TSXV: JTR
www.greenspacebrands.ca
(all amounts in Cdn$ unless otherwise noted)
TORONTO, Nov. 18, 2019 /CNW/ - GreenSpace Brands Inc.
("the Company") (TSXV: JTR) today reported its second quarter
of fiscal 2020 ended September 30,
2019 results. Key Highlights for the Second Quarter of
Fiscal 2020:
- Adjusted EBITDA of $48K,
marking the first adjusted EBITDA positive quarter in nearly 2
years
- Under new IFRS 9 rules, a provision of nearly $1M was taken (in G&A) for 100% of AR over 60
days, although GreenSpace believes much of this is collectible.
Without this provision, EBITDA would have been approximately
$700K and adjusted EBITDA would have
been over $1M for the
quarter
- Adjusted gross margin increased dramatically to 28.6%
compared to 21.8% for Q1 2020 largely as a result of management
decisions to divest of lower margin brands and products.
- SG&A expenses continued to decrease from $4.0M in Q1 to $3.7M in Q2, primarily due to the effects of
restructuring.
- Rebates and discounts as a percentage of gross revenue fell
from 14.6% to 11.8% versus the prior quarter.
Consolidated Performance Summary
|
Three months
ended
|
Six months
ended
|
(in thousands
of Canadian dollars, except per
share amounts)
|
September
30, 2019
|
September
30, 2018
|
September
30, 2019
|
September
30, 2018
|
$
|
$
|
$
|
$
|
|
|
|
|
|
Gross
revenue
|
12,831
|
21,656
|
29,268
|
42,641
|
Less: rebates and
discounts
|
(1,518)
|
(2,349)
|
(3,918)
|
(4,693)
|
Less: listing
fees
|
-
|
(262)
|
(53)
|
(333)
|
Net
revenue
|
11,313
|
19,045
|
25,297
|
37,615
|
|
|
|
|
|
Gross
profit
|
3,240
|
4,440
|
6,242
|
8,755
|
Adjusted Gross
Profit1
|
3,240
|
4,703
|
6,295
|
9,117
|
Adjusted Gross Profit
margin1
|
28.6%
|
24.4%
|
24.8%
|
24.0%
|
|
|
|
|
|
SG&A
expenses
|
3,733
|
5,135
|
7,749
|
11,909
|
Amortization of
intangible assets
|
607
|
701
|
1,246
|
1,401
|
Deferred income tax
(recovery)
|
(171)
|
(195)
|
(366)
|
(391)
|
Interest
expense
|
739
|
412
|
1,342
|
804
|
Accretion
expense
|
-
|
28
|
14
|
58
|
Other income and
expense
|
(11)
|
98
|
(26)
|
98
|
Foreign exchange
loss
|
141
|
(143)
|
185
|
91
|
Restructuring
expense
|
-
|
-
|
195
|
-
|
Net income
(loss)
|
(1,798)
|
(1,596)
|
(4,097)
|
(5,215)
|
|
|
|
|
|
EBITDA
|
(316)
|
(672)
|
(1,396)
|
(3,008)
|
EBITDA, as a
percentage of net revenue
|
(2.8%)
|
(3.5%)
|
(5.5%)
|
(8.0%)
|
|
|
|
|
|
Adjusted
EBITDA1
|
48
|
(984)
|
(215)
|
(1,368)
|
Adjusted EBITDA,
as a percentage of net
revenue excluding listing fees1
|
0.4%
|
(5.1%)
|
(0.8%)
|
(3.6%)
|
|
|
1 – See Non-IFRS
Measures
|
Q2 2020 was positively impacted by several factors versus both
the previous quarter, Q1 2020, and the previous comparable year, Q2
2019. The quarter saw lower than expected revenue because there was
no contribution from the divested brand Kiju, the Company was
far more focused on profitability than in the past and the Company
saw some weakness in the Central Roast brand. However, GreenSpace
saw drastically improved gross margins and significantly
improved EBITDA and adjusted EBITDA margins. Q2 2020 continued the
trend showing that the previously announced restructurings are
having a positive effect and that we have achieved our stated goal
of turning around the business to become adjusted EBITDA positive
as quickly as possible.
