Jamieson Wellness Inc.

administrators for a more detailed discussion of the factors that could cause actual results to differ materially from those predictions and any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during a presentation to reflect future events or circumstances, except as it may be required under the optical securities laws. Finally, we would like to remind listeners that the company may refer to certain non-IFRS financial measures during this teleconference. A 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. Pallotto to get started. Please go ahead, sir.

Thank you, Andrew, 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 Q2 performance and highlights. Chris will then review the financials in detail before I conclude our prepared remarks and open the floor to questions. Q2 marked another solid quarter, reinforcing the continued strength of the health and wellness category and our leadership within it. Branded revenue growth of nearly 14% reflects both sustained global demand for our trusted brands and our team's continued execution of our strategic plan across all key markets. In China, we grew both dollar and volume share in each of our primary platforms throughout the quarter as our marketing and social commerce activity continues to bring new consumers into the Jameson ecosystem. This investment halos the rest of the Jameson business as we saw remarkable results in our traditional cross-border e-commerce platforms, brick and mortar channels, and specifically through our successful 618 campaign, which averaged 73% growth over the prior year's promotion. In the U.S., U Theory is gaining traction with growth of nearly 10% in the quarter. Consumption grew in our traditional retail channels and was also particularly strong in e-commerce, driven by our new e-commerce partnership. Trending ingredients, including ashwagandha and shilajit, were standouts in the quarter, driving demand for products in the growing stress support and energy categories. In Canada, consumer consumption remains strong, outpacing shipments, as our proudly Canadian platform continues to resonate with consumers. Our new product quality advertising campaign, featuring our own team members working within our own facilities, continued in Q2, with new creative in support of the launch of our new magnesium product executed in-store and across traditional and social media channels. Magnesium has seen substantial consumer interest and demand, and Jameson has elevated the product offerings available with its last innovation that is now performing ahead of our expectations. Internationally, we're seeing continued momentum driven by innovation, particularly across the Middle East, as new product launches and successful Heart and Women's Health campaigns drove sell-through in many markets. In our strategic partner segment, our team is focused on delivering new products and expanding our relationship with existing customers. Some confusion in the quarter around the tariff situation caused delays initially while we worked to understand business impact with our partners. Now clarified, we are on track for Q4 delivery on these opportunities. We exited the first half of 2025 with growth across every branded business unit and delivered a combined branded growth of 14%, setting us up to meet our full year expectations. As we head into the second half of the year, we remain focused on executing our innovation roadmap, expanding our global reach, and driving operational excellence. Now let me turn the call over to Chris to discuss our financial performance in detail.

