good natured Products Inc. Announces Financial Results for the Three and Nine Months Ended September 30, 2021

VANCOUVER, BC, Nov. 30, 2021 /CNW/ - good natured Products Inc. (the "Company" or "good natured^®") (TSXV: GDNP), a North American leader in plant-based products and packaging, today announced its financial results for the three months ("Q3 2021") and nine months ended September 30, 2021 ("YTD 2021").

The Company's Q3 2021 year-over-year revenue growth of almost 300% benefited from robust market demand, a full fiscal quarter of contribution from the recent acquisition of Ex-Tech Plastics Inc., and the addition of a range of new customer accounts, including initial shipments to a large US food producer estimated to deliver approximately USD $13 million in its first year, as announced on October 13, 2021. Q3 2021 also saw the Company's recurring B2B customer base expand to over 850 active accounts, more than doubling compared to 400 B2B customers on September 30, 2020.

"The team delivered record setting revenue growth for Q3 2021 and just under 240% growth for the first nine months of the year," stated Paul Antoniadis, CEO of good natured^®. "We did see some temporary changes in our Q3 2021 product and customer revenue mix with the recent addition of Ex-Tech, whose business is more heavily weighted to National customers and Industrial products with somewhat lower margin rates. The integration of a first full quarter of Ex-Tech's financials, combined with sustained increases in inflationary costs, resulted in our variable gross margin rate dipping to the low end of our targeted range at just under 29% for Q3 2021. Variable gross margins for YTD 2021 are holding above 33%, which remains at the upper end of our targeted range. Based on our growth strategy and business model, we anticipate short-term, quarterly shifts in variable gross margin as part of that process and focus on delivering the optimal range on an annual basis. We've also rolled out several price adjustments and shipping surcharges to offset rapidly rising raw material and logistics costs being felt throughout the industry."

Key Highlights:

• Revenues for Q3 2021 increased 286% to a record $18.0 million compared to $4.7 million for the three months ended September 30, 2020. Revenue for YTD 2021 increased 236% to $38.3 million compared to $11.4 million for the nine months ended September 30, 2020.
  
  
• Variable gross margin, a non-GAAP measure, for Q3 2021 increased 196% to $5.2 million and 28.8% of sales, compared to $1.75 million and 37.6% of sales for the three months ended September 30, 2020. Variable gross margin for YTD 2021 increased 183% to $12.7 million and 33.2% of sales, compared to $4.5 million and 39.4% of sales for the nine months ended September 30, 2020.
  
  
• Gross margin increased 129% to $4.0 million for Q3 2021 and 130% to $10.3 million for YTD 2021, As a percentage of sales, gross margin for Q3 2021 and YTD 2021 was 22.3% and 26.9% respectively.
  
  
• Selling, general and administrative expenses excluding acquisition activity and one-time charges, a non-GAAP measure, for Q3 2021 and YTD 2021 were $4.8 million and $11.2 million compared to $2.0 million and $4.9 million for the three and nine months ended September 30, 2020, representing an increase of 141% and 132% respectively.
  
  
• Selling, general and administrative expenses for Q3 2021 and YTD 2021, including acquisition activity and one-time charges, were $5.4 million and $12.9 million compared to $2.1 million and $5.5 million for the three and nine months ended September 30, 2020, representing an increase of 154% and 136% respectively.
  
  
• The Company's Adjusted EBITDA, a non-GAAP measure, for Q3 2021 and YTD 2021 showed a loss of $0.6 million for both periods, compared to a loss of $0.3 million and $0.7 million for the three and nine months ended September 30, 2020 respectively. YTD 2021 Adjusted EBITDA improved 11% compared to the nine-month period ended September 30, 2020.
  
  
• In Q3 2021, the Company incurred a net loss of $2.9 million compared to a net loss of $1.7 million in the three months ended September 30, 2020. Net loss for YTD 2021 was $8.5 million compared to a net loss of $4.0 million in the nine months ended September 30, 2020.
  
  
• Net working capital increased to $12.4 million at the end of Q3 2021, compared to $3.8 million at September 30, 2020, an increase of 225%.

