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

Good afternoon, everyone. Welcome to the Jamieson Wellness 2022 Annual General 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, President and Chief Executive Officer; Chris Snowden, Chief Financial Officer and Corporate Secretary; and Tim Penner, Director. Before I turn the call over to Mr. Williams, please note that the prepared remarks, which will follow the formal portion of the meeting, contains 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 are 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 and other financial measures during this audio webcast. For further details on non-IFRS and other financial measures, including relevant definitions and certain reconciliations, see 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 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 President and Chief Executive Officer; and Chris Snowden, Chief Financial Officer and Corporate Secretary of Jamieson. As we announced on February 24, I've made the decision to retire from the Board effective at the end of this meeting. And so also on the line today is Tim Penner, a member of our Board and the Director appointed by the Board to succeed me as Chair. We decided to hold this annual shareholders meeting in an all-virtual format to proactively address 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, 2021 and the auditor's 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 and authorize the directors to fix their remuneration; and four, consider and if deemed advisable, pass an advisory resolution on Jamieson's approach to executive compensation. These matters are set out in the management information circular made available to shareholders in connection with this meeting. Jamieson elected to send out proxy-related materials to this meeting to shareholders using the notice and access provisions under National Instrument 51-102, Continuous Disclosure Obligations and National Instrument 54-101, Communications 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 Tim will also say a few words. 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. 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. When asking the 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 and read out loud the name of the person who asked such question, and if applicable, the entity such person represents. [Operator Instructions]. However, questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting. For the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. The online voting is open for all resolutions at this time. Registered shareholders and duly appointed proxy holders will be asked to vote on each item of business. 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 vote, you will receive a message on the virtual interface requesting you to register your votes. You will only be permitted to vote while the polls are open. If you use your control number to log into the meeting, any vote you cast at the meeting will revoke any proxy you previously submitted. If you do not wish to revoke a previously submitted proxy, you should not vote at the meeting. We will now proceed with the formal portion of today's meeting. To expediate the formal part of the meeting, I will move and second all motions. I will act as Chairman of the meeting and Chris Snowden, Jamieson 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 scrutineer to compute the votes of 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 9, 2022. The consolidated financial statements for the years ended December 31, 2021 and 2020 and auditor's report thereon and the form of proxy have been provided to each shareholder of Jamieson of record at the close of business on March 21, 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 calling this meeting, together with the form of proxy were mailed to each shareholder of record at the close of business on April 8, 2022. With the consent of the meeting, reading of the notice of the meeting will be dispensed with. I therefore declare that the 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 telephone 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 a preliminary report on attendance from the scrutineer, and I have 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. The first item of business is to put before the meeting Jamieson's financial statements for the fiscal year ended December 31, 2021, and the auditor's report thereon. Those financial statements, together with the auditor's report thereon and forming part of the 20 -- the 2021 annual report were made available to all shareholders of Jamieson by mail or electronically in accordance with the notice and access provisions. We'd be pleased to receive any questions you may have regarding the financial statements during the question period later in this meeting. We will dispense with 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 maximum of 3 -- sorry, a minimum of 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. Louise Aronne, Tania Clarke, Michael Pilato, Timothy Penner, Catherine Potechin; Steve Spooner, Mei Ye. I will now nominate the directors and second the nominations. I nominate each of the person whose name appears in the management information circular under the heading Election of Directors to be a director of Jamieson until 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'd 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 the directors to fix their remuneration. I will now move and second the resolution appointing of the directors -- of 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 the successors are appointed at such remuneration as may be fixed by the directors, and the directors are authorized to fix such remuneration. And 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 an advisory resolution of proving Jamieson's approach to executive compensation. As disclosed in the management information circular under the heading compensation of executive officers, each year the Board offers shareholders the opportunity to cast at each Annual General Shareholders' 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 resolution set out in Schedule A to Jamieson's management information circular dated March 9, 2022, be approved, and I also second the motion. Unless there are any questions, I will move on to the voting process. As I mentioned earlier, voting today will be conducted by electronic ballot. The ballot is open to registered holders and appointed proxy holders. Please register your vote 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 button next to the resolution with respect to the advisory vote on Jamieson's approach to executive compensation. If you have not already voted online, please complete the electronic ballot now. We will give you one more minute. Ruth Winker, Senior Director of Corporate Affairs of Jamieson will confirm for us when the polls have closed. [Voting]

Thank you, Mr. Chairman. The polls are now closed.

