Jamieson Wellness Inc. Reports First Quarter 2023 Results, Maintains Full Year Outlook and Declares First Quarter Dividend

04 May 2023
www.businesswire.com
Financial StatementAcquisition
TORONTO--(BUSINESS WIRE)--Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported its first quarter results for the period ended March 31, 2023. All amounts are expressed in Canadian dollars.
'cash from operating activities before working capital considerations'
“Jamieson Wellness entered 2023 in a position of strength, having laid a solid foundation for continued growth across our business in 2022,” said Mike Pilato, President and CEO of Jamieson Wellness. “Our Jamieson Brands segment delivered another exceptional quarter with a 30% revenue increase, reflecting organic growth, the impact of our U.S. acquisition, and the continued demand for our brands, globally.
“As expected, revenue grew at a faster rate than Adjusted EBITDA in the quarter, which posted a 17% increase. This reflects strategic investments in brand building activities and expanding our team and operations in the U.S. and China, while ensuring our Canadian business remains healthy and grows its leadership position. We are confident in our outlook for the year and look forward to continuing to support our consumers’ health and wellness journeys while driving value for all our stakeholders.”
First Quarter Highlights
Maintained strong momentum in Canada as consumer consumption outpaced shipments
Over-delivered revenue expectations in the U.S. led by stronger than expected consumer consumption
Began production of key new and improved youtheory product in anticipation of shipping in Q2
Met continued strong demand for the Jamieson brand in China as COVID-19 restrictions lifted
Grew team in China in anticipation of transition to an owned distribution and operations model in Q2
Launched a sustainable partner program in support of ESG commitments to help identify, measure and monitor sustainability progress and risk within the Company’s supply chain
First Quarter Financial Results Consolidated Summary
All comparisons are with the first quarter of 2022
Consolidated revenue increased 31.9% to $136.7 million with both Jamieson Brands and Strategic Partners segments contributing to growth
Gross profit margin3 decreased by 110 basis points to 35.5%, driven by segment mix led by the over delivery of expectations in youtheory and Strategic Partners, both of which have inherently lower profit margins
EBITDA1 increased $0.9 million to $19.3 million; Adjusted EBITDA1 increased by $3.6 million to $24.5 million, due to higher volumes and gross profit, offset by increased SG&A expenses including investments to support growth in the U.S. and China
Net earnings decreased 27.5% to $7.1 million; Adjusted net earnings1 decreased 18.0% to $8.8 million, driven by the reasons noted above and offset by borrowing costs related to the U.S. acquisition and associated higher prevailing interest rates, the impact of which appears higher in the first quarter due to its seasonally lower volumes
Diluted earnings per share was $0.17; Adjusted diluted earnings per share2 was $0.21 and includes dilution as a result of the shares issued in the youtheory transaction
Summary of Segment Results
All comparisons are with the first quarter of 2022
Revenue was $108.1 million, an increase of 30.0% or $24.9 million
Canada revenue increased 2.4% as consumer consumption paced ahead of shipments in the quarter, due to the typical seasonal influx of shipments in Q4 2022 to support cold and flu season
U.S. (youtheory) contributed $22.2 million in revenue driven by stronger than expected consumer consumption and e-commerce growth of over 33.0%
China revenue increased 36.6% due to continued category growth led by higher consumer sell-through in the cross-border e-commerce channel and the removal of COVID-19 restrictions
International revenue declined an expected 15.5%, reflecting slowing declines in Eastern Europe and the timing of promotional replenishments in the Caribbean and South East Asia regions in the prior year
Gross profit increased $8.2 million to $43.8 million; gross profit margin3 decreased by 230 basis points as expected, due to the inherently lower youtheory gross margin profile and product mix
Adjusted EBITDA1 increased $1.1 million to $20.7 million driven by higher volumes and associated gross profit, offset by investments in SG&A to support growth in the U.S. and China; Adjusted EBITDA margin2 decreased by 440 basis points to 19.1% due to the factors noted above
Strategic Partners
Revenue was $28.6 million, an increase of 39.7% or $8.1 million, due to timing of customer orders and lapping of a softer Q1 2022
Gross profit increased $2.4 million to $4.7 million
Gross profit margin3 increased by 510 basis points to 16.5%
Adjusted EBITDA1 increased by $2.5 million to $3.9 million; Adjusted EBITDA margin2 increased by 660 basis points to 13.5%
Balance Sheet and Cash Flow
The Company generated $7.9 million in cash from operations compared to $17.1 million in Q1 2022
Cash from operating activities before working capital considerations of $13.1 million decreased by $2.2 million compared to Q1 2022 due to decreased earnings including realized acquisition costs
Cash from working capital decreased by $6.9 million driven by timing of collections and inventory payments
As at March 31, 2023, the Company had $124.8 million in cash and available revolving and swingline facilities and net debt1 of $375.2 million
1 This is a non-IFRS financial measure. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each non-IFRS financial measure.
