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Jamieson Wellness Inc. Reports Second Quarter 2020 Financial Results

August 12, 2020

Increases Fiscal 2020 Guidance and Declares Increased Quarterly Dividend

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its second quarter ended June 30, 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 Second Quarter 2020 Results versus Second Quarter 2019 Results

  • Revenue increased 15.6% to $93.2 million;
  • Jamieson Brands revenue increased by 22.2%;
  • Adjusted EBITDA increased 15.8% to $19.0 million;
  • Net income was $6.0 million and adjusted net income increased 25.1% to $9.9 million; and
  • Earnings per diluted share were $0.15 and adjusted earnings per diluted share were $0.24.

“Our Purpose as an organization is to improve the world’s health and wellness, and 2020 continues to show us that now, more than ever, our people and our brands are uniquely positioned to do so. I am very proud of our entire organization for their devoted efforts supporting our customers and consumers around the world through this period of increased need,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “We have implemented numerous strategies to adapt to the challenging environment, each of which has prioritized the health and safety of our employees while allowing our operations to continue without any significant interruption. I am pleased that we continue to provide value to our investors, with sustained growth in revenue and earnings. We continue to drive our growth initiatives forward, increasing our outlook for both domestic and international revenue as well as for adjusted EBITDA and adjusted net earnings, and are confident in our near and long-term growth opportunities.”

Declaration of Second Quarter Dividend

The board of directors of the Company authorized a 1.5 cent increase in the quarterly dividend and declared a cash dividend for the second quarter of 2020 of 12.5 cents per common share, or approximately $5.0 million in the aggregate. The dividend will be paid on September 15, 2020 to all common shareholders of record at the close of business on August 28, 2020. The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada).

Second Quarter 2020 Results

Revenue increased 15.6% to $93.2 million in the second quarter of 2020 compared to $80.6 million in the second quarter of 2019 driven by 22.2% growth in Jamieson Brands partially offset by an anticipated 4.4% decline in Strategic Partners.

Revenue in the Jamieson Brands segment increased by 22.2% or $13.5 million to $74.3 million in the second quarter of 2020. The Company continued to see point-of-purchase sales growth ahead of its expectation as COVID-19 continues to impact consumers in Canada and within international markets. The Company’s domestic Jamieson Brands sales increased by 14.0%, or $7.3 million, reflecting the acceleration of sales due to higher demand for immunity and general health supplements. The Company’s international business generated significant growth, increasing 69.0%, or $6.2 million versus prior year, led by strong growth in multiple geographies as demand for immunity products increased significantly, particularly in China and Europe. China continues to lead international growth through increased cross border e-commerce sales and initial shipments into domestic retail stores as the distribution network is expanded.

Revenue in the Strategic Partners segment decreased 4.4%, or $0.9 million to $18.9 million in the second quarter of 2020, primarily due to the timing of new programs launched in the prior year, the availability of production capacity to meet demand and the lower volumes related to a specific customer; partially offset by the impact of a change in billing practices for a key partner.

Gross profit increased by $3.4 million in the second quarter of 2020, driven by revenue growth and segment mix. Gross profit margin decreased by 140 basis points to 35.3%. Gross profit margin in the Jamieson Brands segment decreased by 230 basis points to 41.1% due to the implementation of physical distancing initiatives and safety measures in the Company’s production facilities in response to COVID-19, offsetting operational efficiencies that normally accompany higher volumes and favorable product mix. Gross profit margin in Strategic Partners decreased by 330 basis points to 12.7%, primarily driven by customer mix, the billing change of a key customer and expenses related to the implementation of physical distancing and additional safety measures related to COVID-19.

Selling, general and administrative (“SG&A”) expenses increased by 23.9%, or $4.0 million, to $21.0 million in the second quarter of 2020. Excluding the impact of specified COVID-19 and other related costs of $3.2 million, SG&A expenses increased by $0.8 million due to higher variable compensation expenses partially offset by timing of marketing activity and a reduction in travel, meals, and entertainment costs as a result of COVID-19.

Earnings from operations decreased 10.6% to $10.7 million in the second quarter of 2020 and operating margin decreased by 330 basis points to 11.5% as a result of higher revenue and gross profit offset by higher SG&A and share-based compensation expenses. On an adjusted basis, earnings from operations increased 13.5% to $14.8 million in the second quarter of 2020 and operating margin was 15.9%, or relatively consistent with the prior year period.

