Gross profit margins for Sprout of 26%
and Biodroga of 28%
Company to host a conference call at
10:00 a.m. (Eastern Time) Friday,
August 18, 2023, to discuss these results
LAVAL, QC,
Aug. 17,
2023 /PRNewswire/ - Neptune Wellness Solutions Inc.
("Neptune" or the "Company") (NASDAQ: NEPT), a consumer-packaged
goods company focused on plant-based, sustainable and
purpose-driven lifestyle brands, today announced its financial and
operating results for the three-month period ending June 30,
2023.
During the first quarter of 2024 Neptune continued to focus on
operational improvements, cost reductions and operational
efficiencies. In the first quarter the Company's organic baby
food product line, Sprout, performed well with 26% gross profit
margins achieved, ahead of Neptune's projection of 22% in 2024.
Neptune continues to prioritize cost management and the
implementation of measures to increase operational efficiency
throughout the business and the Company expects to see this in
further cost savings through fiscal 2024.
First Quarter 2024 Financial
Highlights:
- Consolidated net revenue of $10.6
million, down from $16.3
million for the same period last year. This is largely due
to a decrease of $2.7 million or 100%
in Cannabis revenues from the now-divested Cannabis business, as
well as decrease of $2.9 million in
nutraceutical revenues versus the same period last year due to
timing of orders, offset by an increase in revenue from food and
beverages.
- Gross profit of $2.8 million
compared to a gross loss of $4.5
million for the same period last year. This improvement to
the gross profit was attributable to the increase in food and
beverage revenues, the divestiture of the cannabis business and
cost cutting measures, offset by the decrease in nutraceutical
revenues due to timing of customer orders.
- Consolidated SG&A expenses of $10.0
million compared to $9.0
million in Q1 of fiscal 2023, an increase of $1.0 million or 12%. This was primarily due to
the increase in consulting expenses and accounting fees relating to
the filing of the 10K.
- Sprout achieved gross margins of 26% in the first quarter,
ahead of our previous guidance targeting 22% for fiscal 2024.
- Biodroga reported gross margins of 28%, reflecting effective
cost management initiatives.
- Reported first quarter net loss of $6.4
million compared to a reported net loss of $6.5 million in the comparable period in fiscal
2023.
- Adjusted EBITDA (non-GAAP) loss of $7.3
million compared to an Adjusted EBITDA (non-GAAP) loss of
$11.4 million same period 2023.
First Quarter Business
Highlights:
- Secured inventory financing for Sprout through an invoice
purchase and security agreement partnership, amending the maximum
available amount to $7.5 million,
from $5 million previously
announced.
- Extended maturity of $13 million
promissory note for Sprout from Morgan Stanley to December 31, 2024.
- Announced the closing of a public offering of approximately
$4 million.
- Increased Sprout's distribution growth to nearly 29,340 doors
in the United States and 3,000 in
Canada, totaling nearly 32,340 in
North America.
Subsequent Events and Business
Updates
- Announced initiation of the next phase of strategic review
process.
- Appointed Lisa Gainsborg, the
Company's Financial Controller, to Interim Chief Financial
Officer.
- Entered into a binding term sheet with Morgan Stanley providing
option to exchange debt of Sprout Organics.
- Amended the inventory finance rider to allow expanded access to
the total available amounts. At the same time executed an over
advance rider of up to $600,000.
Conference Call Details:
The Company will host a conference call at 10:00 a.m. (Eastern Time) Friday, August 18,
2023, to discuss these results. The conference call will be webcast
live and can be accessed by registering on the Events and
Presentations portion of Neptune's Investor Relations website at
www.investors.neptunewellness.com. The webcast will be archived for
approximately 90 days.
About Neptune Wellness Solutions
Inc.
