VANCOUVER, BC, Feb. 15, 2022 /CNW/ - good natured Products Inc.
(the "Company" or "good natured®") (TSXV: GDNP), a North
American leader in plant-based products and packaging, today
released its annual letter to shareholders from Paul Antoniadis, the Company's CEO.
Dear Owners,
As always, I'd like to start by expressing my sincere
appreciation for your commitment to good natured®
and trusting us to be stewards of your sustainable investing
dollars. This is your company, and on behalf of our 200+ employees
I want to personally thank you for your trust and partnership on
our path to building North
America's leading earth-friendly product company.
With ESG investment opportunities becoming more common, we hope
our 7-year track record of delivering on our growth strategy has
made us – and will continue to make us – stand out from the crowd.
Helping our customers achieve their sustainable development goals
remains at the core of what we do, and your capital contribution
plays an invaluable role in creating positive economic,
environmental, and social impact for all our stakeholders and the
families who depend on us.
We're kicking off 2022 with the same courage and conviction to
aggressively grow our topline revenue, both organically and through
acquisition, with targeted gross margins in the 21% to 28% range
and annual improvements in EBITDA. We anticipate continued global
supply chain disruptions, external inflation, and fluctuation in
our market valuation in 2022 (both up and down). Our keen focus on
execution, providing great service, and managing operational
excellence is our "superpower" and path to success. I've been so
impressed with our team's demonstrated ability to stay focused on
our strategic objectives, adapt quickly and continue to achieve our
operational targets.
We passionately believe that the key to making annually
renewable, plant-based materials truly mainstream must be about
more than just the ingredients. We're in the business of making
better everyday products®, which means they're
designed to deliver great performance and do less environmental
harm, while also making it easy and affordable for customers to
make the switch. Every year, we assess what initiatives will be
most meaningful in the current market conditions to grow and
maintain a strong competitive advantage. In 2022, we anticipate
this to include continued and purposeful expansion of our
sustainable product and service portfolio, along with key
technology investments to enhance our operational capabilities and
deploy predictive tools to deliver "anticipatory service" to our
customers.
Our strategic acquisitions in 2020 and 2021, along with capital
deployed toward high-speed manufacturing technology, are
solidifying good natured® as a market leader with
robust supply chain capabilities in Canada and the
United States. Investments in robotics and manufacturing
automation will also increase high value, skilled employment
opportunities in our local communities. These initiatives position
the Company to deliver our 2022 plan by enhancing manufacturing
capability for our existing customers and paving the way to add new
organic customers to deliver our revenue growth objectives. Many
prospective customers are urgently seeking to re-shore their supply
chain to de-risk global disruptions, creating a substantial pool of
additional addressable markets for the Company in the immediate
future.
The year ahead will not be without challenges and unforeseen
circumstances. Economic and operating conditions are far from
normal (although we all might be actively re-examining what
"normal" is). Our team loves taking on new challenges and takes an
unconventional approach to lean into emerging opportunities when
things are tough, so we're incredibly energized for what's coming
in 2022!
2021 – The Year in Review
This past year was truly one of the most challenging and
rewarding operating environments I've experienced in my
professional career. It was humbling to witness our team's
commitment to repeatedly overcoming obstacles caused by persistent
external inflationary pressures and supply chain disruptions to
achieve record-breaking annual revenue. We completed our largest
acquisition, delivered strong organic customer growth, launched a
broad series of new sustainable products, invested in high-speed
manufacturing technology, and stayed on top of our cash, inventory
and production requirements despite constantly fluctuating macro
and micro-economic conditions,
As noted in our press release dated January 20, 2022, we ended the 2021 fiscal year
with fantastic momentum and anticipated annual revenue growth of
255% to 270%, for the year ended December
31, 2021 ("FY2021") compared to the year ended December 31, 2020 ("FY2020"); plus, FY2021
revenue expected to range between $59.3
million to $61.3 million.
Variable gross margin, a non-GAAP measure1, for FY2021
is anticipated between 30% and 32%, while gross margin for FY2021
is estimated to land between 24% and 26% for the full year. These
are preliminary and unaudited revenue and gross margin estimates
prepared by the Company for FY2021.
