Jamieson Wellness Inc. Reports First Quarter 2023 Results, Maintains Full Year Outlook and Declares First Quarter Dividend

Consolidated revenue increased 31.9% to $136.7 million; Jamieson Brands revenue increased 30.0%;
Adjusted EBITDA¹ increased $3.6 million to $24.5 million; Adjusted diluted earnings per share² was $0.21

TORONTO--(BUSINESS WIRE)--Jamieson Wellness Inc. (“Jamieson Wellness” or the “Company”) (TSX: JWEL) today reported its first quarter results for the period ended March 31, 2023. All amounts are expressed in Canadian dollars.

“Jamieson Wellness entered 2023 in a position of strength, having laid a solid foundation for continued growth across our business in 2022,” said Mike Pilato, President and CEO of Jamieson Wellness. “Our Jamieson Brands segment delivered another exceptional quarter with a 30% revenue increase, reflecting organic growth, the impact of our U.S. acquisition, and the continued demand for our brands, globally.

“As expected, revenue grew at a faster rate than Adjusted EBITDA in the quarter, which posted a 17% increase. This reflects strategic investments in brand building activities and expanding our team and operations in the U.S. and China, while ensuring our Canadian business remains healthy and grows its leadership position. We are confident in our outlook for the year and look forward to continuing to support our consumers’ health and wellness journeys while driving value for all our stakeholders.”

First Quarter Highlights

• Maintained strong momentum in Canada as consumer consumption outpaced shipments
• Over-delivered revenue expectations in the U.S. led by stronger than expected consumer consumption
• Began production of key new and improved youtheory product in anticipation of shipping in Q2
• Met continued strong demand for the Jamieson brand in China as COVID-19 restrictions lifted
• Grew team in China in anticipation of transition to an owned distribution and operations model in Q2
• Launched a sustainable partner program in support of ESG commitments to help identify, measure and monitor sustainability progress and risk within the Company’s supply chain

First Quarter Financial Results Consolidated Summary

All comparisons are with the first quarter of 2022

• Consolidated revenue increased 31.9% to $136.7 million with both Jamieson Brands and Strategic Partners segments contributing to growth
• Gross profit margin³ decreased by 110 basis points to 35.5%, driven by segment mix led by the over delivery of expectations in youtheory and Strategic Partners, both of which have inherently lower profit margins
• EBITDA¹ increased $0.9 million to $19.3 million; Adjusted EBITDA¹ increased by $3.6 million to $24.5 million, due to higher volumes and gross profit, offset by increased SG&A expenses including investments to support growth in the U.S. and China
• Net earnings decreased 27.5% to $7.1 million; Adjusted net earnings¹ decreased 18.0% to $8.8 million, driven by the reasons noted above and offset by borrowing costs related to the U.S. acquisition and associated higher prevailing interest rates, the impact of which appears higher in the first quarter due to its seasonally lower volumes
• Diluted earnings per share was $0.17; Adjusted diluted earnings per share² was $0.21 and includes dilution as a result of the shares issued in the youtheory transaction

Summary of Segment Results

All comparisons are with the first quarter of 2022

Jamieson Brands

• Revenue was $108.1 million, an increase of 30.0% or $24.9 million
• Canada revenue increased 2.4% as consumer consumption paced ahead of shipments in the quarter, due to the typical seasonal influx of shipments in Q4 2022 to support cold and flu season
• U.S. (youtheory) contributed $22.2 million in revenue driven by stronger than expected consumer consumption and e-commerce growth of over 33.0%
• China revenue increased 36.6% due to continued category growth led by higher consumer sell-through in the cross-border e-commerce channel and the removal of COVID-19 restrictions
• International revenue declined an expected 15.5%, reflecting slowing declines in Eastern Europe and the timing of promotional replenishments in the Caribbean and South East Asia regions in the prior year
• Gross profit increased $8.2 million to $43.8 million; gross profit margin³ decreased by 230 basis points as expected, due to the inherently lower youtheory gross margin profile and product mix
• Adjusted EBITDA¹ increased $1.1 million to $20.7 million driven by higher volumes and associated gross profit, offset by investments in SG&A to support growth in the U.S. and China; Adjusted EBITDA margin² decreased by 440 basis points to 19.1% due to the factors noted above