2 This is a non-IFRS ratio. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each non-IFRS ratio.
3 This is a supplementary financial measure. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each supplementary financial measure.
Maintaining Fiscal 2023 Outlook
The Company is maintaining its outlook for the 2023 fiscal year and continues to anticipate the following:
Revenue in a range of $670.0 to $700.0 million, which represents annual growth of 22.0% to 28.0%
Adjusted EBITDA in a range of $140.0 to $146.0 million
Adjusted diluted earnings per share in a range of $1.62 to $1.72
For additional details on the Company’s fiscal 2023 outlook, including guidance for the second quarter of 2023, 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 March 31, 2023
Declaration of First Quarter Dividend
The board of directors of the Company authorized and declared a cash dividend for the first quarter of 2023:
$0.17 per common share, or approximately $7.1 million in the aggregate
Paid on June 15, 2023 to all common shareholders of record at the close of business on June 1, 2023
The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada)
Closing of Previously Announced Distributor Transaction in China
Also announced today, the Company has completed the previously announced purchase of the operating assets of its distributor partner in China. The purchase allows the Company to directly operate its sales, marketing and distribution activities in the world’s second largest VMS market. With full control of its brand and value chain in China, the Company expects to accelerate its ability to bring more world-class, high-quality vitamins, minerals, and supplements to a broader base of Chinese consumers. Details on the completed transaction can be found in a separate media release issued this afternoon.
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 March 31, 2023 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 first quarter 2023 results at 5:00 p.m. ET today, May 4, 2023. To access:
By phone: 1-855-327-6837 from Canada and the U.S. or 1-631-891-4304 from international locations
Online: https://investors.jamiesonwellness.com or https://viavid.webcasts.com/starthere.jsp?ei=1606237&tp_key=c3f122c2bf
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 also offers a variety of VMS products under its youtheory, Progressive, Smart Solutions, Iron Vegan and Precision brands. The Company is a participant of the United Nations Global Compact and adheres to its principles-based approach to responsible business. For more information please visit www.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 2023 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 30, 2023 and under the “Risk Factors” section in the MD&A filed today, May 4, 2023. 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 MD&A for a discussion of the uncertainties, risks and assumptions associated with these statements.