Thank you. I have 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; and three, 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. This concludes the formal portion of today's meeting. I will now turn the meeting over to Michael Pilato, Chris Snowden and Tim Penner for some remarks. Following their remarks, there will be a question-and-answer period. Mike?

Thank you, Dave, and good afternoon, everyone. Thank you for joining us for our Jamieson Wellness 2022 Annual General Meeting of Shareholders. 2021 was another incredible year for Jamieson Wellness reaching $100 million in adjusted EBITDA as we also celebrated our 100th year of our Jamieson brand. Brand growth momentum that lasts an entire century is rare. I'm humbled and privileged to be able to lead this company surrounded by such an incredible team [ charge shaping ] our vision as we look to drive our leadership into the next 100 years. While the ongoing pandemic increased global consumer adoption of proactive health and wellness practices, Jamieson established a very strong connection with millions of consumers much earlier by being part of their daily lives for decades. The brand equity we built by staying true to our core values enabled us to drive exceptionally strong performance in 2021 and has positioned us for even greater growth potential in the future. Our 2021 results reflected continued progress across our 3 primary strategic initiatives: expanding our market-leading position in the domestic Canadian market; building our brand in China; and leveraging the power of our platform to drive growth in other international markets. Our gross margin performance was a major proof point for the strength of our global supply chain and operational excellence globally. Despite unprecedented supply chain and inflationary pressures, we were able to expand our consolidated gross profit margin by 150 basis points on a normalized basis, reflecting our ongoing focus on operational improvements and cost management. During fiscal 2021, we saw a continuation of the strong trends we experienced in the prior year, reporting revenue of $451 million, representing growth of nearly 12% over fiscal 2020. Adjusted EBITDA increased almost 14% to $100.1 million, while adjusted net earnings increased by over 15%. This resulted in adjusted diluted earnings per share of $1.32, an increase of nearly 14% versus prior year. Growth was led by our domestic branded business, where revenue rose 8.5%, reflecting strong consumption along with higher inventories to support seasonal promotional activities. Internationally, branded revenue increased 13% on a constant currency basis, as further growth in China was partially offset by the timing of strong replenishments to other regions earlier in the year. Strategic Partners revenue increased by 24%, mainly due to expanded demand and increased [ programs ] with new and existing customers. We remain confident in our future and our continued commitment to delivering strong, consistent results that lead to significant shareholder value accretion. In addition, we remain committed to our historical track record of margin expansion. We have multiple pathways to drive growth for the foreseeable future, along with a highly leverageable global platform that resonates locally with consumers in each of the geographies in which we operate. As we continue our market leadership for the next 100 years, we remain focused on our 3 main pillars for growth; number one is in Canada, continued strong growth in our home country, it is imperative, our Canadian business is always healthy, profitable and growing; number two is China, we'll accelerate consumer awareness and adoption of our brand in the second largest vitamin mineral supplement market in the world, where we have seen much success to date and plan to see much more success in the future. And around the world, we'll expand our leading positions in Eastern Europe, the Middle East and the other 40-plus countries we are in, while selectively entering new markets, either organically or through strategic acquisition. Before I turn the meeting over to Chris, I also want to touch on our significant efforts around ESG. Our vision at Jamieson Wellness is to improve the world's health and wellness. We are very fortunate to manufacture and sell products that have a positive impact on physical health but our definition of wellness also includes mental and social well-being. Recently, we announced that Jamieson Wellness joined the UN Global Compact initiative, another step in our journey that we are very, very proud of. We've also shared with you our ESG targets that we are working towards, and we will continue to share our progress as we make progress in all these areas. I want to thank our entire team for their hard work, dedication and perseverance to bring our vision to life every day for consumers around the globe. Your energy and passion for helping to improve the world's health and wellness helped us deliver another outstanding year and has positioned us for an even brighter future. With that, I'm going to turn the meeting over to Chris to discuss our 2022 guidance. Chris, over to you.

