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Jamieson Wellness Inc. Reports Third Quarter 2020 Financial Results

November 05, 2020

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its third quarter ended September 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 Third Quarter 2020 Results versus Third Quarter 2019 Results

  • Revenue increased 19.2% to $105.6 million;
  • Jamieson Brands revenue increased by 17.7%;
  • Adjusted EBITDA increased 18.2% to $22.9 million;
  • Net income was $12.1 million and adjusted net income increased 33.3% to $12.7 million; and
  • Earnings per diluted share were $0.29 and adjusted earnings per diluted share were $0.30.

“We are pleased to report strong growth across all segments, with continued elevated consumer demand for our products both domestically and internationally,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “We delivered 9.5% growth in our domestic Jamieson Brands and 82% growth in our international business as consumers around the world remain focused on their health and rely on the trusted Jamieson brand. In China, we continue to build market share and expand our domestic distribution channels by leveraging the strength of our Jamieson Brand in Canada. We have accelerated investment in our manufacturing facilities to increase production capacity while ensuring the highest level of safety for our employees. Overall, this year highlights the importance of our vision to improve the world’s health and wellness. Our team is working tirelessly to deliver the products our customers have come to depend on. We remain focused on adapting to this challenging environment, while executing our key growth initiatives and enhancing our long-term positioning.”

Third Quarter 2020 Results

Revenue increased 19.2% to $105.6 million in the third quarter of 2020 compared to $88.6 million in the third quarter of 2019 driven by 17.7% growth in Jamieson Brands and 25.0% growth in Strategic Partners.

Revenue in the Jamieson Brands segment increased by 17.7% or $12.4 million to $82.6 million in the third quarter of 2020. The Company continued to see strong consumer demand as COVID-19 continues to impact consumers in Canada and within international markets. The Company’s domestic Jamieson Brands sales increased by 9.5%, or $5.9 million, reflecting higher demand for immunity and general health supplements. This includes the volume impact of higher velocity sport nutrition products with sales returning to pre-COVID-19 levels as supplement-only health food stores re-opened during the quarter. The Company’s international business continues to perform ahead of expectations, increasing 82.2%, or $6.5 million versus prior year. The Company realized strong growth in China, Eastern Europe and Middle East based on continued demand for immunity products and an acceleration of fourth quarter cough and cold shipments. China continues to lead international growth through increased cross border e-commerce sales and shipments into domestic retail stores as the distribution network is expanded.

Revenue in the Strategic Partners segment increased 25.0%, or $4.6 million to $23.0 million in the third quarter of 2020, primarily due to the timing of new programs and higher turnkey revenues. This was partially offset by lower volumes for a strategic partner retail customer, which began consolidating stores while working through its COVID-19 related Chapter 11 reorganization.

Gross profit increased by $4.6 million, or 13.9%, in the third quarter of 2020, driven by revenue growth. Gross profit margin decreased by 170 basis points to 36.0%. Gross profit margin in the Jamieson Brands segment decreased by 80 basis points to 43.0% as higher freight and third-party costs required to maximize throughput, as well as COVID-19 physical distancing initiatives and safety measures established in the Company’s production facilities in March offset operational efficiencies that normally accompany higher volumes. Gross profit margin in Strategic Partners decreased by 340 basis points to 11.1%, primarily driven by customer mix, higher third-party costs required to maximize throughput and the implementation of physical distancing and safety measures related to COVID-19.

Selling, general and administrative (“SG&A”) expenses increased by $0.1 million, to $19.0 million in the third quarter of 2020. Excluding the impact of primarily COVID-19 related costs and business integration costs of $0.8 million, SG&A expenses increased by $1.5 million due to higher variable compensation expenses and timing of marketing activity, which had been delayed to the latter half of the year as a result of COVID-19.

