NEPT - Earnings call transcript Q1 2023 | Neptune Wellness Solutions Inc.

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Operator

Good afternoon, ladies and gentlemen and welcome to the Neptune Wellness Solutions Inc.

First Quarter 2023 Earnings Conference Call. [Operator Instructions] Also note that the call is being recorded on Monday, August 15, 2022. And now I would like to turn the conference over to Morry Brown, Vice President, Investor Relations for Neptune Wellness Solutions. Please go ahead.

Morry Brown

hello and operator you, everyone. Thank joining Thank Wellness for Neptune today fiscal you first for Solutions’ call. quarter the conference us XXXX earnings me Financial Cammarata, and With Michael Chief are Officer; Executive President Raymond Officer. and Chief Silcock, today All today amounts are discussed U.S. in forward-looking may of maybe change. our to our and representing contain and expectations information dollars subject remarks as today core not and Today’s contains specifically measures, with be non-GAAP conference trends thus relying GAAP investors our highlight measure solely may supplemental financial of adjusted the business in apparent when measures. our call otherwise operating EBITDA performance that to on provide to Management period, operating also uses and meet adjusted EBITDA operating working annual expenditure comparisons in assess to order capital period capital ability to facilitate our from budgets our performance prepare and requirements. defined GAAP. recognized, measure Adjusted not or EBITDA a under standardized is

are undertake in update forward-looking conjunction not comparable Canadian by entirety statement, from laws. financial most securities a as adjusted with and do them by prepared from or comparability on review maybe measures Our cautioned and EBITDA used are encouraged including peers, not to differ our disclosures and should reliance substitute the to put in with in We as measures. maybe required GAAP any non-GAAP measures measures to financial obligation accordance likely their will be and not statements that our undue of considered for limited. therefore, GAAP. companies, view Investors other isolation definition except in any and Non-GAAP U.S.

to turn the out were and I'll on our over found which subject now public SEDAR Assumptions are to risks these preparing in Michael. as laid made in statements, forward-looking EDGAR. call filings

Michael Cammarata

profitability. ending to year business reflect results XXXX. strategic XXXX to XXXX begin first of June and path XX, consumer and products core The a leading our of and XXXX We reported Fiscal results our a our achieved sectors our margins. and these the fiscal in quarter revenue outline decisions of fiscal a growth a our in impacts refocus to branded path for quarter decisions the package to a tough of was on you the to first good Sprout. leading to ability for perfect brands while of good consumer like is portfolio becoming platform leverage for and consumer with expertise high growth good grow Sprout planet improving take company the period example

on We cost focus reductions have continued also internally. to

have who GMP, is sale pursuing the Stifel We actively the of cannabis business. hired

for sale We have selling and their factory also listed equipment. the are

strategic cost cannabis of the are hyper approximately review the of us and simplifies of from includes best cost quarter the on XXXX. cuts the consultants. all enacted across the in spend the at late business have corporate XX% total, the reduction actions corporate reductions million reduction level, are This the since for announced reductions a play, XXX in reduced X.X and at headcount including the additional peer areas last positioned those cuts X.X corporate initial and purpose to the step Company. level, with of XX%. final headcount our believe strategic overall million million million. XX fall a CPG payroll profitability have have It our we announced units In of XXXX, to by we XX after we reduced in review to upon enabling June corporate We driven growth. the cost addition fall, payroll Building review both external or corporate for business and and and from our in announced of XX, the expenses the structure, during strategic to focus total, In beginning, transition

the stakeholder prudent units. and ongoing is and business well We our synergies ensure increase actions corporate profitability Neptune to and for look additional review savings choice structure across are that and achieve we strategic Our positioned line Silcock to XX, believe is we during as continue this Officer, to these Neptune's made which took Chief have XXXX. on pleased Financial this quarter. leadership Raymond appointments We effect the to important two to with strategy, July of announce values. appointment In were very

You May, will detail suited in public to Neptune. addition extensive for for success further while across grateful of of to with as leading are financial the guidance continuing of be for of discuss announced bolsters Philip strategic Neptune Formal he and is board track the areas an Philip experience of our commercial as Neptune’s Chairman growth. record companies his next CPG. stage long-term well brands. over quarter. we and holds results Ray drive Phil particular for hearing In deep a The cost of private With from of to as of growth as through transitions, performance for experience and Chair CFO achieve the in shortly Audit Sanford efficiencies. financial companies And we experience navigate knowledge first Sprout. Member this we stage years has experience a Ray advisory both the Board firsthand more next XX and Neptune's growth well as new of