Neptune is a consumer-packaged goods company that aims to
innovate health and wellness products. Founded in 1998 and
headquartered in Laval, Quebec
with a United States headquarters
in Jupiter, Florida, the company
focuses on developing a portfolio of high-quality, affordable
consumer products that align with the latest market trends for
natural, sustainable, plant-based and purpose-driven lifestyle
brands. The company's products are available in more than 29,000
retail locations and include well-known organic food and beverage
brands such as Sprout Organics, Nosh, and Nurturme, as well as
nutraceuticals brands like Biodroga and Forest Remedies. With its efficient and
adaptable manufacturing and supply chain infrastructure, the
company can quickly respond to consumer demand, and introduce new
products through retail partners and e-commerce channels. Please
visit neptunewellness.com for more details.
Disclaimer – Safe Harbor
Forward–Looking Statements
Statements in this news release that are not statements of
historical or current fact constitute "forward-looking statements"
within the meaning of applicable securities laws. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other unknown factors that could cause the
actual results of Neptune to be materially different from
historical results or from any future results expressed or implied
by such forward-looking statements. In addition to statements which
explicitly describe such risks and uncertainties, readers are urged
to consider statements labeled with the terms "believes", "belief",
"expects", "intends", "projects", "anticipates", "will", "should"
or "plans" to be uncertain and forward-looking. Forward-looking
statements relate to future events or future performance and
reflect management's expectations or beliefs regarding future
events including, but not limited to, statements with respect to
the timing of reporting quarterly results. Although the Company
believes that the assumptions and factors used in preparing the
forward-looking information or forward-looking statements in this
news release are reasonable, undue reliance should not be placed on
such information and no assurance can be given that such events
will occur in the disclosed time frames or at all. The
forward-looking statements and information included in this news
release are made as of the date of this news release and the
Company does not undertake an obligation to publicly update such
forward-looking information or forward-looking information to
reflect new information, subsequent events or otherwise unless
required by applicable securities laws. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the date of this news release. The forward-looking
statements contained in this news release are expressly qualified
in their entirety by this cautionary statement and the "Cautionary
Note Regarding Forward-Looking Information" section contained in
Neptune's latest Annual Report on Form 10-K and it subsequent
filings, which are available on EDGAR
at www.sec.gov/edgar.shtml. All forward-looking statements in
this news release are made as of the date of this news release.
Neptune does not undertake to update any such forward-looking
statements whether as a result of new information, future events or
otherwise, except as required by law.
Condensed Consolidated Interim Balance Sheets
(in
U.S. dollars)
|
|
As at
|
|
As at
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$1,379,875
