Jamieson Wellness Inc. Reports Second Quarter 2018 Financial Results, Reiterates 2018 Guidance and Increases Quarterly Dividend

Published: Aug 08, 2018

Aug. 8, 2018 20:00 UTC

TORONTO--(BUSINESS WIRE)-- Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its second quarter ended June 30, 2018 and announced that the Company’s board of directors has authorized a 12.5% increase in the quarterly dividend. 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 Second Quarter 2018 Results versus Second Quarter 2017 Results

  • Revenue increased 8.2% to $77.1 million, driven by 79.2% growth of international revenue and 26.6% growth in Strategic Partner revenue;
  • Adjusted EBITDA was $14.2 million compared to prior year of $15.1 million;
  • Net Income was $4.8 million, Adjusted Net Income was $6.9 million compared to prior year of $7.9 million;
  • Earnings per diluted share were $0.12 and adjusted earnings per diluted share were $0.17;
  • Increases quarterly dividend by 12.5%

“Second quarter consolidated revenue growth remained strong, as international branded sales growth accelerated and we generated robust growth of Strategic Partners revenue. This strength offset an unfavorable timing related impact on domestic branded revenue, where consumer purchases have outpaced shipments year to date,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “While the mix impact of proportionally higher Strategic Partner sales combined with lower domestic Branded volumes led to lower reported Gross Profit and adjusted EBITDA margins specific to the quarter, we are comfortable with our margin outlook for fiscal 2018. In addition, we are reiterating our 2018 adjusted EBITDA and earnings per share guidance and are increasing our 2018 revenue outlook to reflect the strong international sales trends and market opportunities.”

Declaration of Second Quarter Dividend and Quarterly Dividend Increase

On August 8, 2018, the board of directors authorized a $0.01 increase in the quarterly dividend and declared a cash dividend for the second quarter of 2018 of $0.09 per common share, or approximately $3.4 million in the aggregate. The dividend will be paid on September 14, 2018 to all common shareholders of record at the close of business on August 31, 2018. The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada).

“We are pleased to announce our first quarterly dividend increase,” continued Mr. Hornick. “The increase reflects not only our strong cash generation, but our confidence in our underlying business performance.”

Second Quarter 2018 Results

Revenue increased 8.2% to $77.1 million in the second quarter of 2018 from $71.3 million in the second quarter of 2017 and was driven by a 3.5% increase in Jamieson Brands revenue, and a 26.6% increase in Strategic Partners revenue. The increase in the Jamieson Brands revenue was driven primarily by international growth, partially offset by lower domestic Branded volumes as consumer purchases have outpaced shipments which has led to a decline in retailer inventories, along with the impact of continued integration of the Company’s Health Food businesses. The increase in Strategic Partners revenue was the result of activity originally planned for the first quarter and expanded activity from existing strategic partners.

Gross profit increased 4.0% to $26.3 million in the second quarter of 2018 from $25.3 million in the second quarter of 2017 and gross profit margin decreased 130 basis points to 34.2% from 35.5% in the same respective period. The increase in gross profit is due to revenue growth from both segments, while the decrease in gross profit margin is primarily due to a higher proportion of Strategic Partner revenue as compared to the prior year period. In addition, margins were lower as the prior year period Strategic Partner gross profit benefitted from favorable pricing and margins related to certain products.

Selling, general and administrative expenses (“SG&A”) increased 19.9% to $15.8 million in the second quarter of 2018 from $13.2 million in the second quarter of 2017. The increase reflected the inclusion of $0.6 million of public company costs, $0.5 million increase in marketing to support the launch of our Jamieson Essentials plus Protein, and $1.4 million in non-recurring costs associated with the health food business integration, professional fees and international market expansion. Normalizing for the impact of non-recurring costs, SG&A as a percentage of revenue is consistent with the second quarter of 2017 at 18.6% notwithstanding planned SG&A increases in the current year related to public company costs.

Operating income decreased 4.9% to $10.2 million in the second quarter of 2018 from $10.7 million in the second quarter of 2017 and operating margin decreased 180 basis points to 13.2% from 15.0% in the same respective periods.

