Jamieson Wellness Inc. Reports Second Quarter 2021 Financial Results

- August 5th, 2021

Increases Fiscal 2021 Guidance and Declares Increased Quarterly Dividend Jamieson Wellness Inc. today reported financial results for its second quarter ended June 30, 2021. 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 2021 Results versus Second Quarter …

Increases Fiscal 2021 Guidance and Declares Increased Quarterly Dividend

Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its second quarter ended June 30, 2021. 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 2021 Results versus Second Quarter 2020 Results

  • Revenue increased 18.6% to $110.6 million;
  • Jamieson Brands revenue increased by 10.9%;
  • Adjusted EBITDA increased 17.6% to $22.3 million;
  • Net earnings was $11.5 million and adjusted net earnings increased 21.8% to $12.0 million; and
  • Earnings per diluted share were $0.28 and adjusted earnings per diluted share were $0.29.

“We are pleased to report another outstanding quarter of growth across our business as consumers globally continue to be highly engaged in improving their health and wellness,” said Mike Pilato, President and Chief Executive Officer of Jamieson Wellness. “Our branded revenue grew by 11% in the quarter, as a result of continued demand from our expanded consumer base. Our tablet compression and packaging capacity expansion projects are on track and have allowed us to improve our domestic customer and international distributor inventories ahead of our third quarter seasonal demand and promotional calendar. Consumer data continues to indicate that health and wellness, which was a growing trend before the pandemic, has become firmly embedded in consumer behaviour for the long-term. We remain confident in our plans for continued growth, and as such, have increased the midpoint of our outlook for revenue, adjusted EBITDA and adjusted net earnings. We are pleased that this earnings growth further enables us to support our strategic priorities and has allowed us to increase our quarterly dividend.”

Second Quarter 2021 Results

Revenue increased 18.6% to $110.6 million in the second quarter of 2021 compared with $93.2 million in the second quarter of 2020 driven by 10.9% growth in Jamieson Brands and 48.9% growth in Strategic Partners.

Revenue in the Jamieson Brands segment increased by 10.9% or $8.1 million to $82.4 million. The Company’s domestic branded sales increased by 11.7% in the second quarter of 2021, primarily due to inventory replenishment supporting consumer demand, pricing, and timing of orders from retailer and distributor partners ahead of third quarter seasonal demand and promotional calendar. The Company’s international branded business increased by 21.6% on a constant currency basis, or 7.8% on a reported basis, compared with the second quarter of 2020 due to higher volumes in preparation for seasonal demand in the second half of 2021 and timing of non-immunity product order fulfillment.

Revenue in the Strategic Partners segment increased 48.9%, or $9.3 million to $28.2 million in the second quarter of 2021 mainly due to production timing of customer branded products throughout the year.

Gross profit increased by $5.4 million to $38.3 million in the second quarter of 2021 mainly driven by revenue growth. Gross profit margin decreased by 60 basis points to 34.7%, reflecting margin improvements in both segments, offset by the impact of the proportional sales growth in the Strategic Partners segment due to timing. Gross profit margin in the Jamieson Brands segment increased by 70 basis points to 41.8% due to revenue growth and volume driven efficiencies, partially offset by ongoing operating costs of using a third-party logistics provider and additional safety and business continuity costs while operating under a COVID-19 environment. Gross profit margin in Strategic Partners increased by 100 basis points to 13.7% mainly due to volume driven efficiencies.

Selling, general and administrative (“SG&A”) expenses increased by $0.2 million to $21.2 million in the second quarter of 2021. On a normalized basis, SG&A expenses increased $2.8 million to $19.7 million in the second quarter of 2021 due to additional resources to support strategic initiatives, along with domestic marketing and international investments to promote brand presence in China.

Earnings from operations increased by $5.4 million, or 50.3%, to $16.0 million in the second quarter of 2021 and operating margin increased by 300 basis points to 14.5% as a result of higher revenue and gross profit. On a normalized basis, earnings from operations increased by $3.0 million, or 19.9% in the second quarter of 2021 and operating margin was 16.1% compared with 15.9% in second quarter of 2020.