|
|
$1,993,257
|
Short-term
investment
|
|
17,642
|
|
17,540
|
Trade and other
receivables
|
|
5,982,381
|
|
7,507,333
|
Prepaid
expenses
|
|
2,249,403
|
|
1,025,969
|
Inventories
|
|
13,769,482
|
|
13,006,074
|
Total current
assets
|
|
23,398,783
|
|
23,550,173
|
|
|
|
|
|
Property, plant and
equipment
|
|
1,259,090
|
|
1,403,264
|
Operating lease
right-of-use assets
|
|
1,868,773
|
|
1,941,347
|
Intangible
assets
|
|
1,530,924
|
|
1,607,089
|
Goodwill
|
|
2,480,080
|
|
2,426,385
|
Total assets
|
|
$30,537,650
|
|
$30,928,258
|
|
|
|
|
|
Liabilities and Equity
(Deficiency)
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Trade and other
payables
|
|
$29,486,667
|
|
$27,051,561
|
Current portion of
operating lease liabilities
|
|
339,620
|
|
339,620
|
Loans and
borrowings
|
|
9,565,115
|
|
7,538,369
|
Provisions
|
|
3,282,201
|
|
2,948,340
|
Liability related to
warrants
|
|
2,352,493
|
|
3,156,254
|
Total current
liabilities
|
|
45,026,096
|
|
41,034,144
|
|
|
|
|
|
Operating lease
liabilities
|
|
1,940,174
|
|
2,017,888
|
Loans and
borrowings
|
|
15,652,951
|
|
15,412,895
|
Other
liability
|
|
23,000
|
|
24,000
|
Total
liabilities
|
|
62,642,221
|
|
58,488,927
|
|
|
|
|
|
Shareholders' Equity
(Deficiency):
|
|
|
|
|
Share capital -
without par value (21,822,149 shares issued and outstanding
as of
June 30, 2023; 11,996,387 shares
issued and outstanding as of March 31, 2023)
|
|
323,411,029
|
|
321,946,102
|
Warrants
|
|
6,291,164
|
|
6,155,323
|
Additional paid-in
capital
|
|
58,755,071
|
|
58,138,914
|
Accumulated other
comprehensive loss
|
|
(14,899,175)
|
|
(14,538,830)
|
Deficit
|
|
(388,555,731)
|
|
(383,641,363)
|
Total equity
(deficiency) attributable to equity holders of the
Company
|
|
(14,997,642)
|
|
(11,939,854)
|
|
|
|
|
|
Non-controlling
interest
|
|
(17,106,929)
|
|
(15,620,815)
|
Total shareholders'
equity (deficiency)
|
|
(32,104,571)
|
|
(27,560,669)
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
Subsequent
events
|
|
|
|
|
Total liabilities and
shareholders' equity (deficiency)
|
|
$30,537,650
|
|
$30,928,258
|
|
See accompanying notes
to the condensed consolidated interim financial
statements.
|
|
Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss
(Unaudited) (in U.S.
dollars)
For the three-month periods ended June 30, 2023 and 2022
|
|
|
|
|
Three-month periods
ended
|
|
|
June 30,
2023
|
|
June 30,
2022
|
|
|
|
|
Recasted
|
Revenue from sales, net
of excise taxes
of nil (2022 - $641,877 )
|
$10,587,154
|
|
$15,968,098
|
Royalty
revenues
|
21,687
|
|
284,189
|
Other
revenues
|
18,976
|
|
19,941
|
Total
revenues
|
10,627,817
|
|
16,272,228
|
|
|
|
|
|
Cost of sales other
than impairment loss on inventories
|
(7,817,051)
|
|
(17,671,698)
|
Impairment loss on
inventories
|
—
|
|
(3,079,997)
|
Total cost of
sales
|
(7,817,051)
|
|
(20,751,695)
|
Gross profit
(loss)
|
2,810,766
|
|
(4,479,467)
|
|
|
|
|
|
Research and
development expenses
|
(21,864)
|
|
(214,687)
|
Selling, general and
administrative expenses
|
(10,041,057)
|
|
(8,968,614)
|
Impairment loss on
assets held for sale
|
—
|
|
(815,661)
|
Net gain on sale of
property, plant and equipment
|
—
|
|
85,002
|
Loss from operating
activities
|
(7,252,155)
|
|
(14,393,427)
|
|
|
|
|
|
Finance
income
|
—
|
|
1,424
|
Finance
costs
|
(1,793,179)
|
|
(916,522)
|
Foreign exchange gain
(loss)
|
(184,156)
|
|
1,407,285
|
Loss on issuance of
derivatives
|
(787,985)
|
|