Subsequent to quarter end, on October 28th, 2021, the Company closed a convertible debenture offering for gross proceeds of $17.25 million and a $35.8 million senior credit facility with National Bank, for total debt financing of $53 million dollars, which includes an uncommitted $10 million credit facility at the discretion of National Bank. The new funding increases working capital, decreases the blended average interest rate paid on long term debt and materially reduces principal payments over the next three years.

Paul further added: "I would like to thank our good natured^® team, our partners and our customers for contributing to this record-setting revenue growth – what a fantastic achievement! It's energizing to see the resilience, entrepreneurial spirit and commitment to making a positive environmental impact despite this inflationary period and global supply chain disruptions. This gives me great confidence that by maintaining our focus on providing our customers good service and timely solutions to ensure they've got the products they need when they need them, the Company will gain market share and strengthen its long-term market position as a leader for plant-based products and packaging in North America."

The Company's Q3 2021 unaudited financial statements and Management's Discussion and Analysis (MD&A) are available on SEDAR at sedar.com.

Q3 2021 Results Conference Call
The Company will host a conference call to discuss its financial results for Q3 2021, hosted by Paul Antoniadis, Executive Chair & CEO, and Kevin Leong, Chief Financial Officer, on November 30, 2021 at 11:00 AM Eastern / 8:00 AM Pacific time.

Date: November 30, 2021
Time: 11:00 AM EST / 8:00 AM PST
Toll-Free: 1-833-900-2239 International: [phone]
Conference ID: 8626349

Participants are asked to dial in 10 minutes prior to the start of the call.

A replay of the call will be available approximately two hours after its completion through to December 20, 2021. The replay will be available by dialing 1-800-585-8367 or [phone].

The good natured^® corporate profile can be found at: investor.goodnaturedproducts.com

About good natured Products Inc.
good natured^® is passionately pursuing its goal of becoming North America's leading earth-friendly product company by offering the broadest assortment of eco-friendly options made from plants instead of petroleum. We're all about making it easy and affordable for business owners and consumers to switch to better everyday products® made from renewable materials and free from chemicals of concern.

Part of the sustainable consumer goods market, good natured^® offers over 400 products and services through wholesale and retail channels, including our own e-commerce stores. From plant-based home organization products to compostable food containers, bioplastic industrial supplies and medical packaging, we're focused on delivering a great customer experience to make more plant-based products readily accessible to more people as the path to deliver meaningful environmental and social impact.

For more information: goodnaturedproducts.com

On behalf of the Company:
Paul Antoniadis – Executive Chair & CEO
Contact: 1-604-566-8466

Investor Contact:     
Spencer Churchill
Investor Relations
1-877-286-0617 ext. 113
[email protected] 

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibilities for the adequacy or accuracy of this release.

Non-GAAP financial measures

We have included in this press release a discussion of the Company's variable gross margin, SG&A excluding acquisition costs, and adjusted EBITDA, all non-GAAP measures, for Q3 FY21, nine-months ended September 30, 2021, Q3 FY20 and nine-months ended September 2020 to provide, what management believes, is a meaningful comparison of the Company's performance in Q3 FY21 and nine-months ended September 2021. In this news release, variable gross margin is gross margin excluding fixed production costs such as depreciation, repairs and maintenance, utilities and similar overhead items, SG&A excluding acquisition costs and adjusted EBITDA is earnings before interest and finance costs, taxes, depreciation and amortization, other non–cash items and one–time gains and losses. Variable gross margin, SG&A excluding acquisition costs and Adjusted EBITDA do not have standardized meanings, and therefore may not be comparable to similar measures presented by other issuers. The use of variable gross margin by management allows for evaluation of the core aspects of the Company's profit margin as certain fixed items, such as depreciation, repairs and maintenance, and utilities are excluded. The use of SG&A excluding acquisition costs allows for an evaluation of Company's expenses disregarding the expenses associated with the Company's voluntary execution of Its growth through acquisition strategy. The use of the adjusted EBITDA by management allows for evaluation of the Company's principal business activities as certain non–core items such as interest and finance costs, taxes, depreciation and amortization, and other non–cash items and one–time gains and losses are removed.