Adjusted EBITDA increased by 17.6% to $22.3 million in the second quarter of 2021 and adjusted EBITDA margin was 20.2% compared with 20.4% in the second quarter of 2020.

Interest expense and other financing costs remained consistent at $1.4 million compared with the second quarter of 2020.

Net earnings for the second quarter of 2021 was $11.5 million compared with $6.0 million in the second quarter of 2020. Adjusted net earnings, which excludes all non-operating expenses and foreign exchange, increased by $2.2 million, or 21.8%, to $12.0 million in the second quarter of 2021.

Adjusted net earnings excludes costs associated with share-based compensation relating to one-time grants to certain employees and the tax benefit realized on the vesting of certain share-based awards, foreign exchange loss, business integration, COVID-19 related costs, other non-recurring earnings or expenses net of related tax effects. A detailed reconciliation of reported net earnings to non-IFRS adjusted net earnings is included in the tables accompanying this release under the heading “Non-IFRS Financial Measures”.

Balance Sheet & Cash Flow

The Company generated $5.1 million in cash from operations during the second quarter of 2021 compared with $14.4 million in the second quarter of 2020. Cash from operating activities before working capital considerations of $16.1 million was $6.3 million higher due to increased earnings in the current quarter. Cash invested in working capital increased by $15.6 million driven by higher international branded and Strategic Partner sales which carry longer terms and timing of tax installments, partially offset by accelerated inventory purchases earlier in the year resulting in lower purchases in Q2 2021. The Company’s cash as at June 30, 2021 was $4.6 million compared with $1.2 million on December 31, 2020 and $6.8 million at the end of the second quarter of 2020. The Company ended the quarter with approximately $109.4 million in cash and available operating lines and net debt of $165.6 million.

Three months ended

June 30

($ in 000’s, except as otherwise noted)

2021

2020

$ Change

% Change

Cash, beginning of period

8,766

5,227

3,539

67.7

%

Cash flows from (used in):
Operating activities

5,079

14,422

(9,343

)

(64.8

%)

Investing activities

(6,664

)

(4,740

)

(1,924

)

(40.6

%)

Financing activities

(2,545

)

(8,113

)

5,568

68.6

%

Cash, end of period

4,636

6,796

(2,160

)

(31.8

%)

Declaration of Second Quarter Dividend

The board of directors of the Company authorized a 2.5 cent or a 20% increase in the quarterly dividend and declared a cash dividend for the second quarter of 2021 of $0.15 per common share, or approximately $6.0 million in the aggregate. The dividend will be paid on September 15, 2021 to all common shareholders of record at the close of business on August 31, 2021. The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada).

Board of Directors Transition

Jamieson Wellness director Jason Tafler has resigned from the Company’s board of directors effective August 4th, 2021, due to personal and family health reasons. Director Mei Ye has been appointed to replace Mr. Tafler on the Company’s Audit Committee. “We are grateful for Jason’s valued contribution to the board and the Company, in particular his insight and strategic thinking in the area of digital retailing and marketing,” said David Williams, Chair of the board of Jamieson Wellness. “We wish him and his family the very best as they take this time to prioritize their own personal health and wellness.”

Fiscal 2021 Outlook

The Company is increasing its outlook for fiscal 2021 and anticipates revenue in a range of $435.0 to $445.0 million, compared with $421.0 to $438.0 million previously, which represents annual growth of 7.8% to 10.2%. The Company anticipates adjusted EBITDA in a range of $97.0 to $100.0 million, narrowed from a previous range of $95.0 to $100.0 million, and now anticipates adjusted diluted earnings per share in a range of $1.27 to $1.32 compared with $1.24 to $1.32 previously. The increase in the Company’s outlook reflects strong growth in domestic branded and Strategic Partners revenues while international branded volume growth will be impacted by the strengthening of the Canadian dollar. Higher temporary operating and logistics costs are anticipated as the Company continues to operate in a COVID-19 pandemic environment, with enhanced measures implemented as a result of the third wave of the pandemic in Canada and supply chain premiums experienced globally.

