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Jamieson Wellness Inc. Reports Fourth Quarter and Full Year 2019 Financial Results and Establishes 2020 Guidance

February 20, 2020

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its fourth quarter and year ended December 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 Fourth Quarter 2019 Results versus Fourth Quarter 2018 Results

  • Revenue increased 4.1% to $103.3 million;
  • Jamieson Branded revenue increased by 13.0%;
  • Adjusted EBITDA increased 11.8% to $25.6 million;
  • Net income was $13.2 million and adjusted net income increased 16.7% to $14.3 million;
  • Earnings per diluted share were $0.33 and adjusted earnings per diluted share were $0.36.

Highlights of Full Year 2019 Results versus Full Year 2018 Results

  • Revenue increased 7.9% to $345.0 million;
  • Jamieson Branded revenue increased by 9.1%;
  • Adjusted EBITDA increased 12.2% to $75.9 million;
  • Net income was $31.7 million and adjusted net income increased 13.0% to $38.1 million;
  • Earnings per diluted share were $0.80, and adjusted earnings per diluted share increased 12.9% to $0.96;
  • Achieved high end of full year 2019 guidance for revenue, adjusted EBITDA and adjusted earnings per share.

“We are very pleased with our fiscal 2019 performance, delivering robust revenue growth, margin expansion, and earnings at the high end of our 2019 guidance,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “We finished the year with strong momentum in our flagship Jamieson brand both domestically and internationally. We returned our specialty brands to a healthy level of growth and favorable positioning. Our branded strength and incremental efficiencies across the organization are driving improved operating margins and allowing us to further invest in our growth opportunities. In China, our regulatory expertise was instrumental in allowing us to take a lead international position with 21 Jamieson products available for the domestic market. Throughout 2020, we plan to advance our e-commerce efforts, enter the U.S. market and further grow our promising China business. We are proud of our consistent performance, which is a tribute to the strength of our brands and the tireless work of each of our valued team members.”

Declaration of Fourth Quarter Dividend

On February 19, 2020, the board of directors of the Company authorized a $0.01 increase in the quarterly dividend and declared a cash dividend for the fourth quarter of 2019 of $0.11 per common share or approximately $4.3 million in the aggregate. The dividend will be paid on March 13, 2020 to all common shareholders of record at the close of business on February 28, 2020. The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada).

Fourth Quarter 2019 Results

Revenue increased 4.1% to $103.3 million in the fourth quarter of 2019 compared to $99.1 million in the fourth quarter of 2018 and was driven by 13.0% growth in Jamieson Brands partially offset by a 16.9% decline in Strategic Partners.

Revenue in the Jamieson Brands segment increased by $9.1 million, or 13.0%, to $78.8 million in Q4 2019 due to strong growth in domestic and international Jamieson branded sales of $5.2 million and $3.4 million respectively, plus an increase in Specialty Brands revenue of $0.5 million. The Company’s domestic Jamieson branded sales increased by 10.3% driven by the strength of media campaigns leading to strong consumer demand and increased shelf space at a key customer. The Company’s international business continues to grow, increasing 37.7% versus prior year, led by strong growth in China as the Company continues to build distribution of registered products for the domestic Chinese retail channel, along with the timing of shipments across key regions including Europe, the Middle East and the rest of Asia. Specialty Brands volumes increased by 4.8% through continued focus on innovation as well as drug, grocery and e-commerce channel expansion, combined with improving promotional programs through collaboration with customers. The decline in the Strategic Partners segment was anticipated and due to the timing of new partner programs that occurred earlier in the year.

Gross profit increased by $4.3 million in the fourth quarter of 2019, driven by both revenue growth and operating efficiencies. Gross profit margin increased by 280 basis points to 38.3% due to favorable mix and margin improvements in both segments. Gross profit margin in the Jamieson Brands segment increased by 100 basis points to 45.6% due to production efficiencies gained from the addition of volume through the Company’s facilities and an increase in packaging capacity. Gross profit margin in Strategic Partners increased by 50 basis points to 14.6% due to favourable mix and 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 3.8%, or $0.6 million, to $17.6 million in the fourth quarter of 2019. Normalizing for higher non-recurring costs in 2018, SG&A expenses increased by $1.8 million due to the timing of marketing programs, investments in resources for e-commerce and international growth as well as variable compensation.

