Jamieson Wellness Inc.
Q1/23 preview: Focus to be on consumer demand trends and Nutrawise progress
Our view: Jamieson Wellness Inc. (“Jamieson”) will report Q1 results on May 4 after market close. The conference call will take place the same day at 5:00pm ET. We expect investor focus at the quarter to primarily be on directional updates on the youtheory business and commentary on the broader consumer/demand outlook across the company's markets. Reiterating $41 price target and Outperform rating.
Key points:
Thoughts heading into Q1 reporting — We expect investor focus at Q1 reporting to be on: 1) update on the Nutrawise (youtheory brand) integration and trends YTD; 2) any commentary on consumer demand across Jamieson's markets; 3) inventory in the retail channel (particularly in Canada) and how retailers are positioned amidst the current backdrop; and, 4) any updates on progress in China following the DCP partnership announced at Q4 reporting (more on this below).
Overview of partnership with DCP in China — Jamieson entered into a partnership with DCP Capital (“DCP”; a China-based private equity firm with local market expertise) to accelerate Jamieson’s business in China. Contingent on Jamieson closing its previously announced acquisition of specific assets from its distribution partner in China, DCP will contribute ~$47MM in capital in exchange for a one-third share in the ownership structure of Jamieson’s Chinese operations. In addition, DCP will subscribe for ~$102MM of preferred shares (which are puttable between years 2 and 5; no dividend). Lastly, DCP will subscribe for warrants to purchase ~2.5MM common shares (vs. ~42.8MM diluted shares outstanding as of Q4/22) at an exercise price equal to a 10% premium to the 20-day volume weighted average share price as of February 22, 2023 (exercisable between years 2 and 5).
Tweaking estimates for seasonality; Full-year estimates unchanged —
While our full-year estimates are largely unchanged, we have tweaked the seasonality of our estimates. Our Q1 revenue forecast is $125.4MM (+21.0% YoY; consensus: $130.1MM), and our Adjusted EBITDA forecast is $22.4MM (+6.9% YoY; consensus: $23.5MM).
Balance sheet and 2023 guidance overview — Exiting Q4, Jamieson's leverage stood at 3.6x, which we forecast to decline to ~1.5x by year-end 2023 (reflecting the benefits from Jamieson's recent M&A/other strategic activities, such as the acquisitions of Nutrawise and certain assets of the Chinese distribution partner, as well as the DCP partnership). Recall the company's 2023 guidance calls for revenue and Adjusted EBITDA growth of +22–28% YoY and +13–18% YoY, respectively. Jamieson is also expecting youtheory revenue growth of 11.5%–19.0% YoY on a pro-forma basis to $145MM- $155MM.