Jamieson Wellness Inc

TSX:JWEL

Earnings Call Analysis

Company Forecasts Revenue and Earnings Growth

In Q4, the company saw consolidated revenue increase by 14.3% to $220.4 million, with significant contributions from both Jamieson Brands, which grew 16% to $181 million, and Youtheory. Chinese revenue climbed over 90%, reflecting a strategic push such as the 11/11 Singles' Day program. International business grew by 37% due to European strength, while Strategic Partner revenue rose by 7%. Gross profit margins remained consistent, and adjusted earnings per share increased by 8.1% year-over-year to $0.67. Cash flow was strong, ending the quarter with $211.9 million. For fiscal 2024, revenue is expected to reach $720-$760 million, a 6.5-12.5% growth, with adjusted EBITDA between $138-$144 million. Adjusted earnings per share are projected at $1.55-$1.65, indicating up to a 7% increase. However, adjusted EBITDA margins are expected to decline by 120-170 basis points. Looking ahead to 2025, the company targets 8-15% revenue growth, and adjusted EBITDA growth of 10-17%, potentially reaching $155-$165 million, supported by improved manufacturing efficiencies.

Financial Performance and Strategic Actions

Jamieson Brands delivered a strong financial performance with gross profit margins of 40.4%, though this represented a slight dip compared to the previous year, primarily due to a mix of product categories sold. The company effectively managed its expenses and achieved an adjusted net earnings increase to $28.6 million, reflecting persistent growth even in a challenging post-COVID landscape. Within the Strategic Partners segment, margins slightly declined to 15.1% owing to customer mix but were buffered by production efficiencies.

Growth Initiatives and Market Expansion

Post-COVID, consumer behaviors have shifted, benefiting the health and wellness industry. Positioned to capitalize on this transformation, Jamieson has integrated its acquisitions in the U.S. and China, setting the stage for accelerated growth. Executives highlighted their recent union agreement and readiness to navigate the evolving market. The emphasis is on understanding consumer preferences and delivering products that cater to a growing health-conscious audience.

Investments to Fuel Market Penetration

Jamieson is committed to investing in brand equity and demand-generation initiatives, notably in China, where the company's growth is expected to sharply increase by 45% to 60% as it harnesses consumer momentum. The company is clear on its intent to invest in the opportunity at hand and challenge both large multinationals and smaller competitors with speed and agility.

Capital Allocation and Shareholder Value

Financially, Jamieson expects cash from operations to be robust, with potential cash availability between $50 million to $60 million after investments and working capital considerations. This financial strength lays the groundwork for potential debt repayment, dividend payouts, or share buybacks, further highlighting the company's commitment to delivering shareholder value.

Sales Dynamics in Core Markets

The company has witnessed substantial domestic consumption growth, with double-digit increases in both unit and dollar growth. Despite some inventory challenges with a major retailer, the executives express confidence in the stability of their Canadian operations and foresee consumption and shipments aligning more closely going forward. Additionally, there is an observable consumer shift to channels providing value, such as online and discount channels, suggesting a strong continuous engagement with health products.

Earnings Call Transcript 2023-Q4

[Operator]

Good afternoon, everyone. Welcome to the Jamieson Wellness Conference Call to discuss the Financial Results for the Fourth quarter and Full Year of 2023. [Operator Instructions] As a reminder, today's call is being recorded.On the call today from management are Mike Pilato, President and Chief Executive Officer; and Chris Snowden, Chief Financial Officer and Corporate Secretary.Before I turn the call over to Mr. Pilato, please note that the press release covering the company's fourth quarter and full year 2023 financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website.Please note that the prepared remarks, which will follow, contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We refer you to all risk factors contained in Jamieson press release issued this afternoon and in filings with the Canadian securities administrators for a more detailed discussions of the factors that could cause actual results to differ materially from those projections and any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as it may be required under applicable securities laws.Finally, we would like to remind listeners that the company may refer to certain non-IFRS financial measures during this teleconference. A reconciliation of these non-IFRS financial measures was included with the company's press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in Canadian dollars and are occasionally rounded to the nearest million.I will now turn the call over to Mr. Pilato to get started. Please go ahead, sir.

[Michael Pilato, executive]