Earnings from operations increased 19.8% to $20.3 million in the fourth quarter of 2019 and operating margin increased by 260 basis points to 19.7% primarily due to the gross margin improvements noted above.

Adjusted EBITDA increased 11.8% to $25.6 million in the fourth quarter of 2019 from $22.9 million in the fourth quarter of 2018 and adjusted EBITDA margin was 24.8% compared to 23.1% in the prior year period.

Interest expense and other financing costs decreased by $0.4 million to $2.0 million in the fourth quarter of 2019 mainly due to lower interest rates as a result of the Company’s amended and restated credit agreement, partially offset by the impact of the adoption of IFRS 16, which includes the recognition of interest expense on lease liabilities.

Net income for the fourth quarter of 2019 was $13.2 million compared to $10.0 million in the fourth quarter of 2018. Adjusted net income, which excludes all non-operating expenses and refinancing costs, increased to $14.3 million in the fourth quarter of 2019 from $12.2 million in the fourth quarter of 2018.

Adjusted net income for the fourth 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 $13.0 million in cash from operations during the fourth quarter of 2019 compared to $22.2 million in the prior year. Cash from operating activities before working capital considerations of $18.2 million was higher by $3.9 million primarily due to increased earnings in the current quarter. Investments in working capital increased by $13.1 million as follows:

  • Higher accounts receivable due to the timing of revenue and collections plus significant growth in the proportion of international revenues which carry longer trade terms
  • Higher inventory due to an over depletion in 2018 combined with increased safety stock (including unique SKUs for China) to improve customer fulfillment; and
  • Lower trade payables due to timing of production / inventory build leading up to the fourth quarter and an accelerated deduction of trade obligations by the Company’s domestic retail partners

The Company’s cash at December 31, 2019 was $0.2 million compared to $12.4 million on December 31, 2018. The Company ended the year with $110.4 million in cash and available operating lines and total debt of $164.8 million. On November 14, 2019, the Company declared a quarterly dividend of $0.10 per common share to holders of record as of November 29, 2019 and paid such dividend on December 13, 2019. The dividend payment was approximately $3.9 million in the aggregate.

Three months ended

December 31

($ in 000's, except as otherwise noted)

2019

2018

$ Change

% Change

 
Cash, beginning of period

4,153

 

2,815

 

1,338

 

47.5

%

Cash flows from (used in):
Operating activities

12,996

 

22,233

 

(9,237

)

(41.5

%)

Investing activities

(3,488

)

(4,611

)

1,123

 

24.4

%

Financing activities

(13,463

)

(7,992

)

(5,471

)

(68.5

%)

Cash, end of period

198

 

12,445

 

(12,247

)

(98.4

%)

Initial 2020 Outlook

The Company is establishing its initial 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 increases of 6% to 9% to invest in marketing to drive international growth and additional resources to support e-commerce initiatives
  • A forecasted CAD/USD exchange rate of $1.32
  • 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.

Consolidated Financial Statements and Management’s Discussion and Analysis

The Company’s audited consolidated annual financial statements and accompanying notes as at and for the three and twelve months ended December 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 fourth quarter and full year 2019 results at 5:00 p.m. ET today, February 20, 2020. The call can be accessed live over the telephone by dialing 1-888-204-4368 from Canada and the U.S. or 1-323-994-2093 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 4866271 and it will be available until Thursday, March 5, 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=137923. 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 2020 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 28, 2019 and as modified by the disclosure under the “Risk Factors” section in the Company’s MD&A filed February 20, 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

 

For the year ended

December 31

 

December 31

2019

 

2018

 

2019

 

2018

 
Revenue

103,253

 

99,145

 

344,980

 

319,776

 

Cost of sales

63,711

 

63,906

 

215,246

 

204,358

 

Gross profit

39,542

 

35,239

 

129,734

 

115,418

 