Earnings from operations increased by $4.5 million, or 34.2%, to $17.8 million in the third quarter of 2020 and operating margin increased by 190 basis points to 16.9% as a result of higher revenue and gross profit, while fixed costs remained consistent with the prior year. On an adjusted basis, earnings from operations increased 20.5% to $18.6 million in the third quarter of 2020 and operating margin was 17.6%, compared to 17.4% in the prior year period.

Adjusted EBITDA increased 18.2% to $22.9 million in the third quarter of 2020 from $19.4 million in the third quarter of 2019 and adjusted EBITDA margin was 21.7% compared to 21.9% in the prior year period.

Interest expense and other financing costs decreased to $1.3 million from $2.5 million in the third quarter of 2020, mainly due to lower average borrowings in the quarter and lower interest rates.

Net income for the third quarter of 2020 was $12.1 million compared to $4.9 million in the third quarter of 2019. Adjusted net income, which excludes all non-operating expenses and foreign exchange gains or losses, increased to $12.7 million in the third quarter of 2020 from $9.5 million in the third quarter of 2019.

Adjusted net income for the third 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 $4.6 million in cash from operations during the third quarter of 2020 compared to cash generated of $6.7 million in the prior year. Cash from operating activities before working capital considerations of $16.1 million was $4.4 million higher primarily reflecting higher volumes in the third quarter. Higher cash invested in working capital was mainly driven by accelerated purchases and payments of immunity and other raw materials to ensure continuity of supply. The Company’s cash at September 30, 2020 was $3.1 million compared to $4.2 million on September 30, 2019. The Company ended the quarter with $118.0 million in cash and available operating lines and total debt of $160.1 million.

On August 12, 2020, the Company declared a quarterly dividend of $0.125 per common share to holders of record as of August 28, 2020 and paid such dividend on September 15, 2020. The dividend payment was approximately $5.0 million in the aggregate.

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

2020

2019

$ Change % Change
 
Cash, beginning of period

6,796

5,268

1,528

29.0%

Cash flows from (used in):
Operating activities

4,553

6,741

(2,188)

(32.5%)

Investing activities

(1,799)

(1,678)

(121)

(7.2%)

Financing activities

(6,406)

(6,178)

(228)

(3.7%)

Cash, end of period

3,144

4,153

(1,009)

(24.3%)

Fiscal 2020 Outlook

The Company is increasing its revenue outlook for fiscal 2020 and anticipates revenue in a range of $395.0 to $400.0 million, compared to $385.0 to $395.0 million previously, which represents annual growth of 14.5% to 16.0%. The Company has narrowed its adjusted EBITDA to the higher end of the prior range, and now anticipates adjusted EBITDA in a range of $86.0 to $88.0 million, compared to $84.0 to $88.0 million previously. The Company now anticipates adjusted diluted earnings per share in a range of $1.11 to $1.15 compared to $1.08 to $1.15 previously. The increase in the Company’s outlook reflects strong consumer demand both domestically and internationally.

Consumer response to COVID-19 has resulted in the acceleration of demand for both immunity and general health supplements throughout 2020. Higher demand is expected to continue for products in specific categories as consumers seek out health and wellness solutions while adapting to the changing environment surrounding COVID-19. The Company focused on the safety and well-being of its employees while implementing necessary measures in its operating facilities to ensure business continuity, including increased sanitation, maximizing physical distancing where possible, and establishing shift gaps to avoid congestion during changeovers. COVID-19 has affected supply chains globally and any manufacturing closures, for the Company or its suppliers, have the potential to impact the continuity of supply and availability of certain raw materials or components required for production. The Company’s products remain widely available in all existing retail channels and any store closures may affect the availability of its products to consumers. A resurgence of COVID-19 may result in more stringent government measures, potential closures of essential and non-essential businesses, which may impact revenues, the timing of shipments and cost of product. The Company's 2020 estimates may be impacted by the depth and duration of any additional measurements implemented as a result of COVID-19.

