Record revenue represents growth of 41%
year over year
TSXV: JTR
www.greenspacebrands.ca
(all amounts in Cdn$
unless otherwise
noted)
TORONTO, Nov. 14, 2018 /CNW/ - GreenSpace Brands Inc.
("GreenSpace" or "the Company") (TSXV: JTR) today reported its
second quarter fiscal year 2019 results for the period ending
September 30, 2018.
Key Highlights for the Second Quarter of Fiscal 2019:
- Record gross revenue of $21.7
million, representing a 41% increase over the prior year
period and a 3.2% sequential increase from the first quarter of
fiscal 2019
- Adjusted gross margin of 24.4% compared to 23.0% for the
prior year period and 23.7% in the first quarter of fiscal
2019
- SG&A expenses increased from 18.3% to 23.7% of gross
revenue year over year, primarily due to higher costs in the US
business
- Adjusted EBITDA margins fell to (5.1%) as a percentage of
net revenue excluding listing fees, from 3.5% in the prior year
period
- Rebates and Discounts as a percentage of gross revenue was
10.9% compared to 11.8% in the prior year period
- Announced organizational changes affecting the US business,
resulting in annual cost savings expected in the range of
$1.4 million to $1.8 million
- Announced the appointment of James
Haggarty as Lead Director for GreenSpace Brands, effective
immediately
"The second quarter saw continued investment to support our US
business, primarily in product development relating to the launch
of Riot Eats, the re-launch of Go Veggie and the launch of
Love Child into the US.
That investment negatively affected adjusted EBITDA but is now
virtually complete and our expectation is that with a focus on
operational efficiency, we believe we can return to positive
adjusted EBITDA prior to the end of the fiscal year." said
Matthew von Teichman, President and
CEO, GreenSpace. "While we remain committed to growing our
existing brands, operational efficiency and cost management
continue to be a key focus as we work towards achieving
profitability and driving value for our shareholders. The recent
focus on operational efficiencies has started to show results, as
reflected by our adjusted gross profit improvement of 1.4
percentage points, the highest gross margin we have achieved in
over 2 years."
Consolidated Performance Summary
|
Three months
ended
|
Six months
ended
|
|
|
Sept
30
|
Sept
30
|
|
(in thousands
of Canadian dollars, except per share amounts)
|
2018
|
2017
|
2018
|
2017
|
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Gross
revenue
|
21,656
|
15,370
|
42,641
|
29,603
|
|
Less: rebates and
discounts
|
(2,349)
|
(1,820)
|
(4,693)
|
(3,494)
|
|
Less: listing
fees
|
(262)
|
(412)
|
(333)
|
(542)
|
|
Net
revenue
|
19,044
|
13,138
|
37,615
|
25,567
|
|
|
|
|
|
|
|
Gross
profit
|
4,440
|
2,701
|
8,755
|
5,436
|
|
Adjusted Gross
Profit1
|
4,702
|
3,113
|
9,117
|
5,978
|
|
Adjusted Gross Profit
margin1
|
24.4%
|
23.0%
|
24.0%
|
22.9%
|
|
|
|
|
|
|
|
SG&A
expenses
|
5,135
|
2,814
|
11,909
|
5,471
|
|
Amortization of
intangible assets
|
701
|
463
|
1,401
|
816
|
|
Deferred income tax
(recovery)
|
(195)
|
(123)
|
(391)
|
(217)
|
|
Interest
expense
|
412
|
67
|
804
|
148
|
|
Accretion
expense
|
28
|
68
|
58
|
115
|
|
Other income and
expense
|
98
|
-
|
98
|
-
|
|
Foreign exchange
loss
|
(143)
|
-
|
91
|
-
|
|
Net income
(loss)
|
(1,596)
|
(588)
|
(5,215)
|
(897)
|
|
Net loss per share
(basic and diluted)
|
(0.02)
|
(0.01)
|
(0.07)
|
-
|
|
|
|
|
|
|
|
EBITDA
|
(672)
|
(44)
|
(3,008)
|
79
|
|
EBITDA, as a
percentage of net revenue
|
(3.5%)
|
(0.3%)
|
(8.0%)
|
0.3%
|
|
|
|
|
|
|
|
Adjusted
EBITDA1
|
(984)
|
475
|
(1,368)
|
890
|
|
Adjusted EBITDA,
as a percentage of net revenue excluding listing
fees1
|
(5.1%)
|
3.5%
|
(3.6%)
|
3.4%
|
|
1 – See Non-IFRS
Measures
|
Revenue
Gross revenue, for the second quarter ended
September 30, 2018, was the highest
gross revenue amount earned by the Company in a single quarter.
