Sienna Resources

Good Natured Products Announces First Quarter 2023 Results

24 May 2023

Vancouver, British Columbia--(Newsfile Corp. - May 24, 2023) - good natured Products Inc. (TSXV: GDNP) (OTCQX: GDNPF) (the "Company" or "good natured®"), a North American leader in plant-based products, today announced its financial results for the three months ended March 31, 2023 ("Q1 2023").

Q1 2023 Highlights

  • Revenue of $20.3 million compared to $25.9 million in Q1 2022 and $23.3 million in Q4 2022.

  • Adjusted EBITDA1 of $0.7 million compared to $1.2 million in Q1 2022 and $0 in Q4 2022.

  • Variable gross margin1 of 38% compared to 32% in Q1 2022 and 33% in Q4 2022.

  • SG&A expenses of $3.8 million compared to $3.8 million in Q1 2022 and $4.9 million in Q4 2022.

  • Cash flow from operations of $0.8 million compared to $3.1 million in Q1 2022 and $4.0 million in Q4 2022.

  • Ending cash balance of $11.6 million compared to $11.9 million at December 31, 2022.

The Company's Packaging business group was robust in Q1 2023 and delivered 46% year-over-year revenue growth. A year-over-year decrease in Industrial business group revenue was driven by continued customer de-stocking from high inventory levels in prior quarters due in part to unpredictable demand cycles from their end users, as well as an overall industry shift to just-in-time ordering. This was concentrated amongst the Company's commodity petroleum-based industrial products inherited through its acquisitions, where a combination of increased competitive pressure and declines in average selling prices were particularly pronounced.

"We're keenly focused executing our long-term strategy to make plant-based packaging the largest and most profitable portion of our business. The recent White House announcement committing the United States to making 90% of plastics from bio-based materials has heightened the market relevance of our mission," stated Paul Antoniadis, CEO of good natured®. "Our industrial capability has been assembled for supply chain efficiencies that will fuel our ability to scale packaging revenues. We expect a continued increase in usage of our industrial production capacity to support our own thermoforming facilities. Our team has been carefully navigating this transitional time, improving our margins in comparison to Q1 2022, reducing costs from Q4 2022, and delivering an ending cash balance that is essentially unchanged from 2022 year-end."

Q1 2023 Financial Overview

Revenue for Q1 2023 decreased 22% to $20.3 million as compared to $25.9 million for the three months ended March 31, 2022 ("Q1 2022"). The year-over-year change in revenue in Q1 2023 was driven by the reduction in revenue from third-party Industrial thermoforming customers due to factors outlined above. This was partly offset by organic growth in the Company's Packaging business group, as well as contribution from the FormTex acquisition completed in July 2022.

Variable gross margin for Q1 2023 increased to 38% compared to 32% for Q1 2022. The increase in variable gross margin reflects the higher mix of revenue from the Packaging business group, improved supply chain management, and productivity enhancements. Gross margin for Q1 2023 was 28% compared to 26% for Q1 2022.

Selling, general and administrative expenses ("SG&A") in Q1 2023 increased by 1% compared to Q1 2022 and represented 19% of total revenue compared to 15% for Q1 2022. The small increase in SG&A expenses was driven by a 13% increase in wages reflecting the July 2022 FormTex acquisition, as well as overall growth in average wage rates. The increase in wages was not fully offset by a 18% decline in other SG&A costs, which reflects the Company's efforts to reduce costs in areas such as accounting and audit fees, investor relations expenses, as well as general legal fees (see table below for more details).

The Company's adjusted EBITDA1 for Q1 2023 was $0.7 million compared to $1.2 million for Q1 2022. The decline in adjusted EBITDA1 reflects the decline in revenue and gross profit, not fully offset by the decline in fulfilment and logistics costs.

In Q1 2023, the Company incurred a net loss of $2.5 million compared to a net loss of $1.6 million in Q1 2022.

Cash Flow and Net Working Capital

Cash generated by operating activities for Q1 2023 was $0.8 million compared to $3.1 million for Q1 2022. As at March 31, 2023, the Company had cash of $11.6 million and net working capital of $8.8 million, compared to $11.9 million and $10.0 million as at December 31, 2022.

The Company's Q1 2023 financial statements and Management's Discussion and Analysis are available on SEDAR at sedar.com and on the Company's investor website at investor.goodnaturedproducts.com.

Q1 2023 Results Conference Call

The Company will hold a conference call to discuss its financial results for Q1 2023, hosted by Paul Antoniadis, Executive Chair & CEO, and Kerry Biggs, Chief Financial Officer, on May 24, 2023 at 11:00 AM Eastern / 8:00 AM Pacific time.