For additional details on the Company’s fiscal 2020 outlook, including guidance for the fourth 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 September 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 September 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 third quarter 2020 results at 5:00 p.m. ET today, November 5, 2020. The call can be accessed live over the telephone by dialing 1-866-248-8441 from Canada and the U.S. or 1-323-289-6581 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 7139838 and it will be available until Thursday, November 19, 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=141891. 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, November 5, 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 Nine months ended
September 30 September 30

2020

2019

2020

2019

 
Revenue

105,565

88,558

283,292

241,728

Cost of sales

67,520

55,146

181,050

151,537

Gross profit

38,045

33,412

102,242

90,191

 
Gross profit margin

36.0%

37.7%

36.1%

37.3%

 
Selling, general and administrative expenses

19,010

18,867

57,635

52,305

Share-based compensation

1,231

1,280

3,769

2,770

Earnings from operations

17,804

13,265

40,838

35,116

 
Operating margin

16.9%

15.0%

14.4%

14.5%

 
Foreign exchange (gain) loss

(271)

346

(172)

177

Other expenses

3

3,400

3

3,403

Interest expense and other financing costs

1,315

2,521

4,633

7,406

Income before income taxes

16,757

6,998

36,374

24,130

Provision for income taxes

4,613

2,070

10,181

5,632

Net income

12,144

4,928

26,193

18,498

Adjusted net income

12,655

9,492

30,336

23,862

 
EBITDA

21,202

12,221

49,882

39,691

Adjusted EBITDA

22,933

19,394

58,603

50,269

 
Adjusted EBITDA margin

21.7%

21.9%

20.7%

20.8%

 
Weighted average number of shares
Basic

39,741,698

38,538,319

39,430,417

38,389,489

Diluted

41,574,340

39,576,781

41,261,833

39,363,585

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

0.31

0.13

0.66

0.48

Diluted, earnings per share

0.29

0.12

0.63

0.47

Adjusted Diluted, earnings per share

0.30

0.24

0.74

0.61

 

Jamieson Wellness Inc.

Consolidated Statements of Financial Position

In thousands of Canadian dollars

 
 
September 30,
2020
December 31,
2019
Assets
Current assets
Cash

3,144

198

Accounts receivable

91,784

89,394

Inventories

103,625

81,948

Prepaid expenses and other current assets

5,116

1,893

203,669

173,433

Non-current assets
Property, plant and equipment

81,954

64,906

Goodwill

122,975

122,975

Intangible assets

197,021

198,189

Deferred income tax

2,203

2,272

Total assets

607,822

561,775

 
Liabilities
Current liabilities
Accounts payable and accrued liabilities

76,853

67,795

Income taxes payable

3,668

2,365

Derivatives

1,687

1,292

Current portion of other long-term liabilities

3,095

1,890

85,303

73,342

Long-term liabilities
Long-term debt

160,118

164,769

Post-retirement benefits

4,223

3,923

Deferred income tax

50,692

51,107

Other long-term liabilities

22,659

9,466

Total liabilities

322,995

302,607

 
Shareholders' equity
Share capital

255,198

243,224

Contributed surplus

12,130

10,727

Deficit

18,600

6,061

Accumulated other comprehensive income (loss)

(1,101)

(844)

Total shareholders' equity

284,827

259,168

Total liabilities and shareholders' equity

607,822

561,775

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

 
Jamieson Brands
 
Three months ended
September 30

2020

2019

$ Change % Change
 
Revenue

82,604

70,184

12,420

17.7%

 
Gross profit

35,489

30,739

4,750

15.5%

Gross profit margin

43.0%

43.8%

-

(0.8%)

 
Selling, general and administrative expenses

17,322

16,188

1,134

7.0%

 
Share-based compensation

1,231

1,280

(49)

(3.8%)

 
Earnings from operations

16,936

13,271

3,665

27.6%

Operating margin

20.5%

18.9%

-

1.6%

 
Adjusted EBITDA

21,467

17,785

3,682

20.7%

Adjusted EBITDA margin

26.0%

25.3%

-

0.7%

 
 
