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

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.

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.

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.

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