Jamieson Wellness Inc.

everyone. Welcome to the Jameson Wellness Conference call to discuss the financial results for the third quarter of 2024. At this time, all participants are in a listen-lonely mode. Later, we will conduct a question and answer session, and instructions will be given at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, Today's call is being recorded. On the call today, from management are Mike Palato, President and Chief Executive Officer, and Chris Snowden, Chief Financial Officer and Corporate Secretary. Before I turn the call over to Mr. Palato, 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, and due reliance should not be placed upon them. We refer you to all risk factors contained in Jameson's press release issued this afternoon and in filings with the Canadian Securities Administrators for a more detailed discussion of the factors that could 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... I will now turn the call over to Mr. Palato to get started. Please go ahead, sir.

Thank you, Angeline, and good afternoon, everyone. Thank you for taking the time to join us on the call today. I'll start with an overview of our Q3 performance and key growth activities. Chris will then review the financials in detail before I conclude our prepared remarks and open the floor to questions. In the third quarter, consolidated revenue reached $176 million, representing a 16% increase compared to the prior year. Our brands continue to resonate with consumers globally, with growth in all of our key geographies. Consumers continue to focus on improving their health and wellness with quality brands they can trust. And this is reflected in our branded revenue growth of 20% in the quarter. In Canada, revenue increased by 15% over Q3 2023 and a 4% growth year to date, driven by continued strong consumer consumption, pricing, and lapping of a customer inventory reduction in the same period last year. In addition to product innovations we discussed earlier in the year, such as an expansion of our Jameson gummies line and new and improved 100% complete multivitamins. In Q3, we launched two new Jameson sleep support products that are doing well and contributing to our innovation targets for the year. China revenue increased almost 82% in Q3 and 89% year to date, driven by our marketing and promotional investment strategy. Our dedicated team in China continues to work closely with our global consumer insights team to ensure Jameson is anticipating consumer needs and responding with product innovations to meet them. As a result, in Q3, we significantly outpaced category growth in both units and dollars and generated material gains in on-trend categories such as energy, immunity, bone health, and eye health. Utheory revenues increased nearly 6% on the quarter and 13% year-to-date, driven by consumer consumption, innovation, and new distribution. and partially offset by the initial stocking of product renovations in the prior year. Our Utheory brand continues to resonate with consumers, and in Q3 in particular, we drove double-digit growth of two of our products in the stress and energy categories, these two consumer needs states that continue to be on trend. International revenue increased 25% in Q3 and 17% year-to-date, driven by innovation and new distribution gains. This was a particularly exciting quarter for our international business as we grew in every region in which we operate. In our strategic partner segment, revenue was down by just over 5% as expected. Through the quarter, the team was focused on replacing our previously lost contract. We were pleased to have secured new partners during Q3 and expect to have new business begin shipping before the end of the year. From a profitability standpoint, consolidated normalized gross margins rose by 230 basis points due to substantial growth in branded sales during the quarter, and adjusted EBITDA rose by $2 million to approximately $34 million. With the successful Q3 behind us and the end of 2024 just around the corner, we remain committed to delivering on our strategic priorities. Our new integrated advertising campaign in Canada is reinforcing the Jameson brand's position as a leading vitamin mineral supplement brand. It is connecting consumers even more deeply with our brand and history of industry leading quality and trust through digital marketing, social media engagement, influencer partnerships, and engaging TV ads featuring our own facilities and team members. In 2025, we will expand this exciting campaign globally sharing these snapshots of Jameson's operations, people, and commitment to quality with new audiences worldwide. We are continuing to invest in brand growth in China and the US, as our high-quality products continue to gain the trial and trust of consumers in these markets. Distributor-partner collaboration has been integral to growth in our international business, and we are continuing to deepen our relationships with our distributor partners to support this fast-growing segment of our business. Thank you for your support as we continue to work towards delivering another successful year. Now, let me turn it over to Chris for a deeper dive into our financial performance.