Thank you, Allyn, and good afternoon, everyone, and good evening and good morning to those listening overseas. Thanks for taking the time to join us for our Q4 and 2023 results. Last week, we successfully negotiated a new 4-year employment agreement with our unionized manufacturing team in Windsor, Ontario, giving us clear visibility and stability as we continue to drive forward with our global growth strategy. The ongoing negotiations resulted in our earnings call this afternoon being a little later in the quarter than you have come to expect from us. We sincerely appreciate your understanding and patience as we prioritize bringing these important team members back to work as quickly as possible.I'm happy to be here today to share our 2023 performance in detail before turning it over to Chris for our quarter 4 financials and guidance for 2024 and 2025. Then I'll conclude with some additional color around our key operational and strategic initiatives before taking your questions.2023 was another transformative year for Jamieson and another year of profitable double-digit growth, accelerated share gains across our targeted markets reflected our continued strength and expanding scale. With global markets now settled post COVID-19, we ended the year with strong growth momentum at the consumer level across all branded business segments, proving that COVID-19 was an accelerator of category growth with many tailwinds still behind us.Our consolidated revenue grew 23.5% to over $676 million in 2023, the largest quarter of growth in the company's public history. We delivered growth across all segments, led by Jamieson Brands improving by 25.5% over the year. Our Strategic Partners segment was up 15.5% in 2023. And as a result, our adjusted EBITDA was over $138 million, up over $14 million or nearly 12% growth as we invested in our global growth pillars of the United States and China, including infrastructure and demand-generating marketing.Our adjusted EPS came in at $1.55 per diluted share, flat to 2022, despite several specific items which flowed through to the bottom line, including our material investments in growth in China and the U.S. and higher interest rates and borrowing costs. These results clearly illustrate the strength of our strategy, our agility and our ability to understand consumers globally as we continue diversifying our global footprint. At the same time, we are further expanding our 102-year-old market leadership position domestically here in Canada.By comparison, on the global stage, our position in China and the U.S. is distinctly different than in Canada, each our unique markets requiring local execution and go-to-market strategies tailored to each country's specific consumer trends and preferred channels. And we are extremely proud of the strong double-digit growth we delivered in both in 2023.Let's review each business unit in a little more detail, starting with Canada. The evolution of an over century-long commitment to excellence in our core Canadian market, allows us to continue to leverage our position as the clear category leader and expand our position with share growth once again in 2023, a position we've built through consistent product innovation, strategic consumer marketing and expanded distribution for decades. In 2023, we delivered another year of record-setting consumption in both units and dollars were once again growing market share. The health of the brand at the consumer level in Canada has never been stronger. Consumption significantly outpaced shipments in 2023 as customers recalibrated inventory levels in a post-COVID high cost of capital year beyond historic norms. We believe that through Q1 2024, impacted by our previously mentioned work stoppage, inventory levels have now been reset in the market to a new normal, and Canada will see sales growth more in line with consumption and historical expectations for the remainder of the year and beyond.In the U.S., with the youtheory integration now 100% complete, we are squarely focused on innovation, e-commerce and further channel and market expansion opportunities. In 2023, our first full year of youtheory ownership reported revenue was up 123% and over 17% on a pro-forma organic basis, delivering the solid double-digit growth we committed to. We executed on multiple fronts, both digitally through e-commerce and physically on on-store shelves. We see this business continuing to produce strong double-digit organic growth for the foreseeable future and have started 2024 off strong with some new distribution and new innovations hitting the shelf early.In China, we have come a very long way in mastering the complexities and nuances of doing business in this very different market, a market with highly engaged consumer in health and one looking for high-quality health products from foreign brands like Jamieson. Our business in China was up over 80% in 2023 on a reported basis, and on a pro-forma basis, grew more than 45% to over $50 million. Now with full ownership and control of the value chain, we are very optimistic about 2024 and the potential for future expansion in what has become the world's largest market opportunity in our industry. We also have the DCP team in our corner and with their deep local roots, knowledge and network, combined with some accelerated demand generation investment behind our recent momentum, we are confident we will see another year of exceptional growth in China and drive this business above $80 million in 2024 and pass $100 million in short order.Internationally, where Jamieson products are available in multiple markets, we drove incremental growth accelerated in Q3 and Q4, and we started to see consumption growth and market share growth across key markets where we are focused, partially offset in Q4 by some temporary shipping delays related to the Middle East conflict. With recent growth momentum behind us, we are confident in our ability to deliver another year of growth in this branded segment, led by some key and select markets.Turning to profitability, our normalized gross profit grew $242 million in 2023 for a margin of 36%, consistent with the prior year despite consolidating the inherently lower margin profile of youtheory for a full 12 months. Adjusted EBITDA topped $138 million for a margin of 20.4%, reflecting our growth in investments made throughout the year. All told, the prospects and projections for future growth are increasingly better every year, and I expect 2024 to continue this path.I'll pause here for Chris to add some of the financial details, and then I'll close with some context around our outlook and strategy for 2024 and beyond before taking your questions. Chris, over to you.