Revenue
Gross revenue for the second quarter ended
September 30, 2019 decreased 40.8%
and net revenue, which is gross revenue excluding deductions for
rebates, discounts and one-time listing fees, decreased 40.6% over
the same period in the prior year. The decrease in revenue was
primarily due to the exclusion of Rolling Meadow Dairy and Kiwi
Butter revenue from the portfolio as they were sold to Agrifoods
Cooperative Subsidiary on January 31,
2019, as well the exclusion of Nothing But Nature revenue
from the portfolio as it was sold to Zurban Beverages Inc. on
May 21, 2019. Additionally, the
Company experienced roughly $2
million in short shipments in the quarter as part of the Q1
working capital issues. This had a negative effect on revenue as
well as gross profit $ and ebitda.
Gross Profit and Adjusted Gross Profit (see Non-IFRS
Measures)
The Company's adjusted gross profit margin for the
second quarter ended September 30,
2019 increased from 24.4% to 28.6% compared to the same
period in the prior year, a 17% increase. The increase in the
quarter was primarily due to the higher volume of sales from brands
with higher margins as well as the discontinuation or sale of lower
margin brands.
Selling, General and Administrative ("SG&A")
Expenses
The quarter was positively impacted by a variety of
factors, the largest of which is the continued 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 the prior year period due in part to the effect of the
restructurings, as well as due to enhanced cost saving strategies.
Salaries and wages decreased from 8.3% of gross revenue to 6.8% of
gross revenue, primarily due to the previously announced
restructurings. Advertising and promotion costs also decreased
significantly from the prior year period by 3.1% of gross revenue.
Management expects SG&A as a percentage of revenue to continue
to drop after the recently announced restructurings decrease
costs.
"The second quarter finally saw us return to adjusted EBITDA
positive results for the first time in a very long time" says
Matthew von Teichman, CEO of
GreenSpace Brands. "If you remove the effect of the new IFRS 9
rules around removing bad debt from the results, which we believe
we will still be able to collect, the end result is EBITDA of over
$700K in the quarter and adjusted
EBITDA over $1M. It's been almost 2
years since we posted an adjusted EBITDA positive result and it
shows how diligent the team has been to remove expenses from the
business in order to push towards a return to profitability. As we
start to rebuild our sales profile within this leaner operating
environment, we hope to continue to achieve improved bottom line
results going forward."
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 year on year organic revenue growth at
a brand level, continued incremental gross margin improvement and
continued positive adjusted EBITDA margins going forward. 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
|
6-months
ended
|
|
September
30, 2019
|
September
30, 2019
|
September
30, 2019
|
September
30, 2019
|
|
$
|
$
|
$
|
$
|
Gross
profit
|
3,240
|
4,440
|
6,242
|
8,755
|
Add back
non-recurring expenses
|
|
|
|
|
Listing
fees
|
-
|
262
|
53
|
333
|
Loss on
discontinued product
|
-
|
28
|
-
|
29
|
Adjusted
gross profit
|
3,240
|
4,730
|
6,295
|
9,117
|
Adjusted
gross profit percentage
|
28.6%
|
24.4%
|
24.8%
|
24.0%
|
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
|
6-months
ended
|
|
September
30, 2019
|
September
30, 2019
|
September
30, 2019
|
September
30, 2019
|
|
$
|
$
|
$
|
$
|
EBITDA
|
(316)
|
(672)
|
(1,396)
|
(3,008)
|
Add back
non-cash and non-recurring expenses
|
|
|
|
|
Stock based
compensation
|
24
|
39
|
39
|
67
|
Fines and
penalties for shorts
|
303
|
-
|
550
|
-
|
Restructure
cost
|
-
|
107
|
195
|
484
|
Professional
fees
|
37
|
-
|
344
|
-
|
Listing
fees
|
-
|
262
|
53
|
333
|
Recall
expense
|
-
|
(720)
|
-
|
756
|
Adjusted
EBITDA
|
48
|
(984)
|
(215)
|
(1,368)
|
Results Conference Call
The Company will hold its
second quarter 2020 conference call on Tuesday November 19th 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 November 26th, 2019. To
access the rebroadcast, please dial (416) 764-8677 or 1 (888)
390-0541 and use the passcode 103984.
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.