(2,126,955)
|
Gain on revaluation of
derivatives
|
3,616,993
|
|
9,523,700
|
Total
other income (expense)
|
851,673
|
|
7,888,932
|
Loss before income
taxes
|
(6,400,482)
|
|
(6,504,495)
|
|
|
|
|
|
Income tax
recovery
|
—
|
|
—
|
Net loss
|
(6,400,482)
|
|
(6,504,495)
|
|
|
|
|
|
Other comprehensive
loss
|
|
|
|
Net change in
unrealized foreign currency losses
on translation of net investments in
foreign operations
(tax effect of nil for all
periods)
|
(360,345)
|
|
(2,791,479)
|
Total other
comprehensive loss
|
(360,345)
|
|
(2,791,479)
|
|
|
|
|
|
Total comprehensive
loss
|
$(6,760,827)
|
|
$(9,295,974)
|
|
|
|
|
|
Net loss attributable
to:
|
|
|
|
Equity holders of the
Company
|
$(4,914,368)
|
|
$(4,284,350)
|
Non-controlling
interest
|
(1,486,114)
|
|
(2,220,145)
|
Net loss
|
$(6,400,482)
|
|
$(6,504,495)
|
|
|
|
|
|
Total comprehensive
loss attributable to:
|
|
|
|
Equity holders of the
Company
|
$(5,274,713)
|
|
$(7,075,829)
|
Non-controlling
interest
|
(1,486,114)
|
|
(2,220,145)
|
Total comprehensive
loss
|
$(6,760,827)
|
|
$(9,295,974)
|
|
|
|
|
|
Basic loss per share
attributable to:
|
|
|
|
Common Shareholders of
the Company
|
$(0.30)
|
|
$(0.72)
|
|
|
|
|
|
Diluted loss per share
attributable to:
|
|
|
|
Common Shareholders of
the Company
|
$(0.30)
|
|
$(0.72)
|
|
|
|
|
|
Basic and diluted
weighted average number of common shares
|
16,197,737
|
|
5,958,266
|
|
The Company has removed
certain captions compared to prior filings, as they are not
required by US GAAP.
|
See accompanying notes
to the condensed consolidated interim financial
statements.
|
|
SELECTED CONSOLIDATED FINANCIAL INFORMATION (in millions,
except per share data)
The following table sets out selected
consolidated financial information.
|
|
|
|
|
|
|
Three-month periods
ended
|
|
|
|
June 30,
2023
|
|
June 30,
2022
|
|
|
|
|
|
Recasted
|
|
|
|
$
|
|
$
|
Total
revenues
|
|
|
10.628
|
|
16.272
|
Adjusted
EBITDA1
|
|
|
(7.267)
|
|
(11.351)
|
Net loss
|
|
|
(6.400)
|
|
(6.504)
|
Net loss attributable
to equity holders of the
Company
|
|
|
(4.914)
|
|
(4.284)
|
Net loss attributable
to non-controlling interest
|
|
|
(1.486)
|
|
(2.220)
|
Basic and diluted loss
per share
|
|
|
(0.30)
|
|
(0.72)
|
Basic and diluted loss
attributable
to common shareholders of the
Company
|
|
|
(0.30)
|
|
(0.72)
|
|
|
|
|
|
|
|
|
|
As at
June 30, 2023
|
|
As at
March 31, 2023
|
|
As at
March 31, 2022
|
|
|
$
|
|
$
|
|
$
|
Total assets
|
|
30.538
|
|
30.928
|
|
104.955
|
Working
capital2
|
|
(21.627)
|
|
(17.484)
|
|
7.071
|
Non-current financial
liabilities
|
|
17.616
|
|
17.455
|
|
13.800
|
(Deficiency) equity
attributable to equity holders of the Company
|
|
(14.998)
|
|
(11.940)
|
|
48.116
|
(Deficiency) equity
attributable to non-controlling interest
|
|
(17.107)
|
|
(15.621)
|
|
12.722
|
|
|
1
|
The Adjusted EBITDA is
a non-GAAP measure. It is not a standard measure endorsed by US
GAAP requirements. A reconciliation to the Company's net loss is
presented below. In the quarter ended September 30, 2022, the
Company recasted comparative Adjusted EBITDA to conform to its
current definition. As a result, the following adjustments were
removed in the current and comparative quarters: litigation
provisions, business acquisition and integration costs, signing
bonus, severance and related costs, and write-down of inventories
and deposits.
|
2
|
Working capital is
calculated by subtracting current liabilities from current assets.
