Jamieson Wellness Inc. — Management Reports 2021

Feb 25, 2021

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the three and twelve months ended December 31, 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the three and twelve months ended December 31, 2020

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) of Jamieson Wellness Inc. (together with its subsidiaries), referred to herein as “Jamieson”, the “Company”, “we”, “us” or “our”, is dated as of February 24, 2021. It should be read in conjunction with our audited consolidated annual financial statements and our accompanying notes for the year ended December 31, 2020.

Our audited consolidated annual financial statements and accompanying notes for the year ended December 31, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These audited consolidated annual financial statements include the accounts of our Company and other entities that we control and are reported in Canadian dollars. All references in this MD&A to “Q4 2020” are to our fiscal quarter ended December 31, 2020 and to “Q4 2019” are to our fiscal quarter ended December 31, 2019. All references in this MD&A to “YTD 2020” are to our year ended December 31, 2020 and to “YTD 2019” are to our year ended December 31, 2019.

See “ Forward-Looking Information ” and “ Risk Factors ” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those indicated or underlying forward-looking information as a result of various factors, including those referred to under the heading “ Risk Factors ” and elsewhere in this MD&A.

Non-IFRS Financial Measures

This MD&A makes reference to certain non-IFRS measures. Management uses these non-IFRS financial measures for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of ongoing operations and in analyzing our business performance and trends. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “gross profit”, “gross profit margin”, “operating margin” “EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA margin”, “Adjusted Net Income” and “Adjusted Diluted Earnings per Share” to provide supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also uses non-IFRS measures in order to prepare annual operating budgets and to determine components of management compensation.

Forward-Looking Information

Certain statements contained in this MD&A including, in particular, in the sections below entitled “ Summary of Factors Affecting our Performance ”, “ Liquidity and Capital Resources ”, “ Outlook ” and “ Risk Factors ”, contain forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to our future outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividend policy, plans and objectives of our Company. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects”, “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.

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In addition, our assessments of, and targets for, annual revenue, Adjusted EBITDA, Adjusted Diluted Earnings per Share and certain other measures are considered forward-looking information. See “ Outlook ” for additional information concerning our strategies, assumptions and market outlook in relation to these assessments.

The forward-looking information contained in this MD&A is based on management’s opinions, estimates and assumptions in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe to be appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Certain assumptions in respect of the ability to pursue further strategic acquisitions; our ability to source raw materials and other inputs from our suppliers; our ability to continue to innovate product offerings that resonate with our target customer base; our ability to retain key management and personnel; our ability to continue to expand our international presence and grow our brand internationally; our ability to obtain and maintain existing financing on acceptable terms; currency exchange and interest rates; the impact of competition; changes to trends in our industry or global economic factors; and changes to laws, rules, regulations and global standards are material factors made in preparing the forward-looking information and management’s expectations contained in this MD&A.

The forward-looking information contained in this MD&A represents management’s expectations as of the date of this MD&A and is subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except (i) as required under applicable securities laws in Canada and (ii) to provide updates in our annual MD&A for each financial year up to and including that in respect of 2021 on our growth targets disclosed in our final prospectus dated June 29, 2017 in respect of our initial public offering and secondary offering, including to provide information on our growth targets disclosed in such prospectus, actual results and a discussion of variances from our growth targets. The forward-looking information contained in this MD&A is expressly qualified by this cautionary statement.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that management considered appropriate and reasonable as of the date such statements are made, and is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to those described below and referred to under the heading “ Risk Factors ” and those discussed under the “ Risk Factors ” section of our most recent annual information form.

We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect our results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information.

Overview

Founded in 1922, Jamieson is Canada’s leading branded manufacturer, distributor and marketer of highquality natural health products. We offer consumers a comprehensive and innovative line of branded vitamins, minerals and supplements (“VMS”) products and certain over-the-counter remedies through our Jamieson and Smart Solutions by Lorna Vanderhaeghe brands as well as sports nutrition products through our Progressive, Precision and Iron Vegan brands, all of which we refer to as our “Jamieson Brands” segment. In addition to our Jamieson Brands segment, we also offer comprehensive manufacturing and product development services on a contract manufacturing basis to select blue-chip consumer health companies and retailers worldwide, which we refer to as our “Strategic Partners” segment.

VMS and sports nutrition are two large and growing segments of the consumer health industry. Jamieson is Canada’s #1 overall consumer health brand by sales and Canada’s #1 brand in VMS by sales. Our trusted reputation and success in Canada have allowed us to significantly grow the business internationally, with products being sold in over 45 countries and regions worldwide.

Our trusted reputation, strong industry relationships and certifications and commitment to meeting the highest standards of manufacturing, together with high quality production capabilities, attract opportunities for us to

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manufacture products for select blue-chip consumer health companies and retailers worldwide. Combining deep consumer insights with extensive research and development capabilities, we deliver category-leading innovation and growth.

Our leading market position and brands, focus on quality and innovation and extensive selection of products, make us the preferred partner for retailers in Canada.

Summary of Factors Affecting Our Performance

We believe our performance and future success depend on a number of factors that present significant opportunities for us. These factors are also subject to a number of inherent risks and challenges, some of which are discussed below and referred to under “ Risk Factors ”.

Impact of COVID-19

Considering the outbreak of COVID-19 around the world, conditions may come into existence that influence our operations. Since becoming aware of the outbreak in early January 2020, the Company has secured additional, alternate sources of raw materials to ensure continuity of supply and implemented safety measures across the organization to ensure that our employees and business partners are protected. Consumer response to COVID-19 has resulted in the acceleration of demand for both immunity and general health supplements. Higher demand includes the impact of temporary non-essential store closures within the supplement-only portion of the health food channel during the year while our products remained widely available within essential e-commerce and food, drug, and mass (“FDM”) channels.

Revenue and the distribution of our products may be impacted by an escalation of COVID-19 infections should it lead to the closure of essential FDM and e-commerce channels. High demand and service interruptions to transportation may affect the delivery of raw materials and ingredients as well as international and domestic shipments of finished goods. Manufacturing closures have the potential to impact our ability to produce finished goods and affect the availability of purchased finished goods. The duration and impact of the COVID-19 outbreak is unknown and our ability to continue to adapt to the changing environment may materially affect our business, results of operations or financial condition.

We have not benefited from or applied for any government financial aid or relief fund relating to the COVID19 pandemic.

Our Brands

Our iconic brands have been built around consumer trust through focus on product quality, purity and potency. Our well-established brands include Jamieson, Smart Solutions by Lorna Vanderhaeghe, Progressive, Precision and Iron Vegan. Maintaining, enhancing and growing our brand appeal in Canada and internationally is critical to our continued success. Failure to maintain and enhance our brands in any of the targeted markets may materially and adversely affect the business, results of operations or financial condition.

Product Innovation and Planning

We believe that product innovation is integral to our success and we continue to focus on innovation as a key pillar of our growth. Our business is subject to changing consumer trends and preferences which is dependent, in part, on continued consumer interest in our new products, line extensions and reformulations. The success of new product offerings, enhancements, or reformulations depends upon a number of factors, including our ability to: (i) accurately anticipate customer needs; (ii) develop new products, line extensions or reformulations that meet these needs; (iii) successfully commercialize new products, line extensions and reformulations in a timely manner; (iv) price products competitively; (v) manufacture and deliver products in sufficient volumes and in a timely manner; (vi) differentiate product offerings from those of competitors; and (vii) maintain relationships with scientist employees and consultants and members of our panel of consumer health industry experts, which we call the Jamieson Scientific

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Advisory Board, in order to benefit from their expertise and innovations. We believe our pace of innovation and speed to market with the introduction of new products provide us with a competitive advantage within the space we compete.

Customer Relationships

We have longstanding and deeply entrenched customer relationships with Canada’s top retailers across the FDM, club, health food store, specialty and online retail channels. We sell products through our knowledgeable retail partners and we are dependent on retail partners across all channels to display and present our products to customers, in their brick-and-mortar stores and on their online e-commerce sites. Our partners service customers by stocking and displaying our products, and, in certain health food and other specialty stores, explaining product attributes and health benefits. Our relationships with these retail customers are important for consumer trust in the brand and the advertising and educational programs we continue to deploy. Failure to maintain these relationships with retail partners or financial difficulties experienced by these retail partners could adversely affect our business.

Sourcing and Production

We have developed a strong, global supply chain based on long-standing relationships and have had relationships with the majority of our suppliers for over ten years. We purchase our ingredients from approximately 250 high quality raw material ingredient and packaging suppliers worldwide and potential suppliers are subject to a rigorous evaluation process by our quality assurance department. We are dependent on a stable and consistent supply of materials and inputs, including ingredients and packaging products. Although materials and inputs are generally available from multiple sources, certain materials and inputs are sourced from a restricted number of suppliers. In 2020, our top ten suppliers accounted for approximately 50% of our purchases. As is customary in the consumer health industry, we do not have long-term written contracts with most suppliers and often enter into short to medium-term contracts for raw materials at fixed prices to provide time to address price increases and mitigate margin erosion.

Consumer Trends

The Canadian consumer health industry is subject to shifts in consumer trends, preferences and spending. Our revenue and operating results depend, in part, on our ability to respond to such changes in a timely manner. As a result of our broad product scope and our strong innovation capabilities, we believe that we are well-positioned to respond to these shifts in consumer trends, preferences and spending.

Our revenue is also impacted by consumer spending habits, including spending on our products, which are affected by many factors that are beyond our control, including, but not limited to, prevailing economic conditions, levels of employment, fuel prices, salaries and wages, the availability of consumer credit, and consumer perception of economic conditions.

Competition

The market for VMS and sports nutrition products is highly competitive. Our direct competition consists of publicly and privately-owned companies, which tend to be highly fragmented in terms of both geographic market coverage and product categories. In many of our product categories, we compete not only with widely advertised branded products, but also with private label products. Given our significant scale and broad product scope relative to our competition, iconic brand status, strong innovation capabilities and high-quality manufacturing, we believe that we are well-positioned to capitalize on favorable long-term trends in the VMS and sports nutrition segments. The specialized knowledge, expertise, and certifications required for production of VMS and sports nutrition products, is generally a significant barrier to entry for new competitors. Internationally, our competition varies by market and we have a strategic approach to entering international markets, which includes evaluating certain factors in each market, such as competitiveness, pricing dynamics, growth potential, regulatory environment and the propensity to be attracted to foreign brands.

