Jamieson Wellness Inc. Reports First Quarter 2018 Financial Results and Reiterates 2018 Guidance

TORONTO--(BUSINESS WIRE)--Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported financial results for its first quarter ended March 31, 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 First Quarter 2018 Results versus First Quarter 2017 Results

• Revenue increased 8.0% to $70.1 million;
• Adjusted EBITDA increased 11.0% to $12.7 million;
• Net Income was $4.6 million and Adjusted Net Income increased 165.4% to $5.8 million;
• Earnings per diluted share were $0.12 and Adjusted earnings per diluted share were $0.15.

“The Jamieson brand continues to enjoy excellent momentum during the first quarter driven by strong consumer demand and the launch of our new Jamieson Essentials plus Protein. Jamieson brands led sales gains in the quarter, driving 8.0% consolidated revenue growth and strong increases in both Adjusted Net Income and Adjusted EBITDA,” said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. “Strategic Partners revenue was impacted by the timing of orders, which we anticipate will balance out in the third and fourth quarters. We have also begun the integration of our health food operations, including the consolidation of our distribution facilities and the integration of the salesforce. We remain confident with our 2018 outlook, our innovation pipeline and are focused on capturing incremental international growth opportunities.”

First Quarter 2018 Results

Revenue increased 8.0% to $70.1 million in the first quarter of 2018 from $64.9 million in the first quarter of 2017 and was driven by a 13.2% increase in Jamieson Brands revenue, partially offset by a 14.8% decrease in Strategic Partners revenue. The increase in the Jamieson Brands revenue was driven by 7.8% organic growth and the acquisition of Body Plus. The decrease in Strategic Partners was primarily driven by the timing of customer orders, including the launch of customer branded innovation during the first quarter of 2017 that was not repeated in first quarter of 2018.

Gross profit increased 14.2% to $25.4 million in the first quarter of 2018 from $22.2 million in the first quarter of 2017 and gross profit margin increased 200 basis points to 36.2% from 34.2% in the same respective period. The increase in the gross profit margin was primarily driven by segment mix, manufacturing efficiencies and includes higher relative margins from Sonoma activities.

Selling, general and administrative expenses (“SG&A”) increased 10.2% to $14.8 million in the first quarter of 2018 from $13.4 million in the first quarter of 2017. As a percentage of revenue, SG&A increased 40 basis points to 21.1% from 20.7% in the prior year period. The increase as a percentage of revenue reflected the inclusion of $0.6 million of public company costs and the higher SG&A as a percentage of revenue associated with the acquired businesses, partially offset by $0.7 million of lower marketing costs as marketing spend this year is aligned to support the launch of Jamieson Essentials plus Protein in the second quarter of 2018.

Operating income increased 26.2% to $10.1 million in the first quarter of 2018 from $8.0 million in the first quarter of 2017 and operating margin increased 200 basis points to 14.4% from 12.4% in the same respective periods.

Interest expense and other financing costs were $2.2 million in the first quarter of 2018 compared to $8.3 million in the first quarter of 2017. The change was driven by lower borrowings including discharge of the note payable to Jamieson Finco LP in the pre-IPO reorganization, lower interest rates on the Company’s credit facility entered into in January 2017 and a write-off of deferred financing fees in the first quarter of 2017.

Net income for the first quarter of 2018 was $4.6 million compared to net loss of $21.7 million in the first quarter of 2017. Adjusted Net Income, which excludes all non-operating expenses, increased to $5.8 million in the first quarter of 2018 from $2.2 million in the first quarter of 2017.

Adjusted Net Income for the first quarter of 2018 excludes costs associated with termination benefits and related costs, business integration costs, foreign exchange losses, other non-recurring expenses and adjusts for purchase consideration accounted for as compensation expense, as well as the related tax effects of each item. Adjusted Net Income for the first quarter of 2017 excludes costs associated with preferred share accretion, write-off of deferred financing fees, termination benefits and related costs, acquisition costs, purchase consideration accounted for as compensation expense, amortization of fair value adjustments, share based compensation, foreign exchange loss, public offering 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 measures.

