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Jamieson Wellness Inc. Reports Third Quarter 2017 Financial ResultsJamieson Wellness Inc. ("Jamieson Wellness" or the "Company") (TSX: JWEL) today reported financial results for its third quarter and nine months ended September 30, 2017. 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 and Summary of Third Quarter 2017 Results versus Third Quarter 2016 Results
"We delivered strong third quarter results, including robust revenue growth in the core Jamieson Brands segment, good performance of our recent acquisitions and favorable margin expansion," said Mark Hornick, President and Chief Executive Officer of Jamieson Wellness. "We are also excited about our newest product innovation, Cold Fighter. Cold Fighter has enjoyed a great reception from the trade and has launched in time for cold and flu season. Additionally, our market-leading quality and innovation rises to a new level with the introduction of the TRU-ID certification program. Our Jamieson herbal products have qualified for this leading-edge global 3rd party certification, which will further ensure our consumers can have continued confidence in the superior quality and purity of Jamieson's herbal ingredients." Third Quarter 2017 Results Revenue increased 45.0% to $80.1 million in the third quarter of 2017 from $55.3 million in the third quarter of 2016 and was driven by a 34.9% increase in Jamieson Brands revenue to $61.9 million and a 94.6% increase in Strategic Partners revenue to $18.3 million. The increase in the Jamieson Brands revenue was primarily driven by the acquisition of Body Plus and 12.2% organic growth of Jamieson Brands' domestic and international volumes. The increase in Strategic Partners revenue was driven by timing and additional volumes from strong consumer demand and the acquisition of Sonoma. Gross profit increased 51.2% to $26.4 million in the third quarter of 2017 from $17.5 million in the third quarter of 2016 and gross profit margin increased 140 basis points to 33.0% from 31.6% in the same respective periods. The increase in the gross profit margin was primarily driven by higher volumes and improved manufacturing efficiencies in the legacy Jamieson Brands segment combined with higher inherent margins from Body Plus and Sonoma. Selling, general and administrative expenses ("SG&A") increased 43.2% to $12.7 million in the third quarter of 2017 from $8.9 million in the third quarter of 2016. As a percentage of revenue, SG&A decreased 20 basis points to 15.9% from 16.1% in the prior year period and included $0.4 million in public company costs. Operating income increased 53.1% to $11.3 million in the third quarter of 2017 from $7.4 million in the third quarter of 2016 and operating margin increased 80 basis points to 14.1% from 13.3% in the same respective periods. Interest expense and other financing costs were $2.4 million in the third quarter of 2017 compared to $5.7 million in the third quarter of 2016. The change was driven by lower borrowings including discharge of the note payable to Jamieson Finco LP in the Company's recent pre-IPO reorganization and lower interest rates on the Company's new credit facility entered into in January 2017. Net income for the third quarter of 2017 was $1.1 million compared to net income of $8.3 million in the third quarter of 2016. Net income for the third quarter of 2017 included $2.6 million of public offering costs, $2.2 million of purchase consideration recorded in other expenses, $1.7 million of accelerated options vesting included in share-based compensation, $0.3 million of amortization of fair value adjustments, and $0.3 million of other non-recurring consulting and acquisition costs. Net income in the third quarter of 2016 included a $7.5 million gain associated with a reduction in preferred share obligations. Adjusted Net Income, which excludes all non-operating expenses, increased 210.2% to $7.8 million in the third quarter of 2017 from $2.5 million in the third quarter of 2016. The increase in Adjusted Net Income primarily reflects higher sales volumes along with increased gross profit margin, leverage on SG&A and lower interest costs. Adjusted EBITDA increased 42.9% to $16.1 million in the third quarter of 2017 from $11.3 million in the third quarter of 2016 and Adjusted EBITDA as a percentage of revenue was 20.1%, slightly lower than 20.4% in the same respective period. The growth in Adjusted EBITDA reflects higher sales volumes coupled with increased gross profit margin and lower SG&A as a percentage of revenue. Balance Sheet & Cash Flow The Company generated $0.3 million of cash from operations during the first nine months of fiscal year 2017 compared to $16.6 million in the same period last year. The Company's cash and cash equivalents at September 30, 2017 were $1.2 million compared to $15.9 million on December 31, 2016. On August 22, 2017, the Company declared its first quarterly dividend of $0.08 per common share to holders of record as of September 1, 2017 and paid such dividend on September 15, 2017. The dividend payment was approximately $3.0 million in the aggregate.
Outlook The Company maintains its outlook for 2017 Adjusted EBITDA while narrowing its revenue outlook, which includes the impact of the strengthening Canadian Dollar. The Company continues to expect pro forma Adjusted EBITDA(1) of $62 million and now anticipates pro forma revenue(1) in the range of $303 to $307 million in 2017. This outlook is based on a revised forecasted CAD/USD exchange rate of $1.25 compared to our previous estimate of $1.35. The Adjusted EBITDA outlook above excludes approximately $13.1 million of non-recurring and special expenses related to the Company's initial public offering and secondary offering.
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 and nine months ended September 30, 2017 and related management's discussion and analysis of financial condition and results of operation ("MD&A") are available under the Company's profile on SEDAR at www.sedar.com and on the Investor Relation's section of the Company's website at https://investors.jamiesonwellness.com. Conference Call Management will host a conference call to discuss the Company's third quarter 2017 results at 5:00 p.m. ET on November 9, 2017. 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 13672402 and it will be available until Thursday, November 23, 2017. 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=126813. 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 2017 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 final prospectus ("Prospectus") dated June 29, 2017 in respect of its initial public offering. 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," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Outlook" in the Prospectus for a discussion of the uncertainties, risks and assumptions associated with these statements.
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," and "Adjusted Net Income" 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.
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