITDA

16,392

 

14,153

 

30,875

 

26,839

 

 
Adjusted EBITDA margin

20.3

%

19.1

%

20.2

%

19.0

%

 
Weighted average number of shares
Basic

38,321,699

 

37,954,280

 

38,313,840

 

37,893,060

 

Diluted

39,741,550

 

39,782,841

 

39,732,220

 

39,721,571

 

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

0.21

 

0.13

 

0.35

 

0.25

 

Diluted, earnings per share

0.21

 

0.12

 

0.34

 

0.24

 

Adjusted Diluted, earnings per share

0.20

 

0.17

 

0.36

 

0.32

 

 

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Financial Position

In thousands of Canadian dollars

 

June 30, 2019

December 31, 2018

Assets
Current assets
Cash

5,268

 

12,445

 

Accounts receivable

69,662

 

82,227

 

Inventories

89,004

 

72,079

 

Derivatives

-

 

3,124

 

Prepaid expenses and other current assets

1,795

 

2,163

 

Income taxes recoverable

1,106

 

-

 

166,835

 

172,038

 

Non-current assets
Property, plant and equipment

63,093

 

50,234

 

Goodwill

122,975

 

122,975

 

Intangible assets

199,787

 

201,371

 

Deferred income tax

2,469

 

2,403

 

Total assets

555,159

 

549,021

 

 
Liabilities
Current liabilities
Accounts payable and accrued liabilities

68,870

 

83,481

 

Income taxes payable

-

 

4,454

 

Derivatives

685

 

Current portion of long-term debt

14,625

 

14,625

 

Current portion of other long-term liabilities

1,806

 

-

 

85,986

 

102,560

 

Long-term liabilities
Long-term debt

159,138

 

151,287

 

Post-retirement benefits

3,088

 

2,923

 

Deferred income tax

50,265

 

51,529

 

Other long-term liabilities

9,758

 

-

 

Total liabilities

308,235

 

308,299

 

 
Shareholders' equity
Share capital

241,182

 

239,404

 

Contributed surplus

9,838

 

9,037

 

Deficit

(4,237

)

(10,670

)

Accumulated other comprehensive income

141

 

2,951

 

Total shareholders' equity

246,924

 

240,722

 

Total liabilities and shareholders' equity

555,159

 

549,021

 

 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 

Jamieson Brands

Three months ended
June 30

2019

2018

$ Change

% Change

 
Revenue

60,816

 

55,701

 

5,115

9.2

%

 
Gross profit

26,414

 

23,711

 

2,703

11.4

%

Gross profit margin

43.4

%

42.6

%

-

0.8

%

 
Selling, general and administrative expenses

15,265

 

15,200

 

65

0.4

%

 
Share-based compensation

690

 

355

 

335

94.4

%

 
Earnings from operations

10,459

 

8,156

 

2,303

28.2

%

Operating margin

17.2

%

14.6

%

-

2.6

%

 
Adjusted EBITDA

14,419

 

12,434

 

1,985

16.0

%

Adjusted EBITDA margin

23.7

%

22.3

%

-

1.4

%

 

Six months ended
June 30

2019

2018

$ Change

% Change

 
Revenue

116,857

 

112,270

 

4,587

 

4.1

%

 
Gross profit

50,125

 

46,769

 

3,356

 

7.2

%

Gross profit margin

42.9

%

41.7

%

-

 

1.2

%

 
Selling, general and administrative expenses

30,180

 

30,427

 

(247

)

(0.8

%)

 
Share-based compensation

1,490

 

782

 

708

 

90.5

%

 
Earnings from operations

18,455

 

15,560

 

2,895

 

18.6

%

Operating margin

15.8

%

13.9

%

-

 

1.9

%

 
Adjusted EBITDA

26,498

 

23,786

 

2,712

 

11.4

%

Adjusted EBITDA margin

22.7

%

21.2

%

-

 

1.5

%

 
 

Strategic Partners

Three months ended
June 30

2019

2018

$ Change

% Change

 
Revenue

19,776

 

18,492

 

1,284

 

6.9

%

 
Gross profit

3,165

 

2,925

 

240

 

8.2

%

Gross profit margin

16.0

%

15.8

%

-

 

0.2

%

 
Selling, general and administrative expenses

1,684

 

1,955

 

(271

)

(13.9

%)

 
Earnings from operations

1,481

 

970

 

511

 

52.7

%

Operating margin

7.5

%

5.2

%

-

 

2.3

%

 
Adjusted EBITDA

1,973

 

1,719

 

254

 

14.8

%

Adjusted EBITDA margin

10.0

%

9.3

%

-

 

0.7

%

 
Six months ended
June 30

2019

2018

$ Change

% Change

 
Revenue

36,313

 

28,702

 

7,611

 

26.5

%

 
Gross profit

6,654

 

5,487

 

1,167

 

21.3

%

Gross profit margin

18.3

%

19.1

%

-

 

(0.8

%)

 
Selling, general and administrative expenses

3,258

 

3,527

 

(269

)

(7.6

%)

 
Earnings from operations

3,396

 

1,960

 

1,436

 

73.3

%

Operating margin

9.4

%

6.8

%

-

 

2.6

%

 
Adjusted EBITDA

4,377

 

3,053

 

1,324

 

43.4

%

Adjusted EBITDA margin

12.1

%

10.6

%

-

 

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

Six months ended

June 30

June 30

2019

2018

2019

2018

 
Net income

8,186

 

4,788

 

13,570

 

9,414

 

Adjustments to net income:
Share-based compensation

190

 

38

 

380

 

38

 

Foreign exchange loss

(195

)

192

 

(169

)

392

 

Termination benefits and related costs

-

 

1,046

 

480

 

2,778

 

Purchase consideration accounted for as compensation expense

-

 

-

 

-

 

(1,066

)

International market expansion

434

 

137

 

936

 

137

 

Business integration

262

 

1,125

 

396

 

2,086

 

Other

252

 

331

 

330

 

424

 

Revaluation of deferred tax liability

(1,032

)

-

 

(1,032

)

-

 

Related tax effects

(200

)

(754

)

(523

)

(1,540

)

Adjusted net income

7,897

 

6,903

 

14,368

 

12,663

 

 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 

Three months ended

 

Six months ended

June 30

 

June 30

2019

2018

2019

2018

 
Net income

8,186

 

4,788

13,570

 

9,414

 

Add:
Provision for income taxes

1,480

 

1,802

3,562

 

3,206

 

Interest expense and other financing costs

2,463

 

2,185

4,885

 

4,361

 

Depreciation of property, plant, and equipment

1,981

 

1,315

3,641

 

2,578

 

Amortization of intangible assets

897

 

877

1,812

 

1,747

 

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

15,007

 

10,967

27,470

 

21,306

 

Add EBITDA adjustments:
Share-based compensation

690

 

355

1,490

 

782

 

Foreign exchange loss

(195

)

192

(169

)

392

 

Termination benefits and related costs

-

 

1,046

480

 

2,778

 

Purchase consideration accounted for as compensation expense

-

 

-

-

 

(1,066

)

International market expansion

434

 

137

936

 

137

 

Business integration

204

 

1,125

338

 

2,086

 

Other

252

 

331

330

 

424

 

Adjusted EBITDA

16,392

 

14,153

30,875

 

26,839

 

 

 

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

Source: Jamieson Wellness Inc.

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