Chris? Thank you, Mike, and good afternoon, everyone. In the second quarter, consolidated revenue increased by .7% to $199 million. Growth in the quarter was driven by our Jameson brand segment, which exceeded expectations with growth of 13.8%, increasing to $177 million. Each of our branded business units grew revenue in the second quarter as follows. China increased by 70.8%, primarily driven by a successful 618 promotional campaign, continued consumer loyalty behind our brand building investments, and a heavier weight of influencer programs scheduled for the quarter. Youth theory increased by 9.7%, mainly due to strong consumption in our traditional channels. Growth in e-commerce driven by our new strategic partnership and the timing of shipments of our Q3 promotional programs. Canada increased revenue by 2%, of which .8% was driven by strong consumer consumption and pricing, partially offset by 4.8%, impacted by strong Q2 shipments in the prior year after our first quarter labour disruption. International volumes increased by 9.6%, driven by strong consumer growth in our core markets, particularly in the Middle East. Revenue in our strategic partner segment had decreased by $7.2 million as expected, impacted by the timing of customer ordering patterns for the existing business and new programs shifting later in the second half of the year. Consolidated gross profit increased by $15.8 million in Q2, while normalized gross profit margin or gross profit increased by $14.2 million, mainly driven by higher brand revenues and increased margins, partially offset by lower strategic partner volumes. Consolidated gross profit margin increased by 540 basis points to 40.6%, while normalized consolidated gross profit margins increased by 460 basis points. In the Jameson brand segment, gross profit increased by $17 million, while normalized gross profit increased by $15.4 million, mainly driven by higher revenue and increased margins. Gross profit margin in the Jameson brand increased by 480 basis points, while normalized gross profit increased by 370 basis points to 44.1%, mainly driven by volume and efficiencies compared to shutdown-related inefficiencies in the prior year and favorable channel mix in China in the current quarter. Strategic partner gross profit decreased by $1.2 million, and gross profit margin decreased by 110 basis points, mainly driven by lower volumes and production mix. SG&A expenses increased by .2% in the quarter, excluding the impact of specified costs. SG&A expenses increased by $10.9 million, or .2% due to investments in China through e-commerce marketing campaigns, including the weighting of influencer programs scheduled in the quarter and the timing of variable compensation. Specified costs of $4.7 million in the quarter are mainly comprised of system development costs and post-implementation startup costs associated with our SAP system implementation and other non-recurring expenses primarily related to non-operating legal costs. Operating income increased by $5.1 million, driven by higher gross profit and partially offset by our investment in SG&A. On a normalized basis, operating income increased by $4.1 million, and adjusted EBITDA increased by $3.5 million to $35.1 million. Adjusted net earnings was $17.3 million, or $2.6 million higher than the second quarter of the previous year. A reconciliation of adjusted EBITDA and adjusted net earnings is provided in today's release announcing our second quarter results. Turning to the balance sheet and cash flow. We generated cash from operations before working capital considerations of $18.8 million, an increase of $1.7 million from the prior year. Cash used in working capital decreased by $2.9 million, mainly due to the timing of vendor payments, partially offset by higher accounts receivable from timing, and increased inventories to support growth of our business. In the second quarter, we repurchased for cancellation 96,420 common shares under our NCIB program for an aggregate consideration of $3.1 million, at an average price of $32.43 per share. In Q2, we distributed $8.8 million in dividends and ended the quarter with almost $133 million in cash and available operating lines. Based on the strength of our cash flow in the year, we have announced a dividend of $0.23 per common share, or approximately $9.5 million in aggregate, an increase of $0.02 per share, or 9.5%. The dividend will be paid on September 12, 2025, to common shareholders of record at the close of business on August 29, 2025. Now turning to Outlook. We are maintaining our consolidated revenue and adjusted EBITDA outlook for fiscal 2025, while adjusting our Jameson brand segment outlook to reflect higher branded revenue in China due to our successful digital media programs and strong demand, and lower strategic partner revenue to account for the onboard timing of new programs and partners. In fiscal 2025, we now expect the following. Revenue in the Jameson brand segment to range between $695 to $720 million, representing 10.5 to .3% growth. Jameson China revenue is now expected to grow between 30 and 40%, driven by market expansion, innovation, and increased effectiveness and efficiency of our digital media programs, driving trial and awareness. Revenue in the strategic partners segment to range between $105 and $116 million, representing growth of up to 10%. Growth is expected to be driven by our new programs and higher volumes within our existing program portfolio. Uncertainties surrounding U.S. tariffs have delayed orders and the launches of new products into the fourth quarter, with some new customers shifting volumes into 2026. In addition, adjusted diluted earnings per share is now expected to range between $1.79 and $1.90, or 11 to 18% growth, reflecting higher interest expense on the repurchase of shares under our NCI program and the timing of higher seasonal working capital investments. Our Q3 guidance reflects continued Jameson brand growth built upon our first half momentum. In the third quarter, we expect the following. Consolidated revenue of between $182 and $192 million, representing 3.3 to 9% growth, with higher Jameson brand shipments slightly offset by expected declines within our strategic partners segment. Revenue in Jameson brand segment is expected to increase by 6.5 to 11.5%, driven by consumer demand, innovation, and branded growth across all key markets. Revenue in strategic partners segment is expected to decrease between 10 and 20%, due to planned reductions within existing customers and the timing of commercialization of new business. Adjusted EBITDA to range between $35 and $37 million. Our 2025 guidance reflects the current prevailing trade environment between the United States, Canada, and other countries. To date, tariffs have not had a material impact on our overall financial performance, as these costs have been mitigated through our flexible supply chain and operating efficiencies. We recognized the trade environment is constantly changing, and actual results may be impacted by future changes in global trade policies. A complete discussion of our outlook for the third quarter and full year fiscal 2025, as well as factors impacting our expected performance is included in the outlook section of our MD&A filed this afternoon. And with that, I will turn the call back to Mike for closing comments. Mike.

