Jamieson Wellness Inc. (JWEL) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to the Jamieson Wellness 2021 Annual General and Special Meeting of Shareholders. Please be advised that reproduction of this audio webcast in whole or in part is not permitted without written authorization from the company. On the call today from the Jamieson Wellness Board of Directors and management team are David Williams, Chairman of the Board; Michael Pilato, incoming President and Chief Executive Officer; and Chris Snowden, Chief Financial Officer and Corporate Secretary. Before I turn the call over to Mr. Williams, please note that the prepared remarks, which will follow the formal portion of the meeting, contain forward-looking statements, and additional forward-looking statements may be made in response to your questions during the Q&A portion of the meeting. These statements reflect the company's current expectations regarding future events. Forward-looking statements are 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 statements. Such risks and uncertainties include, but are not limited to, the factors discussed in Jamieson's filings with the Canadian Securities Administrators. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. The company does not undertake any obligation to update the forward-looking statements made during this meeting, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Finally, we would like to remind listeners that the company may refer to certain non-IFRS financial measures during this audio webcast. A reconciliation of these non-IFRS financial measures can also be found in Jamieson's filings with the Canadian Securities Administrators. Also, please note that unless otherwise stated, all figures discussed today are in Canadian dollars and are occasionally rounded to the nearest million. I will now turn the meeting over to Mr. Williams to get started. Please go ahead, sir.