[Christopher Snowden, executive]

Thank you, Mike, and good afternoon, everyone. In the fourth quarter, consolidated revenue increased by 14.3% to $220.4 million, driven by growth in both Jamieson Brands and Strategic Partners segments. Jamieson Brands revenue increased by 16% to $181 million. Domestic Canadian revenue grew by $5.2 million to $94.3 million or 5.8%, reflecting record consumption levels outpacing shipments as specific large retailer reduced inventories below historic levels and below our expectations.Youtheory contributed $55 million to revenue or an 8.7% growth increase across all channels driven by timing, continued demand for existing products, successful innovation and distribution gains. China contributed $20.7 million to revenue, representing more than 90% growth on a pro forma basis. This reflects the seasonal impact of direct sales to consumers under our own distribution model, strong cross-border e-commerce promotional plans for our 11/11 Singles' Day program driven by investments on social media platforms.Our international business grew by 37% on a constant currency basis, driven by growth in Europe, partially offset by delayed shipments in the Middle East due to conflict. Our Strategic Partner revenues increased by $2.6 million or 7%, reflecting timing of shipments and final orders on the close-out of a customer contract.Gross margins in Q4 were 35.9% or 100 basis points lower than the previous year, impacted by the fair value amortization of acquired inventory. On a normalized basis, gross profit margins were consistent with the prior year. Within Jamieson Brands, gross profit margins were 40.4% or 41.8% on a normalized basis. Gross profit margin decreased by 60 basis points, largely due to category mix. Gross profit during the wave -- during the last wave of COVID in the fourth quarter of 2022, immunity demand benefited our reported margins in the prior year. Gross profit margin in the Strategic Partners segment was 15.1% compared to 15.9% last year. Margin was impacted by favorable production efficiencies and offset by customer mix.Selling, general and administrative expenses increased $9.5 million as a result of investment to support our strategic initiatives and marketing, plus $6.1 million in specified costs related to our Chinese distributor expansion and youtheory acquisitions, including our IT system implementation initiatives.Adjusted net earnings, which excludes specified costs, acquisition-related adjustments and foreign exchange, were $28.6 million in the quarter, representing a year-over-year increase of approximately $2 million. Our adjusted earnings per diluted common share were $0.67 and 8.1% increase compared to the prior year. A reconciliation of adjusted EBITDA and adjusted net earnings is provided in today's press release announcing the company's fourth quarter results.Turning to balance sheet and cash flow. We generated $26.1 million in cash in the fourth quarter from operations compared to $40.8 million in the year earlier period. Cash from operations before working capital considerations were $20.4 million in the quarter, down $8.7 million, primarily as a result of our recent acquisition and investments in our IT systems.Cash generated from working capital decreased by $6 million, driven by the timing of payables and income tax payments in the quarter. We repurchased $29 million or 970,200 common shares through our normal course issuer bid in the quarter and distributed approximately $8 million in dividends. We ended the fourth quarter with $211.9 million in cash and available operating lines. Based on our strong cash flow and earnings, we have announced a dividend of $0.19 per common share payable on March 15, 2024.Now turning to guidance, let me start first with our outlook for fiscal 2024, which we are initiating today. In fiscal 2024, we expect the following: net revenue in the range of $720 million to $760 million, reflecting growth between 6.5% and 12.5% compared to 2023; adjusted EBITDA in the range of $138 million to $144 million, an increase of up to 4.5% compared to the prior year; adjusted earnings per fully diluted common share of between $1.55 and $1.65 representing an increase of up to 7% for the year. In addition, we expect to generate between $85 million and $95 million in normalized cash from operations before working capital and specified items expected in the year. This outlook is based on several operational assumptions, which can be found in the MD&A, including factors that may temporarily impact our earnings as well as a strategic shift in our approach to drive accelerated growth in China and the United States.When we break down by business unit, we expect the following: our Jamieson Brands segment to deliver revenue growth of 12% to 18% in 2024, driven by ongoing traction in China and the United States, while further strengthening our domestic leadership position. In Canada, we expect revenue growth of 4% to 7.5% compared with fiscal 2023, reflecting market share gains realized in the prior year and continued consumer strength. Factors impacting this include the recovery of higher costs through in-market pricing. Our current margins reflect inflationary pressures since our last price increase in fiscal 2022 and the planned reductions in customer and distributor inventory levels in first quarter of 2024.Our youtheory revenue growth is expected to be between 13% and 20%, driven by strong marketing programs, product innovation, expanded e-commerce initiatives and distribution gains in both U.S. and international markets. In China, accelerated growth behind our recent momentum translate to revenue growth of 60% to 80% or approximately 45% to 60% pro-forma growth, reflecting investments made to capitalize on emerging social e-commerce channels and further investments in marketing activities to drive brand trial and awareness. International revenue growth of between 5% and 15%, driven by continued growth in existing markets with the potential for geographic expansion and incremental innovation based on anticipated regulatory approvals. And Strategic Partner revenue decline of between 10% and 20% in 2024, reflecting the previously announced customer transition, partially offset by new programs expected to launch in the second half.We expect EBITDA growth and EBITDA margin growth in 2024 to be impacted by the following: gross profit margin to increase by 200 basis points to 250 basis points, including an expansion of 150 basis points to 200 basis points in the brand segment; normalized SG&A to increase by approximately 20% to 35% this year, reflecting an increase in marketing spend of between 60% and 80% to drive further awareness in China and increased share and consumption in the United States; adjusted EBITDA margins are expected to decline between 120 basis points and 170 basis points in 2024.To summarize, key factors impacting our fiscal 2024 results are as follows: a temporary reduction in manufacturing efficiency, resulting from lower production volumes impacted by planned internal and customer branded inventory reductions and lower Strategic Partner volumes; a step-change investment in brand-building activities in both China and the United States, driving brand awareness to accelerate growth in these exciting markets.Now turning to first quarter guidance. On a consolidated basis, in Q1 2024, we expect the following: Jamieson Brands revenue of $106 million to $114 million, representing up to 6% growth. Strategic Partner revenue year-over-year declines in Q1 of between 50% and 60%; consolidated revenue decline of up to 14% or between $118 million and $128 million; domestic, International and Strategic Partner revenues in the quarter will be impacted by the result of our temporary closure of our unionized Windsor manufacturing facilities. This will result in a volume shift between the first and second quarter, with no full year impact as a result of the temporary closure.During the first quarter, we have prioritized and maintained consistent on-shelf availability for consumers, leveraging inventory positions, both in channel, at our customers and in Jamieson Wellness. Consumer consumption [ into these ] markets remained very strong throughout the work stoppage. Our China and U.S. businesses were unaffected by the work stoppage with expected strong momentum in both geographies during the first quarter.Adjusted EBITDA of between $13 million and $16 million based on reduced efficiency from our facility closure as we increase -- and as we increase our investments to maximize growth in the United States and China.To help investors better understand our long-term strategic aspirations and earning expectations, we are providing the following guidance for fiscal 2025 and expect the following: consolidated revenue to grow between 8% and 15%, branded revenue to grow between 10% and 15%, driven by balanced shipments and consumption in Canada and accelerated growth rates in both the United States and in China. Adjusted EBITDA to grow between 10% and 17%, reaching approximately $155 million to $165 million, driven by improved manufacturing efficiencies with higher Strategic Partner and branded production volumes as production volumes align with shipments. In addition, future investments in SG&A and brand marketing spend will align with branded revenue growth.A complete discussion of our outlook for both 2024 and 2025 as well as factors impacting our expected performance is included in the outlook section of our MD&A filed this evening. We encourage investors to read it in its entirety.With that, I'll turn the call back to Mike. Mike?