Adjusted EBITDA increased 15.8% to $19.0 million in the second quarter of 2020 from $16.4 million in the second quarter of 2019 and adjusted EBITDA margin was 20.4% compared to 20.3% in the prior year period.

Interest expense and other financing costs decreased by $1.1 million to $1.4 million in the second quarter of 2020 mainly due to lower average borrowings in the quarter and lower interest rates.

Net income for the second quarter of 2020 was $6.0 million compared to $8.2 million in the second quarter of 2019. Adjusted net income, which excludes all non-operating expenses and foreign exchange gains or losses, increased to $9.9 million in the second quarter of 2020 from $7.9 million in the second quarter of 2019.

Adjusted net income for the second quarter of 2020 excludes costs associated with share-based compensation, foreign exchange loss, business integration, COVID-19 related costs, 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 $14.4 million in cash from operations during the second quarter of 2020 compared to cash generated of $6.6 million in the prior year. Cash from operating activities before working capital considerations of $9.9 million was lower by $2.1 million primarily reflecting higher COVID-19 related costs partially offset by higher volumes in the current quarter. Improvements in cash from working capital was mainly driven by favourable timing on the collection of receivables and timing of payments, partially offset by an increase in inventories to secure immunity related raw materials to ensure continuity of supply.

The Company’s cash at June 30, 2020 was $6.8 million compared to $0.2 million on December 31, 2019. The Company ended the quarter with $118.0 million in cash and available operating lines and total debt of $163.8 million. On May 21, 2020, the Company declared a quarterly dividend of $0.11 per common share to holders of record as of May 29, 2020 and paid such dividend on June 12, 2020. The dividend payment was approximately $4.4 million in the aggregate.

Three months ended

 

 

 

 

June 30

 

 

 

 

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

2020

 

2019

 

$ Change

 

% Change

 
Cash, beginning of period

5,227

 

3,314

 

1,913

 

57.7

%

Cash flows from (used in):
Operating activities

14,422

 

6,601

 

7,821

 

118.5

%

Investing activities

(4,740

)

(2,362

)

(2,378

)

(100.7

%)

Financing activities

(8,113

)

(2,285

)

(5,828

)

(255.1

%)

Cash, end of period

6,796

 

5,268

 

1,528

 

29.0

%

Fiscal 2020 Outlook

The Company is increasing its outlook for fiscal 2020 and anticipates revenue in a range of $385.0 to $395.0 million, compared to $364.0 to $376.0 million previously, which represents annual growth of 11.5% to 14.5%. The Company anticipates adjusted EBITDA in a range of $84.0 to $88.0 million, up from $80.0 to $84.0 million previously, and now anticipates adjusted diluted earnings per share in a range of $1.08 to $1.15 compared to $1.02 to $1.10 previously. The increase in the Company’s outlook reflects strong consumer demand both domestically and internationally.

This outlook reflects the following assumptions:

  • Jamieson Brands segment growth of 14% to 17%, including:
    • 10% to 12% domestic growth, and
    • 40% to 50% international growth
  • Strategic Partners segment growth of approximately 5%
  • Normalized SG&A expense increases of 8% to 10% 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 $6.0 million and $6.5 million
  • Effective income tax rate of approximately 28.0%
  • A fully diluted share count of approximately 41 million shares

Considering the 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, outside of supplement only stores considered non-essential, and our products remain widely available in food, drug, mass 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 June 30, 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 June 30, 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 second quarter 2020 results at 5:00 p.m. ET today, August 12, 2020. The call can be accessed live over the telephone by dialing 1- 800-437-2398 from Canada and the U.S. or 1- 323-289-6576 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 9865727 and it will be available until Wednesday, August 26, 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=140793. 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 today, August 12, 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.

The Company cautions 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.

