TSXV: JTR
www.greenspacebrands.ca
(all amounts in Cdn$
unless otherwise noted)
TORONTO, Aug. 22, 2019 /CNW/ - GreenSpace Brands Inc.
("the Company") (TSXV: JTR) today reported its first quarter
of fiscal 2020 ended June 30, 2019
results. Key Highlights for the First Quarter of Fiscal
2020:
- Gross revenue of $16.4
million, representing a 2% increase over the prior quarter,
even though the Kiju brand was divested May
21, 2019
- Adjusted gross margin increased to 21.8% compared to 19.5%
for Q4 2019.
- SG&A expenses decreased from 31.4% to 24.4% of gross
revenue, primarily due to the effects of restructuring.
- Adjusted EBITDA margins improved to (1.9%) as a percentage
of net revenue excluding listing fees, from (22.0%) in Q4
2019.
- Rebates and Discounts as a percentage of gross revenue fell
from 16.1% to 14.6% versus the prior quarter.
Consolidated Performance Summary
|
Three months
ended
|
(in thousands
of Canadian dollars, except per share amounts)
|
June 30,
2019
|
March 31,
2019
|
$
|
$
|
|
|
|
Gross
revenue
|
16,437
|
16,125
|
Less: rebates and
discounts
|
(2,400)
|
(2,602)
|
Less: listing
fees
|
(53)
|
(191)
|
Net
revenue
|
13,984
|
13,332
|
|
|
|
Gross
profit
|
3,002
|
2,442
|
Adjusted Gross
Profit1
|
3,055
|
2,633
|
Adjusted Gross Profit
margin1
|
21.8%
|
19.5%
|
|
|
|
SG&A
expenses
|
4,016
|
5,069
|
Amortization of
intangible assets
|
639
|
(166)
|
Deferred income tax
(recovery)
|
(195)
|
(196)
|
Interest
expense
|
603
|
542
|
Accretion
expense
|
14
|
14
|
Other income and
expense
|
(15)
|
400
|
Foreign exchange
loss
|
44
|
(277)
|
Restructuring
expense
|
195
|
-
|
Gain on sale of
Rolling Meadow Dairy
|
-
|
(1,376)
|
Loss on goodwill
impairment
|
-
|
3,475
|
Net income
(loss)
|
(2,299)
|
(5,043)
|
|
|
|
EBITDA
|
(1,081)
|
(2,716)
|
EBITDA, as a
percentage of net revenue
|
(7.7%)
|
(20.4%)
|
|
|
|
Adjusted
EBITDA1
|
(264)
|
(2,980)
|
Adjusted EBITDA,
as a percentage of net revenue excluding listing
fees1
|
(1.9%)
|
(22.0%)
|
1 – See Non-IFRS
Measures
|
Q1 2020 was positively impacted by several factors versus both
Q4 2019 (previous quarter) and Q1 2019 (previous year). Q1 2020 saw
the closing of the Nothing but Nature divestiture which brought in
much-needed working capital for the business. That divestiture
happened approximately halfway through the quarter and allowed the
business to order more inventory and fill orders more regularly. Q1
2020 did see significant fines from retailers for short shipping
orders, which appear in EBITDA but have been removed as one-time
items from adjusted EBITDA. Q1 2020 is the first clear indication
that previously announced restructurings are having a positive
effect and that the business is making progress towards its stated
goal of becoming adjusted EBITDA positive as quickly as possible.
The quarter did still feature significant short shipments and the
associated penalties, however June saw fill rates rise quickly as
working capital became more readily available.
Revenue
Gross revenue for the quarter ended
June 30, 2019 increased over the
previous quarter ending March 2019,
in spite of the Nothing but Nature business only being represented
in the results for approximately half the quarter. The increase was
due to strong results in both Love Child and Go Veggie, as well as
being able to fill orders more regularly in the second half of the
quarter within the Central Roast brand. Sequential revenue growth
was approximately 2% going from $16.1
million in gross sales in Q4 2019 to $16.4 million in Q1 2020.
Gross Profit and Adjusted Gross Profit (see Non-IFRS
Measures)
The Company's Adjusted Gross Profit margin for the
first quarter ended June 30, 2019
increased by 2.3%, a 12% improvement, going from 19.5% in Q4 2019
to 21.8% in Q1 2020. The increase was largely due to lower trade
spend relative to Q4 2019, as well as continued strength in the
gross margin profile prior to trade spend. The expectation is that
rebates and discounts as a percentage of revenue will continue to
normalize in future quarters and come down to historical norms.
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
The quarter was positively impacted by a variety of
factors, the largest of which is the emergence of the effect of
some of the previously announced restructurings completed in Q1
2020. SG&A as a percentage of revenue showed a steep decline
from Q4 2019 due in part to the effect of the restructurings, as
well as due to the collection of customer payments which reduced
the expected credit loss. Salaries and wages decreased from
$1.5 million in Q4 2019 to
$1.3 million in Q1 2019, a 13%
decrease, primarily due to the previously announced restructurings.