[Michael Pilato, executive]

Thanks, Chris. Our ability to navigate and deliver results like this in a constantly changing post-COVID environment on a global scale is a testament to the strength and resilience of our strategy and our team. I want to thank the Jamieson team for their commitment and passion for helping advance our mission of becoming the world's most trusted health and wellness company and delivering another good quarter of solid growth. 2023 closed with great momentum at the consumer level across all major markets and brought a close to our acquisition integrations in both the U.S. and China. We are now set up to seize the moment and drive accelerated growth in these new markets under Jamieson management, best practices and operating excellence.Earlier, I mentioned the new 4-year employment agreement we reached with our unionized manufacturing team in Windsor, Ontario. We anticipated negotiations could take some time based on negotiation trends across the country. The agreement reached is fair and competitive for all stakeholders and consistent with our values as an organization. We had contingency plans in place and with production resumed, we are on track to continue meeting the high order fill rates we pride ourselves on. The final terms of the negotiated agreement came within our expectations. While a little more front-end loaded than anticipated, the impact of the new contract is reflected in the guidance Chris provided this afternoon.In closing, our gross initiatives remain on -- our growth initiatives remain on track, as the world continues to evolve, we continue to monitor and adapt to this macroeconomic environment. The pandemic significantly and permanently altered consumer behavior towards vitamins, minerals and supplements, highlighting a continuing growing desire for proactive health management. Exciting tailwinds continue to build behind the category from self-care to digital access to younger demographics entering the category, a shift to quality products and trends like GLP-1s. As the market evolves, understanding these shifts will be crucial for brands to cater to changing consumer needs and preferences.We have learned so much over the past 2 years of transformation since acquiring youtheory in 2022 and our distributor assets in China in 2023. In 2024, we've hit the ground running in these key markets to optimize our strategy and maximize Jamieson's long-term growth potential as a global company, pushing us closer to reaching our goal of $1 billion with speed. To maximize our potential in these markets, we need to make material demand generating and brand equity building investments to drive accelerated top line growth while we have this consumer momentum. While some of this investment will be funded with efficiency driven by our highly profitable 102-year-old Canadian operation, we do not feel that this efficiency provides enough urgency or capital to take full advantage of this opportunity. The time is now.We cannot and will not shelve our enthusiasm or shy away from the strategic shifts and additional investments required for Jamieson to become a global leader. It's a different environment post-COVID. The opportunities are plentiful. We have operational excellence, market expertise and knowledge of the consumer, and we should be the first to grab this opportunity and continue to outpace growth in our key and high potential markets. We have to move with agility and decisiveness as we compete with larger multinational multi-category companies that are not as nimble as we are and smaller entrepreneurial companies that are seeing the opportunities we see in moving towards them. We are setting ourselves up for long-term profitable growth and shareholder value by investing now.Thank you for your support and continued investment. I'm going to turn it over to Allyn to moderate our Q&A.

[Operator]

[Operator Instructions] Your first question comes from Derek Lessard of TD Cowen.