This outlook reflects the following assumptions:

  • Jamieson Brands segment growth of 3.7% to 7.1%, including the impact of a strengthened Canadian dollar on international sales and reflecting the following:
    • 3% to 6% domestic growth, and
    • 20% to 25% international growth in U.S. dollars, while reported revenues in Canadian dollars will be impacted by a strengthened currency compared to the prior year and foreign exchange volatility on the conversion of U.S. dollars to Canadian dollars.
  • Strategic Partners segment growth of between 20% to 25%
  • Normalized SG&A expense increases of 8% to 12%, lowered from our previous range of between 9% to 13% due to COVID-19 restrictions impacting travel and entertainment

For additional details on the Company’s fiscal 2021 outlook, including guidance for the third 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 months ended June 30, 2021.

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, 2021 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 second quarter 2021 results at 5:00 p.m. ET today, August 5, 2021. The call can be accessed live over the telephone by dialing 1-800-437-2398 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 6014317 and it will be available until Thursday, August 19, 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=145686 . 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, 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 30, 2021 and under the “Risk Factors” section in the Company’s MD&A filed today, August 5, 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

Six months ended

June 30

June 30

2021

2020

2021

2020

Revenue

110,556

93,204

208,826

177,727

Cost of sales

72,232

60,263

136,614

113,530

Gross profit

38,324

32,941

72,212

64,197

Gross profit margin

34.7%

35.3%

34.6%

36.1%

Selling, general and administrative expenses

21,224

20,993

41,990

38,625

Share-based compensation

1,057

1,273

3,659

2,538

Earnings from operations

16,043

10,675

26,563

23,034

Operating margin

14.5%

11.5%

12.7%

13.0%

Foreign exchange loss

117

848

133

99

Interest expense and other financing costs

1,371

1,390

2,786

3,318

Income before income taxes

14,555

8,437

23,644

19,617

Provision for income taxes

3,083

2,399

6,036

5,568

Net earnings

11,472

6,038

17,608

14,049

Adjusted net earnings

12,041

9,882

21,261

17,681

EBITDA

19,424

12,715

33,377

28,680

Adjusted EBITDA

22,327

18,983

40,869

35,669

Adjusted EBITDA margin

20.2%

20.4%

19.6%

20.1%

Weighted average number of shares
Basic

40,078,646

39,447,020

39,984,741

39,273,066

Diluted

41,428,523

41,178,625

41,315,745

41,003,141

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

0.29

0.15

0.44

0.36

Diluted, earnings per share

0.28

0.15

0.43

0.34

Adjusted diluted, earnings per share

0.29

0.24

0.51

0.43

Jamieson Wellness Inc.

Consolidated Statements of Financial Position

In thousands of Canadian dollars

June 30,
2021

December 31,
2020

Assets
Current assets
Cash

4,636

1,166

Accounts receivable

109,415

97,951

Inventories

117,436

102,645

Derivatives

370

Prepaid expenses and other current assets

4,180

2,389

Income taxes recoverable

305

236,342

204,151

Non-current assets
Property, plant and equipment

88,603

83,796

Goodwill

122,975

122,975

Intangible assets

194,586

196,158

Deferred income tax

2,321

2,261

Total assets

644,827

609,341

Liabilities
Current liabilities
Accounts payable and accrued liabilities

79,835

73,084

Income taxes payable

6,580

Derivatives

7,675

8,231

Current portion of other long-term liabilities

2,905

3,115

90,415

91,010

Long-term liabilities
Long-term debt

170,258

149,058

Deferred income tax

3,606

3,538

Other long-term liabilities

51,699

51,479

Total liabilities

20,634

21,854

Total liabilities

336,612

316,939

Shareholders’ equity
Share capital

262,196

255,795

Contributed surplus

14,158

12,986

Retained earnings

36,639

29,023

Accumulated other comprehensive loss

(4,778

)

(5,402

)

Total shareholders’ equity

308,215

292,402

Total liabilities and shareholders’ equity

644,827

609,341

Jamieson Wellness Inc.