 
Gross profit margin

38.3

%

35.5

%

37.6

%

36.1

%

 
Selling, general and administrative expenses

17,637

 

16,988

 

69,942

 

65,194

 

Share-based compensation

1,573

 

1,278

 

4,343

 

3,067

 

Earnings from operations

20,332

 

16,973

 

55,449

 

47,157

 

 
Operating margin

19.7

%

17.1

%

16.1

%

14.7

%

 
Foreign exchange loss

227

 

89

 

404

 

608

 

Other expenses (income)

(35

)

64

 

3,369

 

298

 

Interest expense and other financing costs

1,966

 

2,390

 

9,372

 

9,000

 

Income before income taxes

18,174

 

14,430

 

42,304

 

37,251

 

Provision for income taxes

5,011

 

4,384

 

10,647

 

10,578

 

Net income

13,163

 

10,046

 

31,657

 

26,673

 

Adjusted net income

14,253

 

12,217

 

38,111

 

33,733

 

 
EBITDA

22,902

 

19,220

 

62,592

 

55,297

 

Adjusted EBITDA

25,641

 

22,933

 

75,909

 

67,628

 

 
Adjusted EBITDA margin

24.8

%

23.1

%

22.0

%

21.1

%

 
Weighted average number of shares
Basic

38,967,875

 

38,166,594

 

38,535,274

 

38,009,443

 

Diluted

40,130,698

 

39,707,979

 

39,614,909

 

39,531,078

 

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

0.34

 

0.26

 

0.82

 

0.70

 

Diluted, earnings per share

0.33

 

0.25

 

0.80

 

0.67

 

Adjusted Diluted, earnings per share

0.36

 

0.31

 

0.96

 

0.85

 

Jamieson Wellness Inc.

Unaudited Condensed Consolidated Interim Statements of Financial Position

In thousands of Canadian dollars

 

December 31,

2019

December 31,

2018

Assets
Current assets
Cash

198

 

12,445

 

Accounts receivable

89,394

 

82,227

 

Inventories

81,948

 

72,079

 

Derivatives

-

 

3,124

 

Prepaid expenses and other current assets

1,893

 

2,163

 

173,433

 

172,038

 

Non-current assets
Property, plant and equipment

64,906

 

50,234

 

Goodwill

122,975

 

122,975

 

Intangible assets

198,189

 

201,371

 

Deferred income tax

2,272

 

2,403

 

Total assets

561,775

 

549,021

 

 
Liabilities
Current liabilities
Accounts payable and accrued liabilities

67,795

 

83,481

 

Income taxes payable

2,365

 

4,454

 

Derivatives

1,292

 

-

 

Current portion of long-term debt

-

 

14,625

 

Current portion of other long-term liabilities

1,890

 

-

 

73,342

 

102,560

 

Long-term liabilities
Long-term debt

164,769

 

151,287

 

Post-retirement benefits

3,923

 

2,923

 

Deferred income tax

51,107

 

51,529

 

Other long-term liabilities

9,466

 

-

 

Total liabilities

302,607

 

308,299

 

 
Shareholders' equity
Share capital

243,224

 

239,404

 

Contributed surplus

10,727

 

9,037

 

Deficit

6,061

 

(10,670

)

Accumulated other comprehensive income

(844

)

2,951

 

Total shareholders' equity

259,168

 

240,722

 

Total liabilities and shareholders' equity

561,775

 

549,021

 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 
Jamieson Brands
 

Three months ended

December 31

 

 

 

 

2019

 

2018

 

$ Change

 