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Foreign Exchange

We currently benefit from a natural currency hedge by purchasing certain materials and inputs in U.S. dollars and selling our products internationally in U.S. dollars. With respect to sales in Canada, we are exposed to fluctuating U.S.-Canadian currency exchange rate where the products sold contain materials and inputs purchased with U.S. dollars. We manage our net exposure to fluctuating U.S.-Canadian currency exchange rate with foreign exchange hedging contracts. We do not have foreign exchange hedging contracts in place with respect to all currencies in which we currently do business but may, from time to time, enter into additional foreign exchange hedging contracts in respect of other foreign currencies.

Currency hedging entails a risk of illiquidity and, to the extent the applicable foreign currency depreciates or appreciates against the Canadian dollar, the use of hedges could result in losses greater than if the hedging had not been used. There can be no assurance that our hedging strategies, if any, will be effective in the future or that we will be able to enter into foreign exchange hedging contracts on satisfactory terms.

Business Acquisitions

We leverage our relationships and network of industry participants and advisors to actively source and identify acquisition opportunities. We continue to pursue strategic acquisitions that enable us to further broaden and diversify product offerings and leverage current manufacturing and distribution facilities for new products. Any acquisitions may involve large transactions or realignment of existing investments, and present financial, managerial and operational challenges, which, if not successfully overcome, may reduce our profitability.

Implementation of Growth Strategies

We have a successful track record of growing revenues faster than the broader VMS segment and we believe we have a strong domestic and international growth strategy in place aimed at continuing to exceed broader industry growth rates. Our future success depends, in part, on management’s ability to implement our growth strategy, including (i) product innovations within existing categories and growth into adjacent categories and continued growth of existing products in existing categories; (ii) further penetration into international markets and new geographies; and (iii) in support of our profitability targets, improvements in operating income, gross profit and operating expense margins. The ability to implement this growth strategy depends, among other things, on our ability to develop new products and product line extensions that appeal to consumers, maintain and expand brand loyalty and brand recognition, maintain and improve competitive position in the channels in which we compete and identify and successfully enter and market products in new geographic markets, market segments and categories.

Regulation

In Canada and in the other jurisdictions in which we operate, we are subject to the laws and regulations applicable to any business engaged in formulation, production and distribution of consumer health products. This includes natural health product regulations, laws governing advertising, consumer protection regulations, environmental laws, laws governing the operation of warehouse facilities and labour and employment laws. We hold all required Health Canada site licenses, Canadian Food Inspection Agency certifications and import licenses for all of our manufacturing and distribution centres. Our products sold outside of Canada are subject to tariffs, treaties and various trade agreements as well as laws affecting the importation of consumer goods and we continuously monitor changes in these laws, regulations, treaties and agreements.

There is currently no uniform regulation applicable to natural health products worldwide and there has been an increasing movement in certain foreign markets to increase the regulation of natural health products. The adoption of new laws, regulations or other constraints or changes in the interpretations of such requirements may result in compliance costs or lead us to discontinue product sales and may have an adverse effect on the marketing of our products, resulting in loss of sales. We believe that Canadian regulations are amongst the most stringent worldwide and, as we currently operate in compliance with these high standards, increased regulation in foreign jurisdictions makes us uniquely positioned to grow sales in such jurisdictions.

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How We Assess the Performance of our Business

The key performance indicators below are used by management in evaluating the performance of our Company and assessing our business. We refer to certain key performance indicators used by management and typically used by our competitors in the Canadian consumer health industry, certain of which are not recognized under IFRS. See “ Non-IFRS Financial Measures ”.

Revenue

The majority of our revenue is derived from the sale of Jamieson branded products to distributors, retail and wholesale customers, as well as providing contract manufacturing services and the sale of product through our Strategic Partners segment.

Revenue is recognized for the sale of Jamieson branded products and the manufacturing of products to our strategic partners at the point in time when control of the asset is transferred to the customer, based on applicable shipping terms. We generally have a right to payment at the time of delivery (which is the same time that we have satisfied our performance obligations under the arrangement), as such, a receivable is recognized as the consideration is unconditional and only the passage of time is required before payment is due.

A portion of our revenue is derived from contract manufacturing services provided to customers in our Strategic Partners segment under a tolling arrangement where the customer supplies us with a raw material or ingredient. Revenue is recognized net of the cost of the raw material or ingredient supplied by the customer.

Rights of return give rise to variable consideration. The variable consideration is estimated at contract inception using the expected value method as this best predicts the amount of variable consideration to which we are entitled. The variable consideration is constrained to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is subsequently resolved. For products that are expected to be returned, a refund liability is recognized as a reduction of revenue at the time the control of the products purchased is transferred to the customers.

We may provide discounts and sales promotional incentives to our customers, which give rise to variable consideration. The variable consideration is constrained to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is subsequently resolved. The application of the constraint on variable consideration increases the amount of revenue that will be deferred. We apply the most likely amount method estimating discounts provided to customers using contracted rates and estimating sales promotional incentives provided to customers based on historical spending patterns. Jamieson may also provide other consideration to customers for customer-specific programs to promote the Company’s products. Consequently, revenues are recognized net of these estimated program costs. All other estimated non-customer-specific promotional costs and consideration are expensed as selling, general and administrative (“SG&A”) expenses.

In subsequent periods, we monitor the performance of customers against agreed-upon obligations related to sales incentive programs and make any adjustments to both revenue and sales incentive accruals as required.

As required for the audited consolidated annual financial statements, we have disaggregated revenue recognized from contracts with customers. Please refer to Note 23 in our audited consolidated annual financial statements for the disclosure on disaggregated revenue.

Gross Profit

“Gross profit” is defined as revenue less cost of sales. Cost of sales includes product-related costs, labour, other operating costs such as rent, repair and maintenance, and amortization. Our cost of sales may include different costs compared to other manufacturers and distributors in the Canadian consumer health industry. Management believes that gross profit is a useful measure in assessing the Company’s underlying operating performance before SG&A expenses and share-based compensation.

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Gross Profit Margin

“Gross profit margin” is defined as gross profit divided by revenue.

SG&A

Our SG&A expenses are predominantly comprised of wages, benefits, travel, marketing, accounting fees, legal fees, non-customer-specific promotional costs and other expenses related to the corporate infrastructure required to support our business. Our SG&A expenses also include regulatory, legal, accounting, insurance, termination benefits and other expenses associated with being a public company.

Earnings from Operations

“Earnings from operations” is defined as gross profit less SG&A expenses and share-based compensation.

Operating Margin

“Operating margin” is defined as earnings from operations divided by revenue.

EBITDA

“EBITDA” is defined as net income before: (i) provision for (recovery of) income taxes; (ii) interest (income) expense and other financing costs; (iii) depreciation of property, plant, and equipment; and (iv) amortization of intangible assets.

Adjusted EBITDA

“Adjusted EBITDA” is defined as EBITDA before: (i) share-based compensation; (ii) foreign exchange (gain) loss; (iii) termination benefits and related costs; (iv) international market expansion; (v) business integration; (vi) COVID-19 related costs; and (vii) other non-operating and non-recurring costs. We believe Adjusted EBITDA is a useful measure to assess the performance and cash flow of our Company as it provides more meaningful operating results by excluding the effects of interest, taxes, depreciation and amortization costs, expenses we believe are not reflective of our underlying business performance and other one-time, non-recurring or non-cash expenses.

Adjusted EBITDA Margin

“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.

Adjusted Net Income

“Adjusted Net Income” is defined as consolidated net income adjusted for the impact of: (i) share-based compensation; (ii) foreign exchange (gain) loss; (iii) termination benefits and related costs; (iv) international market expansion; (v) business integration; (vi) COVID-19 related costs; (vii) revaluation of deferred tax liability; and (viii) other non-operating and non-recurring costs net of related tax effects. We believe Adjusted Net Income is a useful measure to assess the performance of our Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses.

Adjusted Diluted Earnings per Share

“Adjusted Diluted Earnings per Share” is defined as Adjusted Net Income divided by the total number of outstanding diluted shares at the end of the most recently completed quarter for the relevant period. We believe Adjusted Diluted Earnings per Share is a useful measure to assess the performance of our Company.

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Selected Consolidated Financial Information

The following table provides selected historical financial information and other data of the Company which should be read in conjunction with our audited consolidated annual financial statements and related notes. A reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted Net Income can be found below for the respective fiscal periods.

($ in 000's, except as otherwise noted) Revenue Cost of sales Gross profit Selling, general and administrative expenses Share-based compensation Earnings from operations Operating margin Foreign exchange loss Other expenses Interest expense and other financing costs Income before income taxes Provision for income taxes Net income Adjusted net income EBITDA Adjusted EBITDA Adjusted EBITDA margin Weighted average number of shares Basic Diluted Earnings per share attributable to common shareholders: Basic, earnings per share Diluted, earnings per share Adjusted Diluted, earnings per share	Three months ended December 31 2020 2019 120,369 103,253 77,855 63,711 42,514 39,542 18,624 17,637 1,156 1,573 22,734 20,332 18.9% 19.7% 632 227 19 (35) 1,409 1,966 20,674 18,174 5,269 5,011 15,405 13,163 17,614 14,253 25,417 22,902 29,383 25,641 24.4% 24.8% 39,866,189 38,967,875 41,487,349 40,130,698 0.39 0.34 0.37 0.33 0.42 0.36	Twelve months ended December 31
	2020 120,369 77,855 42,514 18,624 1,156 22,734 18.9% 632 19 1,409 20,674 5,269 15,405 17,614 25,417 29,383 24.4% 39,866,189 41,487,349 0.39 0.37 0.42	2020 2019 403,661 344,980 258,905 215,246 144,756 129,734 76,259 69,942 4,925 4,343 63,572 55,449 15.7% 16.1% 460 404 22 3,369 6,042 9,372 57,048 42,304 15,450 10,647 41,598 31,657 47,948 38,111 75,299 62,592 87,985 75,909 21.8% 22.0% 39,539,955 38,535,274 41,160,341 39,614,909 1.05 0.82 1.01 0.80 1.16 0.96

The following table provides selected consolidated financial position data for the periods indicated.