The following table provides a reconciliation of net loss to adjusted EBITDA for the periods ended:

	Three months ended				Nine months ended
		Sep. 2021		Sep. 2020		Sep. 2021		Sep. 2020
Income (loss) for the period:	$	(2,923)	$	(1,713)	$	(8,524)	$	(4,032)
Share-based compensation		781		91		1,756		163
Depreciation		306		141		818		292
Depreciation in COGS and SG&A		289		-		642		-
Financing costs		974		917		2,934		2,677
Foreign exchange loss (gain)		(480)		51		58		(413)
Loss on convertible debenture redemption		-		31		212		162
Gain on interest-free loan		(14)		(1)		(43)		(67)
Acquisition related activity and one-time charges		626		145		1,686		615
Deferred income taxes		(146)		-		(146)		(80)
Adjusted EBITDA	$	(587)	$	(334)	$	(607)	$	(682)

The following table provides a reconciliation of gross margin to variable gross margin for the periods ended:

	Three months ended				Nine months ended
		Sep. 2021		Sep. 2020		Sep. 2021		Sep. 2020
Revenue	$	18,005	$	4,659	$	38,276	$	11,387
Cost of revenue
Variable cost of product		(12,826)		(2,910)		(25,584)		(6,901)
Variable gross margin		5,179		1,749		12,692		4,486
Fixed factory overhead		(894)		-		(1,797)		-
Depreciation		(271)		-		(586)		-
Gross margin	$	4,014	$	1,749	$	10,309	$	4,486

The following table provides a reconciliation of selling, general and administrative expense:

	Three months ended				Nine months ended
		Sep. 2021		Sep. 2020		Sep. 2021		Sep. 2020
Wages	$	2,028	$	609	$	4,183	$	1,552
Selling & G&A costs		1,097		409		2,516		979
Supply chain & fulfillment SG&A costs		1,672		969		4,534		2,319
Outsource supply chain & fulfillment		139		519		1,160		1,258
Freight & fulfillment		1,368		390		2,869		906
Warehousing		165		60		505		155
Acquisition related activity & one-time charges		626		145		1,686		615
SG&A	$	5,423	$	2,132	$	12,919	$	5,465
SG&A excluding acquisition activity	$	4,797	$	1,987	$	11,233	$	4,851

Cautionary Statement Regarding Forward-Looking Information

This news release contains forward-looking information within the meaning of securities laws including statements related to Company plans and focuses for 2021, the upcoming results conference call and management's outlook for 2021. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

Other than as required under securities laws, we do not undertake to update this information at any particular time.

Forward-looking information contained in this news release is based on our current estimates, expectations and projections regarding, among other things, sales volume and pricing which we believe are reasonable as of the current date. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. All forward-looking information contained in this news release is expressly qualified in its entirety by this cautionary statement.

GOOD NATURED PRODUCTS INC.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars) (Unaudited)
			30-Sep		31-Dec
			2021		2020
Assets
Current assets:
	Cash and cash equivalents	$	8,720	$	8,114
	Trade and other receivables		10,255		5,557
	Inventory (Note 4)		17,017		6,294
	Prepaid expenses		315		671
			36,307		20,636
Non-current assets:
	Property and equipment (note 5)		29,007		15,416
	Customer relationships (note 6)		5,848		5,709
	Intangible assets (note 6)		3,341		3,389
	Goodwill (note 6)		7,651		6,824
		$	82,154	$	51,974
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities	$	15,015	$	8,882
	Credit line (note 7)		4,624		3,073
	Current portion of long-term debt (note 8)		4,274		3,129
			23,913		15,084
Non-Current liabilities:
	Long-term debt (note 8)		30,879		29,702
	Contingent consideration liability (note 3)		1,856		1,756
	Deferred income tax liabilities		3,474		3,620
			36,209		35,078
Shareholders' Equity:
	Common share capital		56,145		28,883
	Contributed surplus		4,441		2,736
	Foreign currency translation reserve		21		244
	Deficit		(38,575)		(30,051)
			22,032		1,812
Total Liabilities and Shareholders' Equity		$	82,154		51,974

