Greenspace Reports First-half Fiscal 2022 Results Highlighting Improved Gross Profit Percentage and Cost Reductions From Project Fit

Canada NewsWire

TORONTO, Nov. 23, 2021

TORONTO, Nov. 23, 2021 /CNW/ - GreenSpace Brands Inc. ("GreenSpace" or the "Company") (TSXV: JTR), a leader within the organic and plant-based food industry, announces that it has filed its Condensed Consolidated Interim Financial Statements for the three-month and six-month periods ended September 30, 2021 and its related Management Discussion and Analysis.

SUMMARY RESULTS OF FIRST HALF OF FISCAL 2022:

   -- Gross Revenue from continuing operations was $9.5 million over the 
      six-month period ended September 30, 2021, a decrease of 46% compared to 
      prior year1. Year-over-year, Gross Revenue was negatively impacted by the 
      decision of select customers, during the prior fiscal year, to stop doing 
      business with the Company or to reduce their product assortment. These 
      decisions were based on poor customer service levels as a consequence of 
      the Company's prior year working capital constraints. With improvements 
      in customer service levels over the last quarter, some of these customers 
      have chosen to relist certain products and the Company will continue to 
      seek to expand its customer base amongst former and new customers. The 
      Company's decision to suspend or de-prioritize certain private label 
      businesses in the United States and Canada during the year also 
      contributed to lower Gross Revenue compared to the prior year. These 
      private label businesses added complexity and distracted resources from 
      building the Company's core brands. As anticipated the portfolio 
      simplification initiated as part of the previously announced Project FIT 
      initiative also negatively impacted Gross Revenue. This initiative will 
      reduce active stock keeping units ("SKUs") across the business by 
      approximately 60% this year, which will result in some revenue softness 
      in the short term. In the long term it will enable the Company to focus 
      on its best-selling SKUs, ultimately increasing revenue, improving gross 
      margins, lowering inventory holding costs and reducing waste. 
   -- Gross Profit Percentage increased to 22.2% for the six-month period ended 
      September 30, 2021, up from 20.1% in the prior year1, primarily 
      comprising: (i) a 1.7 percentage point improvement due to a better 
      portfolio mix as a result of discontinuing lower margin items and 
      increasing the sale of higher margin items across our branded portfolio; 
      (ii) a 2.9 percentage point improvement in product costs principally due 
      to savings arising from Project FIT initiatives and more favourable 
      foreign exchange which more than offset inflationary pressures on input 
      costs; both of which were partially offset by (iii) a 2.5 percentage 
      point reduction in net pricing as the Company's investment in promotion 
      activities with certain strategic retailers surpassed increases to list 
      prices achieved during the period. 
   -- Selling, General and Administrative (SG&A) expenses of $3.8 million for 
      the six-month period ended September 30, 2021 were reduced by 36.4% 
      compared to $6.0 million in the prior year1 with significant fixed cost 
      reductions due to Project FIT. It is important to note that even within 
      this double-digit reduction in SG&A expenses, advertising and consumer 
      promotion investments increased by over 40% compared to prior year. 
   -- EBITDA2 of negative $2.0 million over the six-month period ended 
      September 30, 2021 was improved 29% compared to negative $2.8 million in 
      the prior year1 with the impact of higher gross profit percentage, 
      significantly lower costs, combining to offset the impact of lower gross 
      revenue compared to the prior year1. 
   -- Adjusted EBITDA2 of negative $2.0 million over the six-month period ended 
      September 30, 2021 declined 43% compared to negative $1.4 million in the 
      prior year. Adjusted EBITDA over the most-recent three-month period ended 
      September 30, 2021 is consistent with prior year results3. 
(1) First-half Fiscal 2022 compared to First-half 
 Fiscal 2021. 
(2) EBITDA adds back certain non-cash items to net 
 income or loss from continuing operations and is used 
 by Management to measure operating performance. Adjusted 
 EBITDA further adjusts EBITDA by adding back income 
 or expenses of a non-cash, non-recurring, unusual 
 or one-time nature. Refer to Company's Management 
 Discussion and Analysis. 
(3) Quarter 2 Fiscal 2022 compared to Quarter 2 Fiscal 
 2021. 