quarter and million in forward. going have of are delivering direct with on a core capital revenue achieved our we facility plan Post to we a of expanded Sprouts. general well for Sprout's Stanley. our Biodroga, that other for We for use actions becoming working CPG recently into play also the an the demonstrates Sprout promissory our renewed million to as a the quarter and both taken important position. Morgan for The amendment Sprout's records business offering, the opportunity In from we confidence the notes by notes, million expansion towards first XXXX believe had $X a several sprout $X notes multi-year growth fiscal choice pure shift million. to for and focus results announced best strategic June, company, The investment areas amendment registered in existing secured XX.X Neptune Neptune’s as XX.X end, We purposes. entered of close shows secured maximum corporate led from that expanded improve capital a which the promissory of

Now highlights. operational food with Starting beverage moving our Sprout. to and brand, our

market first at was brand several for net in its year-over-year. product into sales higher gross largest Sprout The resulted quarter successful X.X quarter innovative in sales strong largely growth, record which and recorded with a successful growth. fiscal Sprout, milestones improved The its period share has exciting million XXXX, fiscal of yet. XXXX recent profit of driven by and combined launch in This was margins QX releases in Walmart sales, with revenue quarters,

throughout continue over improved fiscal ago the on XXXX. Gross double and a digits the basis. period, to We expect this margins year into gaining QX percentage

drivers: Two, growth product great increasing. for discounts management; the outperforming for network. it overall made versus brand. Four, shows now year organic food to the retail well Sprout’s distribution periods with improvement have Three, a improved of when Nielsen latest costs when Recent expect we that cost the to time that XX% mix; We the margins of In access has model as product level a we the Sprouts logistical full looked market, from full in the to baby Sprouts an headway as of expanding result increase in only of and of past is partner acquired category turnkey measured, at four Nielsen certain sales period ending in controlling XX% over and year, key gross a of the category. XX, by we Sprouts improved June our as up Sprout’s the driven interest by warehousing all the grew largely weeks XX% the data increase; four the to XXXX, clear distribution One, XX% price data move volume XX% the the realization XXXX, the sales

store with doors versusXX,XXX a of terms Sprouts Nielsen In are expected to in in products up newest XX,XXX data now some soon. show ago of counts, year doors doors the

all Over consumer the the national now to and Sprout’s direct pharmacy And available doors, in is with secured distribution Sprout quarter Sprout the gains in select products supermarket X,XXX Target, their our Sprouts revenue online in launched chains. shipping in our X,XXX and for the Sprouts opportunity well as to continue major to toddlers snack is bars Sprout chain States retailers, U.S. United past through at first May, largest retailers leading CoComelon increase offerings also Canada. Organic co-branded the further XX as In Walmart, and states, the year, including available of and growth. website. nationwide. add new several for

products was including delighted August Walmart X,XXX at to featuring March, In We in our first on an and exciting line walmart.com. Sprouts stores with of into doors been Walmart children's adding and also product ever co-branded food CoComelon launch the have milestone. a co-branded CoComelon, entry displays September,

surpassing sell-through to expectations. SKUs XXX Walmart approximately are achieved have across lines initial their a so several projections strong Walmart’s The We to sales far XXX% performing showing released rollout already stores. product with and

We expect areas baby the to the to just SKUs year. offers expanding continue our the Sprouts XX XX time from versus SKUs we offering beyond Walmart now product further high build this And throughout food revenue plan fiscal impact launch last into demand XXXX. category. the

convenient For value, extend organic the its first healthy, children to and providing time since lifetime now options will Sprout's inception, be it as able grow.

products, a serveables launching and of a vegetables. line full their with Mealz, are meal older serving of new heat children We Up-Age for organic

category Prepared gross Data the We than more XX%-plus with broken are that market, double size out the thrilled retail of that Sprouts margins. Foods of a Nielsen now baby profit is anticipate billion we has and baby food $X.X aisle. the reviews

leverage meal infrastructure into expected expect market. fall growth categories, strong food fiscal to we customers the we the can in now ship the and power the brand see Mealz With into in translate XXXX. baby in this to for expand we to growth is Up-Age in revenue to place believe our

Sprouts category expansion. In explained addition, is also further

for and cereal into We an estimated margins. billion By new XX. supply our unique vendors This to strategic continue supply estimated beverage, and an billion high products on sector potential to growth to market our Sprouts leader profiles. Nielsen allowed sales where examples chain costs, to expertise partnerships, XX partnerships, focused and margin to to has to food efficiency is its accretive and estimated strengthen Sprouts billion down streamlined and focus our from categories size, in market core with see to according improve works rates. we remained number $XXX intend has demand capture the the chain position leveraging include improving as and markets release has overall which all we Sprouts organic seek $X in on fill while of $XX size, maintaining Data. vitamins size fewer Sprouts a beyond. reducing Some reduce the with brand market it

has margins. efficiencies operational Sprouts ensure to business to drive addition, the savings and throughout continued In find cost