Consolidated Statements of Operations and Comprehensive Income (Loss)

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

 

Three months ended

Six months ended

June 30

June 30

2020

 

2019

 

2020

 

2019

 

 
Revenue

93,204

 

80,592

 

177,727

 

153,170

 

Cost of sales

60,263

 

51,013

 

113,530

 

96,391

 

Gross profit

32,941

 

29,579

 

64,197

 

56,779

 

 
Gross profit margin

35.3

%

36.7

%

36.1

%

37.1

%

 
Selling, general and administrative expenses

20,993

 

16,949

 

38,625

 

33,438

 

Share-based compensation

1,273

 

690

 

2,538

 

1,490

 

Earnings from operations

10,675

 

11,940

 

23,034

 

21,851

 

 
Operating margin

11.5

%

14.8

%

13.0

%

14.3

%

 
Foreign exchange loss (gain)

848

 

(195

)

99

 

(169

)

Other expenses

-

 

6

 

-

 

3

 

Interest expense and other financing costs

1,390

 

2,463

 

3,318

 

4,885

 

Income before income taxes

8,437

 

9,666

 

19,617

 

17,132

 

Provision for income taxes

2,399

 

1,480

 

5,568

 

3,562

 

Net income

6,038

 

8,186

 

14,049

 

13,570

 

Adjusted net income

9,882

 

7,897

 

17,681

 

14,368

 

 
EBITDA

12,715

 

15,007

 

28,680

 

27,470

 

Adjusted EBITDA

18,983

 

16,392

 

35,669

 

30,875

 

 
Adjusted EBITDA margin

20.4

%

20.3

%

20.1

%

20.2

%

 
Weighted average number of shares
Basic

39,447,020

 

38,321,699

 

39,273,066

 

38,313,840

 

Diluted

41,178,625

 

39,741,550

 

41,003,141

 

39,732,220

 

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

0.15

 

0.21

 

0.36

 

0.35

 

Diluted, earnings per share

0.15

 

0.21

 

0.34

 

0.34

 

Adjusted Diluted, earnings per share

0.24

 

0.20

 

0.43

 

0.36

 

Jamieson Wellness Inc.

Consolidated Statements of Financial Position

In thousands of Canadian dollars

 

June 30,
2020

December 31,
2019

Assets
Current assets
Cash

6,796

198

 

Accounts receivable

74,945

89,394

 

Inventories

104,287

81,948

 

Derivatives

2,022

-

 

Prepaid expenses and other current assets

2,279

1,893

 

190,329

173,433

 

Non-current assets
Property, plant and equipment

68,540

64,906

 

Goodwill

122,975

122,975

 

Intangible assets

197,752

198,189

 

Deferred income tax

2,262

2,272

 

Total assets

581,858

561,775

 

 
Liabilities
Current liabilities
Accounts payable and accrued liabilities

71,924

67,795

 

Income taxes payable

1,156

2,365

 

Derivatives

1,026

1,292

 

Current portion of other long-term liabilities

1,914

1,890

 

76,020

73,342

 

Long-term liabilities
Long-term debt

163,754

164,769

 

Post-retirement benefits

4,123

3,923

 

Deferred income tax

51,906

51,107

 

Other long-term liabilities

10,381

9,466

 

Total liabilities

306,184

302,607

 

 
Shareholders' equity
Share capital

252,076

243,224

 

Contributed surplus

11,348

10,727

 

Deficit

11,432

6,061

 

Accumulated other comprehensive income (loss)

818

(844

)

Total shareholders' equity

275,674

259,168

 

Total liabilities and shareholders' equity

581,858

561,775

 

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 
Jamieson Brands
 

Three months ended
June 30

2020

2019

$ Change

% Change

 
Revenue

74,292

 

60,816

 

13,476

 

22.2

%

 

Gross profit

30,531

 

26,414

 

4,117

 

15.6

%

Gross profit margin

41.1

%

43.4

%

-

 

(2.3

%)

 
Selling, general and administrative expenses

16,885

 

15,265

 

1,620

 

10.6

%

 
Share-based compensation

1,273

 

690

 

583

 

84.5

%

 
Earnings from operations

12,373

 

10,459

 

1,914

 

18.3

%

Operating margin

16.7

%

17.2

%

-

 

(0.5

%)

 
Adjusted EBITDA

17,624

 

14,419

 

3,205

 

22.2

%

Adjusted EBITDA margin

23.7

%

23.7

%

-

 

-

 

 
 
Strategic Partners
 

Three months ended
June 30

2020

2019

$ Change

% Change

 
Revenue

18,912

 

19,776

 

(864

)

(4.4

%)