Chris. Thank you, Mike. And good afternoon, everyone. In the third quarter, consolidated revenue increased by 16.3% to $176.2 million. This growth was driven by our Jamison brands as our marketing strategy in China and new integrated advertising campaign in Canada helped fuel strong consumer demand, resulting in an increase of 20% to $155 million to cycle against the closeout of previous revenue in the quarter. In strategic partners, as we continue to cycle against the closeout of a previous customer contract, revenue was $21.2 million in the quarter, an anticipated decline of 5.4%. Breaking down our branded revenue results in the quarter, Canadian revenue increased by 15.1%, driven by strong consumer consumption, pricing, and the impact of customer inventory reduction in the same quarter of the previous year. U Theory revenue increased by 5.7%, driven by consumer consumption, innovation, and new distribution, impacted by the timing of product renovations and innovations in the prior quarter. China revenue grew 81.7% on a constant currency basis, driven by our marketing and promotional investments. Jameson International revenue increased by 25.2% on a constant currency basis, driven by innovation and distribution gains. From a profitability perspective, consolidated gross profit increased by $16.4 million in the quarter, while normalized gross profit increased by $12.9 million. This was mainly driven by increased revenue and higher profit margins. Consolidated gross profit margin increased by 460 basis points to 38.4%, while normalized consolidated gross profit margins increased by 230 basis points. Margin improvement due to higher mix of Jameson branded sales and the amortization of fair value adjustments in the prior year. Within the Jameson brands, Gross profit increased by $17.6 million, while normalized gross profit increased by $14.1 million, mainly driven by revenue growth and higher branded margins. Gross profit margin in Jameson brands increased by 520 basis points, while normalized gross profit margins expanded by 250 basis points to 42.1%, primarily driven by growth in China and favorable category mix. In our strategic partner segment, gross profit margin decreased by 460 basis points to 10.9%, impacted by lower volumes impacting plant utilization and customer mix. In the quarter, SG&A expenses increased by 36.4% to $42 million. Excluding the impact of specified costs, SG&A increased by $10.4 million, mainly driven by $9.6 million in marketing investment to grow our brands and continue to prioritize our global expansion initiatives. Specified costs of $3.6 million in the quarter are mainly comprised of our IT system implementation costs. Operating income in the third quarter increased by $4.8 million, driven by higher gross profit and partially offset by increased investment in marketing. On a normalized basis, operating income increased by $2.2 million and adjusted EBITDA increased by $2 million to $33.9 million. Adjusted net earnings in the quarter was $15.8 million, or almost a million dollars higher than Q3 2023. A reconciliation of adjusted EBITDA and adjusted net earnings is provided in today's press release announcing the third quarter results. Turning to the balance sheet and cash flow, in Q3, we generated cash from operations before working capital considerations of $18.5 million, almost $1 million higher, mainly due to increase in our operating profits. Cash generated from working capital increased by $37.4 million due to the timing of accounts receivable collections, income taxes payable, and managed lower inventories. In Q3, we distributed $8.8 million in dividends and ended the quarter with more than $200 million in cash and available operating lines. Based on the strength of our forecasted cash flow this year, we've announced a dividend of 21 cents per common share or approximately $8.8 million in aggregate. This dividend will be paid on December 13th, 2024 to common shareholders of record at the close of business on November 29th, 2024. Now turning to our outlook. The investments we've made this year in digital and traditional marketing continue to provide returns and the consumer consumption remains strong across each of our primary markets. Based on these factors, we're iterating our outlook for fiscal 2025 while narrowing our full year guidance for fiscal 2024. Updates to our 2024 guidance include consolidated revenue is now expected to range between $725 and $755 million, an increase of between 7.2 and 11.7% from our previous range of 6.5 to 12.5%. We now expect Jameis and Brand's revenue to range between $620 and $645 million, an increase of 12.5 to 17% from our previous range of 12 to 18% growth. Strategic partner revenue is now expected to range between $105 and $110 million, a decrease of 12% to 16%, updated from our previous guidance range of 10% to 20% decrease. We have narrowed our range for consolidated adjusted EBITDA and now expect between $139 and $143 million, up to 3.6% growth. Adjusted diluted earnings per share of $1.57 to $1.63, up to 5.2% growth compared to the prior year. A complete discussion of our outlook for the fourth quarter and full year fiscal 2024, as well as factors affecting our expected performance, are included in our outlook section of our MD&A filed this afternoon. And with that, I will turn the call back to Mike for closing comments. Mike? Thanks, Chris.