($ in 000's) Selected Consolidated Financial Position Data: Total assets Total non-current liabilities	As at December 31, As at December 31, 2020 2019 609,341 561,775 225,929 229,265

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Results of Operations — three months ended December 31, 2020 and 2019

The following table provides a summary of our results for the three months ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) Revenue Cost of sales Gross profit Gross profit margin Selling, general and administrative expenses Share-based compensation Earnings from operations Operating margin Foreign exchange loss Other expenses Interest expense and other financing costs Income before income taxes Provision for income taxes Net income Adjusted net income EBITDA Adjusted EBITDA Adjusted EBITDA margin

Three months ended December 31 2020 2019 $ Change % Change 120,369 103,253 17,116 16.6% 77,855 63,711 14,144 22.2% 42,514 39,542 2,972 7.5% 35.3% 38.3% - (3.0%) 18,624 17,637 987 5.6% 1,156 1,573 (417) (26.5%) 22,734 20,332 2,402 11.8% 18.9% 19.7% - (0.8%) 632 227 405 178.4% 19 (35) 54 154.3% 1,409 1,966 (557) (28.3%) 20,674 18,174 2,500 13.8% 5,269 5,011 258 5.1% 15,405 13,163 2,242 17.0% 17,614 14,253 3,361 23.6% 25,417 22,902 2,515 11.0% 29,383 25,641 3,742 14.6% 24.4% 24.8% - (0.4%)

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The following table provides a reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted Net Income for the three months ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) Net income Add: Provision for income taxes Interest expense and other financing costs Depreciation of property, plant, and equipment Amortization of intangible assets Earnings before interest, taxes, depreciation, and amortization (EBITDA) Share-based compensation(1) Foreign exchange loss International market expansion(2) Business integration(3) COVID-19 related costs(4) Other(5) Adjusted EBITDA Provision for income taxes Interest expense and other financing costs Depreciation of property, plant, and equipment Amortization of intangible assets Share-based compensation(6) Other Tax effect of normalization adjustments Adjusted net income	Three months ended December 31 2020 2019 15,405 13,163 5,269 5,011 1,409 1,966 2,336 1,845 998 917 25,417 22,902 1,156 1,573 632 227 - 278 1,759 465 402 - 17 196 29,383 25,641 (5,269) (5,011) (1,409) (1,966) (2,336) (1,845) (998) (917) (1,012) (1,383) - 58 (745) (324) 17,614 14,253	$ Change 2,242 258 (557) 491 81 2,515 (417) 405 (278) 1,294 402 (179) 3,742 (258) 557 (491) (81) 371 (58) (421) 3,361	% Change
	2020 15,405 5,269 1,409 2,336 998 25,417 1,156 632 - 1,759 402 17 29,383 (5,269) (1,409) (2,336) (998) (1,012) - (745) 17,614
			17.0% 5.1% (28.3%) 26.6% 8.8%
			11.0% (26.5%) 178.4% (100.0%) 278.3% 100.0% (91.3%)
			14.6%
			(5.1%) 28.3% (26.6%) (8.8%) 26.8% (100.0%) (129.9%)
			23.6%

• (1) The Company’s share-based compensation expense pertains to our long-term incentive plan (the “LTIP”) (refer to “ Share-based compensation” ), with performance-based share units (“PSUs”) and time-based restricted share units (“RSUs”) expenses, and associated payroll taxes included within the current period.

• (2) Costs in 2019 pertained to the initial setup expenses incurred in establishing our presence in China including regulatory, distribution and supply agreements, and a study of the Chinese market focusing on broad industry understanding and factors affecting consumer purchase preferences.

• (3) We incurred start-up costs of $1.4 million in our transition to a third-party logistics provider to make room for capacity expansion at our Twin Oaks and Scarborough distribution facilities. Remaining expenses pertain to the integration of our operations and supply chain activities, along with a pre-existing contractual obligation, associated with the acquisition and subsequent integration of our acquired business, which terminates at the end of 2020. We incurred expenses related to supply chain optimization and other consulting fees in connection with our acquired business in Q4 2019.

• (4) We incurred additional costs related to COVID-19. These costs do not reflect the ongoing costs of operation and they have been adjusted for comparison purposes. In the current quarter, we donated vitamin supplements to various charitable organizations within Canada and provided funding for a COVID-19 related research study. In December 2020, we re-established shift premiums to essential Jamieson hourly staff who maintained production through the government mandated shutdowns of non-essential services as the province of Ontario entered another period of lockdown.

• (5) In 2019, we incurred expenses pertaining to special projects and cyber-security enhancements.

• (6) Costs pertaining to our LTIP, excluding PSUs and RSUs granted to certain employees (refer to “ Share-based compensation” ).

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The following table provides selected financial information for the Jamieson Brands operating segment for the three months ended December 31, 2020 and December 31, 2019.

Jamieson Brands

($ in 000's, except as otherwise noted) For the three months ended December 31, Revenue Gross profit Gross profit margin Selling, general and administrative expenses Share-based compensation Earnings from operations Operating margin Adjusted EBITDA Adjusted EBITDA margin	2020 89,733 38,566 43.0% 16,906 1,156 20,504 22.9% 26,642 29.7%	2019 78,803 35,962 45.6% 16,035 1,573 18,354 23.3% 23,154 29.4%	$ Change % Change 10,930 13.9% 2,604 7.2% - (2.6%) 871 5.4% (417) (26.5%) 2,150 11.7% - (0.4%) 3,488 15.1% - 0.3%

The following table provides a reconciliation for the Jamieson Brands operating segment from earnings from operations to Adjusted EBITDA for the three months ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) For the three months ended December 31, Earnings from operations Depreciation of property, plant, and equipment Amortization of intangible assets Share-based compensation International market expansion Business integration COVID-19 related costs Other Adjusted EBITDA	2020 20,504 1,857 998 1,156 - 1,759 370 (2) 26,642	2019 18,354 1,358 917 1,573 278 465 - 209 23,154	$ Change 2,150 499 81 (417) (278) 1,294 370 (211) 3,488	% Change
				11.7% 36.7% 8.8% (26.5%) (100.0%) 278.3% 100.0% (101.0%)
				15.1%

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The following table provides selected financial information for the Strategic Partners operating segment for the three months ended December 31, 2020 and December 31, 2019.

Strategic Partners

($ in 000's, except as otherwise noted) For the three months ended December 31, Revenue Gross profit Gross profit margin Selling, general and administrative expenses Earnings from operations Operating margin Adjusted EBITDA Adjusted EBITDA margin	2020 2019 $ Change % Change 30,636 24,450 6,186 25.3% 3,948 3,580 368 10.3% 12.9% 14.6% - (1.7%) 1,718 1,602 116 7.2% 2,230 1,978 252 12.7% 7.3% 8.1% - (0.8%) 2,741 2,487 254 10.2% 8.9% 10.2% - (1.3%)

The following table provides a reconciliation for the Strategic Partners operating segment from earnings from operations to Adjusted EBITDA for the three months ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) For the three months ended December 31, Earnings from operations Depreciation of property, plant, and equipment COVID-19 related costs Other Adjusted EBITDA	2020 2,230 479 32 - 2,741	2019 1,978 487 - 22 2,487	$ Change 252 (8) 32 (22) 254	% Change
				12.7% (1.6%) 100.0% (100.0%)
				10.2%

Revenue

Revenue increased 16.6%, or $17.1 million, to $120.4 million in Q4 2020. This was driven by 13.9% growth in Jamieson Brands revenue and 25.3% growth in Strategic Partners revenue compared with Q4 2019.

Revenue in the Jamieson Brands segment increased by $10.9 million, or 13.9%, to $89.7 million in Q4 2020 due to strong growth in domestic and international Jamieson Brands sales of $9.1 million and $1.8 million respectively. The VMS market experienced strong growth as COVID-19 continues to drive consumer demand on immunity and general health. Our domestic Jamieson Brands sales increased by 13.7% over Q4 2019 reflecting consistent point-ofsale growth over an expanded base, with Jamieson gaining market share over our leading competitors. Our results reflect strong growth in e-commerce and FDM channel retailers, while regional government mandated restrictions impacted replenishments of certain health food retailers who have not transitioned to web-based platforms for servicing their customers. Our international business increased by 14.8% compared to Q4 2019, which includes the expected timing of shipments to China realized in the preceding quarter. Consumer demand for immunity products continues to be high, as we realized strong growth in Eastern Europe and the Middle East in the quarter.

Revenue in the Strategic Partners segment increased 25.3%, or $6.2 million, to $30.6 million in Q4 2020 mainly due to timing, with order fulfillment weighted towards the latter half of this year as we managed customer requirements along with additional programs with our largest customers. The resultant increase in soft-gel volumes associated with these programs was partially offset by lower powder volumes, where a strategic partner retail customer consolidated stores while emerging from their Chapter 11 reorganization.

Gross profit

Gross profit increased by $3.0 million to $42.5 million in Q4 2020, including $1.6 million primarily relating to start-up costs in our transition to a third-party logistics provider. Normalized gross profit increased by $4.6 million to $44.1 million in Q4 2020 mainly driven by revenue growth. Gross profit margin decreased by 300 basis points to

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35.3% in Q4 2020, including 130 basis points as a result of the aforementioned third-party transition and other costs. Normalized gross profit margin was 36.6% or 170 basis points lower than prior year including a 60 basis points reduction from segment mix and a 110 basis points reduction mainly due to higher costs to ensure continuity of supply. All in response to COVID-19, these supply costs include the implementation of physical distancing and safety measures in our production facilities, higher costs to expediate raw materials and third-party packaging costs to maximize throughput.

Gross profit in the Jamieson Brands segment increased by $2.6 million to $38.6 million in Q4 2020, including $1.6 million in start-up costs primarily relating to our transition to a third-party logistics provider. Normalized gross profit increased by $4.2 million to $40.2 million in Q4 2020 mainly driven by revenue growth. Gross profit margin decreased by 260 basis points to 43.0% in Q4 2020, including 180 basis points as a result of third-party transition and other costs. Normalized gross profit margin was 44.8% or 80 basis points lower compared to Q4 2019 as favourable promotional and volume driven efficiencies were offset by higher supply continuity costs required to maximize throughput as noted above.