Selected Consolidated Financial Information
In thousands of Canadian dollars, except share and per share amounts
Three months ended
March 31
2023
2022
Revenue
136,725
103,675
Cost of sales
88,209
65,728
Gross profit
48,516
37,947
Gross profit margin
35.5%
36.6%
Selling, general and administrative expenses
32,392
21,620
Share-based compensation
1,496
1,142
Earnings from operations
14,628
15,185
Operating margin
10.7%
14.6%
Foreign exchange loss
163
463
Interest expense and other financing costs
6,302
1,278
Earnings before income taxes
8,163
13,444
Provision for income taxes
1,098
3,703
Net earnings
7,065
9,741
Adjusted net earnings
8,808
10,744
EBITDA
19,306
18,438
Adjusted EBITDA
24,508
20,945
Adjusted EBITDA margin
17.9%
20.2%
Weighted average number of shares
Basic
41,775,989
40,442,265
Diluted
42,791,481
41,731,184
Earnings per share attributable to common shareholders:
Basic, earnings per share
0.17
0.24
Diluted, earnings per share
0.17
0.23
Adjusted diluted, earnings per share
0.21
0.26
Consolidated Statements of Financial Position
In thousands of Canadian dollars
March 31,
2023
December 31,
2022
Assets
Current assets
Cash
16,293
26,240
Accounts receivable
110,671
160,798
Inventories
186,810
154,488
Derivatives
5,540
6,580
Prepaid expenses and other current assets
6,735
4,298
326,049
352,404
Non-current assets
Property, plant and equipment
110,431
111,709
Goodwill
272,841
272,916
Intangible assets
365,801
367,205
Deferred income tax
3,411
3,029
Total assets
1,078,533
1,107,263
Liabilities
Current liabilities
Accounts payable and accrued liabilities
128,456
142,566
Income taxes payable
995
7,387
Derivatives
33
-
Current portion of other long-term liabilities
4,346
4,852
133,830
154,805
Long-term liabilities
Long-term debt
391,470
400,000
Post-retirement benefits
956
929
Deferred income tax
57,903
58,007
Other long-term liabilities
61,341
61,931
Total liabilities
645,500
675,672
Shareholders' equity
Share capital
309,974
307,200
Contributed surplus
16,872
17,115
Retained earnings
85,441
85,483
Accumulated other comprehensive income
20,746
21,793
Total shareholders' equity
433,033
431,591
Total liabilities and shareholders' equity
1,078,533
1,107,263
Segment Information
In thousands of Canadian dollars, except as otherwise noted
Three months ended
March 31
2023
2022
$ Change
% Change
Revenue
108,110
83,188
24,922
30.0
%
Gross profit
43,801
35,617
8,184
23.0
%
Gross profit margin
40.5
%
42.8
%
-
(2.3
%)
Selling, general and administrative expenses
30,663
20,051
10,612
52.9
%
Normalized selling, general and administrative expenses
27,120
19,197
7,923
41.3
%
Share-based compensation
1,496
1,142
354
31.0
%
Earnings from operations
11,642
14,424
(2,782
)
(19.3
%)
Operating margin
10.8
%
17.3
%
-
(6.5
%)
Normalized earnings from operations
15,185
15,278
(93
)
(0.6
%)
Normalized operating margin
14.0
%
18.4
%
-
(4.4
%)
Adjusted EBITDA
20,651
19,540
1,111
5.7
%
Adjusted EBITDA margin
19.1
%
23.5
%
-
(4.4
%)
Strategic Partners
Three months ended
March 31
2023
2022
$ Change
% Change
Revenue
28,615
20,487
8,128
39.7
%
Gross profit
4,715
2,330
2,385
102.4
%
Gross profit margin
16.5
%
11.4
%
-
5.1
%
Selling, general and administrative expenses
1,729
1,569
160
10.2
%
Normalized selling, general and administrative expenses
1,729
1,521
208
13.7
%
Earnings from operations
2,986
761
2,225
292.4
%
Operating margin
10.4
%
3.7
%
-
6.7
%
Normalized earnings from operations
2,986
809
2,177
269.1
%
Normalized operating margin
10.4
%
3.9
%
-
6.5
%
Adjusted EBITDA
3,857
1,405
2,452
174.5
%
Adjusted EBITDA margin
13.5
%
6.9
%
-
6.6
%
Non-IFRS and Other Financial Measures
This press release makes reference to certain financial measures, including non-IFRS financial measures that are historical, non-IFRS measures that are forward-looking, non-GAAP ratios and supplementary financial measures. Management uses these 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. The Company uses the following non‑IFRS financial measures: “EBITDA”, “Adjusted EBITDA” and “Adjusted net earnings”, the most directly comparable financial measure for each that is disclosed in its financial statements being net earnings, “normalized SG&A”, “normalized earnings from operations”, “cash from operating activities before working capital considerations” and “net debt”, the most directly comparable financial measures for each that is disclosed in its financial statements being gross profit, SG&A, earnings from operations, cash flows from operating activities, and long-term debt, respectively, the following non-IFRS ratios: “Adjusted EBITDA margin”, “Adjusted diluted earnings per share”, “normalized operating margin”, and the following supplementary financial measures: “gross profit margin” and “operating margin” 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 and supplementary financial measures in order to prepare annual operating budgets and to determine components of management compensation. For an explanation of the composition of each such measure and the usefulness and additional uses of each by management, see the “How we Assess the Performance of our Business” section of the MD&A, which is incorporated by reference. See below for a quantitative reconciliation of each non-IFRS financial measure to its most directly comparable financial measure disclosed in the Company’s financial statements to which the measure relates.