% Change

 
Revenue

78,803

69,715

9,088

13.0%

 
Gross profit

35,962

31,079

4,883

15.7%

Gross profit margin

45.6%

44.6%

-

1.0%

 
Selling, general and administrative expenses

16,035

15,453

582

3.8%

 
Share-based compensation

1,573

1,278

295

23.1%

 
Earnings from operations

18,354

14,348

4,006

27.9%

Operating margin

23.3%

20.6%

-

2.7%

 
Adjusted EBITDA

23,154

19,742

3,412

17.3%

Adjusted EBITDA margin

29.4%

28.3%

-

1.1%

For the year ended

December 31

2019

2018

$ Change

% Change

 
Revenue

265,843

243,772

22,071

9.1%

 
Gross profit

116,827

104,115

12,712

12.2%

Gross profit margin

43.9%

42.7%

-

1.2%

 
Selling, general and administrative expenses

62,403

58,616

3,787

6.5%

 
Share-based compensation

4,343

3,067

1,276

41.6%

 
Earnings from operations

50,081

42,432

7,649

18.0%

Operating margin

18.8%

17.4%

-

1.4%

 
Adjusted EBITDA

67,436

60,173

7,263

12.1%

Adjusted EBITDA margin

25.4%

24.7%

-

0.7%

Strategic Partners
 

Three months ended

December 31

 

 

 

 

2019

 

2018

 

$ Change

 

% Change

 
Revenue

24,450

29,430

(4,980

)

(16.9

%)

 
Gross profit

3,580

4,160

(580

)

(13.9

%)

Gross profit margin

14.6%

14.1%

-

 

0.5

%

 
Selling, general and administrative expenses

1,602

1,535

67

 

4.4

%

 
Earnings from operations

1,978

2,625

(647

)

(24.6

%)

Operating margin

8.1%

8.9%

-

 

(0.8

%)

 
Adjusted EBITDA

2,487

3,191

(704

)

(22.1

%)

Adjusted EBITDA margin

10.2%

10.8%

-

 

(0.6

%)

For the year ended

December 31

2019

2018

$ Change % Change
 
Revenue

79,137

76,004

3,133

4.1%

 
Gross profit

12,907

11,303

1,604

14.2%

Gross profit margin

16.3%

14.9%

-

1.4%

 
Selling, general and administrative expenses

7,539

6,578

961

14.6%

 
Earnings from operations

5,368

4,725

643

13.6%

Operating margin

6.8%

6.2%

-

0.6%

 
Adjusted EBITDA

8,473

7,455

1,018

13.7%

Adjusted EBITDA margin

10.7%

9.8%

-

0.9%

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 For the year ended
December 31 December 31

2019

2018

2019

2018

 
Net income

13,163

 

10,046

 

31,657

 

26,673

 

Adjustments to net income:
Share-based compensation

190

 

383

 

761

 

535

 

Foreign exchange loss

227

 

89

 

404

 

608

 

Termination benefits and related costs

-

 

129

 

480

 

2,933

 

Purchase consideration accounted for as a compensation expense

-

 

-

 

-

 

(1,066

)

International market expansion

278

 

669

 

1,712

 

929

 

Business integration

523

 

844

 

1,415

 

4,142

 

Debt refinancing costs

-

 

-

 

-

 

-

 

Other

196

 

704

 

5,138

 

1,718

 

Revaluation of deferred tax liability

-

 

-

 

(1,032

)

-

 

Related tax effects

(324

)

(647

)

(2,424

)

(2,739

)

Adjusted net income

14,253

 

12,217

 

38,111

 

33,733

 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 
Three months ended For the year ended
December 31 December 31

2019

2018

2019

2018

 
Net income

13,163

10,046

31,657

26,673

 

Add:
Provision for income taxes

5,011

4,384

10,647

10,578

 

Interest expense and other financing costs

1,966

2,390

9,372

9,000

 

Depreciation of property, plant, and equipment

1,845

1,533

7,263

5,551

 

Amortization of intangible assets

917

867

3,653

3,495

 

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

22,902

19,220

62,592

55,297

 

Add EBITDA adjustments:
Share-based compensation

1,573

1,278

4,343

3,067

 

Foreign exchange loss

227

89

404

608

 

Termination benefits and related costs

-

129

480

2,933

 

Purchase consideration accounted for as compensation expense

-

-

-

(1,066

)

International market expansion

278

669

1,712

929

 

Business integration

465

844

1,240

4,142

 

Other

196

704

5,138

1,718

 

Adjusted EBITDA

25,641

22,933

75,909

67,628

 

 

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

Source: Jamieson Wellness Inc.

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