Gross profit in the Strategic Partners segment increased by $0.4 million to $3.9 million in Q4 2020 mainly driven by higher volumes, partially offset by an expected reduction resulting from customer mix and supply continuity costs. Gross profit margin decreased by 170 basis points to 12.9% due to the factors noted above including a reduction in volume and efficiency at our powder processing facility offset by higher soft-gel and tablet volumes.

Selling, general and administrative expenses

SG&A expenses increased by $1.0 million to $18.6 million in Q4 2020. Normalized for the impact of specified costs, SG&A expenses increased by $1.4 million from $16.7 million in Q4 2019 to $18.1 million in Q4 2020. The normalized SG&A increase of $1.3 million in Jamieson Brands was driven by increased headcount to support our worldwide and e-commerce expansion plans, higher variable compensation, and increased marketing investments. Normalized SG&A in the Strategic Partners segment increased by $0.1 million compared to the same period in the prior year due to higher compensation expense.

Specified costs of $0.6 million in the current quarter are mainly comprised of COVID-19 donations and wage premiums. Specified costs of $1.0 million in Q4 2019 were related to initial set-up expenses for establishing our presence in China, supply chain optimization, cyber-security enhancements and other consulting fees.

Share-based compensation

Share-based compensation decreased by $0.4 million to $1.2 million in Q4 2020 reflecting lower payroll taxes based on the number of employee exercised options in the prior year and the number of awards issued in the current year.

Earnings from operations and operating margin

Earnings from operations increased by $2.4 million as a result of higher revenue and gross profit. Operating margin decreased by 80 basis points to 18.9% in Q4 2020 due to factors impacting gross profit margin discussed above, partially offset by lower fixed costs as a percentage of revenues.

Earnings from operations in the Jamieson Brands segment increased by $2.2 million due to higher revenue and gross profit. Operating margin decreased 40 basis points to 22.9% in Q4 2020 due to factors impacting gross profit margin discussed above partially offset by lower fixed costs as a percentage of revenues.

Earnings from operations in the Strategic Partners segment increased by $0.3 million due to higher revenue and gross profit. Operating margin decreased 80 basis points primarily due to factors impacting gross profit margin discussed above.

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Foreign exchange loss

Foreign exchange loss of $0.6 million in Q4 2020 was a result of changes in the USD/CAD exchange rate on our USD denominated accounts receivable and accounts payable at the end of the quarter. We experience fluctuations in the USD/CAD exchange rates between the date of transaction and when cash is realized.

Interest expense and other financing costs

Interest expense and other financing costs decreased by $0.6 million to $1.4 million in Q4 2020 due to lower average borrowings and lower prevailing interest rates in the quarter. We have entered into interest rate swaps to manage our long-term interest rate exposure by fixing a portion of our floating rates from October 2020 to September 2024.

Provision for income taxes

Provision for income taxes was $5.3 million in Q4 2020 compared to $5.0 million in Q4 2019. Our Q4 2020 effective tax rate of 25.5% includes the impact of non-deductible share-based compensation over an increased revenue base and adjustments reflected in our latest tax returns. Our Q4 2019 effective tax rate was 27.6% which included the impact of non-deductible share-based compensation.

Depreciation

Depreciation expense increased by $0.5 million to $2.3 million in Q4 2020 due to increases in our capital investments to increase capacity which includes depreciation on our right-of-use lease assets pertaining to our transition to a third-party logistics provider.

Amortization

Amortization expense increased by $0.1 million to $1.0 million in Q4 2020 driven by investments in website development, system implementations, product patent and registrations.

EBITDA and Adjusted EBITDA

EBITDA increased by $2.5 million to $25.4 million in Q4 2020 primarily due to the factors discussed above.

Adjusted EBITDA increased by $3.7 million to $29.4 million and Adjusted EBITDA margin decreased by 40 basis points to 24.4% for the quarter mainly due to higher volumes offset by lower gross profit margins.

Adjusted EBITDA in the Jamieson Brands segment increased by $3.5 million to $26.6 million while Adjusted EBITDA margin increased by 30 basis points to 29.7%. The increase was primarily driven by higher volumes and lower fixed costs as a percentage of revenues.

Adjusted EBITDA in the Strategic Partners segment increased by $0.3 million, to $2.7 million driven by higher volumes. Adjusted EBITDA margin decreased by 130 basis points to 8.9% mainly due to the impact of gross profit margins discussed above.

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Results of Operations — year ended December 31, 2020 and 2019

The following table provides a summary of our results for the year ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) Revenue Cost of sales Gross profit Gross profit margin Selling, general and administrative expenses Share-based compensation Earnings from operations Operating margin Foreign exchange loss Other expenses Interest expense and other financing costs Income before income taxes Provision for income taxes Net income Adjusted net income EBITDA Adjusted EBITDA Adjusted EBITDA margin	For the year ended December 31 2020 2019 403,661 344,980 258,905 215,246 144,756 129,734 35.9% 37.6% 76,259 69,942 4,925 4,343 63,572 55,449 15.7% 16.1% 460 404 22 3,369 6,042 9,372 57,048 42,304 15,450 10,647 41,598 31,657 47,948 38,111 75,299 62,592 87,985 75,909 21.8% 22.0%	$ Change % Change 58,681 17.0% 43,659 20.3% 15,022 11.6% - (1.7%) 6,317 9.0% 582 13.4% 8,123 14.6% - (0.4%) 56 13.9% (3,347) (99.3%) (3,330) (35.5%) 14,744 34.9% 4,803 45.1% 9,941 31.4% 9,837 25.8% 12,707 20.3% 12,076 15.9% - (0.2%)
	2020 403,661 258,905 144,756 35.9% 76,259 4,925 63,572 15.7% 460 22 6,042 57,048 15,450 41,598 47,948 75,299 87,985 21.8%

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The following table provides a reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted Net Income for the year ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) Net income Add: Provision for income taxes Interest expense and other financing costs Depreciation of property, plant, and equipment Amortization of intangible assets Earnings before interest, taxes, depreciation, and amortization (EBITDA) Share-based compensation(1) Foreign exchange loss Termination benefits and related costs(2) International market expansion(3) Business integration(4) COVID-19 related costs(5) Other(6) Adjusted EBITDA Provision for income taxes Interest expense and other financing costs Depreciation of property, plant, and equipment Amortization of intangible assets Share-based compensation(7) Revaluation of deferred tax liability(8) Other Tax effect of normalization adjustments Adjusted net income

For the year ended December 31 2020 2019 $ Change % Change 41,598 31,657 9,941 31.4% 15,450 10,647 4,803 45.1% 6,042 9,372 (3,330) (35.5%) 8,260 7,263 997 13.7% 3,949 3,653 296 8.1% 75,299 62,592 12,707 20.3% 4,925 4,343 582 13.4% 460 404 56 13.9% - 480 (480) (100.0%) 13 1,712 (1,699) (99.2%) 2,202 1,240 962 77.6% 5,064 - 5,064 100.0% 22 5,138 (5,116) (99.6%) 87,985 75,909 12,076 15.9% (15,450) (10,647) (4,803) (45.1%) (6,042) (9,372) 3,330 35.5% (8,260) (7,263) (997) (13.7%) (3,949) (3,653) (296) (8.1%) (4,349) (3,582) (767) (21.4%) - (1,032) 1,032 100.0% 97 175 (78) (44.6%) (2,084) (2,424) 340 14.0% 47,948 38,111 9,837 25.8%

• (1) The Company’s share-based compensation expense pertains to our LTIP, with PSUs and time-based RSU expenses, and associated payroll taxes of $0.4 million included within the current period.

• (2) In 2019, we incurred severance costs and salary continuance related to reorganization activities undertaken in order to gain the capabilities and structure to meet our long-term goals.

• (3) Costs in 2019 pertained to professional fees in establishing our presence in China including entering into regulatory, distribution and supply agreements, and the performance of a study of the Chinese market focusing on broad industry understanding and factors affecting consumer purchase preferences.

• (4) We incurred start-up costs of $1.5 million in our transition to a third-party logistics provider to make room for capacity expansion at our Twin Oaks and Scarborough distribution facilities. Remaining expenses pertain to the integration of our operations and supply chain activities, along with a pre-existing contractual obligation, associated with the acquisition and subsequent integration of our acquired business, which terminates at the end of 2020. In 2019, we incurred expenses pertaining to optimizing our manufacturing and supply chain processes, and other consulting fees.

• (5) We incurred additional costs related to COVID-19. These costs do not reflect the ongoing costs of operation and they have been adjusted for comparison purposes. Costs include donations of PPE and vitamin supplements, funding for a COVID-19 related research study, as well as shift premiums paid to essential

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Jamieson hourly staff who maintained production through government mandated lockdown periods during the year. We have also provided for accounts receivable and specific inventory related to an international retail strategic partner customer who voluntarily entered into bankruptcy protection based on the impact of COVID-19 stay-at-home orders. Based on an executed trade agreement, we have resumed shipment to this partner.

• (6) In 2019, costs were mainly comprised of a $3.4 million charge in connection with our amended and restated credit agreement including the write-off of unamortized deferred financing fee pertaining to our Amended Credit Agreement (refer to “Credit Facilities”) . Additionally, we recorded a partial reserve in connection with a receivable from a key strategic partner customer, who fell victim to a social engineering scheme. Other costs in 2019 pertained to union contract negotiations, cyber-security enhancements and other special projects.

• (7) Costs pertaining to our LTIP, excluding PSUs and RSUs granted to certain employees (refer to “ Share-based compensation” ).

• (8) In 2019, we recorded a tax benefit on the revaluation of our deferred tax liability as a result of lower expected future tax rates due to the closure of our west coast office and distribution center.

The following table provides selected financial information for the Jamieson Brands operating segment for the year ended December 31, 2020 and December 31, 2019.