[Derek Lessard, analyst]

I just wanted to maybe touch on the domestic revenue, which it came in a little bit below your original guidance for Q4. I think you touched a bit about in some of your remarks, but maybe could you just add some color around that shortfall? And you think you did mention in your prepared remarks that you expect consumption to better align with shipments going forward. So just maybe the timing of that?

[Michael Pilato, executive]

Yes, it's a great question. Domestic did come in a little bit below our expectation. What I would refer to, though, first and foremost, is that Canadian business has never been larger or healthier at the consumer level. We had significant consumption growth in the quarter in both units and dollars. And we also had significant market share growth, which we're quite proud of as we expanded our market share position through the year. When it came to shipments in Q4, we talked about in Q2 and Q3, we started to see some retailers burning through inventory levels that were coming out of COVID a little higher than historical norms.What happened in Q4 is we had one major customer make a decision towards the end of the quarter that was not expected and really take their inventory levels down to what we would call historical lows, but also -- I mean, I would call it irresponsible lows, like they are holding very, very little inventory. We're working closely with them right now to try to get that up to more reasonable levels to make sure that they can maintain on-shelf availability. But it really came down to one retailer that just made a choice towards the end of the quarter that did not align with our expectations going into the quarter when we put that guide out there.But consumption remains strong through Q1 with the work stoppage, we've seen a complete recalibration of inventory, both in our internal warehouses as well as in market. We feel pretty confident that coming out of Q1 now, all that burn is behind us and consumption and shipments will more closely align to expectations into historical norms.

[Derek Lessard, analyst]

Okay. And do you have an indication of what the -- I guess, what the POS sales were domestically, where that consumption is...

[Michael Pilato, executive]

Yes. I mean, we have very clear numbers on what they were. What I can tell you is, in Q4, we had double-digit growth in both units and dollars in consumption. And on the year, we had mid-single digit growth above 5% actually in both units and dollars in terms of consumption across the board.

[Derek Lessard, analyst]

Okay. And maybe one last one for me before I requeue. More specifically on the 2024 guide of a solid revenue outlook, but it looks like the spend on China and U.S., is this an acceleration over 2023? And I guess what were you expecting before heading into the year?

[Michael Pilato, executive]

Yes. So most of it is -- there's really 3 things impacting the profit in 2024, Chris alluded to them. Number one is, we did see some -- a contract come off in our Strategic Partners business, which we've talked about before. In that division, that's a contract manufacturing made-to-order division. We have a history of having contracts come out of our system. It takes us 9 to 12 months to get new contracts into the system. We already have some of -- the decline from that contract loss will be partially offset in the back half of the year. And our team is currently negotiating with many possible customers in our pipeline to fill that back up for 2025 and hence the 2025 guide there.The second thing is based on the shutdown for 5 weeks in our manufacturing facility, and our need to reduce inventory off of our balance sheet, we're not -- and the Strategic Partners contract coming off, we're not producing as much volume this year. So we're losing some of that efficiency that we typically see and we expect that to come back in 2025 as consumption and shipments closely align.When it comes to investment, we are accelerating for growth in both China, most notably and somewhat in the U.S. And if I point to anything on China, I would point to the fact that we had an absolutely killer successful year in our growth there in 2023. We learned a lot through the year. We took control of that business 3 months into the year and we have accelerated growth under our ownership. We previously talked about China growing in the range of 25% to 35% a year. And that guide on a pro-forma basis that Chris just walked us through, we're increasing that for 2024 to 45% to 60% growth, and we're doing it behind some of this investment.We make money in China every day. We continue to make money there, but we need to grab this opportunity while we can. And while we have the competitive advantages and the recent learnings we have in market and that's really what's driving that. This investment in China in the short-term as we have this immense growth momentum behind us.

[Operator]

Your next question comes from Ty Collin of Eight Capital.

[Ty Collin, analyst]

Hi, guys. Wanted to follow up on Chris on your commentary around the cash flow for 2024. Just wondering if you could unpack what's behind the pretty substantial improvement you're expecting this year? And I know the numbers in the guidance are kind of ex working capital and ex some of those IT investments. But wondering if you could comment a little bit as well on what you expect out of working capital inventory and that IT spend as well.

[Christopher Snowden, executive]

Yes. So we're expecting cash from operations before those specified items. I think we included specified items as a guide in the MD&A, I think it was $12 million in the range. So on a statutory basis, the guide would be close to $75 million to $85 million rounding that to [ $10 million ]. We expect about a $20 million investment in working capital. That includes a significant reduction of inventory. And then we expect to invest about $15 million in CapEx in fiscal 2024. That leaves between $50 million and $60 million in cash available to repay debt, pay dividends or opportunistically buy back additional shares.

[Ty Collin, analyst]

And then maybe, I guess, shifting to the Canadian business. Just wondering if you could speak at a high level to any trends you're seeing around consumer behavior exiting '23 and into '24 here. Any trading between retail channels, product categories, value tiers and maybe tie that into how your market shares perform specifically against private label and more valued brands?