Good afternoon. My name is David Williams, Chair of the Board of Directors, and I'd like to welcome you to this annual and special meeting of the holders of common shares of Jamieson Wellness Inc., which I will refer to as Jamieson. For those of you who are shareholders, thank you for joining us today. We also welcome all other guests in attendance. I have on the line Michael Pilato, our incoming President and Chief Executive Officer; and Chris Snowden, Chief Financial Officer and Corporate Secretary of Jamieson. We decided to hold this annual and special shareholders' meeting in an all-virtual format out of an abundance of caution to proactively deal with the public health impact of the COVID-19 outbreak and to mitigate the risk to the health and safety of our communities, shareholders, employees and other stakeholders. Our main objective is to ensure that all shareholders have the same opportunities to participate and vote, regardless of their geographic location, and that everyone stays safe. The purpose of this meeting is to, one, receive Jamieson's financial statements for the year ended December 31, 2020, and the auditors' report thereon; two, elect directors of Jamieson for the ensuing year; three, reappoint Ernst & Young LLP as the auditors of Jamieson for the ensuing year; four, to consider and, if deemed advisable, as an ordinary resolution approving, ratifying and confirming the adoption of an amended and restated version of bylaw #2 relating generally to the transaction of the business and affairs of Jamieson, which was approved and adopted by the directors and became effective on May 7, 2021, and repealing Jamieson's previous bylaws; and five, consider and, if deemed advisable, pass an advisory resolution on Jamieson's approach to executive compensation. These matters are set out in management information circular made available to shareholders in connection with this meeting. Jamieson elected to send out proxy-related materials for this meeting to shareholders using the notice-and-access provisions under National Instrument 51-102, Continuous Disclosure Obligations; and National Instrument 54-101, Communication with Beneficial Owners of Securities of a Reporting Issuer. I will refer to these provisions in this meeting as the notice-and-access provisions. After the formal part of the meeting, Mike and Chris will be making some remarks, and we will follow that with a question period, should you wish to ask questions of them. As this meeting is held virtually via live webcast, we think it is necessary to set out a few rules for the orderly conduct of the meeting. One, questions can be submitted using the instant messaging service of the virtual interface. Please note that only registered shareholders or duly appointed proxy holders are entitled to submit questions in respect of a motion during the formal part of the meeting; two, when asking a question, please indicate your name; which entity you represent, if any; and confirm whether you are a registered shareholder or a duly appointed proxy holder. For each question we answer, we will summarize the question, read out loud the name of the person who asked such question and, if applicable, the entity such person represents. Questions may be submitted during the formal part of the meeting but will only be addressed during the question period at the end of the meeting. However, questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting. For the purpose of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders will -- and duly appointed proxy holders will be asked to vote on each item of business after the presentation of all items. If you are a beneficial owner of common shares and have not appointed yourself as a proxy holder and are therefore attending this meeting as a guest, you will not be entitled to vote. When you are asked to vote, you'll receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to do so when the polls are open. We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions. I will act as Chair of the meeting; and Chris Snowden, Jamieson's Chief Financial Officer and Corporate Secretary, will act as secretary. With the consent of the meeting, I appoint Computershare Investor Services Inc. through its representatives as scrutineers to compute the votes on any polls taken at this meeting and to report thereon to me as Chair. The notice call in this meeting, the accompanying management information circular dated March 11, 2021, consolidated financial statements for the years ended December 31, 2020 and 2019 and auditors' report thereon and the form of proxy have been provided to each shareholder of Jamieson of record at the close of business on March 29, 2021, by mail or electronically in accordance with the notice-and-access provisions, and I have been advised by Computershare Investor Services Inc. and have been provided with an affidavit of mailing confirming that notice call in this meeting, together with a form of proxy, were mailed to each shareholder of record at the close of business on April 9, 2021. With the consent of the meeting, reading of the notice of the meeting will be dispensed with. I therefore declare that proper notice of this meeting has been given. A quorum of shareholders is at least 2 holders of common shares present in person or by telephonic or electronic means and holding or represented by proxy not less than 25% of the votes entitled to be cast at the meeting. I have received the preliminary report on attendance from the scrutineer, and I've determined that a quorum is present. I adopt this report and as notice has been served in accordance with the Ontario Business Corporations Act and the bylaws, I declare this meeting to be regularly called and properly constituted for the transaction of business. On behalf of the Board, I thank those shareholders who have chosen to attend the meeting virtually today. I also thank those who submitted their proxies in advance. First item of business is to put before the meeting Jamieson's financial statements for the fiscal year ended December 31, 2020, and the auditors' report thereon. Those financial statements, together with the auditors' report thereon and forming part of the 2020 annual report, were made available to all shareholders of Jamieson by mail or electronically in accordance with the notice-and-access provisions. We will be pleased to receive any questions you may have regarding the financial statements during the question period later in this meeting. We will dispense the reading of the financial