Jamieson Brands

($ in 000's, except as otherwise noted) For the year ended December 31, Revenue Gross profit Gross profit margin Selling, general and administrative expenses Share-based compensation Earnings from operations Operating margin Adjusted EBITDA Adjusted EBITDA margin	2020 316,423 133,861 42.3% 67,169 4,925 61,767 19.5% 81,519 25.8%	2019 265,843 116,827 43.9% 62,403 4,343 50,081 18.8% 67,436 25.4%	$ Change % Change 50,580 19.0% 17,034 14.6% - (1.6%) 4,766 7.6% 582 13.4% 11,686 23.3% - 0.7% 14,083 20.9% - 0.4%

The following table provides a reconciliation for the Jamieson Brands operating segment from earnings from operations to Adjusted EBITDA for the year ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) For the year ended December 31, Earnings from operations Depreciation of property, plant, and equipment Amortization of intangible assets Share-based compensation Termination benefits and related costs International market expansion Business integration COVID-19 related costs Other Adjusted EBITDA	2020 61,767 6,345 3,949 4,925 - 13 2,202 2,318 - 81,519	2019 50,081 5,373 3,649 4,343 464 1,712 1,226 - 588 67,436	$ Change 11,686 972 300 582 (464) (1,699) 976 2,318 (588) 14,083	% Change
				23.3% 18.1% 8.2% 13.4% (100.0%) (99.2%) 79.6% 100.0% (100.0%)
				20.9%

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The following table provides selected financial information for the Strategic Partners operating segment for the year ended December 31, 2020 and December 31, 2019.

Strategic Partners

($ in 000's, except as otherwise noted) For the year ended December 31, Revenue Gross profit Gross profit margin Selling, general and administrative expenses Earnings from operations Operating margin Adjusted EBITDA Adjusted EBITDA margin	2020 87,238 10,895 12.5% 9,090 1,805 2.1% 6,466 7.4%	2019 79,137 12,907 16.3% 7,539 5,368 6.8% 8,473 10.7%	$ Change % Change 8,101 10.2% (2,012) (15.6%) - (3.8%) 1,551 20.6% (3,563) (66.4%) - (4.7%) (2,007) (23.7%) - (3.3%)

The following table provides a reconciliation for the Strategic Partners operating segment from earnings from operations to Adjusted EBITDA for the year ended December 31, 2020 and December 31, 2019.

($ in 000's, except as otherwise noted) For the year ended December 31, Earnings from operations Depreciation of property, plant, and equipment Amortization of intangible assets Termination benefits and related costs Business integration COVID-19 related costs Other Adjusted EBITDA	2020 1,805 1,915 - - - 2,746 - 6,466	2019 5,368 1,890 4 16 14 - 1,181 8,473	$ Change (3,563) 25 (4) (16) (14) 2,746 (1,181) (2,007)	% Change
				(66.4%) 1.3% (100.0%) (100.0%) (100.0%) 100.0% (100.0%)
				(23.7%)

Revenue

Revenue increased 17.0%, or $58.7 million, to $403.7 million in YTD 2020. This was driven by 19.0% growth in Jamieson Brands revenue and 10.2% growth in Strategic Partners revenue year-over-year.

Revenue in the Jamieson Brands segment increased by $50.6 million, or 19.0%, to $316.4 million in YTD 2020 due to strong growth in domestic and international Jamieson Brands sales of $33.4 million and $17.2 million respectively. The VMS market experienced strong growth as COVID-19 continues to drive consumer demand on immunity and general health. Our domestic Jamieson Brands sales increased by 14.4% over prior year reflecting consistent point-of-sale growth throughout the year, with Jamieson’s growth outpacing the market as consumers turned to trusted brands in their purchasing decision. Our results reflect strong growth in e-commerce and FDM channel retailers, while regional government mandated restrictions impacted replenishments of certain health food retailers who have not transitioned to web-based platforms for servicing their customers. We continue to expand our global reach and product portfolio, with international sales increasing 49.9% versus prior year. We realized strong growth in China, Eastern Europe, and the Middle East based on continued demand for immunity products. China continues to lead our international growth through increased sales on cross border e-commerce and shipments into domestic retail stores as we expand our distribution network.

Revenue in the Strategic Partners segment increased 10.2%, or $8.1 million, to $87.2 million in YTD 2020 due to incremental revenue related to the change in billing practices for a key partner along with additional programs with our largest customers leading to an increase in soft-gel production. This was partially offset by the availability of production capacity to meet accelerated demand, and lower powder volumes for a strategic partner retail customer who has consolidated stores while emerging from their Chapter 11 reorganization.

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Gross profit

Gross profit increased by $15.0 million in YTD 2020, including $1.6 million primarily relating to start-up costs in our transition to a third-party logistics provider. Normalized gross profit increased by $16.6 million to $146.3 million in YTD 2020 mainly driven by revenue growth. Gross profit margin decreased by 170 basis points to 35.9% in YTD 2020, including 40 basis points as a result of the aforementioned third-party transition and other costs. Normalized gross profit margin was 36.3% or 130 basis points lower than prior year including a 170 basis points reduction mainly due to higher costs to ensure continuity of supply, partially offset by a 40 basis points addition from favourable segment mix. All in response to COVID-19, these supply costs include the implementation of physical distancing and safety measures in our production facilities, higher costs to expediate raw materials and third-party packaging costs to maximize throughput.

Gross profit in the Jamieson Brands segment increased by $17.0 million to $133.9 million in YTD 2020, including $1.6 million in start-up costs primarily relating to our transition to a third-party logistics provider. Normalized gross profit increased by $18.6 million to $135.5 million in YTD 2020 mainly driven by revenue growth. Gross profit margin decreased by 160 basis points to 42.3% in YTD 2020, including 50 basis points as a result of third-party transition and other costs. Normalized gross profit margin was 42.8% or 110 basis points lower compared to YTD 2019 due to higher supply continuity costs as noted above, partially offset by modest operational efficiencies that normally accompany higher volumes.

Gross profit in the Strategic Partners segment decreased by $2.0 million to $10.9 million in YTD 2020. The decrease was primarily driven by customer mix, supply continuity costs, and the factors impacting revenue noted above. Gross profit margin decreased by 380 basis points to 12.5% in YTD 2020 due to the billing change of a key customer along with the same factors noted above.

Selling, general and administrative expenses

SG&A expenses increased by $6.3 million, to $76.3 million in YTD 2020. Normalized for the impact of specified costs, SG&A expenses increased by $5.8 million from $64.7 million in YTD 2019 to $70.5 million in YTD 2020. The normalized SG&A increase of $5.8 million in Jamieson Brands was mainly driven by higher variable compensation expense, increase in domestic marketing program costs, plus the investment in resources for e- commerce and international growth, partially offset by a reduction in travel, meals and entertainment costs as a result of COVID-19. Normalized SG&A in the Strategic Partners segment is consistent to the same period in the prior year.

Specified costs of $5.7 million in the current year is mainly comprised of COVID-19 donations and wage premiums, reserves pertaining to a retail strategic partner customer’s bankruptcy based on the impact of COVID-19, along with a pre-existing contractual obligation on our acquired business. Specified costs of $5.2 million in 2019 were mainly related to initial set-up expenses for establishing our presence in China, the optimization of our manufacturing and supply chain processes, cyber-security enhancements and a partial reserve we recorded in connection with a receivable from a key strategic partner customer, who fell victim to a social engineering scheme.

Share-based compensation

Share-based compensation increased by $0.6 million to $4.9 million in YTD 2020 due to the alignment of our grant timing to reflect annual performance targets, the cumulative effect of our stock-based equity grants since our initial public offering on July 7, 2017, and lower payroll taxes based on the number of employee exercised options in the prior year and the number of awards issued in the current year.

Earnings from operations and operating margin

Earnings from operations increased by $8.1 million in YTD 2020 as a result of higher revenue. Operating margin decreased by 40 basis points to 15.7% in YTD 2020 mainly due to gross profit margin impact discussed above partially offset by lower fixed costs as a percentage of revenues.

Earnings from operations in the Jamieson Brands segment increased by $11.7 million and operating margin increased 70 basis points to 19.5% in YTD 2020 mainly due to higher volumes discussed above and lower fixed costs

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as a percentage of revenues.

Earnings from operations in the Strategic Partners segment decreased by $3.6 million to $1.8 million and operating margin decreased by 470 basis points primarily due to factors impacting revenue and gross profit margin discussed above along with higher SG&A expenses and reserves driven by COVID-19.

Foreign exchange loss

Foreign exchange loss of $0.5 million in YTD 2020 is due to fluctuations in USD/CAD exchange rates between the date of the transaction and when cash is realized.

Other expenses

In YTD 2019, other expenses were comprised of a $3.4 million charge in connection with our amended and restated credit agreement including the write-off of unamortized deferred financing fee pertaining to our Amended Credit Agreement (refer to “Credit Facilities”) .

Interest expense and other financing costs

Interest expense and other financing costs decreased by $3.3 million to $6.0 million in YTD 2020 due to lower interest rates as a result of our amended and restated credit agreement (refer to “ Credit Facilities ”).

Provision for income taxes

Provision for income taxes was $15.5 million in YTD 2020 compared to $10.6 million in YTD 2019. Our YTD 2020 effective tax rate of 27.1% includes the impact of non-deductible share-based compensation over an increased revenue base and adjustments reflected in our latest tax returns. Our YTD 2019 effective tax rate was 25.2% which included the impact of non-deductible share-based compensation and a one-time tax benefit of $1.0 million due to a revaluation of our deferred tax liability as a result of lower expected future tax rates due to the closure of our west coast office and distribution center.

Depreciation

Depreciation expense increased by $1.0 million to $8.3 million in YTD 2020 due to increases in our capital investments to increase capacity which includes depreciation on our right-of-use lease assets pertaining to our transition to a third-party logistics provider.

Amortization

Amortization expense increased by $0.3 million to $3.9 million in YTD 2020 driven by investments in website development, system implementations, product patent and registrations.

EBITDA and Adjusted EBITDA

EBITDA increased by $12.7 million to $75.3 million in YTD 2020 primarily due to the factors discussed

above.

Adjusted EBITDA increased by $12.1 million to $88.0 million and Adjusted EBITDA margin decreased by 20 basis points to 21.8% mainly due to higher volumes offset by lower gross profit margins.

Adjusted EBITDA in the Jamieson Brands segment increased by $14.1 million to $81.5 million and Adjusted EBITDA margin increased by 40 basis points to 25.8% in YTD 2020. The increase was primarily driven by higher volumes and lower fixed costs as a percentage of revenues.

Adjusted EBITDA in the Strategic Partners segment decreased by $2.0 million, to $6.5 million and Adjusted

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EBITDA margin decreased by 330 basis points to 7.4% in YTD 2020. The decrease was mainly due to the impact of gross profit margins discussed above.