Strategic Partners

• Revenue was $28.6 million, an increase of 39.7% or $8.1 million, due to timing of customer orders and lapping of a softer Q1 2022
• Gross profit increased $2.4 million to $4.7 million
• Gross profit margin³ increased by 510 basis points to 16.5%
• Adjusted EBITDA¹ increased by $2.5 million to $3.9 million; Adjusted EBITDA margin² increased by 660 basis points to 13.5%

Balance Sheet and Cash Flow

• The Company generated $7.9 million in cash from operations compared to $17.1 million in Q1 2022
• Cash from operating activities before working capital considerations of $13.1 million decreased by $2.2 million compared to Q1 2022 due to decreased earnings including realized acquisition costs
• Cash from working capital decreased by $6.9 million driven by timing of collections and inventory payments
• As at March 31, 2023, the Company had $124.8 million in cash and available revolving and swingline facilities and net debt¹ of $375.2 million

¹ This is a non-IFRS financial measure. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each non-IFRS financial measure.
² This is a non-IFRS ratio. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each non-IFRS ratio.
³ This is a supplementary financial measure. See the “Non-IFRS and Other Financial Measures” section of this press release for more information on each supplementary financial measure.

Maintaining Fiscal 2023 Outlook

The Company is maintaining its outlook for the 2023 fiscal year and continues to anticipate the following:

• Revenue in a range of $670.0 to $700.0 million, which represents annual growth of 22.0% to 28.0%
• Adjusted EBITDA in a range of $140.0 to $146.0 million
• Adjusted diluted earnings per share in a range of $1.62 to $1.72
• For additional details on the Company’s fiscal 2023 outlook, including guidance for the second quarter of 2023, 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 March 31, 2023

Declaration of First Quarter Dividend

The board of directors of the Company authorized and declared a cash dividend for the first quarter of 2023:

• $0.17 per common share, or approximately $7.1 million in the aggregate
• Paid on June 15, 2023 to all common shareholders of record at the close of business on June 1, 2023
• The Company has designated this dividend as an “eligible dividend” for the purposes of the Income Tax Act (Canada)

Closing of Previously Announced Distributor Transaction in China

Also announced today, the Company has completed the previously announced purchase of the operating assets of its distributor partner in China. The purchase allows the Company to directly operate its sales, marketing and distribution activities in the world’s second largest VMS market. With full control of its brand and value chain in China, the Company expects to accelerate its ability to bring more world-class, high-quality vitamins, minerals, and supplements to a broader base of Chinese consumers. Details on the completed transaction can be found in a separate media release issued this afternoon.

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, 2023 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 first quarter 2023 results at 5:00 p.m. ET today, May 4, 2023. To access:

• By phone: [phone] from Canada and the U.S. or 1-631-891-4304 from international locations
• Online: https://investors.jamiesonwellness.com or https://viavid.webcasts.com/starthere.jsp?ei=1606237&tp_key=c3f122c2bf

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 also offers a variety of VMS products under its youtheory, Progressive, Smart Solutions, Iron Vegan and Precision brands. The Company is a participant of the United Nations Global Compact and adheres to its principles-based approach to responsible business. For more information please visit www.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 2023 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, 2023 and under the “Risk Factors” section in the MD&A filed today, May 4, 2023. 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 MD&A for a discussion of the uncertainties, risks and assumptions associated with these statements.

 

Jamieson Wellness Inc. Selected Consolidated Financial Information In thousands of Canadian dollars, except share and per share amounts
	Three months ended
	March 31
	2023	2022
Revenue	136,725	103,675
Cost of sales	88,209	65,728
Gross profit	48,516	37,947
Gross profit margin	35.5%	36.6%
Selling, general and administrative expenses	32,392	21,620
Share-based compensation	1,496	1,142
Earnings from operations	14,628	15,185
Operating margin	10.7%	14.6%
Foreign exchange loss	163	463
Interest expense and other financing costs	6,302	1,278
Earnings before income taxes	8,163	13,444
Provision for income taxes	1,098	3,703
Net earnings	7,065	9,741
Adjusted net earnings	8,808	10,744
EBITDA	19,306	18,438
Adjusted EBITDA	24,508	20,945
Adjusted EBITDA margin	17.9%	20.2%
Weighted average number of shares
Basic	41,775,989	40,442,265
Diluted	42,791,481	41,731,184
Earnings per share attributable to common shareholders:
Basic, earnings per share	0.17	0.24
Diluted, earnings per share	0.17	0.23
Adjusted diluted, earnings per share	0.21	0.26

