Jamieson Wellness Inc. Reports Fourth Quarter and Full Year 2020 Financial Results and Establishes 2021 Guidance

- February 25th, 2021

Jamieson Wellness Inc. today reported financial results for its fourth quarter and year ended December 31, 2020. 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 Fourth Quarter 2020 Results versus Fourth Quarter 2019 Results Revenue increased 16.6% to $120.4 million; …

Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its fourth quarter and year ended December 31, 2020. 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 Fourth Quarter 2020 Results versus Fourth Quarter 2019 Results

  • Revenue increased 16.6% to $120.4 million;
  • Jamieson Brands revenue increased by 13.9%;
  • Adjusted EBITDA increased 14.6% to $29.4 million;
  • Net income was $15.4 million and adjusted net income increased 23.6% to $17.6 million; and
  • Earnings per diluted share were $0.37 and adjusted earnings per diluted share were $0.42.

Highlights of Full Year 2020 Results versus Full Year 2019 Results

  • Revenue increased 17.0% to $403.7 million;
  • Jamieson Brands revenue increased by 19.0%;
  • Adjusted EBITDA increased 15.9% to $88.0 million;
  • Net income was $41.6 million and adjusted net income increased 25.8% to $47.9 million; and
  • Earnings per diluted share were $1.01, and adjusted earnings per diluted share increased 21.1% to $1.16.

“We are pleased that consumers across Canada and around the world are choosing Jamieson in their quest for health and wellness,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “The COVID-19 pandemic has elevated health and wellness to become the top priority for consumers globally, and we are grateful for the role our brands play in supporting our consumers’ foundational health. Throughout 2020, our existing consumers increased their daily compliance while broadening the selection of vitamins and supplements in their routines. Many new consumers have engaged with our brands for the first time, as shoppers look for quality products they can trust. We have seen these trends become more established through 2020 and look forward to building upon this baseline of growth in the coming year.

The COVID-19 pandemic also tested our Jamieson team’s ability to navigate unprecedented challenges in a constantly changing environment. I am incredibly proud of how our team pulled together to ensure uninterrupted supply of our products when they were needed the most, while doing everything possible to maintain a healthy and safe working environment.

Entering 2021, we have solid momentum in all of our businesses and our scalable capacity ensures the Company remains well positioned to continue driving exceptional growth, delivering on our long-term vision to improve the world’s health and wellness.”

Fourth Quarter 2020 Results

Revenue increased 16.6% to $120.4 million in the fourth quarter of 2020 compared with $103.3 million in the fourth quarter of 2019 driven by 13.9% growth in Jamieson Brands and 25.3% growth in Strategic Partners.

Revenue in the Jamieson Brands segment increased by 13.9% or $10.9 million to $89.7 million. Demand remained high throughout the fourth quarter across the Company’s domestic and international markets as consumers continue to emphasize immunity and general health. The Company’s domestic Jamieson Brands sales increased by 13.7% in the fourth quarter, gaining share over competitors as the Company experienced steady point-of-sale growth across an expanding base. The Company’s domestic results showed strong growth in e-commerce, food, drug and mass retail channels. The Company’s international business increased 14.8% in the fourth quarter, which includes the expected timing of a shipment to China realized in the preceding quarter. Consumer demand for immunity products continues to be high across all of the Company’s primary international markets with elevated shipments to Eastern Europe and the Middle East in the quarter.

Revenue in the Strategic Partners segment increased 25.3%, or $6.2 million to $30.6 million in the fourth quarter of 2020 reflecting timing factors related to new programs with the Company’s largest soft-gel customer. This was partially offset by lower powder volumes from a strategic partner retail customer who emerged from Chapter 11 reorganization in the quarter.

Gross profit margin decreased by 300 basis points to 35.3% including a 130-basis point impact primarily from start-up costs associated with the Company’s transition to a third-party logistics provider. Normalized gross profit margin of 36.6% was down 170 basis points including 60 basis points attributable to segment mix and 110 basis points mainly due to higher supply continuity costs related to COVID-19. Normalized gross profit margin in the Jamieson Brands segment decreased by 80 basis points to 44.8% as supply continuity costs including increased health and safety measures offset promotional and volume related efficiencies. Gross profit margin in Strategic Partners decreased by 170 basis points to 12.9%, primarily driven by customer mix and a reduction in volume and efficiency at the Company’s powder facility and higher supply continuity costs related to COVID-19.