 
Gross profit

2,410

 

3,165

 

(755

)

(23.9

%)

Gross profit margin

12.7

%

16.0

%

-

 

(3.3

%)

 
Selling, general and administrative expenses

4,108

 

1,684

 

2,424

 

143.9

%

 
Earnings from operations

(1,698

)

1,481

 

(3,179

)

(214.7

%)

Operating margin

(9.0

%)

7.5

%

-

 

(16.5

%)

 
Adjusted EBITDA

1,359

 

1,973

 

(614

)

(31.1

%)

Adjusted EBITDA margin

7.2

%

10.0

%

-

 

(2.8

%)

 
 
Jamieson Brands
 

Six months ended
June 30

2020

2019

$ Change

% Change

 
Revenue

144,086

 

116,857

 

27,229

 

23.3

%

 
Gross profit

59,806

 

50,125

 

9,681

 

19.3

%

Gross profit margin

41.5

%

42.9

%

-

 

(1.4

%)

 
Selling, general and administrative expenses

32,941

 

30,180

 

2,761

 

9.1

%

 
Share-based compensation

2,538

 

1,490

 

1,048

 

70.3

%

 
Earnings from operations

24,327

 

18,455

 

5,872

 

31.8

%

Operating margin

16.9

%

15.8

%

-

 

1.1

%

 
Adjusted EBITDA

33,411

 

26,498

 

6,913

 

26.1

%

Adjusted EBITDA margin

23.2

%

22.7

%

-

 

0.5

%

 
 
Strategic Partners
 

Six months ended
June 30

2020

2019

$ Change

% Change

 
Revenue

33,641

 

36,313

 

(2,672

)

(7.4

%)

 
Gross profit

4,391

 

6,654

 

(2,263

)

(34.0

%)

Gross profit margin

13.1

%

18.3

%

-

 

(5.2

%)

 
Selling, general and administrative expenses

5,684

 

3,258

 

2,426

 

74.5

%

 
Earnings from operations

(1,293

)

3,396

 

(4,689

)

(138.1

%)

Operating margin

(3.8

%)

9.4

%

-

 

(13.2

%)

 
Adjusted EBITDA

2,258

 

4,377

 

(2,119

)

(48.4

%)

Adjusted EBITDA margin

6.7

%

12.1

%

-

 

(5.4

%)

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

Six months ended

June 30

June 30

2020

2019

2020

2019

 
Net income

6,038

 

8,186

 

14,049

 

13,570

 

Adjustments to net income:
Share-based compensation

144

 

190

 

288

 

380

 

Foreign exchange loss (gain)

848

 

(195

)

99

 

(169

)

Termination benefits and related costs

-

 

-

 

-

 

480

 

International market expansion

-

 

434

 

13

 

936

 

Business integration

254

 

262

 

420

 

396

 

COVID-19 related costs

3,932

 

-

 

4,017

 

-

 

Other

-

 

252

 

-

 

330

 

Revaluation of deferred tax liability

-

 

(1,032

)

-

 

(1,032

)

Related tax effects

(1,334

)

(200

)

(1,205

)

(523

)

Adjusted net income

9,882

 

7,897

 

17,681

 

14,368

 

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 

Three months ended

Six months ended

June 30

June 30

2020

2019

2020

2019

 
Net income

6,038

8,186

 

14,049

13,570

 

Add:
Provision for income taxes

2,399

1,480

 

5,568

3,562

 

Interest expense and other financing costs

1,390

2,463

 

3,318

4,885

 

Depreciation of property, plant, and equipment

1,932

1,981

 

3,853

3,641

 

Amortization of intangible assets

956

897

 

1,892

1,812

 

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

12,715

15,007

 

28,680

27,470

 

Add EBITDA adjustments:
Share-based compensation

1,273

690

 

2,538

1,490

 

Foreign exchange loss (gain)

848

(195

)

99

(169

)

Termination benefits and related costs

-

-

 

-

480

 

International market expansion

-

434

 

13

936

 

Business integration

215

204

 

322

338

 

COVID-19 related costs

3,932

-

 

4,017

-

 

Other

-

252

 

-

330

 

Adjusted EBITDA

18,983

16,392

 

35,669

30,875

 

 

Investor and Media Contact Information:

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

Source: Jamieson Wellness Inc.

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