Thank you, Chris, and thanks for your contributions as corporate secretary for Jameson since 2017 in addition to your role as CFO. I am pleased to announce that effective September 1st, Chris will transition his corporate secretary duties to Tara Martin, our senior vice president and general counsel, allowing Chris more time to focus on our strategic business development initiatives. I'd like to once again thank the entire team for their efforts this quarter as we continue to push forward with our purpose of inspiring better lives every day. These kinds of results do not happen without our entire Jameson team working extremely hard with passion, with purpose, and with collaboration. They are an amazing group of professionals that I am proud to be a part of. With that, we will now go to Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question is from Derek from TD Cowan. Please go ahead.

Good afternoon, Mike and Chris, and congratulations on all the results all around. Thanks, Derek. Just maybe a couple for me. I just wanted to zero in on the PR and new theory. I think you guys said that you are gaining traction through the traditional retail presence. You've been clear, obviously, that you are doing really well in club and e-commerce. It feels new. Just maybe add some meat to the bones here.

I think what we are saying in that portion is two things. One, we have continued to pick up some strategic distribution and sustainable distribution as we continue to bring out some new innovation and expand across some retail channels or customers. We have also seen strong consumption. You kind of have seen two things in there. I think consumption has been pacing well. We talked about the pacing behind Ashwagandha and Shilajit. Both ingredients that are really driving growth under trending categories of energy and stress relief that we've talked about for some time. We are continuing to pick up some new distribution as well with some of our new innovations. Really proud of what the team has been able to do down there in our traditional channels and into brick and mortar over the last quarter. I really feel we've got some momentum building there.

Okay, sounds great. I guess you highlighted the timing of shipments for Q2 promotion. As a driver this quarter, does that pull forward some of the shipments in Q3? I guess how should we be thinking about the growth cadence in Q3 for you,

Terry? Yeah, your Q3 shipments will still be strong within guide. There's no anomaly in the quarter there. There may be a little bit extra going.

Okay, thanks, Chris. And, Shilajit. One thing I would

just point to everyone in terms of timing. If you go back to last quarter, we talked about a year ago. Innovation in U Theory was front half-weighted and this year it's back half-weighted. So we're going to see some strong innovation in the back half on U Theory.

Okay. And just maybe last one on China. Pointed to brand loyalty growth. Just maybe talk about how you're measuring that and what you're seeing in terms of the trend.

Yeah, so the way we measure it is as a few ways. So we look at what is happening on social commerce in terms of KOLs that we're leveraging. We've seen very strong growth, obviously, in those channels as we've invested there. But then we've seen very strong growth. We've seen that halo quarter after quarter now to the more traditional channels. It's really significant growth and also strong growth where we have brick and mortar distribution. The consumption coming out of those channels is high as well. We also measure brand equity scores. So we speak to consumers. We do our consumer research and we've really started to see consumer equity and brand equity really start to grow behind our investments. So we measure specifically what are we spending in marketing and in social commerce. And then we look at the other channels to see what's happening, what's haloing over there. And then we speak to consumers through our consumer research methodology to show strength. We also have started to measure some share metrics in China and have seen share growth across dollars and units in the quarter at a substantial rate above any of our foreign brand competitors.

Thanks for that and congrats again, guys.

Thanks, Derek.

Thank you.