The following tables provide a quantitative reconciliation of net earnings to EBITDA, Adjusted EBITDA, and Adjusted net earnings, as well as SG&A to normalized SG&A, earnings from operations to normalized earnings from operations, each of which are non-IFRS financial measures (see the “Non-IFRS and Other Financial Measures” of this press release for further information on each non-IFRS financial measure) for the three months ended March 31, 2023 and March 31, 2022.
Reconciliation of Non-IFRS Financial Measures
In thousands of Canadian dollars
Three months ended
March 31
2023
2022
Net earnings
7,065
9,741
Add:
Provision for income taxes
1,098
3,703
Interest expense and other financing costs
6,302
1,278
Depreciation of property, plant, and equipment
3,467
2,658
Amortization of intangible assets
1,374
1,058
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
19,306
18,438
Add EBITDA adjustments:
Share-based compensation(1)
1,496
1,142
Foreign exchange loss
163
463
Acquisition related costs (2)
2,801
-
IT system implementation (3)
670
739
Other
72
163
Adjusted EBITDA
24,508
20,945
Provision for income taxes
(1,098
)
(3,703
)
Interest expense and other financing costs
(6,302
)
(1,278
)
Depreciation of property, plant, and equipment
(3,467
)
(2,658
)
Amortization of intangible assets
(1,374
)
(1,058
)
Share-based compensation(4)
(1,454
)
(1,142
)
Tax deduction from vesting of certain share-based awards (5)
(1,022
)
-
Tax effect of normalization adjustments
(983
)
(362
)
Adjusted net earnings
8,808
10,744
Three months ended
March 31
2023
2022
Selling, general and administrative expenses
32,392
21,620
Acquisition related cost(2)
(2,801
)
-
IT system implementation(3)
(670
)
(739
)
Other
(72
)
(163
)
Normalized selling, general and administrative expenses
28,849
20,718
Earnings from operations
14,628
15,185
Acquisition related cost(2)
2,801
-
IT system implementation(3)
670
739
Other
72
163
Normalized earnings from operations
18,171
16,087
Normalized operating margin
13.3
%
15.5
%
(1)
The Company’s share-based compensation expense pertains to our long-term incentive plan (the “LTIP”) (refer to “Share-based compensation”), with performance-based share units (“PSUs”), time-based restricted share units (“RSUs”), and deferred share units (“DSUs”) expenses, along with associated payroll taxes.
(2)
Current quarter expense mainly pertains to legal and consulting costs associated with the acquisition of our distributor in China, as well as integration costs relating to our acquisition of youtheory which closed on July 19, 2022.
(3)
Current quarter expense mainly pertains to development costs for our Enterprise Resource Planning (“ERP”) system implementation. Unlike other system improvement projects with costs capitalized, due to its cloud-based nature, these system implementation costs are expensed accordingly.
(4)
Costs pertaining to our LTIP, excluding PSUs granted to certain employees relating to business combinations.
(5)
The vesting of share-based compensation provides a tax benefit during the period in which the awards are settled.
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