Gross revenue for the quarter ended September 30, 2018 increased 40.9% and net
revenue, which is gross revenue net of deductions for rebates,
discounts and one-time listing fees, increased 45.0% over the same
period in prior year.
The gross and net revenue increases in the quarter were the
result of the inclusion of sales of our GO VEGGIE brands through
the acquisition of Galaxy Nutritional Foods, Inc. ("GSB South")
effective January 28, 2018, and Cedar
which was acquired on August 23,
2017. The Company continued to benefit from the launch
of MeatBar, and also had strong growth in Love Child and Kiju. Revenue growth was
partially offset by lower sales from Central Roast, which had a
particularly strong second quarter in the same period last year due
to promotional activity which was not repeated this year, as well
as the discontinuation of Nudge and Holistic Choice whose results
had appeared in previous quarters.
Gross Profit and Adjusted Gross Profit (see Non-IFRS
Measures)
The Company's Adjusted Gross Profit margin for the
second quarter ended September 30,
2018 increased by 1.4 percentage points over the same period
last year. The increase was primarily due to a larger proportion of
revenue being earned through the relatively higher margin GO VEGGIE
brand, which was acquired during the fourth quarter of fiscal 2018,
as well as actively managing production costs across the
portfolio.
Consistent with prior periods, listing fees incurred in the
current quarter (considered one-time, non-recurring costs) have
been added back to gross profit by the Company in calculating
Adjusted Gross Profit. Please see the non-IFRS measures for details
on these adjustments.
Selling, General and Administrative ("SG&A")
Expenses
Overall, SG&A expenses for the second quarter
ended September 30, 2018 increased
from 18.3% of gross revenue in the second quarter of fiscal 2018 to
23.7% of gross revenue in the current quarter. The increase was
primarily due to higher operating costs incurred by GSB South which
are currently higher as a percentage of net revenue compared to the
rest of the GreenSpace business. In addition, the Company continued
to invest in product development to support the launch of Riot
Eats.
GSB South Integration
Today the Company is announcing that it will be closing its US
office in Rhode Island, and
integrating the day-to-day operations into its Toronto office. Existing sales and marketing
functions for the US market will be maintained as is, but all
operations and finance functions will be rolled into the existing
Canadian infrastructure. The Company expects to record a
restructuring provision in the third quarter in the range of
$0.85 million to $0.95 million, and also expects to realize cost
savings from this initiative in the range of $1.4 million to $1.8
million annually.
Outlook
GreenSpace continues to believe that there are a number of
fundamental trends occurring within both the Global and North
American food industries. These trends will continue to drive
consumer demand for GSB brands and customers will continue to be
attracted by the Company's innovation within the natural and
organic marketplace.
As a result of this the Company is optimistic that anticipated
market growth will continue to drive demand for the Company's
acquired and developed brands and provides a significant
opportunity for further expansion into new product offerings. This
has been evidenced by several distribution wins announced over the
last three quarters and entrance into new product categories. In
particular GreenSpace expects that it will continue to execute on a
two-pronged growth strategy. Firstly, the Company expects to have a
strong and ongoing internal brand and product development program.
There are currently a number of new product offerings in various
stages of development that the Company expects to release
strategically, to fill gaps in the Canadian natural and organic
marketplace, over the next few quarters. Secondly, the
tripling in size of the Canadian natural and organic food market
over the last decade has been driven by a number of new entrants,
creating a highly fragmented competitive landscape. The Company
seeks to continue to take advantage of this and expects to
eventually grow through strategic investments in strong, simple
ingredient businesses which are accretive to revenue and
profitability.