Interest expense and other financing costs were $2.2 million in the second quarter of 2018 compared to a benefit of $8.1 million in the second quarter of 2017. The change was driven by lower borrowings in the second quarter of 2018, offset by the discharge of the note payable to Jamieson Finco LP in the pre-IPO reorganization in the second quarter of 2017, which led to interest forgiveness of $11.0 million in the prior year period.

Net income for the second quarter of 2018 was $4.8 million compared to a net loss of $7.0 million in the second quarter of 2017. Adjusted Net Income, which excludes all non-operating expenses, decreased to $6.9 million in the second quarter of 2018 from $7.9 million in the second quarter of 2017.

Adjusted Net Income for the second 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 second quarter of 2017 excludes costs associated with share based compensation, amortization of fair value adjustments, foreign exchange loss, acquisition costs, purchase consideration accounted for as compensation expense, public offering costs, preferred share accretion, a benefit of net interest forgiveness, 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 decreased 6.1% to $14.2 million in the second quarter of 2018 from $15.1 million in the second quarter of 2017 and Adjusted EBITDA as a percentage of revenue was 18.4% compared to 21.2% in the prior year period.

Balance Sheet & Cash Flow

The Company generated $8.5 million of cash from operations during the second quarter of 2018 compared to $3.1 million of cash from operations during the second quarter of 2017. The increase reflects change in cash used in working capital, partially offset by cash generated in operating activities before working capital. The Company’s cash at June 30, 2018 was $7.5 million compared to $10.8 million on June 30, 2017. On May 22, 2018, the Company declared a quarterly dividend of $0.08 per common share to holders of record as of June 1, 2018 and paid such dividend on June 15, 2018. The dividend payment was approximately $3.0 million in the aggregate.

 

   

 

 

 

 

 

 
    Three months ended        
    June 30        
($ in 000's)   2018     2017    

$ Change

  % Change  
                 
Cash, beginning of period   2,373     8,395       (6,022 )   (71.7 %)
Cash flows from (used in):                
Operating activities   8,547     3,065       5,482     178.9 %
Investing activities   (2,468 )   (701 )     (1,767 )   (252.1 %)
Financing activities   (982 )   -       (982 )   100.0 %
Cash, end of period   7,470     10,759       (3,289 )   (30.6 %)
                           

Outlook

The Company is updating its outlook for fiscal 2018, which was initially provided when the Company reported fourth quarter and full year 2017 results on February 22, 2018. The Company anticipates generating revenue in a range of $330.0 to $340.0, which is increased from the prior range of $325.0 to $335.0 million. The Company continues to anticipate Adjusted EBITDA in a range of $67.0 to $69.0 million and adjusted diluted earnings per share in a range of $0.83 to $0.87, as the increased margin related to revenue guidance is re-invested in fixed costs to expand the Company’s international market opportunity and e-commerce infrastructure. This outlook is based, in part, on a forecasted CAD/USD exchange rate of $1.30 and a fully diluted share count of approximately 39.8 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 months ended June 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 second quarter 2018 results at 5:00 p.m. ET on Wednesday, August 8, 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 13681626 and it will be available until Wednesday, August 22, 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=130505. 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 2 St. Clair Avenue West, 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.

                 

Jamieson Wellness Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

In thousands of Canadian dollars, except per share data

                 
    Three months ended   Six months ended
    June 30   June 30
    2018   2017   2018   2017
                 
Revenue   77,109   71,255   147,213   136,156
Cost of sales   50,776   45,935   95,510   88,627
Gross profit   26,333   25,320   51,703   47,529
                 
Gross profit margin   34.2%   35.5%   35.1%   34.9%
                 
Selling, general and administrative expenses   15,806   13,183   30,623   26,624
Share-based compensation   355   1,438   782   2,184
Earnings from operations   10,172   10,699   20,298   18,721
                 
Operating margin   13.2%   15.0%   13.8%   13.7%
                 
Foreign exchange loss   192   186   392   418
Termination benefits and related costs   1,046   -   2,778   2,499
Public offering costs   -   6,653   -   6,884
Acquisition costs   -   446   -   2,303
Other expenses   159   2,221   147   3,924
Preferred share accretion   -   13,411   -   28,796
Interest expense (income) and other financing costs   2,185   (8,084)   4,361   228
Income (loss) before income taxes   6,590   (4,134)   12,620   (26,331)
Provision for income taxes   1,802   2,824   3,206   2,278
Net income (loss)   4,788   (6,958)   9,414   (28,609)
Adjusted net income   6,903   7,870   12,663   10,040
                 