Strategic Partners
 
Three months ended
September 30

2020

2019

$ Change % Change
 
Revenue

22,961

18,374

4,587

25.0%

 
Gross profit

2,556

2,673

(117)

(4.4%)

Gross profit margin

11.1%

14.5%

-

(3.4%)

 
Selling, general and administrative expenses

1,688

2,679

(991)

(37.0%)

 
Earnings (loss) from operations

868

(6)

874

14566.7%

Operating margin

3.8%

-

-

3.8%

 
Adjusted EBITDA

1,466

1,609

(143)

(8.9%)

Adjusted EBITDA margin

6.4%

8.8%

-

(2.4%)

 
 
Jamieson Brands
 
Nine months ended
September 30

2020

2019

$ Change % Change
 
Revenue

226,690

187,041

39,649

21.2%

 
Gross profit

95,295

80,864

14,431

17.8%

Gross profit margin

42.0%

43.2%

-

(1.2%)

 
Selling, general and administrative expenses

50,263

46,368

3,895

8.4%

 
Share-based compensation

3,769

2,770

999

36.1%

 
Earnings from operations

41,263

31,726

9,537

30.1%

Operating margin

18.2%

17.0%

-

1.2%

 
Adjusted EBITDA

54,878

44,282

10,596

23.9%

Adjusted EBITDA margin

24.2%

23.7%

-

0.5%

 
 
Strategic Partners
 
Nine months ended
September 30

2020

2019

$ Change % Change
 
Revenue

56,602

54,687

1,915

3.5%

 
Gross profit

6,947

9,327

(2,380)

(25.5%)

Gross profit margin

12.3%

17.1%

-

(4.8%)

 
Selling, general and administrative expenses

7,372

5,937

1,435

24.2%

 
Earnings (loss) from operations

(425)

3,390

(3,815)

(112.5%)

Operating margin

(0.8%)

6.2%

-

(7.0%)

 
Adjusted EBITDA

3,725

5,987

(2,262)

(37.8%)

Adjusted EBITDA margin

6.6%

10.9%

-

(4.3%)

 

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 Nine months ended
September 30 September 30

2020

2019

2020

2019

 
Net income

12,144

4,928

26,193

18,498

Adjustments to net income:
Share-based compensation

144

190

432

571

Foreign exchange (gain) loss

(271)

346

(172)

177

Termination benefits and related costs

-

-

-

480

International market expansion

-

498

13

1,434

Business integration

121

495

541

892

COVID-19 related costs

645

-

4,663

-

Other

5

4,612

5

4,942

Revaluation of deferred tax liability

-

-

-

(1,032)

Related tax effects

(133)

(1,577)

(1,339)

(2,100)

Adjusted net income

12,655

9,492

30,336

23,862

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

 
Three months ended Nine months ended
September 30 September 30

2020

2019

2020

2019

 
Net income

12,144

4,928

26,193

18,498

Add:
Provision for income taxes

4,613

2,070

10,181

5,632

Interest expense and other financing costs

1,315

2,521

4,633

7,406

Depreciation of property, plant, and equipment

2,071

1,778

5,924

5,419

Amortization of intangible assets

1,059

924

2,951

2,736

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

21,202

12,221

49,882

39,691

Add EBITDA adjustments:
Share-based compensation

1,231

1,280

3,769

2,770

Foreign exchange (gain) loss

(271)

346

(172)

177

Termination benefits and related costs

-

-

-

480

International market expansion

-

498

13

1,434

Business integration

121

437

443

775

COVID-19 related costs

645

-

4,663

-

Other

5

4,612

5

4,942

Adjusted EBITDA

22,933

19,394

58,603

50,269

 

Investor and Media:
Jamieson Wellness
Ruth Winker
416-960-0052
rwinker@jamiesonlabs.com

Source: Jamieson Wellness Inc.

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