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

TORONTO--(BUSINESS WIRE)--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