Your next question is from Nevin Yilkem from PMO Capital Markets. Please go ahead. Yeah,

thank you. Hi, guys. You got Nevin on for Steve tonight. Hey, Nevin. A couple of questions. Hi. So I guess just sticking with the China theme, can you provide some incremental detail on what's driving the improved outlook? Just wondering if there's been any change in your underlying assumptions for broader industry growth in the second half of the year?

No, I think we're upping the guidance a bit in the second half just mainly based on the momentum we have coming out of the first half. We've delivered a very strong plus I think 62 percent in the front half of the year in China. We expect some continued momentum. We are coming up against some real tough comps now in Q3 and Q4. Last year we really started to accelerate in the back half. But we feel we've got good momentum. We feel like we're at a point where we could call that China number up a bit for the second half. And, you know, from a market perspective, we're continuing to see some growth in the China market, you know, some solid growth in the China market. But we continue to outpace that substantially. And we plan to keep doing that into the back half of the year.

Got it. Thanks, Mike. And then switching gears to the domestic market here. I hope you could provide some detail on the underlying 6.8 percent consumption growth in the quarter. That would break down between volumes as well as pricing and then what you're seeing in terms of consumer behavior.

Yeah, so we continue to see consumer behavior be consistent here in Canada. We continue to see a continued shift to channels like club and e-commerce, which we've talked about for a couple of years now as consumers continue to look for value. But we had a great quarter on a consumption basis. So we had mid single unit, mid single percentage unit growth and high single digit dollar growth. What's contributing to that really is our new marketing campaign is doing very well. Our innovation is strong and the gap between units and dollars is a little bit of some pricing overlap. If you remember, we took pricing towards the end of Q1 in 2024 and a little bit of lapping in Q3 as it takes some time for customers to reflect that pricing and market. So a little bit of pricing, but good strong unit growth, mid single digits outpacing category. And we're feeling pretty bullish on the back half of the year around our new advertising campaign and our innovation strategy.

Great to hear. Thanks for taking my questions.

Thank you. Our next question is from Justin Keywood from Stiefel. Please go ahead.

Hi, thanks for taking my call. Nice to see the continued solid execution. Just trying to understand some of the commentary around the strategic partner segment and I guess some variability around the tariffs. So are these US customers where there's some deferrals, I guess, in onboarding or how should we look at that?

Yeah, that's exactly the way I would speak to it. I think it's interesting every time the headlines roar on tariffs, you know, we're onboarding new customers this year. We're signing some new contracts. You just get delays in the system as those create noise and it takes time to circle back, talk about tariffs, talk about the impact, which at this point is really no impact under the KUSMA deal that we have with the United States. But it causes jitters in the marketplace and it's just caused some onboarding to be delayed into Q4 as contracts got put on hold during some of those announcements and some of the noise in the system. So it's exactly as you said, we'll bring as much on as we can in the year. We've adjusted our guide down a little bit and we'll continue to push forward with these customers.

Is there some thought to perhaps replacing those customers with domestic opportunities? 100%.

No, 100%. We are looking at some Canadian opportunities and some global opportunities to work into our system over time. As we talked about at the beginning of the year, there's a little bit of noise on tariffs and strategic partners. We're fully confident in strategic partners moving forward. We just might get into some timing shifts based on announcements and then based on maybe cycling out U.S. for international. But there's a lot of irons in the fire. There's a lot of opportunities out there. It's just a timing game right now.

Okay, great. That's helpful. And then shifting to China, we noticed DCP Capital, your partner, made a pretty substantial acquisition of Sun Art retail group, which as we understand it operates something like 500 stores. Is that an opportunity? I assume it's an opportunity for Jamison, but maybe just if you see it the same way and how that could play out in the quarters ahead?

Yeah, we do see it as a potential opportunity. They did make an announcement. I think that was in Q1. They made that announcement. I believe they've since have closed that deal and are in the middle of doing their work there. We are in talks with them about what a vitamin opportunity could look like with that retailer. It's not a retailer that traditionally has played in this category, but they would like to bring this category alive there and obviously with us. So there is some opportunity there. Any business that we see in the short term would be in our guide. We don't expect it to be huge out of the gate. It's a bit of a test and learn with a new customer. But as it builds traction and if that test becomes successful, you'll see it into our future expectations on the business.