Because there is no standard method endorsed by US GAAP, the
results may not be comparable to similar measurements presented by
other public companies. Current assets as at June 30, 2023,
March 31, 2023 and March 31, 2022 were $23.399, $23.550 and $37.388
respectively, and current liabilities as at June 30, 2023,
March 31, 2023 and March 31, 2022 were $45.026, $41.034 and $30.317
respectively.
|
|
|
NON-GAAP FINANCIAL PERFORMANCE
MEASURES
The Company uses one adjusted financial measure,
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization ("Adjusted EBITDA") to assess its operating
performance. This non-GAAP financial measure is presented in a
consistent manner, unless otherwise disclosed. The Company uses
this measure for the purposes of evaluating its historical and
prospective financial performance, as well as its performance
relative to competitors. The measure also helps the Company to plan
and forecast for future periods as well as to make operational and
strategic decisions. The Company believes that providing this
information to investors, in addition to its GAAP financial
statements, allows them to see the Company's results through the
eyes of Management, and to better understand its historical and
future financial performance. Neptune's method for calculating
Adjusted EBITDA may differ from that used by other
corporations.
A reconciliation of net loss to Adjusted EBITDA
is presented below.
ADJUSTED EBITDA
Although the concept of Adjusted EBITDA is not a
financial or accounting measure defined under US GAAP and it may
not be comparable to other issuers, it is widely used by companies.
Neptune obtains its Adjusted EBITDA measurement by excluding from
its net loss the following items: net finance costs (income),
depreciation and amortization, and income tax expense (recovery).
Other items such as equity classified stock-based compensation,
non-employee compensation related to warrants, impairment losses on
non-financial assets, revaluations of derivatives, costs related to
conversion from IFRS to US GAAP and other changes in fair values
are also added back to Neptune's net loss. The exclusion of net
finance costs (income) eliminates the impact on earnings derived
from non-operational activities. The exclusion of depreciation and
amortization, stock-based compensation, non-employee compensation
related to warrants, impairment losses, revaluations of derivatives
and other changes in fair values eliminates the non-cash impact of
such items, and the exclusion of costs related to conversion from
IFRS to US GAAP, together with the other exclusions discussed
above, present the results of the on-going business. From time to
time, the Company may exclude additional items if it believes doing
so would result in a more effective analysis of underlying
operating performance. Adjusting for these items does not imply
they are non-recurring. For purposes of this analysis, the Net
finance costs (income) caption in the reconciliation below includes
the impact of the revaluation of foreign exchange rates.
In the quarter ended September 30, 2022, the Company recast
comparative Adjusted EBITDA to conform to the current definition.
As a result, the following adjustments were removed in the current
and comparative quarters: litigation provisions, business
acquisition and integration costs, signing bonus, severance and
related costs, and write-down of inventories and deposits.
Adjusted EBITDA1 reconciliation, in
millions of dollars
|
|
|
|
|
|
|
Three-month periods
ended
|
|
|
June 30,
|
|
June 30,
|
2023
|
2022
|
|
|
|
|
Recasted
|
|
|
|
|
|
Net loss for the
period
|
$(6.400)
|
|
$(6.504)
|
Add
(deduct):
|
|
|
|
|
Depreciation and amortization
|
|
0.341
|
|
1.039
|
Revaluation of derivatives
|
|
(3.617)
|
|
(9.524)
|
Net
finance costs
|
|
1.793
|
|
1.635
|
Equity classified stock-based compensation
|
|
0.616
|
|
1.187
|
Impairment loss on long-lived assets
|
—
|
|
0.816
|
Adjusted
EBITDA1
|
$(7.267)
|
|
$(11.351)
|
|
|
1
|
The Adjusted EBITDA is
not a standard measure endorsed by US GAAP requirements. In the
quarter ended September 30, 2022, the Company recasted comparative
Adjusted EBITDA to conform to its current definition. As a result,
the following adjustments were removed in the current and
comparative quarters: litigation provisions, business acquisition
and integration costs, signing bonus, severance and related costs,
and write-down of inventories and deposits.
|
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SOURCE Neptune Wellness Solutions Inc.