EBITDA   10,967   3,255   21,306   6,860
Adjusted EBITDA   14,153   15,071   26,839   26,495
                 
Adjusted EBITDA margin   18.4%   21.2%   18.2%   19.5%
                 
Weighted average number of shares                
Basic   37,954,280   520,253   37,893,060   520,253
Diluted   39,782,841   520,253   39,721,571   520,253
Adjusted Diluted   39,782,841   39,782,841   39,782,841   39,782,841
                 
Earnings per share attributable to common shareholders:                
Basic, earnings (loss) per share   0.13   (13.37)   0.25   (54.99)
Diluted, earnings (loss) per share   0.12   (13.37)   0.24   (54.99)
Adjusted Diluted, earnings per share   0.17   0.20   0.32   0.25
                 
                 

Jamieson Wellness Inc.

Condensed Consolidated Statements of Financial Position

In thousands of Canadian dollars

 

         

 

 

June 30,
2018

 

December 31,
2017

Assets        
Current assets        
Cash   7,470     4,833  
Accounts receivable   60,380     71,996  
Inventories   71,285     59,080  
Derivatives   2,357     -  
Prepaid expenses and other current assets   2,196     1,507  
    143,688     137,416  
Non-current assets        
Property, plant and equipment   47,797     45,173  
Goodwill   122,975     122,975  
Intangible assets   202,664     204,264  
Deferred income tax   2,539     2,727  
Total assets   519,663     512,555  
         
Liabilities      

 

Current liabilities        
Accounts payable and accrued liabilities   65,920     66,621  
Income taxes payable   422     4,267  
Derivatives   -     1,081  
Current portion of long-term debt   12,188     9,750  
    78,530     81,719  
Long-term liabilities        
Long-term debt   160,871     153,459  
Post-retirement benefits   5,145     4,856  
Deferred income tax   50,835     51,697  
Total liabilities   295,381     291,731  
         
Shareholders' equity        
Share capital   237,564     234,908  
Contributed surplus   7,292     7,437  
Deficit   (21,065 )   (19,486 )
Accumulated other comprehensive income (loss)   491     (2,035 )
Total shareholders' equity   224,282     220,824  
Total liabilities and shareholders' equity   519,663     512,555  
             
             
Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars

               

Jamieson Brands

           
               
      Three months ended

June 30

       
      2018     2017    

$ Change

  % Change  
                   
  Revenue   58,617     56,647       1,970     3.5 %
                   
  Gross profit   23,408     21,806       1,602     7.3 %
  Gross profit margin   39.9 %   38.5 %     -     1.4 %
                   
  Selling, general and administrative expenses   14,061     11,766       2,295     19.5 %
                   
  Share-based compensation   355     1,438       (1,083 )   (75.3 %)
                   
  Earnings from operations   8,992     8,602      

390

    4.5 %
  Operating margin   15.3 %   15.2 %     -     0.1 %
                   
  Adjusted EBITDA   12,434     12,663       (229 )   (1.8 %)
  Adjusted EBITDA margin   21.2 %   22.4 %     -     (1.2 %)
                   
                   
Strategic Partners                
                   
      Three months ended

June 30

       
      2018     2017    

$ Change

  % Change  
                   
  Revenue   18,492     14,608       3,884     26.6 %
                   
  Gross profit   2,925     3,514       (589 )   (16.8 %)
  Gross profit margin   15.8 %   24.1 %     -     (8.3 %)
                   
  Selling, general and administrative expenses   1,745     1,417       328     23.1 %
                   
  Earnings from operations   1,180     2,097       (917 )   (43.7 %)
  Operating margin   6.4 %   14.4 %     -     (8.0 %)
                   
  Adjusted EBITDA   1,719     2,408       (689 )   (28.6 %)
  Adjusted EBITDA margin   9.3 %   16.5 %     -     (7.2 %)
                             
                             
Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars

                 
Jamieson Brands                
                   
      Six months ended

June 30

 