Adjusted EBITDA increased 11.0% to $12.7 million in the first quarter of 2018 from $11.4 million in the first quarter of 2017 and Adjusted EBITDA as a percentage of revenue was 18.1% compared to 17.6% in the prior year period.

Balance Sheet & Cash Flow

The Company used $5.2 million of cash from operations during the first quarter of 2018 compared to generating $8.1 million of cash from operations during the first quarter of 2017. The decrease reflects deferred compensation associated with the acquisition of Body Plus and Sonoma and higher inventories relating to the timing of sales in the Strategic Partners segment. The Company’s cash at March 31, 2018 was $2.4 million compared to $4.8 million on December 31, 2017. On February 27, 2018, the Company declared a quarterly dividend of $0.08 per common share to holders of record as of March 7, 2018 and paid such dividend on March 15, 2018. The dividend payment was approximately $3.0 million in the aggregate.

	Three months ended
	March 31
($ in 000's)	2018		2017		$ Change		% Change
Cash, beginning of period	4,833		15,881		(11,048	)	(69.6	%)
Cash flows from (used in):
Operating activities	(5,159	)	8,114		(13,273	)	(163.6	%)
Investing activities	(3,066	)	(83,204	)	80,138		96.3	%
Financing activities	5,765		67,604		(61,839	)	(91.5	%)
Cash, end of period	2,373		8,395		(6,022	)	(71.7	%)

Outlook

The Company is reiterating 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 continues to anticipate generating revenue in a range of $325.0 to $335.0 million, 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. This outlook is based, in part, on a forecasted CAD/USD exchange rate of $1.25, the potential for higher interest rates 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 March 31, 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 first quarter 2018 results at 5:00 p.m. ET on May 9, 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 13679115 and it will be available until Wednesday, May 23, 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=129450. 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 Vitamins 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.

Jamieson Wellness Inc. Unaudited Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss) In thousands of Canadian dollars, except per share data
	Three months ended
	March 31
	2018		2017
Revenue	70,104		64,901
Cost of sales	44,734		42,692
Gross profit	25,370		22,209
Gross profit margin	36.2	%	34.2	%
Selling, general and administrative expenses	14,817		13,441
Share-based compensation	427		746
Earnings from operations	10,126		8,022
	-		-
Operating margin	14.4	%	12.4	%
Foreign exchange loss	200		232
Termination benefits and related costs	1,732		2,499
Public offering costs	-		231
Acquisition costs	-		1,857
Other (income) expenses	(12	)	1,703
Preferred share accretion	-		15,385
Interest expense and other financing costs	2,176		8,312
Income (loss) before income taxes	6,030		(22,197	)
Provision for (recovery of) income taxes	1,404		(546	)
Net income (loss)	4,626		(21,651	)
Adjusted net income	5,760		2,170
EBITDA	10,339		3,605
Adjusted EBITDA	12,686		11,424
Adjusted EBITDA margin	18.1	%	17.6	%
Weighted average number of shares
Basic	37,831,159		520,253
Diluted	39,666,424		520,253
Adjusted Diluted	39,666,424		39,666,424
Earnings per share attributable to common shareholders:
Basic, earnings (loss) per share	0.12		(41.62	)
Diluted, earnings (loss) per share	0.12		(41.62	)
Adjusted Diluted, earnings per share	0.15		0.05