[Michael Pilato, executive]

Yes, it's a great question, Ty. I think it's consistent with what we've talked about the last few quarters, which is really we continue to see some channel shift for sure. We're seeing some channels outperforming others, most notably where consumers can find value, be it discount channel of the grocery accounts and you hear them talking about that even in their earnings releases and how they're seeing the consumer shift to discount banners. We're seeing a continued growth and shift to a club where consumers are looking for value per dose or per pill. And we continue to see high growth in e-commerce, where consumers are out there looking to see where they can find value and where they can find the best deal.When it comes to [ trends ] across customers, it's really interesting to see that despite everything we hear from a macroeconomic perspective and despite everything we hear from a consumer perspective across most sub-categories -- most categories, in vitamins, minerals and supplements, consumers continue to be engaged. Like I talked about a minute ago, Q4, we saw double-digit unit and dollar growth. And actually, the 2 businesses or 2 brands that are growing at the highest percentage and picking up share are the 2 more premium-priced products. It's ourselves and one of our competitors. So consumers continue to prioritize quality and continue to prioritize their health even during this time here in Canada, and it's great to see.We are seeing -- the one thing I would say is, we are seeing a little bit of private label growth. It's not at the rate of us or the other competitor that I just discussed. They're really though taking it from another value player who has had some supply chain issues in the marketplace. They have some real out of stocks on the shelf, and they're an everyday value player and they're trading off with private label right now.

[Operator]

Your next question comes from George Doumet of Scotiabank.

[George Doumet, analyst]

I think earlier, Mike, you mentioned you expect volumes to be down. And I think there's also some pricing you expect to take for 2024. So can you maybe give us a sense of how much volumes are going to be down and how much pricing is embedded in that guidance for...

[Michael Pilato, executive]

Yes, so just to be clear, we do not expect shipments to be down. We expect manufacturing units to be down. We're making less products. If you go back into the end of our quarter 3 and all through 2023, we're sitting on a lot of inventory coming out of COVID in our system internally. We have burned through a good chunk of that through Q1 and we will now maintain a more normalized level of inventory more in line with consumption. So the unit decline we talked about is manufacturing, not consumption and that impacts the efficiency that we get out of our facility short-term when we get through 2024 and back to a full match of manufacturing, shipping and consumption in 2025.When it comes to pricing, we have not priced this business in 2 years. We have had some, obviously, inflation impact over that time, most notably heading into 2024. We are currently pricing the business in Canada, call it -- it depends by category. Every category is moving a little bit on average, though, I'd call it, mid-single digit price increases just above the midway point of single digits.

[George Doumet, analyst]

And I guess -- when you look at the year, the cadence you guys gave guidance for Q1, but again, sticking with Canada here, how should we think of the recovery in revenues like as you go through Q2 to Q4? Is it more equal weighted? Is it more back half? And ultimately, what dictates if we land in the lower or in the upper end of the range for -- again, for Canada?

[Michael Pilato, executive]

Yes. Chris is going to take that.

[Christopher Snowden, executive]

Yes. So it's going to be a one-for-one shift. We expect to be fully recovered from a refill in the second quarter. The one caveat there is from a strategic partner volume perspective, some of that recovery will tail into Q3, Q4. But from a branded volume perspective, both international and domestic Canada will be just a straight shift from Q1 to Q2.

[Michael Pilato, executive]

Yes. And I think the low end of the high-end guide that you mentioned there, George, I'd say 2 things. One is, as we put pricing in, we always like to put a broad range on how it will be accepted in market. We have a great history of passing on pricing. This is not a massive price increase. We have a great history of it being accepted by consumers based on the loyalty of our brand and the quality that we provide. But we did widen the range a little bit just to make sure that we capture any possible downside of that as well as going into any year, we have big innovation plans and those innovation plans can land above our expectations or below our expectations and we build a wide range in there as well for Canada. But overall, I think it's a pretty strong guide. It gets us back to our historical norms. And we're pretty excited about the market share growth and the consumption growth we're seeing in Canada right now and the momentum we have here across the board, it's pretty exciting.

[George Doumet, analyst]

And can you maybe give us a sense of how many EBITDA dollars we're investing in China and in the U.S. in 2024? And then I guess you guys did put out a 2025 guide. Does that embed at all reduction in that level of investment?

[Christopher Snowden, executive]

No, it's all incremental. We're establishing a new baseline of investment that we will continue to grow off. When you talk about that marketing investment, I did talk about 60% to 80% marketing growth year-on-year and that's embedded in the SG&A number I provided, just give me half a second here while I pull it up, 20% to 35% SG&A growth. So when you compare that to top line growth from a brand perspective, it's between a 5% and 20% investment beyond the amount of top line growth from a brands perspective.

[Operator]

Your next question comes from Zachary Evershed of National Bank Financial.

[Zachary Evershed, analyst]

Wanted to talk about the fairly material adjustments between the acquisition costs, IT implementation costs and the post-closing adjustments for youtheory. It does sound like that last one might be one and done, but do correct me if I'm wrong. And can you give us an idea of what acquisition and IT implementation costs look like in 2024?