Selling, general and administrative (“SG&A”) expenses increased by $1.0 million to $18.6 million in the fourth quarter of 2020. On a normalized basis, SG&A expenses increased $1.4 million to $18.1 million in the fourth quarter of 2020 driven by increased headcount to support the Company’s worldwide and e-commerce expansion plans, higher variable compensation, and increased marketing investments. The Company incurred $0.6 million of costs related to COVID-19 in the fourth quarter of 2020 and the year-earlier period included $1.0 million of costs related to China initial set-up, supply chain optimization and cyber-security enhancements.

Earnings from operations increased by $2.4 million, or 11.8%, to $22.7 million in the fourth quarter of 2020 and operating margin decreased by 80 basis points to 18.9% as improvements in fixed costs as a percent of revenue partially offset factors that pressured gross profit margin during the quarter. On a normalized basis, earnings from operations increased by $3.6 million, or 16.9% in the fourth quarter of 2020 and operating margin was consistent at 20.7% compared with the fourth quarter of 2019.

Adjusted EBITDA increased 14.6% to $29.4 million in the fourth quarter of 2020 and adjusted EBITDA margin was 24.4% compared with 24.8% in the fourth quarter of 2019.

Interest expense and other financing costs decreased $0.6 million to $1.4 million in the fourth quarter of 2020 due to lower average borrowings and lower interest rates.

Net income for the fourth quarter of 2020 was $15.4 million compared with $13.2 million in the fourth quarter of 2019. Adjusted net income, which excludes all non-operating expenses and foreign exchange, increased $3.4 million, or 23.6%, to $17.6 million in the fourth quarter of 2020.

Adjusted net income excludes costs associated with share-based compensation, foreign exchange loss, business integration, COVID-19 related costs, other non-recurring expenses and related tax effects. 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”.

Balance Sheet & Cash Flow

The Company generated $18.7 million in cash from operations during the fourth quarter of 2020 compared with $13.0 million in the fourth quarter of 2019. Cash from operating activities before working capital considerations of $22.2 million was $4.0 million higher reflecting increased earnings. Cash invested in working capital decreased by $1.7 million due to the timing of payments and draw down of inventory stemming from strong shipments during the quarter. The Company’s cash at December 31, 2020 was $1.2 million compared to $0.2 million on December 31, 2019. The Company ended the quarter with approximately $127.1 million in cash and available operating lines and total debt of $149.1 million.

On November 19, 2020, the Company declared a quarterly dividend of $0.125 per common share to holders of record as of December 1, 2020 and paid such dividend on December 15, 2020. The dividend payment was approximately $5.0 million in the aggregate.

Three months ended
December 31
($ in 000’s, except as otherwise noted)

2020

2019

$ Change

% Change

Cash, beginning of period

3,144

4,153

(1,009

)

(24.3

%)

Cash flows from (used in):
Operating activities

18,744

12,996

5,748

44.2

%

Investing activities

(4,220

)

(3,488

)

(732

)

(21.0

%)

Financing activities

(16,502

)

(13,463

)

(3,039

)

(22.6

%)

Cash, end of period

1,166

198

968

488.9

%

Fiscal 2021 Outlook

The Company is introducing its revenue outlook for fiscal 2021 and anticipates revenue in a range of $421.0 to $438.0 million, which represents annual growth of 4.3% to 8.6%. The Company estimates adjusted EBITDA in a range of $95.0 to $100.0 million and adjusted diluted earnings per share in a range of $1.24 to $1.32.

This outlook reflects the following assumptions:

  • Jamieson Brands segment growth of between 4.0% and 8.0%, driven by the following:
    • Domestic branded revenues to grow between 2.0% and 5.0% including the impact of both pricing and volume expectations while lapping surge COVID-19 demand realized earlier in the pandemic.
    • International branded growth between 15.0% and 25.0% including headwinds resulting from foreign exchange. The increase reflects strong growth in China while sustaining a higher base in remaining international markets.
  • Revenue in the Strategic Partners segment is expected to increase between 5.0% to 10.0%
  • Normalized SG&A increases of 9% to 13% to expand e-commerce capabilities and support growth in international markets, including a $3.0 to $4.0 million investment in marketing primarily to support international markets and long-term growth opportunities in China
  • Interest expense of between $5.5 million to $6.0 million
  • Income tax rate of approximately 27.0%
  • A fully diluted share count of between 41.5 and 42.0 million shares

For additional details on the Company’s fiscal 2021 outlook, including guidance for the first quarter of 2021, refer to the “Outlook” section in the management’s discussion and analysis of financial condition and results of operations (“MD&A”) for the three and twelve months ended December 31, 2020.