 

Jamieson Wellness Inc. Consolidated Statements of Financial Position In thousands of Canadian dollars
	March 31, 2023	December 31, 2022
Assets
Current assets
Cash	16,293	26,240
Accounts receivable	110,671	160,798
Inventories	186,810	154,488
Derivatives	5,540	6,580
Prepaid expenses and other current assets	6,735	4,298
	326,049	352,404
Non-current assets
Property, plant and equipment	110,431	111,709
Goodwill	272,841	272,916
Intangible assets	365,801	367,205
Deferred income tax	3,411	3,029
Total assets	1,078,533	1,107,263
Liabilities
Current liabilities
Accounts payable and accrued liabilities	128,456	142,566
Income taxes payable	995	7,387
Derivatives	33	-
Current portion of other long-term liabilities	4,346	4,852
	133,830	154,805
Long-term liabilities
Long-term debt	391,470	400,000
Post-retirement benefits	956	929
Deferred income tax	57,903	58,007
Other long-term liabilities	61,341	61,931
Total liabilities	645,500	675,672
Shareholders' equity
Share capital	309,974	307,200
Contributed surplus	16,872	17,115
Retained earnings	85,441	85,483
Accumulated other comprehensive income	20,746	21,793
Total shareholders' equity	433,033	431,591
Total liabilities and shareholders' equity	1,078,533	1,107,263

 

Jamieson Wellness Inc. Segment Information In thousands of Canadian dollars, except as otherwise noted
Jamieson Brands
		Three months ended March 31
		2023		2022		$ Change		% Change
	Revenue	108,110		83,188		24,922		30.0	%
	Gross profit	43,801		35,617		8,184		23.0	%
	Gross profit margin	40.5	%	42.8	%	-		(2.3	%)
	Selling, general and administrative expenses	30,663		20,051		10,612		52.9	%
	Normalized selling, general and administrative expenses	27,120		19,197		7,923		41.3	%
	Share-based compensation	1,496		1,142		354		31.0	%
	Earnings from operations	11,642		14,424		(2,782	)	(19.3	%)
	Operating margin	10.8	%	17.3	%	-		(6.5	%)
	Normalized earnings from operations	15,185		15,278		(93	)	(0.6	%)
	Normalized operating margin	14.0	%	18.4	%	-		(4.4	%)
	Adjusted EBITDA	20,651		19,540		1,111		5.7	%
	Adjusted EBITDA margin	19.1	%	23.5	%	-		(4.4	%)
Strategic Partners
		Three months ended March 31
		2023		2022		$ Change		% Change
	Revenue	28,615		20,487		8,128		39.7	%
	Gross profit	4,715		2,330		2,385		102.4	%
	Gross profit margin	16.5	%	11.4	%	-		5.1	%
	Selling, general and administrative expenses	1,729		1,569		160		10.2	%
	Normalized selling, general and administrative expenses	1,729		1,521		208		13.7	%
	Earnings from operations	2,986		761		2,225		292.4	%
	Operating margin	10.4	%	3.7	%	-		6.7	%
	Normalized earnings from operations	2,986		809		2,177		269.1	%
	Normalized operating margin	10.4	%	3.9	%	-		6.5	%
	Adjusted EBITDA	3,857		1,405		2,452		174.5	%
	Adjusted EBITDA margin	13.5	%	6.9	%	-		6.6	%