Summary of Consolidated Quarterly Results

The following is a summary of selected consolidated financial information for each of the eight most recently completed quarters prepared in accordance with IFRS.

($ in 000's, except per share amounts) Revenue by segment Jamieson Brands Strategic Partners Total revenue Earnings from operations Net income Adjusted net income EBITDA Adjusted EBITDA Basic, earnings per share Diluted, earnings per share Adjusted Diluted, earnings per share

2020 2019 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 89,733 82,604 74,292 69,794 78,803 70,184 60,816 56,041 30,636 22,961 18,912 14,729 24,450 18,374 19,776 16,537 120,369 105,565 93,204 84,523 103,253 88,558 80,592 72,578 22,734 17,804 10,675 12,359 20,332 13,265 11,940 9,911 15,405 12,144 6,038 8,011 13,163 4,928 8,186 5,384 17,614 12,655 9,882 7,800 14,253 9,492 7,897 6,469 25,417 21,202 12,715 15,964 22,902 12,221 15,007 12,463 29,383 22,933 18,983 16,687 25,641 19,394 16,392 14,481 0.39 0.31 0.15 0.20 0.34 0.13 0.21 0.14 0.37 0.29 0.15 0.20 0.33 0.12 0.21 0.14 0.42 0.30 0.24 0.19 0.36 0.24 0.20 0.16

Revenue

Jamieson Brands segment revenue for the last eight quarters were impacted by factors including the following:

• accelerated demand for immunity and general health products as a result of the COVID-19 pandemic;

• the impact of innovation within our core VMS portfolio;

• shipment fluctuations in our international markets;

• the volume and timing of promotion and media;

• the volume of inventory and timing of shipments to distributors and retailers;

• seasonality;

• severity of cold and flu season; and

• foreign currency fluctuations.

Strategic Partners segment revenue for the last eight quarters were impacted by factors including the following:

• available capacity when considering demand for Jamieson Brands products;

• launch of new programs with existing or new customers, which include initial pipeline shipments;

• availability of customer supplied materials;

• innovation and geographic demand for high quality certified manufacturers;

• the impact of a change from a tolling arrangement to turnkey for certain products;

• periodic price increases to recapture cost escalation; and

• foreign currency fluctuations.

Earnings from operations

Earnings from operations for the last eight quarters were also impacted by factors including the following:

• revenue factors impacting price and volume noted above;

• return on incremental promotion and marketing programs;

• improvements in production efficiencies and higher economies of scale;

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• temporary increases to production costs driven by physical distancing initiatives and safety measures established within our facilities to protect our employees as a result of the COVID-19 pandemic;

• supply continuity costs including air freight and third-party packaging costs to meet higher demand during the COVID-19 pandemic;

• additional costs incurred in our transition to a third-party logistics provider to make room for capacity expansion at our Twin Oaks and Scarborough distribution facilities;

• raw material costs in native currency;

• timing of marketing spend and variable compensation; and

• • foreign currency fluctuations.

Selected Annual Information

The following selected annual information is shown for the three most recently completed financial years:

($ in 000's, except share and per share amounts) Revenue Earnings from operations Net income Adjusted net income EBITDA Adjusted EBITDA Basic, earnings per share Diluted, earnings per share Adjusted Diluted, earnings per share Selected Consolidated Financial Position Data: Total assets Total non-current liabilities Dividends declared for the year: Cash dividends per common share		For the year ended December 31
	2020 403,661 63,572 41,598 47,948 75,299 87,985 1.05 1.01 1.16 609,341 225,929 0.47	2019 2018 344,980 319,776 55,449 47,157 31,657 26,673 38,111 33,733 62,592 55,297 75,909 67,628 0.82 0.70 0.80 0.67 0.96 0.85 561,775 549,021 229,265 205,739 0.38 0.34

Over the three-year period, revenue increased year-over-year driven by growth in the Jamieson Brands segment through innovations and international expansion and growth in the Strategic Partners segment through increased business with existing and new customers. In 2020, significant growth was achieved across both segments as consumer response to COVID-19 resulted in the acceleration of demand for immunity and general health supplements domestically and internationally.

Total assets have increased over the three-year period reflecting investments in working capital and property, plant, and equipment designed to improve efficiency or expand capacity. In 2020, significant investments were made to expand production capacity in response to growing demands driven by the COVID-19 pandemic.

Liquidity and Capital Resources

Overview

Our principal uses of funds are for operating expenses, capital expenditures, finance costs, and debt service. Management believes that cash generated from operations, together with amounts available under our Credit Facilities (refer to “ Credit Facilities ”), will be sufficient to meet the Company’s future operating expenses, capital expenditures, and future debt service costs.

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Our primary liquidity and capital requirements are for capital expenditures, working capital and general corporate needs. We have cash and availability under our Credit Facilities that we expect to utilize, along with cash flow from operations, to provide capital to support the growth of our business (primarily through working capital and capital expenditures), repay short-term obligations and for general corporate purposes. We believe that cash from operations, together with our cash balance and our Credit Facilities will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs.

Our ability to fund future debt service costs, operating expenses, and capital expenditures will depend on our future operating performance which will be affected by general economic, financial and other factors including factors beyond our control (refer to “ Risk Factors ”). From time to time, our management reviews acquisition opportunities and if suitable opportunities arise, may make selected acquisitions to implement our business strategy. Historically, the funding for any such acquisitions has come from cash flow from operating activities and additional debt.

Credit Facilities

As at December 31, 2020, the Company had $127.1 million in cash and available revolving and swingline facilities.

On September 27, 2019, Jamieson Laboratories Ltd. (“JLL”), a wholly owned subsidiary of Jamieson, amended and restated its credit agreement (the “Amended Credit Agreement”) to add Jamieson Health Products USA Ltd. (collectively with JLL the “Borrowers”) as a co-borrower and to provide a secured revolving facility of $275.0 million (including a $10.0 million swingline facility) with the option to increase the revolving facility by $200.0 million (collectively, the “Credit Facilities”). The Credit Facilities mature on September 27, 2024 with the outstanding principal repayable in full on this date.

We concluded that the amendments to the Initial Credit Agreement (as defined below) represent a substantial modification of the terms with our lenders. Accordingly, extinguishment accounting was applied, resulting in the derecognition of the previous unamortized deferred financing fee of $2.0 million. Financing costs of $1.4 million were incurred as part of the issuance of the Credit Facilities which have been expensed and recorded as other expenses.

Prior to the Amended Credit Agreement, JLL was party to the credit agreement dated January 31, 2017 with a syndicate of lenders (the “Initial Credit Agreement”). The Initial Credit Agreement provided a secured term credit facility of $195.0 million (with the option to increase the facility up to $255.0 million) and a secured revolving credit facility of $75.0 million (including a $10.0 million swingline facility). Financing costs of $4.3 million and $1.5 million were incurred as part of the issuance of the term credit facility and revolving credit facility, respectively.

For the three and twelve months ended December 31, 2020, JLL made drawings of $13.2 million and $60.2 million, and debt repayments of $24.3 million and $76.0 million, respectively, applied against the Credit Facilities. For the three and twelve months ended December 31, 2020, the weighted average interest rate on the Credit Facilities was 3.1% (2019 - Initial Credit Agreement rate 4.4%).

The Credit Facilities are secured by security agreements and first charges over the assets including property, plant and equipment and intellectual property of the Borrowers and certain other subsidiaries of JLL, subject to permitted liens. Under the terms of the Credit Facilities, the Borrowers are subject to restrictive covenants and must maintain an interest coverage ratio of not less than 3.00:1.00 and a leverage ratio not greater than 4.00:1.00. We are in compliance with all covenants as at the date of this MD&A.

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Analysis of Cash Flows — three months ended December 31, 2020 and 2019

($ in 000's, except as otherwise noted) Cash, beginning of period Cash flows from (used in): Operating activities Investing activities Financing activities Cash, end of period	Three months ended December 31 2020 2019 3,144 4,153 18,744 12,996 (4,220) (3,488) (16,502) (13,463) 1,166 198	$ Change % Change (1,009) (24.3%) 5,748 44.2% (732) (21.0%) (3,039) (22.6%) 968 488.9%
	2020 3,144 18,744 (4,220) (16,502) 1,166

Cash Flows Generated from Operating Activities

In Q4 2020, cash flows generated from operating activities totalled $18.7 million compared to $13.0 million for the same period in the prior year. Cash from operating activities before working capital considerations of $22.2 million was $4.0 million higher, primarily due to increased earnings in the current quarter. Cash invested in working capital decreased by $1.7 million mainly driven by timing of payments and significant shipments in the quarter lowering inventory.

Cash Flows Used in Investing Activities

Cash flows used in investing activities in Q4 2020 totalled $4.2 million compared to $3.5 million for the same period in the prior year. Purchases of property, plant and equipment increased by $0.8 million reflecting our investments in additional manufacturing and packaging equipment required to expand production capacity, along with an increase in right-of-use lease assets pertaining to our transition to a third-party logistics provider. This was partially offset by a $0.1 million decrease in expenditures on intangible assets mainly due to timing. Our intangible assets consist primarily of website development, system implementation, product patent and registrations.

Cash Flows Used in Financing Activities

Cash flows used in financing activities in Q4 2020 totalled $16.5 million compared to $13.5 million for the same period in the prior year. In Q4 2020, we made net repayments of $11.0 million to our Credit Facilities, distributed $5.0 million of dividends to common shareholders, and made payments of lease liabilities of $0.8 million, offset by $0.3 million we received for the exercise of stock options and our employee share purchase plan (“ESPP”). In Q4 2019, we made net repayments of $9.3 million to our Credit Facilities, distributed $3.9 million of dividends to common shareholders, and made payments of lease liabilities of $0.5 million, offset by $0.2 million we received for the exercise of stock options and our ESPP.

