Jamieson Wellness Inc. Reports Third Quarter 2018 Financial Results

Jamieson Wellness Inc. Reports Third Quarter 2018 Financial Results

Narrows Fiscal 2018 Financial Outlook Ranges

Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its third quarter ended September 30, 2018. 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 2018 Results versus Third Quarter 2017 Results

• Revenue increased 3.7% to $83.1 million, driven by a 5.4% growth in Jamieson’s Branded revenue slightly offset by a 2.1% decrease in Strategic Partner revenue;
• Adjusted EBITDA was $17.9 million, an increase of 10.7% compared to prior year of $16.1 million;
• Net Income was $7.2 million, Adjusted Net Income was $8.9 million compared to prior year of $7.8 million;
• Earnings per diluted share were $0.18 and adjusted earnings per diluted share were $0.22.

“During the third quarter we continued to generate very strong double-digit growth in the Jamieson brand, both domestically and internationally. This was partially offset by sales of our specialty brands in the health food channel that were below our expectations and a decrease in Strategic Partners revenue related to timing of ingredients from a specific partner, moving that volume to Q4,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “The Jamieson brand has never been stronger from a consumer uptake perspective and we are tracking ahead of our international plans with strong sales growth and new market launches, including today’s announcement of our new distribution agreement in India. We are addressing the performance of our specialty brands through the recent appointment of Mike Pilato as President of Jamieson Health Food, who brings significant experience growing consumer brands to the Company, as well as initiatives to drive sales and streamline innovation. As mentioned, we expect the delayed third quarter shipments within our Strategic Partners segment to be captured in the current fourth quarter. As such, and given the strength of our Jamieson brand domestically and our international momentum, we continue to expect to achieve our financial outlook and have narrowed our ranges for revenue, adjusted EBITDA and adjusted earnings per share.”

Third Quarter 2018 Results

Revenue increased 3.7% to $83.1 million in the third quarter of 2018 from $80.1 million in the third quarter of 2017 and was driven by a 5.4% increase in Jamieson Brands revenue, and a 2.1% decrease in Strategic Partners revenue. The increase in the Jamieson Brands revenue was driven primarily by higher domestic Jamieson sales of 10.2% and international growth of 14.6%, partially offset by lower volumes on specialty brands of 12.3%. The decrease in Strategic Partners revenue was the result of timing of customer supplied raw materials resulting in volume shifting to the fourth quarter of 2018.

Gross profit increased 4.4% to $27.6 million in the third quarter of 2018 from $26.4 million in the third quarter of 2017 and gross profit margin increased 20 basis points to 33.2% from 33.0% in the same respective period. The slight increase in gross profit is primarily due to revenue growth and margin expansion in Jamieson Brands as operating efficiencies and timing of promotional activities were offset by unfavourable customer mix and production efficiency timing with volume shifting to the fourth quarter in Strategic Partners.

Selling, general and administrative expenses (“SG&A”) increased $1.2 million or 9.3% to $13.9 million in the third quarter of 2018 from $12.7 million in the third quarter of 2017. The increase reflected the inclusion of $1.1 million in non-recurring costs related to the health food business integration, international market expansion, and other non-recurring costs. Normalizing for the impact of non-recurring costs, SG&A as a percentage of revenue decreased to 15.3% from 15.9% in the prior year period.

Operating income increased 12.5% to $12.7 million in the third quarter of 2018 from $11.3 million in the third quarter of 2017 and operating margin increased 120 basis points to 15.3% from 14.1% in the same respective periods.

Interest expense and other financing costs were $2.2 million in the third quarter of 2018 compared to $2.4 million in the third quarter of 2017. The change was driven by higher borrowings offset by lower rates in the current quarter.

Net income for the third quarter of 2018 was $7.2 million compared to a net income of $1.1 million in the third quarter of 2017. Adjusted Net Income, which excludes all non-operating expenses, increased to $8.9 million in the third quarter of 2018 from $7.8 million in the third quarter of 2017.

Adjusted Net Income for the third quarter of 2018 excludes share based compensation, foreign exchange losses, costs associated with termination benefits and related costs, non-recurring business integration costs, international market expansion costs, other non-recurring expenses, as well as the related tax effects of each item. Adjusted Net Income for the third quarter of 2017 excludes costs associated with share based compensation, amortization of fair value adjustments, foreign exchange gains, acquisition costs, purchase consideration accounted for as compensation expense, public offering costs, and other non-recurring expenses, as well as the related tax effects on each item. 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”.

Adjusted EBITDA increased 10.7% to $17.9 million in the third quarter of 2018 from $16.1 million in the third quarter of 2017 and Adjusted EBITDA as a percentage of revenue increased to 21.5% compared to 20.1% in the prior year period.

Balance Sheet & Cash Flow

The Company generated $2.2 million of cash from operations during the third quarter of 2018 compared to $10.5 million of cash used in operations during the third quarter of 2017. The increase reflects a reduction in cash used in working capital reflecting the planned payment of public offering costs in the prior year and cash generated in operating activities before working capital that reflected higher earnings in the current period. The Company’s cash at September 30, 2018 was $2.8 million compared to $1.2 million on September 30, 2017. On August 8, 2018, the Company announced that the board of directors had authorized a 12.5% increase in the quarterly dividend and declared a dividend of $0.09 per common share to holders of record as of August 31, 2018 and paid such dividend on September 14, 2018. The dividend payment was approximately $3.4 million in the aggregate.

Outlook

The Company is narrowing its outlook for fiscal 2018, which was provided when the Company reported second quarter 2018 results on August 8, 2018. The Company now anticipates generating revenue in a range of $332 million to $337 million compared to the prior range of $330 million to $340 million. The forecasted drivers of fiscal 2018 revenue growth include the following:

• Approximately 6.5% to 8.5% growth of the Jamieson Brands segment, including:
  • 7.5% to 9.0% growth of domestic Jamieson branded revenue
  • 29% to 34% international revenue growth, partially offset by
  • 5% to 7% decline in specialty brands revenue, and
• 20% growth in Strategic Partners revenue.

The Company anticipates Adjusted EBITDA in a range of $67 million to $68 million, narrowed from the prior range of $67 million to $69 million, reflecting investments in SG&A to drive the Company’s international and e-commerce efforts and the mix of contribution with lower volumes coming from specialty brands. The Company now anticipates adjusted diluted earnings per share in a range of $0.85 to $0.86 compared to the prior range of $0.83 to $0.87, which takes into consideration the aforementioned factors combined with lower than expected benchmark interest rates and share-based compensation. In addition, this outlook is based, in part, on a forecasted CAD/USD exchange rate of $1.30 and a fully diluted share count of approximately 39.9 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 and nine months ended September 30, 2018 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 2018 results at 5:00 p.m. ET on Tuesday, November 6, 2018. The call can be accessed live over the telephone by dialing 1-877-425-9470 from Canada and the U.S. or 1-201-389-0878 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 13684188 and it will be available until Tuesday, November 20, 2018.

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=131820. 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. 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 2018 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 29, 2018. 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.

Source: Jamieson Wellness Inc.

Non-IFRS Financial Measures

This press release makes reference to certain non-IFRS financial 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 our MD&A.

Investor Relations
ICR
Scott Van Winkle
617-956-6736
Scott.VanWinkle@ICRinc.com
or
Media
Jamieson Wellness Inc.
Ruth Winker
416-960-0052 x2724
Rwinker@jamiesonlabs.com

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