G&A also showed a dramatic improvement in Q1 2020 from Q4 2019,
in part due to the continued rationalization of costs. Advertising
and promotion costs also decreased significantly from Q4 2019 to Q1
2020. Management expects SG&A as a percentage of revenue to
continue to drop after the recently announced restructurings
decrease costs.
"The first quarter was a long-awaited rebound from some
difficult results over the last 18 months. The quarter not only saw
an increase in revenue quarter over quarter, but much more
importantly, it saw a significant drop in the adjusted EBITDA
losses we have been incurring for quite some time." Says
Matthew von Teichman, CEO of
GreenSpace Brands. "We've gone through a difficult time of having
to make a lot of challenging decisions in order to right-size the
business and get GreenSpace ready to return to profitability. We
have executed on some sweeping structural changes that saw an
entire layer of management largely disappear. This was all done in
an effort to create a structure that is not only capable of growing
brands, but also capable of growing brands profitably. Q1 2020 is
the first taste of the potential that those changes bring to our
business, and perhaps the first signal to shareholders that
we have turned the corner."
Outlook
GreenSpace continues to believe that there
are a number of fundamental trends occurring within both the Global
and North American food industries, that offer large opportunities
for some of our brands. In particular, the Plant-Based cheese
category is one of the fastest-growing segments of the Natural Food
market, and the Go Veggie business is well-positioned in that
market. These trends will continue to drive consumer demand for
GreenSpace Brands, and customers will continue to be attracted by
the Company's innovation within the natural and organic
marketplace.
Management expects to see continued year on year organic revenue
growth at a brand level, continued incremental gross margin
improvement and a return to positive adjusted EBITDA margins in the
near future. The Company continues to believe it is in a strong
position to be one of the innovation leaders 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. 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)
|
3-months
ended
|
3-months
ended
|
|
June 30,
2019
|
March 31,
2019
|
|
$
|
$
|
Gross
profit
|
3,002
|
2,442
|
Add back
non-recurring expenses
|
-
|
-
|
Listing
fees
|
53
|
191
|
Adjusted
gross profit
|
3,055
|
2,633
|
Adjusted
gross profit percentage
|
21.8%
|
19.5%
|
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:
|
3-months
ended
|
3-months
ended
|
|
June 30,
2019
|
March 31,
2019
|
|
|
|
|
$
|
$
|
EBITDA
|
(1,081)
|
(2,716)
|
Add back
non-cash and non-recurring expenses
|
|
|
Stock based
compensation
|
15
|
(12)
|
Fines and
penalties for shorts
|
247
|
-
|
Listing
fees
|
53
|
191
|
Restructure
cost
|
195
|
(231)
|
Professional
fees
|
307
|
-
|
Meatbar
discontinuation
|
-
|
241
|
Recall
expense
|
-
|
(453)
|
Adjusted
EBITDA
|
(264)
|
(2,980)
|
Further to the previously announced granting of 184,159 common
shares to a strategic advisor, GreenSpace is settling outstanding
indebtedness with an arm's length party in the sum of $45,000 by the issuance of common shares in the
capital stock of the Company at a price based on 95% of the 20-day
VWAP at the time of settlement (the "Debt for Equity Transaction").
The arm's length party is a consultant and financial advisor that
provided various services to the Company from February 2019 until May
2019. It was a term of the engagement letter with the arm's
length party that the Company could satisfy any amount owing in
cash or common shares in the capital of the Company. The completion
of the Debt for Equity Transaction is subject to the approval of
the TSX Venture Exchange. The shares to be issued under the Debt
for Equity Transaction will be subject to a four-month hold
period.
New President of Love Child Organics
GreenSpace is
very pleased to announce the hiring of a new President for Love
Child Organics, Brittany Compton.
Brittany has over 13 years experience building renowned brands at a
Tier 1 CPG company and has both Canadian as well as global brand
management and operational experience, including taking global
leadership positions in brand innovation, digital marketing
transformation and sustainability. She is also a mother and
certified kids yoga instructor, and a very strong advocate for
clean eating and healthy living. Brittany will be responsible for
all elements of the Love Child business and will be fully P&L
responsible, which is consistent with the new operational structure
for GreenSpace as previously announced.
Results Conference Call
The Company will hold its
first quarter 2020 conference call on Friday, August 23rd at 8:30am (ET). The call will be hosted by
Matthew von Teichman, President and
Chief Executive Officer and Stuart
Pasternak, Chief Financial Officer. Following management's
presentation, there will be a question and answer session for
analysts and investors. To participate in the teleconference, dial
(416) 764-8688 or 1 (888) 390-0546 (Toll-free). Callers are advised
to call five minutes in advance of the call. A taped rebroadcast
will be available until 11:59 pm (ET)
on August 30th, 2019. To access the
rebroadcast, please dial (416) 764-8677 or 1 (888) 390-0541 and use
the passcode 402072.
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 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, 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 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.