Analysis of Cash Flows — for the year ended December 31, 2020 and 2019

($ in 000's, except as otherwise noted) Cash, beginning of period Cash flows from (used in): Operating activities Investing activities Financing activities Cash, end of period	For the year ended December 31 2020 2019 198 12,445 40,596 16,396 (13,169) (9,498) (26,459) (19,145) 1,166 198	$ Change (12,247) 24,200 (3,671) (7,314) 968	% Change
	2020 198 40,596 (13,169) (26,459) 1,166
			(98.4%) 147.6% (38.7%) (38.2%)
			488.9%

Cash Flows Generated from Operating Activities

In YTD 2020, cash flows generated from operating activities totalled $40.6 million compared to $16.4 million for the same period in the prior year. Cash from operating activities before working capital considerations of $60.8

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million was $9.9 million higher, primarily due to increased earnings and the impact of financing fees paid on our debt renewal on prior year’s earnings. Cash invested in working capital decreased by $14.3 million mainly driven by timing of payments and accelerated deductions of trade obligations by our domestic retail partners in the prior year. This was partially offset by increases in inventories to secure raw material supply.

Cash Flows Used in Investing Activities

Cash flows used in investing activities in YTD 2020 totalled $13.2 million compared to $9.5 million for the same period in the prior year. Purchases of property, plant and equipment increased by $2.2 million reflecting our investments in additional manufacturing and packaging equipment required to expand production capacity, along with an increase in right-of-use lease assets pertaining to our transition to a third-party logistics provider. Expenditures on intangible assets increased by $1.4 million reflecting our investments in website development, system implementation, product patent and registrations

Cash Flows Used in Financing Activities

Cash flows used in financing activities in YTD 2020 totalled $26.5 million compared to $19.1 million for the same period in the prior year. In YTD 2020, we made net repayments of $15.7 million to our Credit Facilities, distributed $18.6 million of dividends to common shareholders, and made payments of lease liabilities of $2.4 million, offset by $10.3 million we received for the exercise of stock options and our ESPP. In YTD 2019, we made net repayments of $4.1 million to our Credit Facilities, distributed $14.7 million of dividends to common shareholders, and made payments of lease liabilities of $1.9 million, offset by $1.6 million we received for the exercise of stock options and our ESPP.

Contractual Obligations

The following table summarizes our significant undiscounted maturities of our contractual obligations and commitments as at December 31, 2020.

($ in 000's) Operating leases(1) Trade and other payable Revolving credit facility(2) Total contractual obligations	2021 2022-2025 Thereafter Total
	4,005 $ 14,883 $ 15,839 $ 34,727 $ 73,084 - - 73,084 - 149,058 - 149,058
	77,089 $ 163,941 $ 15,839 $ 256,869 $

• (1) We have entered into several operating leases for vehicles, production equipment, computer and communications equipment, office equipment, and office and warehouse space. In 2020, the Company has entered into leases with a third-party logistics provider to make room for capacity expansion. As of December 31, 2020, our total minimum lease payments payable in future years are $34.7 million.

• (2) On September 27, 2019, JLL amended and restated the Initial Credit Agreement to provide a secured revolving facility of $275.0 million (including a $10.0 million swingline facility) with the option to increase the revolving facility up to $475.0 million. The Credit Facilities mature on September 27, 2024 with the outstanding principal repayable in full on this date.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Related Party Transactions

Balances and transactions between us and our subsidiaries, have been eliminated on consolidation.

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Share-based compensation

The LTIP is an equity-based compensation plan providing for the issuance of securities under which grants will be made. Under the LTIP, the board of directors of the Company, at its discretion, may grant share options, restricted shares, RSUs, PSUs, stock appreciation rights and deferred share units. The awards are settled in common shares of the Company (“Common Shares”) with a cash settlement alternative available to the Company. We also maintain the ESPP for all eligible employees for the purchase of Common Shares.

Our share-based compensation expense, for the three and twelve months ended December 31, 2020 is $1.2 million and $4.9 million, respectively, (2019 - $1.6 million and $4.3 million ).

Financial Instruments

We primarily use foreign currency forward contracts to manage our exposure to fluctuations with respect to transactions in U.S. dollars pertaining to inventory purchases and our international sales. These agreements mature at various dates and qualify for hedge accounting as cash flow hedges of future foreign currency transactions. The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, there is no hedge ineffectiveness to be recognized in the consolidated statements of operations and comprehensive income. As of December 31, 2020, $156.1 million of anticipated foreign currency denominated purchases have been hedged with underlying foreign exchange forward contracts settling at various dates in the 2 years following the end of the current quarter.

We also use interest rate swaps to manage our long-term interest rate exposure with respect to interest on our Credit Facilities which is based on fluctuating CDOR. We have entered into an interest rate swap with a term of October 1, 2020 to September 27, 2024 with a notional principal of $140.0 million and an annual amortization of $10.0 million on the first business day of each year. The interest rate swap is a derivative measured at fair value and meets hedge accounting requirements.

Outstanding Share Capital and Redeemable Preferred Shares

Outstanding Share Capital and Redeemable Preferred Shares
As at January 1, 2020 Exercise of stock options Employee stock purchase plan As at December 31, 2020 As at January 1, 2019 Exercise of stock options Employee stock purchase plan As at December 31, 2019	CommonShares
	# $ 38,989,942 243,224 867,301 12,122 15,669 449 39,872,912 255,795 CommonShares
	# $ 38,207,114 239,404 758,333 3,357 24,495 463 38,989,942 243,224

As at December 31, 2020, the authorized share capital of the Company consisted of:

• a) Unlimited number of Common Shares with no par value. The holders of Common Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company; and

• b) Unlimited number of Preference Shares, issuable in series.

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Critical Accounting Estimates and Judgments

The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and assumptions are continuously evaluated and are based on management’s best judgments and experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results may differ from these estimates.

Significant judgments made by management in applying our accounting policies and key sources of estimation of uncertainty were the same as those applied and described in Note 3 in the accompanying notes of our Company’s audited consolidated annual financial statements for the year ended December 31, 2020. Items subject to significant estimate uncertainty and critical judgements which have the most impact on the amounts recognized in the audited consolidated annual financial statements are included both below and in the annual audited financial statement notes.

Our significant accounting judgments, estimates and assumptions are affected as a result of the various ongoing economic and social impacts of the COVID-19 global pandemic. There continues to be significant uncertainty as to the likely effects of this outbreak which may, among other things, impact our employees, suppliers, and customers. It is not possible to predict the impact COVID-19 will have on our financial position and our results of operations in the future. We are monitoring the future impact of the pandemic on all aspects of our business. At each quarter end, management analyzes the impact of the COVID-19 pandemic on our estimates and judgements related to valuation of inventory, receivables and allowance for doubtful accounts below.

Estimating variable consideration for returns, trade merchandise allowances and sales promotional incentives

We use historical customer return data to determine the expected return percentages. These percentages are applied to determine the expected value of the variable consideration. Any significant changes in experience as compared to historical return pattern will impact the expected return percentages we estimated.

We provide for estimated payments to customers based on various trade programs and sales promotional incentives. We estimate the most likely amount payable to each customer for each trade and incentive program separately using (i) the projected level of sales volume for the relevant period; (ii) customer rates for allowances, discounts, and rebates; (iii) historical spending patterns; and (iv) sales lead time. These arrangements are complex and there are a significant number of customers and products affected. Management has systems and processes in place to estimate and value these obligations.

We update our expected return, trade merchandise allowances and sales promotional incentives on a quarterly basis and the refund liability and trade and promotional accruals are adjusted accordingly. To the extent that payments differ from estimates of the related liability, accounts payable and accrued liabilities, net income, and comprehensive income will be affected in future periods.

Valuation of inventory

Management makes estimates of the future customer demand for products when establishing appropriate provisions for inventory. In making these estimates, management considers the product life of inventory and the profitability of recent sales of inventory. In many cases, products sold by us turn quickly and inventory on-hand values are low, thus reducing the risk of inventory obsolescence. However, code or “best before” dates are very important in the determination of realizable value of inventory. Management ensures that systems are in place to highlight and properly value inventory that may be approaching code dates. To the extent that actual losses on inventory differ from those estimated, inventory, net income, and comprehensive income will be affected in future periods.

Consumer responses to COVID-19 have resulted in the acceleration of demand for both immunity and general health supplements, thus reducing the risk of inventory obsolescence. We have customer specific materials on hand to support certain strategic partner customers, that requires management to estimate future demand at the customers’

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retail locations when establishing appropriate provisions for inventory. These estimates are based on the assumption that such customers will continue to carry on business, and management also considers the current economic conditions of the customer, product life of inventory and the potential alternative use. To the extent that actual losses on inventory differ from those estimated, inventory, net income, and comprehensive income will be affected in future periods.

Receivables and allowance for expected credit losses

We are exposed to credit risk with respect to amounts receivable from customers. Our allowance is determined by historical experiences, and considers factors including, the aging of the balances, the customer’s credit worthiness, and updates based on the current economic conditions, expectation of bankruptcies, and the political and economic volatility in the markets/location of customers.

COVID-19 has increased the measurement uncertainty with respect to the determination of the allowance for doubtful accounts. The impact of the COVID-19 pandemic to customers’ business is considered when making credit assessments. Deposits are requested on accounts as required. We maintain provisions for potential credit losses, which are assessed on a regular basis.

Long-lived assets valuation

We perform impairment testing annually for goodwill and indefinite-life intangible assets and when circumstances indicate long-lived assets may be impaired. Management judgment is involved in determining if there are circumstances indicating that testing for impairment is required, and in identifying CGUs for the purpose of impairment testing. We assess impairment by comparing the recoverable amount of a long-lived asset, CGU, or CGU group to its carrying value. The recoverable amount is defined as the higher of: (i) value in use; or (ii) fair value less costs of disposal.

The determination of the recoverable amount involves significant estimates and assumptions. Fair value less costs to sell is determined using market multiples. Value in use is determined using future cash inflows and outflows, discount rates, growth rates and asset lives. These estimates and assumptions could affect our future results if the current estimates of future performance and fair values change. These determinations will affect the amount of amortization expense on definite-life intangible assets recognized in future periods.

Measurement of fair values

A number of our accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When the measurement of fair values cannot be determined based on quoted prices in active markets, fair value is measured using valuation techniques and models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Changes in assumptions about the inputs to these models could affect the reported fair value of our financial and non-financial assets and liabilities.

Tangible and intangible assets acquired through business combinations are initially recorded at their fair values based on assumptions of management. These assumptions include estimating the cost of tangible assets and future expected cash flows arising from intangible assets identified. Financial instruments acquired are determined based on the amortized costs at the acquisition date that approximate their carrying values.

