May 4, 2023
Jamieson Wellness Inc.
Strong Q1, full-year guidance reiterated
Our view: Jamieson Wellness Inc. (“Jamieson”) reported Q1 results ahead of RBC/Street expectations and also reiterated full-year guidance following a better-than-expected Q1. Revising our price target +$1 to $42; reiterating Outperform rating.
Key points:
Thoughts exiting Q1 – Overall, Q1 results were ahead of expectations, and while investors are likely awaiting increased visibility on the progress in the U.S. (at Q2 reporting), we believe today's print represents good progress. Jamieson reported Q1 revenue of $136.7MM, which was ahead of RBC/consensus of $125.4MM/$130.1MM, while Adjusted EBITDA was $24.5MM vs. RBC/consensus of $22.4MM/$23.5MM. On the call, management noted that unit volume in Canada increased “slightly”, which we view positively amidst the uncertain macro backdrop (some softening of consumer demand has been noted across some of our discretionary names). Management noted that Canadian retailers are getting back to historical inventory build/burn seasonality following the disruption caused by the pandemic. While Q1 results exceeded expectations, Jamieson reiterated its 2023 guidance, which management attributed to the multiple “moving pieces” over the course of 2023 (i.e., investments in the U.S./ China) and the uncertain macro backdrop.
Asset acquisition in China – Jamieson has now closed the $26MM acquisition of operating assets from its distribution partner in China, which means that the partnership with DCP should also close in Q2. On the earnings call, management noted that the partnership with DCP is expected to strengthen Jamieson's presence in China (focus is on Tier 1 & 2 cities). DCP has experience in the Chinese retail space, which we believe should accelerate/expand Jamieson's reach in this market. Interestingly, even though the partnership is yet to “close”, DCP is already working with Jamieson in China to some extent.
Good quarter from youtheory; focus turns to Q2 – Jamieson reported Q1 youtheory sales of $22.2MM, ahead of RBC estimate of $17.0MM (and “down slightly” YoY; e-commerce was +33% YoY). While we view the outperformance positively, recall that Q1 is a smaller quarter for youtheory (much larger contribution expected in Q2 this year). Full-year sales guidance of $145MM-$155MM for youtheory was reiterated, with ~45% expected in H1 (implying ~$43MM-$48MM of sales in Q2). Looking ahead, the company is releasing 5 new youtheory products in Q2, and unit shipments are expected to more closely align with POS going forward.
Balance sheet update – Exiting Q1, Jamieson's leverage was 3.5x, which we expect will decline to ~1.9x by year-end 2023. Following the expected cash inflow from the DCP partnership, we believe that Jamieson will be well positioned to deploy capital into internal investments/dividends (M&A less likely over the medium-term, in our view).