 

   
      2018     2017    

$ Change

  % Change  
                   
  Revenue   118,511     109,567       8,944     8.2 %
                   
  Gross profit   46,216     41,189       5,027     12.2 %
  Gross profit margin   39.0 %   37.6 %     -     1.4 %
                   
  Selling, general and administrative expenses   27,306     23,770       3,536     14.9 %
                   
  Share-based compensation   782     2,184       (1,402 )   (64.2 %)
                   
  Earnings from operations   18,128     15,235       2,893     19.0 %
  Operating margin   15.3 %   13.9 %     -     1.4 %
                   
  Adjusted EBITDA   23,786     22,369       1,417     6.3 %
  Adjusted EBITDA margin   20.1 %   20.4 %     -     (0.3 %)
                   
                   
Strategic Partners                
                   
      Six months ended

June 30

       
      2018     2017    

$ Change

  % Change  
                   
  Revenue   28,702     26,589       2,113     7.9 %
                   
  Gross profit   5,487     6,340       (853 )   (13.5 %)
  Gross profit margin   19.1 %   23.8 %     -     (4.7 %)
                   
  Selling, general and administrative expenses   3,317     2,854       463     16.2 %
                   
  Earnings from operations   2,170     3,486       (1,316 )   (37.8 %)
  Operating margin   7.6 %   13.1 %     -     (5.5 %)
                   
  Adjusted EBITDA   3,053     4,126       (1,073 )   (26.0 %)
  Adjusted EBITDA margin   10.6 %   15.5 %     -     (4.9 %)
                             
                             

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.

Reconciliation of Adjusted Net Income

In thousands of Canadian dollars

                 
    Three months ended   Six months ended
($ in 000's)   June 30  

June 30

    2018     2017     2018     2017  
                 
Net income (loss)   4,788     (6,958 )   9,414     (28,609 )
Adjustments to net income (loss):                
Share-based compensation   38     1,044     38     1,485  
Amortization of fair value adjustments   -     847     -     1,412  
Amortization of deferred financing fee   -     -     -     3,078  
Foreign exchange loss   192     186     392     418  
Termination benefits and related costs   1,046     -     2,778     2,499  
Acquisition costs   -     446     -     2,303  
Purchase consideration accounted for as compensation expense   -     2,215     (1,066 )   3,691  
Public offering costs   -     6,653     -     6,884  
Net interest forgiveness   -     (11,001 )   -     (11,001 )
Preferred share accretion   -     13,411     -     28,796  
International market expansion   137     -     137     -  
Non-recurring business integration   1,125     -     2,086     -  
Other   331     31     424     244  
Related tax effects   (754 )   996     (1,540 )   (1,160 )
Adjusted net income   6,903     7,870     12,663     10,040  
                         
                         
Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

                 
    Three months ended   Six months ended
    June 30   June 30
    2018   2017     2018     2017  
                 
Net income (loss)   4,788   (6,958 )   9,414     (28,609 )
Add:                
Provision for income taxes   1,802   2,824     3,206     2,278  
Interest expense (income) and other financing costs   2,185   (8,084 )   4,361     228  
Preferred share accretion   -   13,411     -     28,796  
Depreciation of property, plant, and equipment   1,315   1,216     2,578     2,487  
Amortization of intangible assets   877   846     1,747     1,680  
                 
Earnings before interest, taxes, depreciation, and amortization (EBITDA)   10,967   3,255     21,306     6,860  
Add EBITDA adjustments:                
Share-based compensation   355   1,438     782     2,184  
Amortization of fair value adjustments   -   847     -     1,412  
Foreign exchange loss   192   186     392     418  
Termination benefits and related costs   1,046   -     2,778     2,499  
Acquisition costs   -   446     -     2,303  
Purchase consideration accounted for as compensation expense   -   2,215     (1,066 )   3,691  
Public offering costs   -   6,653     -     6,884  
International market expansion   137   -     137     -  
Non-recurring business integration   1,125   -     2,086     -  
Other   331   31     424     244  
Adjusted EBITDA   14,153   15,071     26,839     26,495  

 

Contacts

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

 
 

Source: Jamieson Wellness Inc.

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