statements and the auditors' report thereon. The second item of business is the election of directors. Pursuant to Jamieson's articles, there can be, at any time, a minimum 3 and a maximum of 10 directors of Jamieson. As described in the management information circular made available to shareholders in connection with this meeting, there are 8 nominee directors for election as directors. The nominees are Heather Allen, Dr. Louis Aronne, Michael Pilato, Timothy Penner, Catherine Potechin, Steve Spooner, Jason Tafler and David Williams. I declare the meeting open for nominations for the election of directors for the ensuing year or until their successors are elected or appointed. I will now nominate the directors and second the nominations. I nominate each of the persons whose name appears in the management information circular under the heading Election of Directors to be a director of Jamieson till the close of the next Annual Meeting of Shareholders or until their successors are appointed, and I also second the nominations. As you know, Jamieson allows for the election of directors on an individual basis according to our majority voting policy. Any nominee who receives a greater number of votes withheld than votes for cast with respect to his or her election by the shareholders in an uncontested election of directors will tender his or her resignation promptly to the Governance, Compensation and Nominating Committee, which will recommend to the Board whether or not to accept such resignation. I should advise the meeting that by virtue of votes already received by proxy, it is clear that all directors will receive more than enough votes to be elected today. I would like to advise the meeting that Jamieson did not receive any further nominations in accordance with its bylaws. I therefore declare the nominations closed. The next item of business is the appointment of auditors for the ensuing year and the authorization of directors to fix their remuneration. I would now move and second a resolution appointing the auditors for the current year and authorizing the directors to fix their remuneration. I move that Ernst & Young LLP Chartered Accountants be reappointed auditors of Jamieson to hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed, that such remuneration as may be fixed by the directors, and the directors are authorized to fix such remuneration. I also second the motion. Unless there are any questions, I will move to the next item of business. The next item of business is to consider a resolution ratifying and approving the adoption of amended and restated bylaw #2, which I will refer to as the amended and restated bylaw during this meeting, and the repeal of Jamieson's previous bylaws. The amended and restated bylaw relates generally to the transaction of the business and affairs of Jamieson. Purpose of the amended and restated bylaw is to bring the company's bylaws into better alignment with current corporate governance practices. These amendments increase the quorum requirement for meetings of shareholders, amend the provision governing the framework for advance notice of nomination of directors by shareholders. The full text of the resolution to approve the amended and restated bylaw is set out in Schedule A to the management information circular. I note that Jamieson recently made an amendment to the advance notice provisions in bylaw #2 to remove the ability for the company to request certain additional disclosures to assist the eligibility of proposed nominee to serve as an independent director. And bylaw #2, as amended and restated, is the bylaw to be approved at this meeting. The amended and restated bylaw has been filed under Jamieson's profile on SEDAR. I will now move and second the resolution to approve the amended and restated bylaw. I move that the resolution to approve the amended and restated bylaw substantially in the form of such resolutions set out in Schedule A to Jamieson's management information circular dated March 11, 2021, to approve the adoption of the amended and restated bylaw and the repeal of Jamieson's previous bylaws be approved, and I also second the motion. Unless there are any questions, I will move to the next item of business. Being no questions, the next item of business is to consider an advisory resolution approving proving Jamieson's approach to executive compensation. As disclosed in the management information circular under the heading Compensation of Executive Officers, beginning with this meeting, the Board will offer shareholders the opportunity to cast at each Annual General Shareholder Meeting an advisory vote on Jamieson's approach to executive compensation. As this is an advisory vote, the Board will not be bound by the results of the vote. However, the Board will take the results of the vote into account, together with feedback received from shareholders, when considering its approach to executive compensation in the future. I will now move and second the approval of the advisory say-on-pay resolution. I move that the advisory say-on-pay resolutions set out in Schedule C to Jamieson's management information circular dated March 11, 2021, be approved, and I also second the motion. Unless there are any questions, I will move on to the voting process. Not hearing any. As I mentioned earlier, voting today will be conducted by electronic ballot. I will now take a moment to ask that the balloting be opened to registered holders and appointed proxy holders. The polls are now open. And at this point, all registered holders and proxyholders who have properly logged in with their control numbers or usernames and wish to vote will be able to see on the screen all motions being brought forth at this meeting. The voting will be open for 3 minutes. And once the electronic balloting closes, the voting page will disappear, and your vote will automatically be submitted. Ruth Winker, the Corporate Communications Director of Jamieson, will confirm for us when the polls are closed. Please register your votes by accessing the voting page and selecting the For or Withhold buttons next to the name of each proposed director and next to the resolution with respect to the reappointment of Ernst & Young LLP as Jamieson's auditors. Please select the For or Against buttons next to the resolution with respect to the approval of the amended and restated bylaw and next to the resolution with respect to the advisory vote on Jamieson's approach to executive compensation. I will now wait for the vote to conclude. [Voting]

