Jamieson Wellness Inc.

Good afternoon, everyone. Welcome to the Jamieson Wellness Conference Call to discuss the financial results for the second quarter of 2024. At this time, all participants are enlist in only mode. Later, we will conduct a question and answer session and instructions will be given at that time. Please be advised that the reproduction of this call in whole or in part is not permitted without the written authorization from the company. As a reminder, today's call is being recorded. On the call today from the management are Mike Pilato, President and Chief Executive Officer, and Chris Nodan, Chief Financial Officer and Corporate Secretary. Before I turn it over to Mr. Pilato, please note that a press release covering the company's second quarter financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Please note that the prepared remarks, which will follow, contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to all risk factors contained in Jameson's press release issued this afternoon in filing with the Canadian Securities Administrator's for a more detailed discussion of the factors that would cause actual results to differ materially from those projections and any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as it 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 teleconference. Our reconciliation of these non-IFRS financial measures was included with the company's press release issued earlier today. 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 call over to Mr. Palato to get started. Please go ahead, sir.

Thank you, Matthew, and good afternoon, everyone. Thank you for taking the time to join us on the call today. I'll begin with some high-level comments on our Q2 performance and highlight the key activities that contributed to our growth. Then Chris will share a detailed review of the financials before I wrap up and open the floor for questions. In the second quarter, we continue to execute our growth strategy. and leverage our global platform to deliver consolidated revenue of $185 million, an increase of 10% over prior year. We drove growth across all of our branded business units, resulted in branded revenue growth of over 17% in the quarter, led by our China business with growth of over 107% on a constant currency basis. Q2 of 2024 was our most successful promotional quarter to date in China. with programs in June significantly outpacing market growth. We continue to invest in marketing as planned, as our brand, marketing, and demand-generating activities continue to resonate with our target consumer, and growth continues across domestic and cross-border e-commerce segments. In Canada, revenue grew by more than 10% in Q2, as consumer consumption remained strong, and several innovations gained traction in the market, including our recently reformulated 100% complete multivitamins, and six new gummy products, building on our number one gummy position in Canada. Orders impacted by the Q1 labor disruption that were shipped in Q2 as expected also contributed to growth. Demand for our Utheory brand continues to increase. Utheory revenue in the quarter grew by nearly 6% reflecting this demand, but keeping in mind that this is comping Q2 of 2023, which included the initial fill of our new turmeric product. In the first half of this year, U Theory is up nearly 17% and on track to meet our full year expectations. Jameson International Revenue increased by more than 34% in Q2, as several product innovations, including a B12 complex and an omega-tumor product, exceeded our expectations in a few key growth markets. Growth in the quarter was also impacted by the movement of some shipments into Q2 as a result of the Q1 labor disruption. In prioritizing Jameson brand shipments and due to the previously announced transition out of a customer contract, as expected, strategic partner revenue was $5.6 million lower this quarter versus the same quarter last year. From a profitability perspective, consolidated normalized gross profit margins increased by 190 basis points as we drove significant growth in branded sales in the quarter and have a lower proportion of revenue coming from our strategic partners business. Adjusted EBITDA increased by half a million dollars to nearly 32 million dollars in Q2, reflecting higher revenues and profit but continuing to be offset by our continued investment strategy in China. In summary, we are exactly where we anticipated we would be as we reach the halfway point of the year. Our businesses in the US and China are growing strong as our investment strategy in these countries continues and consumers respond with increased demand. The phasing of our marketing plans impact the timing of our adjusted EBITDA growth, which remains on track to meet our outlook for the year. Shipments in both Canada and international have returned to normal after the Q1 labor disruption and are driving growth along with innovation and continued increased consumer consumption. As a result of our strong position today, we are also announcing an 11% increase to our quarterly dividend, which Chris will speak to in more detail shortly. As we head into the second half of the year, we remain focused on executing our remaining marketing, innovation, and promotional activities, delivering on our full-year guidance and ensuring that we continue to live our company purpose of inspiring better lives every day. With that, I will turn the call over to Chris to discuss our second quarter results in more details. Chris, over to you.