Our strategy remains centered on organic initiatives
contributing 50% of our revenue growth and acquisitions delivering
the remaining 50%. Our results in 2021 are more heavily weighted to
acquisition revenue due to the timing of completing two major
acquisitions - IPF in December 2020
and Ex-Tech in May 2021. I don't want
to let the strong execution of our acquisition strategy overshadow
the tremendous success achieved on the organic side. By
December 2021, we'd more than doubled
the number of active, recurring business customers compared to the
2020 year end, and our customer mix has become larger and more
diverse than any other time in the history of the Company. Compared
to any prior period, we're less reliant on any one customer to
deliver our growth numbers, and have a healthy, highly varied
pipeline of future opportunities that makes us more resilient in
unstable market conditions.
Our 2021 share price performance can only be described as a
roller coaster, and we appreciate those who've had the stomach for
the full ride! After a very strong start to the year and reaching a
record market capitalization of $400+ million in February 2021, our market capitalization was down
~12% at year end 2021 versus year end 2020. As owners ourselves,
with management and insiders representing 23% of shares
outstanding, we're keenly focused on creating both positive
environmental impact and long-term economic value. Despite the
fluctuations of 2021, our 3-year market capitalization has grown
from approximately $10 million at the
end of 2018 to approximately $172
million at the end of 2021, representing an increase of over
1,600%. Our liquidity has also improved significantly, with average
daily volume in 2021 having increased over 1,200% from 2018.
We're also very pleased to have increased our analyst and
research coverage to a total of seven firms in 2021, including the
first from a Schedule I bank in Canada. We were also able to attract several
new institutional investors and family offices to invest in the
company's stock. This has broadened our base of long-term
investors
2021 Highlights·
- Acquired Ex-Tech Plastics Inc., a US manufacturer of high
quality, rigid plastic sheets with almost 40 years of operations.
The acquisition significantly increased our capacity to produce
plant-based rollstock that we use to make our rigid thermoformed
packaging, added 105 customers, and FY2020 revenue of approximately
$33 million, adjusted
EBITDA2 of US$2.6
million, and net income of US$1.5
million.
- Announced commencement of shipments to our largest organic
commercial customer, a national US food producer, expected to
generate USD$13 million in its first
year,
- Successfully completed a $17.25
million convertible debenture financing and a $35.8 million senior credit facility, inclusive
of a $10 million uncommitted
accordion, with National Bank, materially reducing the blended
interest rate paid on our long-term debt and principal repayments
due over the next three years.
- Announced partnership with Jones Healthcare Group, a market
leader in advanced packaging and medication dispensing solutions,
to focused on expanding sustainable packaging solutions. Jones'
blister packaging products will now be made with good
natured® Bio-PET, a food-safe, curbside
recyclable bioplastic material.
- Purchased high-speed manufacturing equipment that is
anticipated to be operational in Q1 of 2022 and grow annual
production capacity at our IPF facility by 50% to 33 to 35 million
pounds.
- Purchased high-speed thermoforming manufacturing technology
that is anticipated to be installed and operational at our Shepherd
facility in Q2 of 2022.
- Announced good natured® as recipient of
Deloitte's Clean Technology award, a new award category in the
Technology Fast 50 program that recognizes Canada's top clean innovators. The Company was
also named to Deloitte's North American Technology Fast 500
category, recognizing our 460% revenue growth between 2017 and
2020,
- Along with a multitude of plant-based food packaging products,
launched a line of plant-based Bin Bags, Zipper Bags and
retail-packed Compostable Tableware, expanding our general
merchandise assortment for direct-to-consumer and in-store retail
locations across North
America.
- Ranked among the TSX Venture Exchange's top 50 best performing
companies. Presented by the TSX Venture Exchange, good
natured® was ranked 4th in the Clean
Technology & Life Sciences sector based on three equally
weighted criteria: market capitalization growth, share price
appreciation and trading volume amount,
- As part of the organic growth segment, added Better Bites
Bakery, an Austin, Texas-based
producer of plant-based treats free from the top 8 allergens with
nationwide US distribution to retailers such as Kroger, Whole Foods
Market, Super Target, Costco and H-E-B.
- Launched Canada's first
compostable and microwavable plant-based take-out containers in
response to Canada's proposed
single-use plastic ban as well as Canada and US Plastics Pact guidelines.