Management expects to see continued year on year organic revenue
growth, incremental gross margin improvement and positive adjusted
EBITDA margins, once the Go Veggie acquisition is integrated. The
Company continues to believe it is in a strong position to be one
of the innovation leaders, as well as a principle consolidator, in
the North American natural and organic food market, due to its
industry position and accumulated reputational goodwill.
Use of Non-IFRS Measures, Measures of Operating Performance
and Reconciliation of Net (Loss) Earnings to Adjusted
EBITDA
This press release contains references to "Adjusted Gross
Profit" and "Adjusted EBITDA" which are not measures prescribed by
International Financial Reporting Standards (IFRS). Management uses
IFRS, non-IFRS and operating performance measures as key
performance indicators to better assess the Company's underlying
performance and provides this additional information in this
MD&A.
Adjusted Gross Profit is a non-IFRS measure which
represents gross profit adjusted to exclude non-recurring, one-time
listing fees which would not be considered part of on-going, normal
operations. The Company's management believes that in
addition to gross profit, adjusted gross profit is a useful
supplemental measure of gross profit prior to one-time expense
items such as listing fees. Adjusted Gross Profit allows
management to compare the Company's margin over time on a
consistent basis. However, adjusted gross profit is not a
recognized measure under IFRS. Investors are cautioned that
Adjusted Gross Profit should not be construed as an alternative to
gross profit determined in accordance with IFRS. The Company's
method of calculating adjusted gross profit may differ from the
method used by other issuers, and accordingly, the Company's
adjusted gross profit calculation may not be comparable to
similarly titled measures used by other issuers.
Adjusted EBITDA is a non-IFRS measure and excludes
finance costs, interest income, income tax expense or recovery,
depreciation and amortization and income or expenses of a
non-recurring, unusual or one-time nature. Adjusted EBITDA is a
measure used by management, the food and beverage industry and
investors as an indicator of the Company's operating performance,
ability to incur and service debt, and as a valuation metric. The
Company uses adjusted EBITDA to evaluate the operating performance
of its business as well as an executive compensation metric. While
adjusted EBITDA is a non-IFRS measure, management believes that it
is an important indicator of operating performance because it
excludes the effect of financing and investing activities by
eliminating the effects of interest and depreciation and removes
the impact of certain non-recurring items that are not indicative
of our ongoing operating performance. Therefore, management
believes Adjusted EBITDA gives investors greater transparency in
assessing the Company's results of operations. The Company's method
of calculating Adjusted EBITDA may differ from the method used by
other issuers and, accordingly, the Company's Adjusted EBITDA
calculation may not be comparable to similarly titled measures used
by other issuers.
A reconciliation of the Company's Gross Profit to Adjusted gross
profit is outlined in the following table:
Reconciliation of Gross profit to Adjusted gross
profit
(expressed in thousands of Canadian
dollars)
|
Three months
ended
|
Six months
ended
|
|
30-Sep-18
|
30-Sep-17
|
30-Sep-18
|
30-Sep-17
|
|
$
|
$
|
$
|
$
|
Gross
profit
|
4,440
|
2,701
|
8,755
|
5,436
|
Add back
non-recurring expenses
|
|
|
|
|
Listing
fees
|
262
|
412
|
333
|
542
|
Loss on discontinued
product
|
-
|
-
|
28
|
-
|
Adjusted gross
profit
|
4,702
|
3,113
|
9,117
|
5,978
|
Adjusted gross
profit percentage
|
24.4%
|
23.0%
|
24.0%
|
22.9%
|
Reconciliation of Net loss from continuing operations to
EBITDA and Adjusted EBITDA from continuing operations
(expressed in thousands of Canadian dollars)
A
reconciliation of the Company's net loss to Adjusted EBITDA is
outlined in the following table:
|
Three months
ended
|
Six months
ended
|
|
30-Sep-18
|
30-Sep-17
|
30-Sep-18
|
30-Sep-17
|
|
$
|
$
|
$
|
$
|
Net
loss
|
(1,596)
|
(588)
|
(5,215)
|
(897)
|
Interest and
accretion expense
|
440
|
135
|
862
|
263
|
Depreciation and
amortization
|
822
|
532
|
1,645
|
930
|
Unrealized foreign
exchange loss
|
(143)
|
-
|
91
|
-
|
Deferred income tax
recovery
|
(195)
|
(123)
|
(391)
|
(217)
|
EBITDA
|
(672)
|
(44)
|
(3,008)
|
79
|
Add back
non-cash and non-recurring expenses
|
|
|
|
|
Stock based
compensation
|
39
|
46
|
67
|
75
|
Recall
expense
|
(720)
|
-
|
756
|
-
|
Listing
fees
|
262
|
412
|
333
|
542
|
Restructure
cost
|
107
|
61
|
485
|
194
|
Adjusted
EBITDA
|
(984)
|
475
|
(1,368)
|
890
|
About GreenSpace Brands Inc.