Declaration of Fourth Quarter Dividend

The Company announces today a cash dividend for the fourth quarter of 2020 of $0.125 per common share or approximately $5.0 million in the aggregate. The dividend will be paid on March 15, 2021 to all common shareholders of record at the close of business on March 5, 2021. The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada).

Leadership Transition

Also announced today, Mark Hornick has decided to retire and Mike Pilato, President of Jamieson Canada, will advance to the role of President and CEO of Jamieson Wellness, effective June 1, 2021. The Board of Directors wish Mr. Hornick the very best in his retirement, and look forward to continuing to grow the Company under the leadership of Mr. Pilato. Details on this planned succession and ongoing transition can be found in a separate media release issued this afternoon.

Consolidated Financial Statements and Management’s Discussion and Analysis

The Company’s audited consolidated annual financial statements and accompanying notes as at and for the three and twelve months ended December 31, 2020 and related 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 fourth quarter 2020 results at 5:00 p.m. ET today, February 25, 2021. The call can be accessed live over the telephone by dialing 1-866-248-8441 from Canada and the U.S. or 1-323-289-6576 from international locations. Due to increased volumes of conference calls this quarter, please dial the conference call number 15 minutes prior to the start time. 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 8052896 and it will be available until Thursday, March 11, 2021.

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=143519 . 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 Smart Solutions by Lorna Vanderhaeghe, 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 results and its outlook for its 2021 revenue, adjusted EBITDA and adjusted diluted earnings per share. Words such as “expect,”, “anticipate”, “intend,”, “may,”, “will”, “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 27, 2020 and under the “Risk Factors” section in the Company’s MD&A filed today, February 25, 2021. 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.

The Company cautions 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.

Jamieson Wellness Inc.

Consolidated Statements of Operations

In thousands of Canadian dollars, except share and per share amounts

Three months ended For the year ended
December 31 December 31

2020

2019

2020

2019

Revenue

120,369

103,253

403,661

344,980

Cost of sales

77,855

63,711

258,905

215,246

Gross profit

42,514

39,542

144,756

129,734

Gross profit margin

35.3

%

38.3

%

35.9

%

37.6

%

Selling, general and administrative expenses

18,624

17,637

76,259

69,942

Share-based compensation

1,156

1,573

4,925

4,343

Earnings from operations

22,734

20,332

63,572

55,449

Operating margin

18.9

%

19.7

%

15.7

%

16.1

%

Foreign exchange loss

632

227

460

404

Other expenses

19

(35

)

22

3,369

Interest expense and other financing costs

1,409

1,966

6,042

9,372

Income before income taxes

20,674

18,174

57,048

42,304

Provision for income taxes

5,269

5,011

15,450

10,647

Net income

15,405

13,163

41,598

31,657

Adjusted net income

17,614

14,253

47,948

38,111

EBITDA

25,417

22,902

75,299

62,592

Adjusted EBITDA

29,383

25,641

87,985

75,909

Adjusted EBITDA margin

24.4

%

24.8

%

21.8

%

22.0

%

Weighted average number of shares
Basic

39,866,189

38,967,875

39,539,955

38,535,274

Diluted

41,487,349

40,130,698

41,160,341

39,614,909

Earnings per share attributable to common shareholders:
Basic, earnings per share

0.39

0.34

1.05

0.82

Diluted, earnings per share

0.37

0.33

1.01

0.80

Adjusted Diluted, earnings per share

0.42

0.36

1.16

0.96

Jamieson Wellness Inc.

Consolidated Statements of Financial Position

In thousands of Canadian dollars

December 31,
2020
December 31,
2019
Assets
Current assets
Cash

1,166

198

Accounts receivable

97,951

89,394

Inventories

102,645

81,948

Prepaid expenses and other current assets

2,389

1,893

204,151

173,433

Non-current assets
Property, plant and equipment

83,796

64,906

Goodwill

122,975

122,975

Intangible assets

196,158

198,189

Deferred income tax

2,261

2,272

Total assets

609,341

561,775

Liabilities
Current liabilities
Accounts payable and accrued liabilities

73,084

67,795

Income taxes payable

6,580

2,365

Derivatives

8,231

1,292

Current portion of other long-term liabilities

3,115

1,890

91,010

73,342

Long-term liabilities
Long-term debt

149,058

164,769

Post-retirement benefits

3,538

3,923

Deferred income tax

51,479

51,107

Other long-term liabilities

21,854

9,466

Total liabilities

316,939

302,607

Shareholders’ equity
Share capital

255,795

243,224

Contributed surplus

12,986

10,727

Deficit

29,023

6,061

Accumulated other comprehensive income (loss)

(5,402

)

(844

)