There is 1 minute left on the timer. [Voting]

Thank you. I'm just waiting for the advise from the scrutineer. I've been advised by the scrutineer that the ballots and proxies deposited for the meeting have now been voted and that each of the resolutions has been carried with the effect that, one, each of the 8 nominees has been elected as a director of Jamieson to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed; two, the appointment of Ernst & Young LLP as the auditors of Jamieson has been approved and the Board of Directors has been authorized to fix their remuneration; three, the resolution approving the amended and restated bylaw has been approved; and fourth, the advisory say-on-pay resolution has been approved. We will file a report setting out the voting results on the SEDAR website. The formal items of business as set out in the notice of meeting have now been dealt with. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. As this concludes the formal portion of today's meeting, I will now turn the meeting over to Michael Pilato and Christopher Snowden for some remarks. Following their remarks, there will be a question-and-answer period. Mike?

Perfect. Thanks, Dave, and good afternoon, everyone. Thank you for joining us for our Jamieson Wellness 2021 Annual General and Special Meeting of Shareholders. The COVID-19 pandemic made health and wellness a top priority for consumers in 2020, and Jamieson Wellness is there to support them. Our existing consumers increased their daily compliance and added more vitamin and supplements to their routines. We also successfully engaged many new consumers for the first time as shoppers look for high-quality products they could trust during such an uncertain time. The COVID-19 pandemic also tested our Jamieson team's ability to navigate unprecedented challenges in a constantly changing environment. I am personally incredibly proud of how our team pulled together to ensure uninterrupted supply of our products when our consumers needed them the most while doing everything possible to maintain a healthy and safe working environment for our team. During fiscal 2020, we saw a continuation of strong trends we experienced earlier in the year. We reported revenue of nearly $404 million, representing growth of 17% from fiscal 2019. We reported adjusted EBITDA of an increase of almost 16% to $88 million, while adjusted net income increased by nearly 26%. This resulted in adjusted diluted earnings per share of $1.16, an increase of approximately 21% versus prior year. Our Jamieson Brands segment revenue increased 19% in 2020. We benefited from underlying strength in the overall vitamin and mineral supplement market, the power of our brands and solid execution across the board. This led to an increased market share. Similarly, the breadth of our business continued to impress as we experienced solid performance across all major categories and channels. We now have a new expanded consumer base coming out of 2020 that we are growing from in 2021 and are confident we will grow also for the long term. Our international revenue increased by approximately 50% as consumer demand remained strong and broad-based across our key geographies, including China, Eastern Europe and the Middle East. China continued to lead our international growth through increased sales on cross-border e-commerce and shipments into domestic retail stores as we expanded our distribution network. Our Strategic Partners segment increased by 10%, led by additional programs with our largest customers, which were partly offset by the availability of production capacity to meet accelerated demand. We continued our momentum from 2020 into the first quarter of 2021 with first quarter revenue exceeding $98 million, an increase of over 16% versus the year earlier. Adjusted EBITDA increased 11% to $18.5 million, while adjusted net income increased 18.2% to $9.2 million. And adjusted earnings per diluted share increased 16% to $0.22. We have solid momentum in all of our businesses and remain well positioned to continue driving growth in 2021 and well beyond. Next week, I will take on the position of President and CEO, alongside a team of almost 1,000 strong, passionate, talented and driven people that continues to fuel this Canadian organization forward around the world. It is my commitment to our Board of Directors, the Jamieson team and our shareholders that we will continue to build on the 99 years of growth momentum we have behind us, past our 100th anniversary and into the next century of growth. We are in a new point in our journey with very strong brand leadership position in Canada and a growing presence in over 45 countries around the world. We have grown and we have expanded that in our pursuit to become a global leading health and wellness company, we are just beginning. We will continue to build our culture at Jamieson, leaning into our values of teamwork, accountability and entrepreneurship while building on our bedrock of transparency, integrity and external focus. We will be relentless in our focus on our consumers, meeting them every step of the way to improve their health and wellness. We will meet them where and when they want with the products they need, and we will exceed their expectations of us. We will never compromise on our high-quality standards while continuing to improve our foundational capabilities in all areas that set us apart from our competition: world-class quality manufacturing, consumer insights, digital expertise, regulatory capabilities and innovation. We also have clarity on where we will drive material growth into the next century of our history. In Canada, continued strong growth in our home country. It is imperative our Canadian business is always healthy, profitable and growing to help us reach our global aspirations. In China, we'll accelerate consumer awareness and adoption of our brand in the second largest vitamin and mineral supplement market in the world where we have seen much success to date. And all around the world, we will expand our leading positions in Eastern Europe, the Middle East and countries we are currently in while selectively entering new markets, either organically or through acquisition. As we approach Jamieson's 100th anniversary, we are honored to be here for the health of our consumers, to support our dedicated team and to continue to drive value for our shareholders. I want to thank you all again for joining us today. I want to thank you for being here. And with that, I'm going to turn the meeting over to Chris to discuss our 2021 guidance. Chris?