To the extent that these estimates differ from those realized, the measured asset or liability, net income, and/or comprehensive income will be affected in future periods. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in Notes 7, 12, 15, 16 and 20.

Taxes

The calculation of current and deferred income taxes requires us to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities that are subject to accounting estimates

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inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by the tax authorities.

Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the consolidated statements of financial position, a charge or credit to income tax expense in the consolidated statements of operations and comprehensive income and may result in cash payments or receipts.

All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in our income, capital or commodity tax provisions in the future. The amount of such a change cannot be reasonably estimated.

Useful lives of property, plant and equipment and intangible assets with finite useful lives

We employ significant estimates to determine the estimated useful lives of property, plant and equipment and intangible assets with finite useful lives, including assets arising from business combinations, considering industry trends such as technological advancements, past experience, expected use and review of asset lives.

Components of an item of property, plant and equipment may have different useful lives. We make estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires taking into account industry trends and company-specific factors. We review these decisions at least once each year or when circumstances change. We will change depreciation methods, depreciation rates or asset useful lives if they are different from previous estimates.

Significant Accounting Policies

Our audited consolidated annual financial statements were prepared using the same accounting policies as described in Note 2 in the accompanying notes of our audited consolidated annual financial statements for the year ended December 31, 2020.

Recently adopted accounting standards

No recent accounting standard changes have been identified as applicable for the three and twelve month period ended December 31, 2020 and onwards.

Disclosure Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer (the “Certifying Officers”), along with other members of management, have designed, or caused to be designed under their supervision, disclosure controls and procedures (“DC&P”) to provide reasonable assurance that (i) material information relating to the Company is made known to them by others, particularly during the period in which the annual filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the effectiveness of the Company’s DC&P as at December 31, 2020 and have concluded that the Company's DC&P was effective as at December 31, 2020.

Internal Control over Financial Reporting

The Certifying Officers, along with other members of management, have designed, or caused to be designed under their supervision, internal control over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes prepared in accordance with IFRS. The Certifying Officers have used the Internal Control – Integrated Framework (2013 COSO Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission to design the Company’s ICFR. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the

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effectiveness of the Company’s ICFR as at December 31, 2020 and have concluded that the Company's ICFR was effective as at December 31, 2020.

There have been no changes in the Company’s ICFR during the three-month period ended December 31, 2020 which have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.

Limitations of an Internal Control System

We believe that any DC&P or ICFR, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met and that all control issues, including instances of fraud, if any, within the Company have been prevented or detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any system of control is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all future conditions.

Outlook

In fiscal 2021, we expect revenue to grow between 4.3% and 8.6% and range from $421.0 to $438.0 million. We anticipate Adjusted EBITDA to range from $95.0 to 100.0 million and Adjusted Diluted Earnings per Share to range from $1.24 to $1.32.

Revenue in the Jamieson Brands segment is expected to increase between 4.0% and 8.0% compared to fiscal 2020, driven by growth in the following categories:

• In fiscal 2021, we expect domestic branded revenues to grow between 2.0% and 5.0% including the impact of both pricing and volume expectations while lapping surge COVID-19 demand realized earlier in the pandemic. Our guidance reflects a higher base resulting from the impact of COVID-19 and consumers continued focus on health and wellness. We plan to expand our market position focusing on innovation and consumer education while increasing investments in digital commerce.

• We expect international growth between 15.0% and 25.0% including headwinds resulting from a strengthening Canadian dollar impacting our US denominated international sales. Our guidance reflects strong growth in China while sustaining a higher base in our remaining international markets. We plan to increase our marketing investments in China to build brand equity and accelerate our long-term growth opportunities in China.

Revenue in the Strategic Partners segment is expected to increase between 5.0% to 10.0%, reflecting the higher demand of our customers’ branded products.

We expect to incur certain costs affecting gross margins, including the costs associated with continuing COVID-19 safety measures in our operating facilities and higher depreciation resulting from our capacity expansion and transition to a third-party logistics platform. We expect to incur approximately $1.5 million in start-up costs in the first quarter of 2021 associate with the completing of our transition to a third-party logistics provider to make room to maximize our capacity within our existing operating footprint. We also expect to incur non-capital costs to begin IT system enhancements to improve operating efficiencies and better service our customers as we continue to grow. Both our third-party logistics transition costs and IT enhancement costs have been adjusted in our expected Adjusted EBITDA range for fiscal 2021. These transition costs will impact Net Income while our expected Adjusted Net Income and Adjusted Diluted Earnings per Share for fiscal 2021 will also reflect the adding back of these expenses on a tax-effected basis.

The foregoing financial outlook is based on the following assumptions for fiscal 2021, amongst others:

• an average annual exchange rate between the U.S. and Canadian dollar of U.S.$1.00 = $1.30;

• normalized SG&A expenses will increase by approximately 9.0% to 13.0% as we continue to expand in our e-commerce capability and support growth in international markets, including a $3.0 to $4.0 million investment in marketing primarily to support international markets and our long-term growth opportunities in China;

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• depreciation expense will be approximately $10.5 million reflecting the acceleration of capital additions and our third-party logistics platform;

• stock-based compensation costs of approximately $5.0 million;

• interest expense of approximately $5.5 to $6.0 million based on our estimated borrowing and prevailing rates;

• income tax rates of approximately 27.0% based on non-deductible stock-based compensation; and

• a fully diluted share count of between 41.5 and 42.0 million shares.

Our revenue growth and cost increases will not be linear throughout fiscal 2021, with the following factors impacting growth in the first quarter:

• We expect domestic Jamieson Brands segment to grow between 1.0% and 3.0% in the first quarter of 2021 compared to the first quarter of 2020, reflecting inventory replenishment in retail and initial implementation of pricing, offsetting the surge in demand in the first quarter of 2020 as a result of COVID-19.

• Growth in our international markets for the first quarter is expected to be between 50.0% and 60.0% due to the production timing of non-immunity products as we prioritized larger production runs of immunity products exiting fiscal 2020.

• We expect Strategic Partners revenues in the first quarter of 2021 to increase by between 30.0% and 40.0%, reflecting production line availability and the timing of our customer programs in the first quarter of 2020.

• We expect gross margins for both the Branded and Strategic Partners segment in the first quarter of 2021 to be approximately 100 bps lower compared to the first quarter of 2020 resulting from costs associated with COVID-19 safety measures implemented in the second quarter of 2020, combined with an upfront signing bonus on the renewal of our collective bargaining agreement with our hourly employees.

• SG&A expenses will increase by approximately 10.0% to 11.0% as we increase our resources and marketing efforts in our international markets.

While efforts have been taken to slow the infection rates of COVID-19 globally through mandated shutdowns, restrictions and the rollout of vaccines, there exists the continued risk that a resurgence of COVID-19 infections (or its variants as reported by the World Health Organization) may impact our estimates for fiscal 2021. Any prolonged retail or manufacturing closures could impact our ability to service our customers and consumers. An outbreak within our operating facilities could result in absenteeism or a plant closure for an extended duration. Our suppliers may experience a business disruption which could impact their ability to supply raw materials or components required to manufacture our products. Limitations on transportation or border closures may result in shipment delays from our suppliers or to our customers. Our guidance above reflects the current situation and may be impacted by the depth and duration of any potential measures resulting from the pandemic.

The description of our 2021 financial outlook in this MD&A is based on management’s current views and strategies, our assumptions and expectations concerning our growth opportunities and our assessment of the opportunities for our business and the consumer health industry as a whole and the VMS and sports nutrition segments of the consumer health industry in particular, and has been calculated using accounting policies that are generally consistent with our current accounting policies. The description of our 2021 outlook is forward-looking information for purposes of applicable securities laws in Canada and readers are therefore cautioned that actual results may vary from those described above. See “Forward-Looking Information” and “ Risk Factors ” for a reference to the risks and uncertainties that impact our business and that could cause actual results to vary.

Current Share and Option Information

As of the date hereof, an aggregate of 39,876,799 Common Shares are issued and outstanding. As of the date hereof, the Company had 2,546,553 options, 256,894 PSUs and 9,000 RSUs outstanding.

Additional Information

Additional information relating to our Company, including our most recent annual report and annual information form are available on SEDAR at www.sedar.com.

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Risk Factors

We are exposed to a variety of financial risks in the normal course of operations including credit risk, market risk and liquidity risk, each of which is discussed below. Management oversees the management of these risks. Our financial instruments and policies for managing these risks are detailed below. Please see also the discussion of risks associated with COVID-19 discussed above under the heading “Summary of Factors Affecting Our Performance” and “Outlook”.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to us. We are exposed to credit risk from our customers (primarily related to trade accounts receivable) in the normal course of business. We have adopted a policy of only dealing with creditworthy counterparties. To mitigate this risk, we carry out regular credit evaluations and purchase credit insurance for international customers, where appropriate, as a means of mitigating the risk of financial loss from defaults.

We are also exposed to counterparty credit risk inherent in our financing activities, trade receivable insurance, foreign currency derivatives and interest rate derivatives. We have assessed these risks as minimal.

Market Risk

Market risk is comprised of foreign exchange risk, interest rate risk and commodity price risk.

Foreign Exchange Risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily from transactions in U.S. dollars such as a portion of trade accounts payable, trade accounts receivable and cash. We use foreign exchange forward contracts to manage foreign exchange transaction exposure.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our accounts receivable and accounts payable are non-interest bearing. Our exposure to the risk of changes in market interest rates arises from long-term debt obligations with floating interest rates. We manage our interest rate risk by entering into interest rate swaps, in which we agree to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.

Commodity Price Risk

We are exposed to price risk related to purchases of certain commodities used as raw materials. We may use fixed price contracts with suppliers to mitigate commodity price risk. Concentration in any one raw material is not significant to us.

Liquidity Risk

Liquidity risk is the risk we will not be able to meet our financial obligations associated with financial liabilities. We are exposed to this risk mainly in respect of our accounts payable and accrued liabilities, various long-term debt agreements, obligations under our post-retirement benefits plan and lease liabilities.

We manage our liquidity risk through continuous monitoring of our forecast and actual cash flows and through the management of our capital structure. We continually revise our available liquid resources as compared to the timing of the payment of liabilities to manage our liquidity risk.

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