GreenSpace is a
Canadian-based brand ideation team that develops, markets and sells
premium natural food products to consumers across North America. GreenSpace owns Rolling Meadow
Dairy, Canada's first grass fed
dairy business, Life Choices, convenience meat products made with
grass fed and pasture raised meats without the use of added
hormones and antibiotics, Love
Child, a producer of 100% organic food for infants and
toddlers made with the purest, natural and most nutritionally-rich
ingredients, Central Roast, a clean snacking brand featuring a wide
assortment of nut and seed mixes, Kiju, the Canadian market leader
in the shelf stable organic juice segment, CEDAR, the leaders in
the Canadian Cold Press Juice category and the most recently
acquired brand, GO VEGGIE, one of the leaders in the US plant based
dairy market. All brands are wholly owned and retail in a variety
of natural and mass retail grocery locations across Canada.
For more information, visit www.greenspacebrands.ca.
GreenSpace's filings are also available at
www.SEDAR.com.
Forward-Looking Statements
Certain statements in this
press release constitute forward-looking statements within the
meaning of applicable securities laws. Forward-looking
statements include, but are not limited to, statements made under
the heading "Outlook" and other statements concerning the Company's
2018 objectives, strategies to achieve those objectives, as well as
statements with respect to management's beliefs, plans, estimates,
and intentions, and similar statements concerning anticipated
future events, results, circumstances, performance or expectations
that are not historical facts. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "outlook", "objective", "may", "will",
"expect", "intend", "estimate", "anticipate", "believe", "should",
"plans" or "continue", or similar expressions suggesting future
outcomes or events. Such forward-looking statements reflect
management's current beliefs and are based on information currently
available to management. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those contemplated by such statements and there can
be no assurance that actual results will be consistent with these
forward-looking statements. Factors that could cause such
differences include the cyclical nature of the construction and
agriculture industries, changes in general economic conditions and
interest rates, adverse weather, cost and availability of materials
used to manufacture the Company's products, competitive
developments, legislative and government policy changes, as well as
other risk factors included in the Company's Annual Information
Form dated August 22, 2018 under the
heading "Risks and Uncertainties Related to the Business" and as
described from time to time in the reports and disclosure documents
filed by the Company with Canadian securities regulatory agencies
and commissions. This list is not exhaustive of the factors
that may impact the Company's forward-looking statements.
These and other factors should be considered carefully and readers
should not place undue reliance on the Company's forward-looking
statements. As a result of the foregoing and other factors,
no assurance can be given as to any such future results, levels of
activity or achievements or levels of dividends and neither the
Company nor any other person assumes responsibility for the
accuracy and completeness of these forward-looking
statements. The factors underlying current expectations are
dynamic and subject to change. Certain statements included in
this press release may be considered "financial outlook" for
purposes of applicable securities laws, and such financial outlook
may not be appropriate for all purposes. All forward-looking
statements in this press release are qualified by these cautionary
statements. The forward-looking statements contained herein
are made as of the date of this press release and except as
required by applicable law, the Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE GreenSpace Brands Inc.