Date: May 24, 2023
Time: 11:00 AM ET / 8:00 AM PT
Toll-Free: 1-888-396-8049 International: +1-416-764-8646
Conference ID: 07288870
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 June 7, 2022. The replay will be available by dialing 1-877-674-7070 or +1-416-764-8692 and by using the passcode 288870.

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 plant-based products made from rapidly renewable resources instead of fossil fuels. The Company is focused on making it easy and affordable for business owners and consumers to shift away from petroleum to better everyday products® that use more renewable materials, less fossil fuel, and no chemicals of concern.

good natured® offers over 400 products and services through wholesale, direct to business, and retail channels. From plant-based home organization products to certified compostable food containers, bio-based industrial supplies and medical packaging, the Company is focused on making plant-based products more readily accessible to people as a means to create 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
This email address is being protected from spambots. You need JavaScript enabled to view it.

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 profit, variable gross margin, SG&A excluding acquisition activity and one-time charges, and adjusted EBITDA all non-GAAP measures, for Q1 2023, Q1 2022 and Q4 2022 to provide, what management believes, is a meaningful comparison of the Company's performance in Q1 2023. These non-GAAP measures do not have standardized meanings, and therefore may not be comparable to similar measures presented by other issuers. Variable gross profit, variable gross margin, SG&A excluding acquisition activity and one-time charges, and adjusted EBITDA are more fully defined and discussed in the Company's Q1 2023 Management's Discussion and Analysis under the heading "non-IFRS financial measures", which is available on the Company's SEDAR profile at www.sedar.com and on the Company's investor website at investor.goodnaturedproducts.com.

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

  3 mon. ended Mar 31    
($000s) 2023  2022  +/- 
  Net loss for the period (2,521) (1,592) 58% 
  Share-based compensation 403  601  -33% 
  Depreciation 627  671  -7% 
  Depreciation in COGS & SG&A 532  304  75% 
  Financing costs 1,799  975  85% 
  Foreign exchange loss (gain) (291) (26) 1019% 
  Gain on WINN Loan (42) -  - % 
  Loss on financing -  -  - % 
  Acquisition related expenses & one time charges 291  278  5% 
  Deferred income taxes recovery (125) (54) 131% 
  Adjusted EBITDA1 673  1,157  -42% 

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

  3 months ended Mar 31    
  2023  2022  +/- 
  Revenue 20,315  25,936  -22% 
  Variable cost of product 12,702  17,715  -28% 
  Variable gross profit1 7,613  8,221  -7% 
  Variable gross margin % 37.5%  31.7%    
  Fixed factory overhead 2,014  1,587  27% 
  Gross profit 5,599  6,634  -16% 
  Gross margin % 27.6%  25.6%    

The following table provides a reconciliation of selling, general and administrative expense excluding acquisition activity and one-time charges:

   3 mon. ended Mar 31    
($000s) 2023  2022  +/- 
  SG&A Wages 2,353  2,086  13% 
  SG&A Other 1,031  1,250  -18% 
  Product Development expense 166  192  -14% 
  Acquisition related expenses & one-time charges 291  278  5% 
  SG&A 3,841  3,806  1% 
  SG&A % of Revenue 19%  15%    
  SG&A excluding acquisition activity & one-time charges1 3,550  3,528  1% 
  SG&A % of Revenue excluding acquisition related &
   one-time charges
 17%  14%    
  SG&A Wages % of Revenues 12%  8%    

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 2023, the upcoming results conference call and management's outlook for 2023.

By their nature, forward-looking statements involve known and unknown risks, uncertainties, changes in circumstances and other factors that are difficult to predict and many of which are outside of the Company's control 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.

Forward-looking information contained in this news release is based on our current estimates, expectations and projections regarding, among other things, future plans and strategies, projections, future market and operating conditions, supply conditions, end customer demand conditions, anticipated events and trends, general market conditions, the economy, financial conditions, sales volume and pricing, expenses and costs, and other future conditions which we believe are reasonable as of the current date. Important factors that could cause actual results and financial conditions to differ materially from those indicated in the forward-looking statements include, but are not limited to: future capital needs and uncertainty of additional financing, risks relating to general economic, market and business conditions and unforeseen delays in the realization of the Company's plans, risks related to the loss of key manufacturing equipment, capability or facilities, the performance of plant-based materials and the ability of the Company's products and packaging to meet significant technical requirements, changes in raw material supply and costs, labour availability and labour costs, fluctuations in operating results, and other related risks as more fully set out in the Annual Information Form of the Company and other documents disclosed under the Company's filings at www.sedar.com. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date.