Thank you, Mike, and good afternoon, everyone. As Mike mentioned, 2021 was another exceptional year of growth for Jamieson Wellness. More and more consumers continue to look to Jamieson for their health and wellness needs. And we have been here to ensure those needs are met. Despite the ongoing supply chain and inflation challenges, we remain confident in our ability to meet our revenue and profit growth expectations. And as such, we are reiterating our 2022 guidance and expect the following: Net revenue in the range of $474 million and $491 million representing top line growth between 5% and 9%. This compares to $451 million in revenue for 2021, reflecting strong demand for our branded products both domestically and internationally. Adjusted EBITDA in the range of between $108 million and $112 million or 8% to 12% growth over fiscal 2021, reflecting higher volumes and margins realized from our expanded operating efficiencies, while passing along pricing in all segments of our business, recuperating the impact of higher material prices, transportation and other input costs. Adjusted earnings per fully diluted common share between $1.42 and $1.48, representing almost 8% to 12% growth over fiscal 2020 -- fiscal 2021. We anticipate Jamieson Brands segment growth of between 6% and 10% in fiscal 2022, including 4% to 7% growth of our brands domestically, reflecting strong consumer demand on a higher post pandemic baseline and the impact of retail replenishments throughout 2021, in addition to our continued focus on innovation and our 100th year anniversary marketing campaigns, international revenue growth of approximately 20% on a constant currency basis, driven by growth in China as we increase our local capabilities and brand investments in that market. In addition, revenue will come from growth in our existing markets and from expansion to additional markets in key geographic regions. We expect Strategic Partner revenue growth of up to 5%, reflecting new programs and pricing. In closing, I would like to thank the entire Jamieson team for their unwavering commitment to ensuring our consumers' needs are met. As the world continues to focus on health and wellness, we are honored that Jamieson brand is -- Jamieson is the brand consumers have trusted for 100 years and counting. With that, let me turn the meeting back to Mike.

Thanks so much, Chris. Before we go to Q&A, I'd like to take a moment to acknowledge the tremendous contributions of our Chairperson, Dave Williams. He's been the Chair of Jamieson Wellness Board of Directors since our IPO in 2017. Dave, your thoughtful guidance and outstanding leadership over the past 5 years has been deeply, deeply valuable. On behalf of the Board, management and the entire Jamieson team, I want to thank you for all your support, and we all wish you the very best into the future. The Board has appointed Director, Tim Penner, to succeed Dave as Board Chair, following his election at this AGM. Tim is with us here today, and I'm now going to turn the meeting over to him to say a few words. Tim, over to you.

Thanks very much, Mike. And on behalf of the Board, I also want to thank Dave Williams for his exceptional leadership as Board Chair for the last 5 years. Dave led the company through its IPO in 2017. More recently, he led us through a very successful CEO transition, and he has helped define the strategy that will guide the company's growth for many years to come. Dave, thank you for a job very, very well done. As a Board member for the last 3-plus years, I am quite proud of the work that we've done to develop and rally behind a successful growth strategy and the work that we've done to make meaningful environmental, social and governance improvements. I want to thank the Jamieson Wellness team for driving continued growth with a dedication to operational excellence. And I look forward to working with both the Board and the Jamieson team in my role as Chair. We have so many opportunities together. The future of Jamieson Wellness is tremendously bright. And now I'll turn the meeting back to Dave.

Thank you, Tim, and thank you, Mike, for your kind remarks. My 5 years as Chair of the Jamieson Wellness Board of Directors has been very rewarding, both personally and professionally. I am thankful for the opportunity to contribute to the company's powerful vision of improving the world's health and wellness, I'm proud of our accomplishments and remarkable growth. In working with Mr. Penner on the Board for several years, I am confident that his industry acumen and passion for the continuing legacy of this company, make him my ideal successor. The management team's stewardship of this iconic Canadian company is world class. And I wish Mr. Penner, the Board of Directors, management and the entire Jamieson Wellness team all the best as they continue to drive forward the company's mission of becoming the world's most successful and trusted health and wellness company. I will now open the floor for any questions. [Operator Instructions].

Mr. Chairman, there are no questions at this time. There are no questions at this time.

Thank you, Ruth. And with that, I'd like to thank everyone for attending the Jamieson Wellness 2022 Annual General Meeting. Have a pleasant afternoon.

This concludes the meeting. You may now disconnect.