- Highlighted new customer acquisitions in fast growing emerging
industries. such as meal kits (Simple Feast and Vegano), high-tech
growers (Heron Farms and ColdAcre).
- Launched our plant-based Bio-PET material, containing 20-30%
plant-based content, up to 50% recycled content and readily
accepted in curbside recycling programs across North America.
- Successfully completed and upsized $23.1
million bought deal short form prospectus financing in
March 2021.
2022 – A Look at What's Next
Our 2022 plan stays true to our long-term strategy of delivering
aggressive revenue growth, gross margins within our targeted range
and annual improvements in EBITDA, while concurrently fueling
positive environmental impact and growing value for our owners.
The acquisition of Ex-Tech in May
2021 added approximately $33
million in trailing 12-month revenue (as at December 2020) and essentially doubled the size
of the Company. Annualized revenue from this acquisition and
several organic customers already puts us in a strong position to
successfully deliver another year of very strong revenue growth.
Any potential future acquisitions or additional organic growth from
our active sales pipeline will be incremental.
Executing our 2022 plan will also result in a re-balancing of
our revenue mix by business group. With the recent IPF and Ex-Tech
acquisitions, our Industrial business group became a larger
percentage of our total revenue. As we deploy more manufacturing
capability toward our own operations, we anticipate our packaging,
general merchandise, commercial/business supplies, and associated
services will contribute higher percentages of overall revenue mix
in 2022.
Our 2021 capital investments in high-speed manufacturing and
automation technology will position us well to support our planned
revenue growth in 2022. We expect this equipment to be fully
operational over the course of the first and second quarter of 2022
and anticipate additional investments in manufacturing, robotics,
and operational technology in 2022. These strategic investments
will drive operational efficiencies, position us as an emerging
leader in domestic, high-tech manufacturing of sustainable products
and create the pathway to continued revenue growth and EBITDA
improvements in 2023.
Our 2022 plan also includes continued progress toward upgrading
our technology platforms and the creation of real-time access to
financial data, metrics and business insights. To that end, good
natured® will be implementing a new ERP (Enterprise
Resource Planning) system that is expected to be fully functional
in 2023. This system will provide comprehensive access to
AI-enabled planning and decision-making tools across the Company's
growing number of locations and be deployed as part of the
Enterprise tech stack with any future acquisitions.
We remain committed to driving alignment between our owners, our
board, and our operating team members. Our unique, "good natured"
culture plays a big role in helping us achieve a higher level of
cohesion and common purpose, along with strong differentiation
against competitors. We're here to deliver long term economic value
as owners and make a positive contribution to the environment, and
our team is rewarded accordingly to keep us moving together toward
these collective goals.
Thank you for your dedication, passion and support that have
enabled us to execute our strategic goals in 2021 and position the
Company for success in 2022 and beyond. For those of you who are
not on our regular communications list, I encourage you to
subscribe to our investor newsletter at the link below to receive
updates about our 2022 progress as it happens:
https://investor.goodnaturedproducts.com/contact-us/newsletter-subscription/
Sincerely,
Paul Antoniadis
good natured Products Inc.
CEO & Executive Chair
*****
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
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 certain non-GAAP
measures that are used to evaluate the performance of business,
including adjusted EBITDA. As non-GAAP measures generally do not
have a standardized meaning, they may not be comparable to similar
measures presented by other issuers. Adjusted EBITDA does not have
a generally accepted industry definition.
Cautionary Statement Regarding Forward-Looking
Information
We have included in this press release certain non-GAAP
financial measures and ratios that provide what management believes
are meaningful comparisons of the Company's performance, including
adjusted EBITDA and variable gross margin.
In this release, variable gross margin is gross margin
excluding fixed production costs such as depreciation, repairs and
maintenance, utilities and similar overhead items. The use of
variable gross margin by management allows for evaluation of the
core aspects of the Company's profit margin as certain fixed
production costs that are outside the Company's control are
excluded. Management believes variable gross margin provides an
accurate measure of the Company's product margin contribution by
removing fixed factory overhead. Variable gross margin provides
deeper insight into normalized product margins related to variable
material input costs, inbound freight and labour costs associated
with producing the goods being sold. Variable gross margin also
removes gross margin percentage fluctuations due to changes in
revenue from factors such as mix of insourced versus outsourced
manufacturing to respond to specific customer requirements for
multiple-facility production, depreciation from facility capital
investments and the addition of manufacturing facility acquisitions
with factory overhead charges.