Jamieson Wellness Inc. Unaudited Condensed Consolidated Interim Statements of Financial Position In thousands of Canadian dollars
	March 31, 2018		December 31, 2017
Assets
Current assets
Cash	2,373		4,833
Accounts receivable	57,795		71,996
Inventories	69,746		59,080
Derivatives	747		-
Prepaid expenses and other current assets	1,899		1,507
	132,560		137,416
Non-current assets
Property, plant and equipment	46,926		45,173
Goodwill	122,975		122,975
Intangible assets	203,442		204,264
Deferred income tax	2,586		2,727
Total Assets	508,489		512,555
Liabilities
Current liabilities
Accounts payable and accrued liabilities	60,500		66,621
Income taxes payable	952		4,267
Derivatives	-		1,081
Current portion of long-term debt	10,969		9,750
	72,421		81,719
Long-term liabilities
Long-term debt	160,785		153,459
Post-retirement benefits	4,998		4,856
Deferred income tax	50,405		51,697
Total Liabilities	288,609		291,731
Shareholders' equity
Share capital	235,876		234,908
Contributed surplus	7,508		7,437
Deficit	(22,811	)	(19,486	)
Accumulated other comprehensive loss	(693	)	(2,035	)
Total shareholders' equity	219,880		220,824
Total Liabilities and Shareholders' equity	508,489		512,555

Jamieson Wellness Inc. Segment Information In thousands of Canadian dollars
Jamieson Brands
		Three months ended March 31,
		2018		2017		$ Change		% Change
	Revenue	59,894		52,920		6,974		13.2	%
	Gross profit	22,808		19,383		3,425		17.7	%
	Gross profit margin	38.1	%	36.6	%	-		1.5	%
	Earnings from operations	9,136		6,633		2,503		37.7	%
	Operating margin	15.3	%	12.5	%	-		2.8	%
	Adjusted EBITDA	11,352		9,706		1,646		17.0	%
	Adjusted EBITDA margin	19.0	%	18.3	%	-		0.7	%
Strategic Partners
		Three months ended March 31,
		2018		2017		$ Change		% Change
	Revenue	10,210		11,981		(1,771	)	(14.8	%)
	Gross profit	2,562		2,826		(264	)	(9.3	%)
	Gross profit margin	25.1	%	23.6	%	-		1.5	%
	Earnings from operations	990		1,389		(399	)	(28.7	%)
	Operating margin	9.7	%	11.6	%	-		(1.9	%)
	Adjusted EBITDA	1,334		1,718		(384	)	(22.4	%)
	Adjusted EBITDA margin	13.1	%	14.3	%	-		(1.2	%)

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 our MD&A.

Reconciliation of Adjusted Net Income In thousands of Canadian dollars
	Three months ended March 31,
	2018		2017
Net income (loss)	4,626		(21,651	)
Adjustments to net income (loss):
Share-based compensation	-		441
Amortization of fair value adjustments	-		565
Amortization of deferred financing fee	-		3,078
Foreign exchange loss	200		232
Termination benefits and related costs	1,732		2,499
Acquisition costs	-		1,857
Purchase consideration accounted for as compensation expense	(1,066	)	1,476
Public offering costs	-		231
Preferred share accretion	-		15,385
Non-recurring business integration	961		-
Other	93		213
Related tax effects	(786	)	(2,156	)
Adjusted net income	5,760		2,170

Reconciliation of EBITDA and Adjusted EBITDA In thousands of Canadian dollars
	Three months ended March 31,
	2018		2017
Net income (loss)	4,626		(21,651	)
Add:
Provision for (recovery of) income taxes	1,404		(546	)
Interest expense and other financing costs	2,176		8,312
Preferred share accretion	-		15,385
Depreciation of property, plant, and equipment	1,263		1,271
Amortization of intangible assets	870		834
Earnings before interest, taxes, depreciation, and amortization (EBITDA)	10,339		3,605
Add EBITDA adjustments:
Share-based compensation	427		746
Amortization of fair value adjustments	-		565
Foreign exchange loss	200		232
Termination benefits and related costs	1,732		2,499
Acquisition costs	-		1,857
Purchase consideration accounted for as compensation expense	(1,066	)	1,476
Public offering costs	-		231
Non-recurring business integration	961		-
Other	93		213
Adjusted EBITDA	12,686		11,424