Total shareholders’ equity

292,402

259,168

Total liabilities and shareholders’ equity

609,341

561,775

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

Jamieson Brands
Three months ended
December 31

2020

2019

$ Change % Change
Revenue

89,733

78,803

10,930

13.9

%

Gross profit

38,566

35,962

2,604

7.2

%

Gross profit margin

43.0

%

45.6

%

(2.6

%)

Selling, general and administrative expenses

16,906

16,035

871

5.4

%

Share-based compensation

1,156

1,573

(417

)

(26.5

%)

Earnings from operations

20,504

18,354

2,150

11.7

%

Operating margin

22.9

%

23.3

%

(0.4

%)

Adjusted EBITDA

26,642

23,154

3,488

15.1

%

Adjusted EBITDA margin

29.7

%

29.4

%

0.3

%

Strategic Partners
Three months ended
December 31

2020

2019

$ Change % Change
Revenue

30,636

24,450

6,186

25.3

%

Gross profit

3,948

3,580

368

10.3

%

Gross profit margin

12.9

%

14.6

%

(1.7

%)

Selling, general and administrative expenses

1,718

1,602

116

7.2

%

Earnings from operations

2,230

1,978

252

12.7

%

Operating margin

7.3

%

8.1

%

(0.8

%)

Adjusted EBITDA

2,741

2,487

254

10.2

%

Adjusted EBITDA margin

8.9

%

10.2

%

(1.3

%)

Jamieson Brands
Twelve months ended
December 31

2020

2019

$ Change % Change
Revenue

316,423

265,843

50,580

19.0

%

Gross profit

133,861

116,827

17,034

14.6

%

Gross profit margin

42.3

%

43.9

%

(1.6

%)

Selling, general and administrative expenses

67,169

62,403

4,766

7.6

%

Share-based compensation

4,925

4,343

582

13.4

%

Earnings from operations

61,767

50,081

11,686

23.3

%

Operating margin

19.5

%

18.8

%

0.7

%

Adjusted EBITDA

81,519

67,436

14,083

20.9

%

Adjusted EBITDA margin

25.8

%

25.4

%

0.4

%

Strategic Partners
Twelve months ended
December 31

2020

2019

$ Change % Change
Revenue

87,238

79,137

8,101

10.2

%

Gross profit

10,895

12,907

(2,012

)

(15.6

%)

Gross profit margin

12.5

%

16.3

%

(3.8

%)

Selling, general and administrative expenses

9,090

7,539

1,551

20.6

%

Earnings from operations

1,805

5,368

(3,563

)

(66.4

%)

Operating margin

2.1

%

6.8

%

(4.7

%)

Adjusted EBITDA

6,466

8,473

(2,007

)

(23.7

%)

Adjusted EBITDA margin

7.4

%

10.7

%

(3.3

%)

Non-IFRS Financial Measures

This press release makes reference to certain non‑IFRS 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 the Company’s MD&A.

Reconciliation of Adjusted Net Income

In thousands of Canadian dollars

Three months ended For the year ended
December 31 December 31

2020

2019

2020

2019

Net income

15,405

13,163

41,598

31,657

Adjustments to net income:
Share-based compensation

144

190

576

761

Foreign exchange loss

632

227

460

404

Termination benefits and related costs

480

International market expansion

278

13

1,712

Business integration

1,759

523

2,299

1,415

COVID-19 related costs

402

5,064

Other

17

196

22

5,138

Revaluation of deferred tax liability

(1,032

)

Related tax effects

(745

)

(324

)

(2,084

)

(2,424

)

Adjusted net income

17,614

14,253

47,948

38,111

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

Three months ended For the year ended
December 31 December 31

2020

2019

2020

2019

Net income

15,405

13,163

41,598

31,657

Add:
Provision for income taxes

5,269

5,011

15,450

10,647

Interest expense and other financing costs

1,409

1,966

6,042

9,372

Depreciation of property, plant, and equipment

2,336

1,845

8,260

7,263

Amortization of intangible assets

998

917

3,949

3,653

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

25,417

22,902

75,299

62,592

Add EBITDA adjustments:
Share-based compensation

1,156

1,573

4,925

4,343

Foreign exchange loss

632

227

460

404

Termination benefits and related costs

480

International market expansion

278

13

1,712

Business integration

1,759

465

2,202

1,240

COVID-19 related costs

402

5,064

Other

17

196

22

5,138

Adjusted EBITDA

29,383

25,641

87,985

75,909

Investor and Media Contact Information:
Jamieson Wellness
Ruth Winker
416-705-5437
rwinker@jamiesonlabs.com

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