Despite reporting a 49-per-cent year-over-year increase in revenue in the fourth quarter, Jamieson Wellness Inc. was down 7.8 per cent after warning 2023 EBITDA margins are expected to decline by 175 basis points due to “the margin profile” of the recently acquired businesses, including U.S.-based Nutrawise Health & Beauty Corp., and “proportionate revenue growth within strategic partners.”
After the bell on Thursday, the Toronto-based company reported revenue of $192.8-million, up from $129.8-million in fiscal 2021 but narrowly below the Street’s expectation of $200.8-million. The increase was driven by “continued consumer demand, higher average retailer inventories in conjunction with a severe cold & flu season, and in-year pricing.” Adjusted earnings per share of 62 cents matched the consensus expectation
“JWEL reported Q4 results that came largely in line with expectations – but issued 2023 guidance that missed Street adj. EBITDA guidance by 6 per cent (and us by 3 per cent),” said Scotia Capital analyst George Doumet. “This was the result of: (i) $4-million to $5-million investment in opex in China to support growth (we modeled $5-million) and (ii) a top line decline at the recently acquired Youtheory business (expected to be down 5 per cent, at midpoint, vs. 2022). JWEL also announced a partnership with DCP Capital to help accelerate growth in China. DCP will invest $101.6-million in prefs and $47.5-million for a 33.3-per-cent stake in JWEL China (5 per cent of total sales).
“We are in the early innings of both an opex investment cycle in China and in the integration at Youtheory. In the context of current valuation (shares trading at 13.5 times our 2023 estimates, or a 3.6-per-cent FCF yield), we need to see improved visibility on the aforementioned before getting more constructive on the name.”