Thank you, Mike, and good afternoon. In the second quarter, consolidated revenue increased by 10.3%. to $184.8 million. This growth was driven by Jameson Brand segment and continued strong consumer demand resulting in an increase of 17.2% to $155.8 million of revenue in the quarter. In our strategic partners segment, as we continue to cycle against the closeout of a previous customer contract, revenue is $29 million in the quarter and anticipated decline of 16.3%. A few more details on our branded segment are as follows. Canada revenue increased by 10.1% in the second quarter, driven by strong consumer consumption, pricing, and the shift of revenue from the first quarter into the second quarter due to the labor disruption. U Theory revenue increased 5.6% in the quarter, reflecting increased consumer demand. partially offset by the initial fill of turmeric innovation in the prior year. China's shipments grew 106.6% compared with the prior quarter on a constant currency basis, driven by our marketing investment to drive brand equity, awareness, and a highly successful promotional program in June. Jameis International Revenue, increased by 34.3% on a constant currency basis, driven by innovation and the timing shift in revenue due to the labor disruption in the previous quarter. Consolidated gross profit increased by $10.2 million to $65 million in the second quarter, while normalized gross profit increased by $9.4 million, mainly driven by higher revenues and increased margins. Consolidated gross profit margin increased by 250 basis points to 35.2% in the quarter, while normalized consolidated gross profit margins increased by 190 basis points. Margin improved due to the significant growth in Jameson brand sales and a lower proportion of strategic partner revenues. In the Jameson brand segment, gross profit increased by $11.6 million, while normalized gross profit increased by $10.8 million, mainly driven by revenue growth and higher margins. Gross profit margin in the Jameson brand segment increased by 190 basis points, while normalized gross profit margin increased by 130 basis points to 40.4%, mainly driven by significant volume growth in China. In our strategic partner segment, gross profit margin decreased by 190 basis points to 12.9%, impacted by lower volumes and customer mix. In Q2, SG&A, up $43.9 million, reflected an increase of 25.9%. Excluding the impact of specified cost, SG&A expenses increased by $8.5 million, mainly driven by $9.8 million in investment to grow our brands as we continue to prioritize our global expansion initiatives. These costs were partially offset by $1.3 million in other SGN expenses due to the timing of variable compensation costs. Specified costs of $4.1 million in the quarter were largely comprised of $3.4 million of IT system implementation costs. Operating income in the second quarter increased by $0.8 million, driven by higher gross profit and partially offset by the timing of investments in SG&A. On a normalized basis, operating income increased by $0.6 million and adjusted EBITDA increased by $0.5 million to $31.6 million, reflecting the impact of higher sales volume and pricing, partially offset by higher investments in marketing and infrastructure. Adjusted net earnings in the quarter was $14.7 million, or $1 million higher than Q2 2023. A reconciliation of our adjusted EBITDA and adjusted net earnings is provided in today's press release announcing our second quarter results. Now turning to the balance sheet and cash flow. In Q2, we generated cash from operations before working capital considerations of $17.1 million. $4.4 million higher, mainly due to higher gross profit margins. Cash invested in working capital increased by $9.3 million due to the timing of accounts receivable collections partially offset by a drawdown in our inventories. In Q2, we distributed $7.9 million in dividends and ended the quarter with $190.1 million in cash and available revolving and swing line facilities. Based on our strong cash position and forecasts, we have announced a dividend of $0.21 per common share, or approximately $8.8 million in aggregate. This represents a $0.02 or 11% increase compared to the second quarter dividend in the prior year. This dividend will be paid on September 13, 2024, to common shareholders of record at the close of business of August 30, 2024. Now turning to guidance. All of our business units are continuing to perform as expected, as consumer consumption globally remains very strong. We maintain our previous guidance disclosed for the full year of fiscal 2024 and fiscal 2025. With respect to the third quarter, we expect the following. Consolidated revenue to range between $167 and $177 million, an increase of 10 to 17%. Revenue in the Jameson brand segment is expected to increase by 14 to 20%, or approximately $147 to $155 million. Revenue in the strategic partner segment is expected to decline up to 10%, reflecting our transition away from the customer contract with a new business anticipated to begin shipping in the fourth quarter. Adjusted EBITDA to range between $31 to $34 million, broadly reflecting increased shipments, product innovation, and strong continued consumption, offset by investments to drive brand awareness and growth in both the U.S. and China. With that, I will turn the call back to Mike for closing comments. Mr. Palaudo.