Very helpful.

Thanks for taking my questions. You're welcome. Ladies and

gentlemen, as a reminder, should you have any questions, please press the star followed by the number one. Your next question is from Zachary Evershed from National Bank Financial. Please go ahead.

Hey, congrats on the quarter and thanks for taking my questions.

Thank you, Zach. Nice to hear from you. So discussing the e-commerce partnership, it sounds like it's going well. Could you give us an update on how it's performing relative to plan in terms of the speed of the rollout and the lift that you're hoping to get on the marketing?

Yeah, we're getting really solid double digit lifts on it. Our plan was built quarter by quarter building. Like, this is something that doesn't just flip on and all of a sudden you're doubling and tripling your business. It builds quarter after quarter after quarter. And we've seen on plan increases in terms of consumption from Q1 to Q2. And we expect to see continued growth there in Q3 and Q4. So we're feeling good about it. Again, you know, as we talked about a lot, we like to test and learn things. So we're testing and learning with that partner on different promotions, different aspects of how they can drive volume and making sure that we're pushing our dollars to the most efficient spend on the platform to drive the highest POS growth at the highest profit that we can. So a lot of maneuvering going on testing and learning, but substantial growth in Q2 and looking forward to the back half.

Gotcha, thanks. And then on the QInnovations in the Proudly Canadian platform, what is resonating and driving that domestic growth in addition to the magnesium category?

Yeah, I mean, magnesium is where we have put a lot of focus on because it's a growing category. We have a superior product that we brought to market and we've spent a lot of our marketing is pointed at that product right now. So it definitely is the clear winner. And we think that we have a winner for the market long term. And it's doing well. Really, if I think about growth in Canada, I think about it kind of in three pillars. Our quality campaign, our new quality campaign is doing exceptionally well for us using our own employees, giving consumers a peek into our facilities. I think that is driving a substantial chunk of the growth for us. I think number two would be some of the innovation we have in the market. And then number three, a little bit of pickup on this proudly Canadian theme that we're feeling here in Canada today.

That's helpful. Thanks. We'll turn it over. Thank you.

Your next question is from Rylan Conrad from RBC Capital Markets. Please go ahead.

Hey, good afternoon, guys. Thanks for taking my questions. Just to start off. I know it's still early days, but is there any kind of incremental things that you could share on the initial traction with GLP-1? Is that expected to be more of a meaningful contributor in the back half?

Yeah, I mean, our GLP-1 products launched, I think, a couple late Q4 last year, and maybe the third one, early Q1. As we've talked about, it's kind of a put it in market and let's see how it builds over time. It's like anything in this category we talked about, and that's why we've never talked about it with any huge numbers for this year. You throw down in this industry, in this category, bunts and singles on innovation, and they turn into doubles, triples, and home runs over time because you're changing consumer behavior. In this case, we're actually entering a brand new category. I mean, it's consumers that are going down this new weight loss journey for the first time. So we're seeing it continue to build. Any growth we see in it and anything we've seen in the front half and anything we see for it in the back half is built into our into our guidance that Chris shared. But we never expected this to be a rocket ship out of the gate. We expect it to build over time, and we're seeing some consistent growth to our expectations.

Okay, that's helpful. And then just kind of shifting gears to capital allocation. I believe you're previously looking at maybe doing a bit or being more active on M&A later this year. But just curious if there's been any kind of changes to your priorities just following the preferred share redemption by DCP.

No, we continue to be committed to growing both organically and through acquisition. The environment, there's actually reported to be some opportunities coming to market as we get to the end of 2025 and into 2026. We continue to have our requirements from an M&A perspective and we'll evaluate opportunities as they come to our attention.

Perfect. Thanks guys. Thank you. Ladies and gentlemen, this concludes your conference call for today.

We thank you for participating and ask that you please disconnect your lines.