GOOD NATURED PRODUCTS INC.
Consolidated Statements of Net Loss and Comprehensive Loss
(In thousands of Canadian dollars, except per share amounts) (Unaudited)
			Three months ended Sept. 30				Nine months ended Sept. 30
			2021		2020		2021			2020
Product revenue		$	18,005	$	4,659	$	38,276	$	11,387
Cost of product revenue (note 11)			(13,991)		(2,910)		(27,967)		(6,901)
Gross margin			4,014		1,749		10,309		4,486
Other (Expenses) Income:
Product development			(94)		(97)		(325)		(318)
Selling, general, and administrative
	(note 12)		(5,423)		(2,132)		(12,919)		(5,466)
Share-based compensation (note 9(b,d))			(781)		(91)		(1,756)		(164)
Depreciation and amortization			(306)		(141)		(818)		(292)
Financing costs			(974)		(917)		(2,934)		(2,676)
Foreign exchange (loss) gain			481		(52)		(58)		413
Loss on debenture redemption
	and debt conversion		-		(31)		(212)		(163)
Gain on interest free loan (note 8(f))			14		(1)		43		66
Loss before income taxes			(3,069)		(1,713)		(8,670)		(4,114)
Deferred income tax recovery			146		-		146		80
Net loss for the period			(2,923)		(1,713)		(8,524)		(4,034)
Other comprehensive loss, net of tax
Items that may be reclassified subsequently to profit or loss:
Unrealized currency gain (loss) on
	translation of foreign operations	$	(466)	$	200	$	(223)	$	(200)
	Comprehensive loss for the period		(3,389)		(1,513)		(8,747)		(4,234)
Basic and diluted loss per share		$	(0.02)	$	(0.01)	$	(0.03)	$	(0.02)
Weighted average shares outstanding –
	basic and diluted shares outstanding		216,713		113,443		208,482		110,536

GOOD NATURED PRODUCTS INC.
Consolidated Statements of Cash Flow
(In thousands of Canadian dollars) (Unaudited)
					Nine months ended Sept. 30
					2021		2020
Cash provided by (used in):
Operations:
Net loss				$	(8,524)	$	(4,033)
Items not involving cash:					-
Depreciation and amortization					1,113		292
Unrealized foreign exchange loss					(483)		(313)
Amortization of right of use assets					278		38
Share based compensation (note 9 (b))					1,756		164
Loss on debenture redemption and conversion (note 9 (b))					212		163
Gain on interest free loan (note 8 (a))					(43)		(66)
Financing costs					2,934		2,677
Deferred income tax					(146)		(80)
					(2,903)		(1,158)
				-
Changes in non-cash operating working capital:
Trade and other receivables					459		(1,660)
Inventory					(8,229)		(2,435)
Prepaid expenses					578		(95)
Accounts payable and accrued liabilities					458		1,278
Finance costs paid					(2,441)		(2,118)
Cash used in operating activities					(12,077)		(6,188)
Financing:
Issuance of common shares, net of costs					21,026		3,028
Exercise of warrants for common shares					2,062		57
Exercise of options for common shares					131		-
Credit Line advance (note 7)					1,585		1,464
Proceeds from convertible debenture, net of
of issuance costs (note 8 (b))					-		1,056
Redemption of convertible debentures					-		(4,369)
Proceeds from long-term debt, net of issuance costs (note 8(c))					10,102		9,046
Repayment of other long-term debt (note 8(a,d))					(4,120)		(126)
Cash provided by financing activities					30,786		10,156
Investments:
Business Acquisitions exclude cash acquired					(15,438)		(8,402)
Purchase of equipment					(2,523)		(189)
Other assets					(192)		(169)
Cash used in investing activities					(18,153)		(8,760)
Effect of foreign exchange rate changes on cash					50		175
Increase (decrease) in cash					606		(4,617)
Cash and cash equivalents, beginning of period					8,114		8,455
Cash and cash equivalents, end of period					8,720		3,838

SOURCE Good Natured Products

Related Links

https://goodnaturedproducts.ca/