In this release, adjusted EBITDA is earnings before
interest and finance costs, taxes, depreciation and amortization,
other non–cash items and one–time gains and losses. The use of
adjusted EBITDA by management allows for evaluation of 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
Company believes that, in addition to conventional measures
prepared in accordance with IFRS, certain investors and other
stakeholders also use this non-IFRS measure as information to
evaluate the Company's operating and financial performance.
Adjusted EBITDA provides an indication of the Company's continuing
capacity to generate income from operations before considering the
Company's financing decisions, share compensation, costs of
amortizing capital assets and other significant or unusual items.
With the Company being keenly focused on revenue growth, adjusted
EBITDA provides management a valuable, normalized metric for the
evaluation of ongoing operating performance, strategic decisions
and future operating plans.
As non-GAAP financial measures or ratios generally, including
variable gross margin and adjusted EBITDA do not have a
standardized meanings under the financial reporting framework used
to prepare the Company's financial statements, they may not be
comparable to similar measures presented by other issuers.
The following table provides a reconciliation of preliminary
and historic gross margin to preliminary and historic variable
gross margin (expressed in thousands of dollars):
|
FY2021
|
|
Low
end
|
|
Upper
end
|
Cost of product
revenue
|
|
|
|
Variable cost of
product
|
(41,600)
|
|
(40,400)
|
Variable gross
margin
|
18,700
|
|
19,900
|
Factory overhead and
depreciation
|
(4,200)
|
|
(4,200)
|
Gross
margin
|
14,500
|
|
15,700
|
Revenue
|
59,300
|
|
61,300
|
The following table provides a reconciliation of Ex-Tech's
FY2020 net income to adjusted EBITDA:
|
Year
end
|
|
December 31,
2020
|
Net
Income
|
$1,378
|
Forgiveness of
loan
|
(936)
|
Depreciation and
amortization
|
903
|
Interest
Expense
|
259
|
Rent
|
444
|
Other normalizing
adjustments
|
524
|
Adjusted EBITDA
profit
|
$2,572
|
Adjusted EBITDA as a
% of Revenue
|
10%
|
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this release are not based on
historical facts and constitute forward-looking information, as
defined in securities laws. Forward-looking information is not a
promise or guarantee of future performance but is only a prediction
that relates to future events, conditions or circumstances or the
Company's future results, performance, achievements or developments
and is subject to substantial known and unknown risks, assumptions,
uncertainties and other factors that could cause the Company's
actual results, performance, achievements or developments in its
business or industry to differ materially from those expressed,
anticipated or implied by such forward-looking information.
Forward-looking statements in this release include
information regarding preliminary financial results, future gross
margins, the Company's 2022 plans, the potential benefits expected
from the Company's previous investments and plans to expand our
business organically or through acquisitions contained in this
press release may constitute forward-looking information within the
meaning of securities laws. Readers are cautioned not to place
undue reliance upon any such forward-looking statements, which
speak only as of the date they are made.
The forward-looking statements in this release are based on
certain factors and assumptions regarding expected growth, results
of operations, performance and business prospects and
opportunities. Specifically, management has assumed that the
Company's performance will meet management's internal projections.
While management considers these assumptions to be reasonable based
on information currently available to us, they may prove to be
incorrect. 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 statement. 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.
Other than as required under securities laws, we do not
undertake to update this information at any particular
time.
The estimates of FY2021 revenues and variable gross margins,
as well as the estimated yearly revenues from the Company's largest
organic commercial customer, a national US food producer, contained
in this release were approved by management on January 19, 2022 and October 11, 2021 respectively.
|
___________________________________________
|
1 For more
information regarding non-GAAP measures included in this news
release, please refer to "Non-GAAP financial measures"
below.
|
2 For more
information regarding non-GAAP measures included in this news
release, please refer to "Non-GAAP financial measures"
below
|
SOURCE Good Natured Products