"Since April, we have been embedding our new Focused Growth Strategy across the business and heightening our drive towards profitable growth, " said Shawn Warren, President and CEO of GreenSpace Brands Inc. "We are seeing encouraging progress with stronger service levels, broad retailer support, new distribution channel wins and continued momentum from Project FIT cost savings initiatives from our motivated team. Revenue is expected to improve as we move through the second-half of the fiscal year, with better inventory levels supporting our efforts to improve pricing, build consumption with customer promotions, launch margin-accretive innovations and accelerate our channel expansion and route to market excellence initiatives. Exciting new product launches are currently being presented to retail customers and we will formally announce these new products in January 2022. Compared to prior year, it is important to note that EBITDA improvements have accelerated in the latest fiscal quarter, despite a challenging revenue comparable over the same timeframe. Management expects EBITDA improvements as revenue and gross profit percentage increases and as Project FIT initiatives yield more benefits in the second-half of the current fiscal year. Our successful equity raise and debt renewals completed in September 2021 will help to accelerate our transformation initiatives."

OUTLOOK:

Management believes that its new Vision, Strategic Plan and implementation of its Focused Growth Strategy will lead to significant improvements in adjusted EBITDA starting in the second half of the year ending March 31, 2022 and continuing into subsequent years. Management has improved customer service levels across all three of its branded businesses, leading to the resumption of widespread promotional activities with retailers which is expected to improve revenue as the year progresses.

The Company has been able to regain distribution with certain strategic customers and has been able to accelerate its new channel growth across e-commerce platforms, as well as new customer channels. Aligned with its Focused Growth Strategy, Management has prioritized improvements in gross profit and overall profitability through better product mix, price increases and enhanced cost management.

GreenSpace has been able to rebuild credibility with its supplier base and renegotiate payment terms with a number of key suppliers across its ingredient and manufacturing network. While rebuilding customer revenue momentum may take time after the working capital challenges of the previous two years, Management expects that the foundational elements have been established to deliver improvements in both topline performance and profitability improvements, particularly moving into the second half of the current fiscal year. Additional restructuring costs aligned with the Project FIT initiative are expected to come in the current fiscal quarter, which Management believes will lower fixed costs over subsequent quarters and beyond. Management believes that the rapid implementation of its Focused Growth Strategy will drive improvements in the operation over time, produce positive adjusted EBITDA and free cash flow to help finance the future growth opportunities available to the Company.

ABOUT GREENSPACE BRANDS INC.:

GreenSpace is a North American organic and plant-based food business that develops, markets and sells premium food products to consumers within the fast-growing natural and organic food categories. GreenSpace owns LOVE CHILD ORGANICS, a producer of 100% organic food for infants and toddlers made with natural and nutritionally-rich ingredients, CENTRAL ROAST, a clean snacking brand featuring a wide assortment of organic nut and seed mixes and GO VEGGIE, one of the pioneers and leaders in the US plant-based dairy market. All brands are wholly-owned and are sold in a variety of online, natural and retail grocery locations.

For more information, visit www.greenspacebrands.ca and GreenSpace's filings are also available at www.SEDAR.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:

This news release includes certain information and contains statements that may constitute "forward-looking information" and "forward-looking statements", respectively, under applicable securities law. Forward-looking statements can be identified by words such as: "anticipate", "intend", "plan,", "goal", "believe", "project", "estimate", "expect", "strategy", "likely", "may", "should", "will", and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding guidance relating to fiscal year 2022 EBITDA and expected operating results, such as revenue growth and earnings. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, certain of which are beyond the control of GreenSpace, including, but not limited to, the failure of third parties to comply with their obligations to the Company or its affiliates; the impact of new and changes to, or application of, current laws and regulations; critical accounting estimates and changes to accounting standards, policies, and