Thank you, Mike, and good afternoon, everyone. As Mike mentioned, 2020 was an incredible year for Jamieson. We have bolstered our already strong growth prospects and the future of this company. We continue to see consumer data and business results that indicate we are operating off a larger consumer base. 2020 was a step change in our industry and in our brand from which we will continue to grow. Health and wellness and VMS has seen sustained growth as a global consumer mega trend pre-COVID, it has accelerated during COVID and is expected to continue to grow post COVID as consumers continue to drive toward healthier lifestyles, preventative health care solutions and self-care. Based on this and within our previous financial disclosures, we have established our 2021 guidance and anticipate the following: net revenue in the range of $421 million to $438 million, representing top line growth of almost 4.5% to 9%. This compares to $404 million in revenue for 2020, reflecting consumers' concern for their health and wellness, driving demand for our branded products, both domestically and internationally. Adjusted EBITDA in the range of $95 million to $100 million or approximately 8% to 14% growth over fiscal 2021 and adjusted EBITDA of $88 million and adjusted diluted earnings per share of between $1.24 and $1.32. Revenue in the Jamieson Brands segment is expected to increase between 4% and 8% compared to fiscal 2020 driven by growth in the following categories: domestic branded revenues to grow between 2% and 5%, including the impact of both volume and pricing expectations while lapping surge COVID-19 demand recognized earlier in the pandemic. We plan to expand our market position by continuing to focus on innovation and consumer education while increasing investments in digital commerce. We expect international growth between 20% and 30%, excluding a 5% foreign exchange headwind, resulting from a strengthening Canadian dollar. Our guidance reflects strong growth in China while sustaining a higher baseline of demand in our remaining international markets. We are expanding our marketing investment in China to build brand awareness and equity to accelerate our long-term growth in the region. Revenue in the Strategic Partners segment is expected to increase between 5% and 10%, reflecting higher demand for our customers' branded products. A complete discussion of our outlook and factors impacting our expected performance in 2021 is included in the outlook section of our MD&A, included in our fiscal 2020 financial statements and annual report. With that, let me turn the meeting back to Mr. Williams.

Thank you, Chris. I will now open the floor for any questions. I ask that all attendees who would like to ask a question use the instant messaging feature of the virtual interface to do so. We will answer as many questions as time permits. We will now give attendees a moment to type in their questions. For each question we answer, we will be -- summarize the question and read out loud the name of the person who asked such question, and if applicable, the entity such person represents. Questions which were already answered or that are redundant or repetitive will not be answered.

Mr. Williams, there are no questions at this time.

Thank you, Ruth. Before we conclude today's meeting, I'd like to take a moment to recognize our outgoing President and CEO, Mark Hornick. This is his last AGM with Jamieson Wellness as he retires next week. On behalf of the Board of Directors, management and the entire Jamieson Wellness team, I'd like to thank Mark for all his contributions to Jamieson Wellness over the last 7 years. Mark's leadership, enthusiasm and dedication to this company and all that it stands for has been truly inspirational. We wish Mark the very best in his retirement. This concludes the Jamieson Wellness 2021 Annual and Special General Meeting. Thank you for attending, and have a pleasant evening.

This concludes the meeting. You may now disconnect.