[Christopher Snowden, executive]

Do you want me to focus on the quarter or the full year?

[Zachary Evershed, analyst]

Both, please.

[Christopher Snowden, executive]

Let's go to the full year to start here. So when we're talking about adjustments to earnings from operations, we have acquisition, divestiture and related costs. Those are transactional costs primarily related to our acquisition in China. That's about $8.4 million. We have an amortization of fair value adjustment. That's related to the fair value of inventory acquired in the Chinese -- our China distributor acquisition and is a non-cash item. We have our IT system implementation costs in the year of $7.7 million. From a guide perspective, we're guiding between $11 million and $12 million in investments or in specified costs, and that is spread between IT implementation costs as well as strike-related costs in fiscal 2024. So that's the clarification on what we're expecting going forward.And then lastly, we had an acquisition-related purchase consideration adjustment, and that relates to a reduction in the contingent consideration expectation for youtheory and that really is based on our accelerated investment in marketing and infrastructure to drive growth there, and that's offset by some adjustments that go the other way against that release of contingent consideration. All related to the opening balance sheet as it relates to youtheory on the date of acquisition.

[Zachary Evershed, analyst]

And then in terms of capital allocation priorities, you guys did mention potential to buy back shares. Why so have that on the table when investment into China and U.S. does seem so attractive?

[Christopher Snowden, executive]

Well, we did note in our prepared remarks that we have $212 million in available cash and working -- and available funds. When we just look at the long-term value of organization compared to the current trading, we have to consider it as a way to continue to drive value for investors.

[Operator]

[Operator Instructions] Your next question comes from John Zamparo from CIBC.

[John Zamparo, analyst]

I wanted to start on China, and it's an interesting development, the strategic decision to increase investment there. And I guess the backdrop of this is that growth in the top line in China has been really compelling as is with the existing level of spend. So what causes you to want to invest disproportionately in that business? What is it that you saw over the past couple of quarters, especially since you have your private equity partner involved that made you want to do this? And why do you view it as a limited time opportunity?

[Michael Pilato, executive]

Yes. So I think a couple of things, John, and thanks for the question. I think we've seen exceptional growth in China over the last year in our brand. And I think what we're seeing -- well, I know what we're seeing is consumers resonate with our brand at even a stronger level than we anticipated. We overdelivered our expectation on the year, and in all honesty, right, there's a lot of skepticism in the marketplace on can we deliver our China number? Well, we overdelivered our China number, and we did it in a way that is profitable and makes money on everything we sell there. And we saw this happening throughout the year. We saw our momentum building quarter after quarter as we own the business, and we see the consumer just getting more and more engaged in consumer health.We also see competitors across the marketplace seeing what we're doing and understanding that we currently have this competitive advantage in our ability to move fast with our partner there and our ability to get products registered for in-market distribution and really pick up some brick-and-mortar distribution and sales there. And we want to strike now when we have this momentum and we have this competitive advantage in front of us, and we need to move quickly. So that's really the driver.I mean, I think it's quite impressive that we had all the skepticism coming into the year, we overdelivered the expectation. We started talking about growing 25% to 35% a year in China and now we're putting a guide out into the marketplace that's 45% to 60% of pro-forma growth in that country as we invest there. So we're pretty excited about it. I think we saw the consumer just move quicker and with more speed to our brand and we think that this has got great potential upside for us long term.When you talk about the step change in the ongoing basis, we'll see how this year goes. We're going to get a lot of learnings. We're quite confident in our guide and quite confident in our number. I think what we're saying, though, is from here, we'd expect to increase marketing more in line with the top line growth and not exceed it, at least to the levels that we're seeing it exceed here and at least not on a total consolidated basis that we're seeing here. We do have decent margins in China. We want to make sure that we grow those and we get them more in line with our expectations long-term for the rest of the business.

[John Zamparo, analyst]

Okay. And then switching to the U.S. It sounds like maybe for some -- similar reasons, but it's an identical decision to invest more in that business even though the sales numbers seem to be pretty compelling as is. So is it a similar concept of what you're seeing in the U.S., just consumer demand for the category resonating with your brand? I'm curious what you're seeing there that wants you to lean in on marketing spend in the U.S. as well.

[Michael Pilato, executive]

Yes. Again, we have a full year of ownership under our belt here. We had a lot of learnings in 2023. Again, a lot of skepticism from the market in terms of could we drive growth in the U.S. to what we thought we could. We put a guide out into the marketplace to start the year last year, I think, $145 million to $155 million we delivered towards the top end of that guide and see momentum from a consumer perspective. We are investing in the U.S. but not at the level we are in China. So I would say, separate the 2. We're putting incremental marketing into that market and putting a good growth plans in 2024 of, I think, plus 13% to plus 20% on the year, and we have great momentum coming out of Q3 and Q4 and into Q1. But the increased level of marketing into the U.S. on a percentage basis is not at the level it is in China. China by far is the bigger investment right now.