Segment Information

In thousands of Canadian dollars, except as otherwise noted

Jamieson Brands

Three months ended
June 30

2021

2020

$ Change

% Change

Revenue

82,391

74,292

8,099

10.9

%

Gross profit

34,467

30,531

3,936

12.9

%

Gross profit margin

41.8

%

41.1

%

0.7

%

Selling, general and administrative expenses

19,226

16,885

2,341

13.9

%

Share-based compensation

1,057

1,273

(216

)

(17.0

%)

Earnings from operations

14,184

12,373

1,811

14.6

%

Operating margin

17.2

%

16.7

%

0.5

%

Adjusted EBITDA

19,645

17,624

2,021

11.5

%

Adjusted EBITDA margin

23.8

%

23.7

%

0.1

%

Strategic Partners

Three months ended
June 30

2021

2020

$ Change

% Change

Revenue

28,165

18,912

9,253

48.9

%

Gross profit

3,857

2,410

1,447

60.0

%

Gross profit margin

13.7

%

12.7

%

1.0

%

Selling, general and administrative expenses

1,998

4,108

(2,110

)

(51.4

%)

Earnings from operations

1,859

(1,698

)

3,557

209.5

%

Operating margin

6.6

%

(9.0

%)

15.6

%

Adjusted EBITDA

2,682

1,359

1,323

97.4

%

Adjusted EBITDA margin

9.5

%

7.2

%

2.3

%

Jamieson Brands

Six months ended
June 30

2021

2020

$ Change

% Change

Revenue

158,286

144,086

14,200

9.9

%

Gross profit

65,524

59,806

5,718

9.6

%

Gross profit margin

41.4

%

41.5

%

(0.1

%)

Selling, general and administrative expenses

38,506

32,941

5,565

16.9

%

Share-based compensation

3,659

2,538

1,121

44.2

%

Earnings from operations

23,359

24,327

(968

)

(4.0

%)

Operating margin

14.8

%

16.9

%

(2.1

%)

Adjusted EBITDA

36,470

33,411

3,059

9.2

%

Adjusted EBITDA margin

23.0

%

23.2

%

(0.2

%)

Strategic Partners

Six months ended
June 30

2021

2020

$ Change

% Change

Revenue

50,540

33,641

16,899

50.2

%

Gross profit

6,688

4,391

2,297

52.3

%

Gross profit margin

13.2

%

13.1

%

0.1

%

Selling, general and administrative expenses

3,484

5,684

(2,200

)

(38.7

%)

Earnings from operations

3,204

(1,293

)

4,497

347.8

%

Operating margin

6.3

%

(3.8

%)

10.1

%

Adjusted EBITDA

4,399

2,258

2,141

94.8

%

Adjusted EBITDA margin

8.7

%

6.7

%

2.0

%

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 earnings” 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 Earnings

In thousands of Canadian dollars

Three months ended

Six months ended

June 30

June 30

2021

2020

2021

2020

Net earnings

11,472

6,038

17,608

14,049

Adjustments to net earnings:
Share-based compensation

(788

)

144

836

288

Foreign exchange loss

117

848

133

99

International market expansion

13

Business integration

184

254

1,701

420

COVID-19 related costs

1,480

3,932

2,178

4,017

Other

65

(179

)

Related tax effects

(489

)

(1,334

)

(1,016

)

(1,205

)

Adjusted net earnings

12,041

9,882

21,261

17,681

Reconciliation of EBITDA and Adjusted EBITDA

In thousands of Canadian dollars

Three months ended Six months ended
June 30 June 30

2021

2020

2021

2020

Net earnings

11,472

6,038

17,608

14,049

Add:
Provision for income taxes

3,083

2,399

6,036

5,568

Interest expense and other financing costs

1,371

1,390

2,786

3,318

Depreciation of property, plant, and equipment

2,438

1,932

4,834

3,853

Amortization of intangible assets

1,060

956

2,113

1,892

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

19,424

12,715

33,377

28,680

Add EBITDA adjustments:
Share-based compensation

1,057

1,273

3,659

2,538

Foreign exchange loss

117

848

133

99

International market expansion

13

Business integration

184

215

1,701

322

COVID-19 related costs

1,480

3,932

2,178

4,017

Other

65

(179)

Adjusted EBITDA

22,327

18,983

40,869

35,669

Investor and Media Contact Information:

Jamieson Wellness
Ruth Winker
416-705-5437
rwinker@jamiesonlabs.com

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