Jamieson Wellness Inc. Reports Third Quarter 2019 Financial Results

Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its third quarter ended September 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 Third Quarter 2019 Results versus Third Quarter 2018 Results

• Consolidated revenue increased 11.2% to $88.6 million;
• Jamieson Branded revenue increased by 13.6%;
• Adjusted EBITDA increased 8.6% to $19.4 million;
• Net income was $4.9 million and adjusted net income increased 7.2% to $9.5 million;
• Earnings per diluted share were $0.12 and adjusted earnings per diluted share were $0.24;
• Narrowing guidance ranges, including increasing the mid-point of guidance for adjusted EBITDA and adjusted EPS.

“We generated healthy third quarter results with growth across each of our branded business segments and channels,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “During the third quarter we continued to see increasing consumer demand for the Jamieson brand, both in Canada and internationally. In China, we began shipping into domestic channels during the quarter, including 15 registered products to a global mass retail partner, adding to our strong cross-border e-commerce trends. In addition, our focus on Specialty Brands led to improved growth of 4% in that segment with further acceleration expected during the fourth quarter. Given this outcome and our favorable margin outlook, we are increasing the midpoint of our fiscal 2019 guidance for adjusted EBITDA and adjusted EPS. We are proud of our year to date performance and anticipate a strong finish to fiscal 2019.”

Third Quarter 2019 Results

Revenue increased 11.2% to $88.6 million in the third quarter of 2019 compared to $79.7 million in the third quarter of 2018 and was driven by 13.6% growth in Jamieson Brands and 2.8% growth in Strategic Partners. The increase in the Jamieson Brands segment was driven by a 14.8% increase in domestic sales due to timing of shipments related to Q3 and Q4 promotions combined with strong consumer demand and expanded distribution; a 23.9% increase in international sales led by strong growth in China attributable to an initial shipment of registered products for domestic retail and strong demand in cross-border e-commerce; as well as a 4.0% increase in Specialty Brands as result of continued focus on sales execution, rollout of innovation and improved promotional activity. The growth in the Strategic Partners segment was impacted by a key partner transitioning from a tolling to a turnkey arrangement. Excluding the impact of the billing change, third quarter Strategic Partner revenue decreased by 10.3%.

Gross profit increased by $5.5 million in the third quarter of 2019, driven by both revenue growth and operating efficiencies. Gross profit margin increased by 260 basis points to 37.7% in the third quarter of 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 130 basis points to 43.8% in the third quarter of 2019 due to production efficiencies gained from the addition of volume through our facilities and an increase in packaging capacity. Gross profit margin in Strategic Partners increased by 520 basis points to 14.5% in the third quarter of 2019, primarily due to volume related 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 32.4%, or $4.6 million, to $18.9 million in the third quarter of 2019. Excluding the impact of higher business integration, international market expansion, termination benefits and other non-recurring costs of $1.0 million, SG&A expenses increased by $3.6 million due to the timing of variable compensation and marketing programs, plus investments in resources for e-commerce and international growth.

Earnings from operations increased 4.7% to $13.3 million in the third quarter of 2019 from $12.7 million in the third quarter of 2018. Operating margin decreased by 90 basis points to 15.0%, primarily due to the timing of SG&A expenses, including marketing and variable compensation adjustments in the prior year, offsetting gross margin increases noted above.

Adjusted EBITDA increased 8.6% to $19.4 million in the third quarter of 2019 from $17.9 million in the third quarter of 2018 and adjusted EBITDA margin was 21.9% compared to 22.4% in the prior year period.

Interest expense and other financing costs increased by $0.3 million to $2.5 million in the third quarter of 2019 2019 mainly due to higher prevailing rates, along with the impact of the adoption of IFRS 16, which includes the recognition of interest expense on lease liabilities.

Net income for the third quarter of 2019 was $4.9 million compared to $7.2 million in the third quarter of 2018 and included the cost of $3.4 million for refinancing our amended and restated credit agreement. Adjusted net income, which excludes all non-operating expenses and refinancing costs, increased to $9.5 million in the third quarter of 2019 from $8.9 million in the third quarter of 2018.

Adjusted net income for the third 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 $6.7 million in cash for operations during the third quarter of 2019 compared to $2.2 million in the prior year. This increase is mainly due to a reduction of cash used in working capital of $3.7 million and lower cash used in operating activities before working capital considerations of $0.6 million. The Company’s cash at September 30, 2019 was $4.2 million compared to $2.8 million on September 30, 2018. On August 20, 2019, the Company declared a quarterly dividend of $0.10 per common share to holders of record as of August 30, 2019 and paid such dividend on September 13, 2019. The dividend payment was approximately $3.9 million in the aggregate.

Outlook

The Company is narrowing 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 now anticipates revenue in the range of $339.0 to $345.0 million, representing growth of 6% to 8% over $319.8 million in 2018. The Company anticipates adjusted EBITDA in a range of $74.5 to $76.0 million and adjusted diluted earnings per share in a range of $0.94 to $0.96. This outlook is based, in part, on a forecasted CAD/USD average annual exchange rate of $1.33 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 September 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 third quarter 2019 results at 5:00 p.m. ET on November 6, 2019. The call can be accessed live over the telephone by dialing 1-888-394-8218 from Canada and the U.S. or 1-323-794-2588 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 7351513 and it will be available until Wednesday, November 20, 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=136663. 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.

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.

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Jamieson Wellness
Ruth Winker
416-960-0052
[email protected]