[John Zamparo, analyst]

One housekeeping and then one other one, more broadly, the guide of 120 basis points to 170 basis points of EBITDA margin decline in '24, can you say approximately how much of that just purely comes from mix?

[Christopher Snowden, executive]

From gross profit mix like...

[Michael Pilato, executive]

You're talking EBITDA margin?

[John Zamparo, analyst]

EBITDA margin, yes.

[Christopher Snowden, executive]

EBITDA margin -- mix at the GP level or at the...

[Michael Pilato, executive]

So I would answer this, you're talking EBITDA, right, John?

[John Zamparo, analyst]

Yes.

[Christopher Snowden, executive]

No, but we guided for gross profit margin to increase 200 basis points to 250 basis points. So that entire EBITDA decline is based on the accelerated investment in SG&A and marketing.

[John Zamparo, analyst]

Okay. My broader question on -- is on GLP-1s, and you referenced it during the call. I know you're bullish on this for the VMS industry. I think it's an interesting angle to GLP-1s. Can you give any updated thinking or additional data on this that you've seen and how it might benefit your industry and the company as well?

[Michael Pilato, executive]

Yes. So we continue to follow GLP-1 trends very closely. And we have for some time. What's interesting about us is we have one of the world's leading researchers of GLP-1s and obesity. He's been doing it for 35 years on our board for the last 10 years. He leads our Scientific Advisory Board. His name Dr. Louis Aronne at Weill-Cornell in the United States. He's very embedded in our scientific decisions here, and he's been educating us on GLP-1 and the research he's been seeing around these trends for some time.What I can tell you is we believe that this is a long-term trend for the category. We believe that the trend comes in the side of supporting consumers who are on GLP-1 -- taking GLP-1 medications. We have a tremendous amount of insights from consumers now. We have tremendous amount of insights from our scientific advisory board. We are currently finalizing the development of a line of support products for GLP-1 consumers. We are currently presenting those 2 customers to gain their feedback. We're bringing that feedback back into our scientific team and our marketing team. We'll finalize what those products look like and hopefully have some more news on that in the coming quarters. I don't want to commit to a quarter right now because it's moving. It's moving with speed. It's moving with urgency. But we have started to talk about it to some customers to gain their feedback and what they're looking for and we will circle back with some products in, I'd say, in the midterm -- in 2024.

[Operator]

Your next question comes from Justin Keywood of Stifel.

[Justin Keywood, analyst]

Just coming back to the capital allocation decision, we saw the business deleverage in the quarter. I believe it's a 2x net debt to EBITDA. I understand the investments in China and the U.S. and the NCIB. But doing the math, there's still expected to be some cash generation in 2024. Is there any attention to additional M&A, including into the U.S. or other markets?

[Christopher Snowden, executive]

I think that's certainly still on the table, Justin. But from a guide perspective, that obviously would not include a hypothetical.

[Justin Keywood, analyst]

Right. And would you be targeting potential assets in the U.S. in tuck-in nature? Or is this more of a medium-term scenario in getting the business to the $1 billion goal?

[Christopher Snowden, executive]

I think when we look at our current short-term priorities, I think with this guidance, we are prioritizing organic growth and really driving this business forward. Certainly, if the right opportunity came along, we look at both category expansion in the U.S. as an opportunity, a category where youtheory currently does not play where it would take us longer to expand to that category through innovation or we would look at mature markets in Europe or potentially Asia to continue to grow the Jamieson brand in an area where it's less likely for us to grow organically based on the fact that investment would require and time would be required to create scale in that particular geography.

[Justin Keywood, analyst]

And on the NCIB, is there a target amount of capital that you plan to deploy this year or amount of shares that you intend to buy back?

[Christopher Snowden, executive]

We have not put a target for 2024. We did -- with the -- a few shares that were acquired in the first quarter right after the year end, we did hit our 1 million share buyback target for the fourth quarter and a couple of days, but we're leaving that open in early 2024 as we see how cash generation comes in and the business performs.

[Operator]

Your next question comes from Zachary Evershed of National Bank Financial.

[Zachary Evershed, analyst]

Just one quick follow-up. Is the mild winter weighing on 2024, given the soft flu season? And is there an assumption of a return to historical patterns baked into 2025 guidance?

[Michael Pilato, executive]

Yes. Like I talked about a little earlier, we have not seen a slowdown in our business at the consumption level with the mild winter. We have seen growth expand across many categories. It's not just being driven by immunity. Immunity is pretty stable through the period. We've seen continued strong growth in the back half in the quarter and into this year on things like energy, some of the mineral products. We've seen fish oil doing quite well. We see multi-vitamins doing well. We've seen sleep and joint health continue to do well. So again, coming out of COVID, we saw consumers really spread their usage out across multi-categories. We're seeing that continued growth across the board.Yes, I think when it comes to normalizing consumption and shipments and historical norms, that would all be built into Q2 on in this year and then into 2025 for sure.

[Operator]

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.