If 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 herein 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.

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) (Unaudited)      
   31-Mar  31-Dec 
   2023  2022 
        
Assets      
        
Current assets:      
 Cash and cash equivalents$11,610 $11,860 
 Trade and other receivables 11,418  9,360 
 Inventory (note 3) 11,906  12,663 
 Prepaid expenses 744  929 
   35,678  34,812 
        
Non-current assets:      
 Property and equipment (note 5) 44,771  44,692 
 Right-of-use assets (note 6) 4,745  5,001 
 Customer relationships (note 7) 6,316  6,447 
 Intangible and other assets (note 7) 4,499  4,523 
 Goodwill (note 7) 8,966  8,966 
  $104,975 $104,441 
        
        
Liabilities and Shareholders' Equity    
Current liabilities:      
 Accounts payable and accrued liabilities$21,223 $18,265 
 Current portion of long-term debt (note 8) 5,638  6,593 
   26,861  24,858 
        
Non-Current liabilities:      
 Long-term debt (note 8) 56,176  55,320 
 Contingent consideration liability (note 8) 2,072  2,035 
 Deferred income tax liabilities 3,153  3,278 
   61,401  60,633 
        
Shareholders' Equity:      
 Common share capital 63,496  63,446 
 Contributed surplus 7,916  7,563 
 Foreign currency translation reserve 2,150  2,269 
 Deficit (56,849) (54,328)
   16,713  18,950 
        
Total Liabilities and Shareholders' Equity$104,975 $104,441 
GOOD NATURED PRODUCTS INC.  
Consolidated Statements of Net Loss and Comprehensive Loss 
(In thousands except per share amounts) (Unaudited) 
  
 Three months ended March 31 
  2023  2022 

Product revenue
$20,315 $25,936 
Cost of product revenue (note 11) (14,716) (19,302)

Gross profit

 5,599  6,634 
Other (Expenses) Income:      
     Selling, general, and administrative (note 12) (3,841) (3,806)
     Fulfilment and logistics (1,908) (2,253)
     Share-based compensation (note 9 (b)) (403) (601)
     Depreciation and amortization (627) (671)
     Financing costs (1,799) (975)
     Foreign exchange gain (loss) 291  26 
     Gain on interest free loan (note 8 (c)) 42  - 

Net loss before taxes

 (2,646) (1,646)
Deferred income tax recovery 125  54 

Net loss for the period
$(2,521)$(1,592)

Other comprehensive Income (loss), net of tax
      
Items that may be reclassified subsequently to profit or loss:      
     Unrealized currency gain on translation of foreign operations (119) (186)
Other comprehensive loss for the period$(2,640)$(1,778)
Basic and diluted loss per share$(0.01)$(0.01)

Weighted average shares outstanding - basic and diluted
 241,762  222,223 
GOOD NATURED PRODUCTS INC.     
Consolidated Statements of Cash Flow      
(In thousands)      
       
 Three months ended March 31
  2023  2022 
       
Cash provided by (used in):      
       
Operations:      
Net loss$(2,521)$(1,592)
Items not involving cash:      
     Depreciation and amortization 842  813 
     Unrealized foreign exchange (gain) loss (127) 273 
     Amortization of right of use assets 256  168 
     Share based compensation (note 9(b, d)) 403  601 
     Gain on interest free loan(42) - 
     Financing costs 1,799  975 
     Deferred income tax (125) (54)
  485  1,184 
       
Changes in non-cash operating working capital:      
     Trade and other receivables (2,058) 4 
     Inventory 757  (2,071)
     Prepaid expenses 185  (26)
     Accounts payable and accrued liabilities 2,958  4,774 
  1,842  2,681 
       
     Finance costs paid (1,535) (725)
Cash provided by (used in) operating activities 792  3,140 
       
Financing:      
     Exercise of warrants for common shares -  254 
     Exercise of options for common shares -  28 
     Proceeds from long-term debt, net of issuance costs (note 8)1,404  700 
     Repayment of long-term debt (note 8) (1,681) (568)
Cash provided by financing activities  (277) 414 
       
Investments:      
     Purchase of equipment (697) (1,466)
     Purchase of other assets (69) (227)
Cash used in investing activities (766) (1,693)
       
Effect of foreign exchange rate changes on cash 1  (142)
       
Increase in cash (250) 1,719 
       
Cash and cash equivalents, beginning of period 11,860  10,655 
       
Cash and cash equivalents, end of period 11,610  12,374 

1 A non-GAAP financing measure. Please refer to the "Non-GAAP Financial Measures" below for an explanation of these measures and reconciliation to the Company's financial results reported in accordance with GAAP.

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