Non-IFRS and Other Financial Measures

This press release makes reference to certain financial measures, including non-IFRS financial measures that are historical, non-IFRS measures that are forward-looking, non-GAAP ratios and supplementary financial measures. Management uses these 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. The Company uses the following non‑IFRS financial measures: “EBITDA”, “Adjusted EBITDA” and “Adjusted net earnings”, the most directly comparable financial measure for each that is disclosed in its financial statements being net earnings, “normalized SG&A”, “normalized earnings from operations”, “cash from operating activities before working capital considerations” and “net debt”, the most directly comparable financial measures for each that is disclosed in its financial statements being gross profit, SG&A, earnings from operations, cash flows from operating activities, and long-term debt, respectively, the following non-IFRS ratios: “Adjusted EBITDA margin”, “Adjusted diluted earnings per share”, “normalized operating margin”, and the following supplementary financial measures: “gross profit margin” and “operating margin” 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 and supplementary financial measures in order to prepare annual operating budgets and to determine components of management compensation. For an explanation of the composition of each such measure and the usefulness and additional uses of each by management, see the “How we Assess the Performance of our Business” section of the MD&A, which is incorporated by reference. See below for a quantitative reconciliation of each non-IFRS financial measure to its most directly comparable financial measure disclosed in the Company’s financial statements to which the measure relates.

The following tables provide a quantitative reconciliation of net earnings to EBITDA, Adjusted EBITDA, and Adjusted net earnings, as well as SG&A to normalized SG&A, earnings from operations to normalized earnings from operations, each of which are non-IFRS financial measures (see the “Non-IFRS and Other Financial Measures” of this press release for further information on each non-IFRS financial measure) for the three months ended March 31, 2023 and March 31, 2022.

 

Reconciliation of Non-IFRS Financial Measures In thousands of Canadian dollars
	Three months ended
	March 31
	2023		2022
Net earnings	7,065		9,741
Add:
Provision for income taxes	1,098		3,703
Interest expense and other financing costs	6,302		1,278
Depreciation of property, plant, and equipment	3,467		2,658
Amortization of intangible assets	1,374		1,058
Earnings before interest, taxes, depreciation, and amortization (EBITDA)	19,306		18,438
Add EBITDA adjustments:
Share-based compensation^(1)	1,496		1,142
Foreign exchange loss	163		463
Acquisition related costs ^(2)	2,801		-
IT system implementation ^(3)	670		739
Other	72		163
Adjusted EBITDA	24,508		20,945
Provision for income taxes	(1,098	)	(3,703	)
Interest expense and other financing costs	(6,302	)	(1,278	)
Depreciation of property, plant, and equipment	(3,467	)	(2,658	)
Amortization of intangible assets	(1,374	)	(1,058	)
Share-based compensation^(4)	(1,454	)	(1,142	)
Tax deduction from vesting of certain share-based awards ^(5)	(1,022	)	-
Tax effect of normalization adjustments	(983	)	(362	)
Adjusted net earnings	8,808		10,744
	Three months ended
	March 31
	2023		2022
Selling, general and administrative expenses	32,392		21,620
Acquisition related cost^(2)	(2,801	)	-
IT system implementation^(3)	(670	)	(739	)
Other	(72	)	(163	)
Normalized selling, general and administrative expenses	28,849		20,718
Earnings from operations	14,628		15,185
Acquisition related cost^(2)	2,801		-
IT system implementation^(3)	670		739
Other	72		163
Normalized earnings from operations	18,171		16,087
Normalized operating margin	13.3	%	15.5	%

(1)	The Company’s share-based compensation expense pertains to our long-term incentive plan (the “LTIP”) (refer to “Share-based compensation”), with performance-based share units (“PSUs”), time-based restricted share units (“RSUs”), and deferred share units (“DSUs”) expenses, along with associated payroll taxes.
(2)	Current quarter expense mainly pertains to legal and consulting costs associated with the acquisition of our distributor in China, as well as integration costs relating to our acquisition of youtheory which closed on July 19, 2022.
(3)	Current quarter expense mainly pertains to development costs for our Enterprise Resource Planning (“ERP”) system implementation. Unlike other system improvement projects with costs capitalized, due to its cloud-based nature, these system implementation costs are expensed accordingly.
(4)	Costs pertaining to our LTIP, excluding PSUs granted to certain employees relating to business combinations.
(5)	The vesting of share-based compensation provides a tax benefit during the period in which the awards are settled.