We disrupt our while to food are focused expanding on scaling market. cost effectively, organic

challenges that industry, Spout rates to in increases. strong chain future and supply While fill progress I very team price excited some of to made are continue impact these offset we am achieve to for Sprout. Sprouts maintain to proud the the by period time short not a increased immune partially has results the and of managed the costs I am has of shipping

Turning Biodroga. now and care to including personal beauty,

and a MaxSimil in We the result and in the chain QX. opportunities products new of new innovate steps this million bringing developed line portfolio benefit the the to years shifted revenue the million. being Biodroga quarter success with beauty revenue its and years launch new related existing the new for recently $X also additional and going with of was over product to marketing its generated the and its to partly growth our new effective translated $X.X kids which presence has throughout with brand have credentials and note, expect will Biodroga for been to into of care first growth quarters attendance, our website delays, roughly two removing revenue lines quarter the lines new and expected this for is continues that would promotions grow customer undertaking This customers. already the personal XXXX. offerings for Biodroga customer Biodroga taken two both studies groups, of from capabilities while The base still have expand tradeshow drive leads personal in and best we QX bolster existing even the is in beauty offerings strategy, customers are few QX growth supply launched to and in that forward. clinical portfolio a It's at timing as to continue new generated products to QX fiscal important solid past new for Biodroga increase product customers largest important partners care as timing our of to well quarter to continue technology. of Biodroga's throughout in launch. strong it to revenue fiscal the due sales is

studying Sprouts to XXX care when Curcumin We supplement brand ex The the MaxSimil combined supplement improvements to increase in MaxSimil This the and taking alone. cognitive at have near stores demand. impacts good immune The trial chains Biodroga significant compared stores. begin elderberry of a in health on success the in Curcumin. In consumer the combined Market the beauty completing forest in additional are showed was human is a QX fresh clinical in launched both study combined Forest of eye pharmacy eye that absorption results with continued and one showing and in largest time Omega-X-X-X aimed the Remedies, Farmers with Ahioil when week first XX also expects launched future maintaining health. cognitive in examine in and over personal will United stores and study with week Multi quarter. QX, human nationwide clinical Glutin at also were function. supplements Meanwhile, MaxSimil growth in our Ahiflower remedies, States, new

sales Per see growth July XX XX in from the Remedies SPINS showing XXXX. throughout dollar growth launch weeks Forest versus to XX% product over a expect the solid of last this the We is data weeks. prior fiscal XX, through

for the the been working gummies, are which XXXX. a An of this pipeline new developed formulation are We multi-omega example Forest has quarter Remedies. of calendar planning in Remedies, and kids for first also launch on developing the currently we currently is product to Forest

expansion fill issues and rates. have chain These across included over of control have supply introduced and the sector-wide network both ensuring supply our Forest we improved felt helped while mitigate the While increased has continue supply be have to co-manufacturers, chain Biodroga strong impacts chain measures Remedies to actions process these we with agility delays. maintain

drive as best especially reducing stakeholders, on In taken with into from operations strategic decisions operating fiscal company pure continue the Neptune can we the efficiently to throughout Forest to The and To we as over few addition, conclude, possible. quarters challenging of have business Remedies that quarter pleased actions our streamline first to ensure of work XXXX. the costs are we as and results Biodroga operate past growth CPG believe the and these to the are path are in environment. a We s for us play intended consideration the interest position taking profitability macroeconomic and company. when

progress great recent strategic quarters made already have in We on our priorities.

consumers, to available are hand product in now our offerings. to strategic largest areas with the are right detail. over the now products Our our product Thank for With will I chains, financial and you we lines that, discuss of results our Ray brands, expanding Neptune call a many the co-branded and retail growth partnerships our our to and high country's stakeholders. in team, disrupting more

Raymond Silcock

you very already consumer I'm as company the during a value transitions package improve time work with brands. Neptune's for believe CFO have and goods see to to the financial growth to we can this for planet strategic for are position, but still forward. stakeholder well a improved We pivotal achieve that afternoon, company. good be and changes good positioned I Michael going Neptune recent good the have to had everyone. I you, excited Neptune impact Thank joining

have do your I Although questions the I my get answers you recently session, I but I with all any call. best the Q&A during offline to company, back will during joined to today's will don't answer

was note fiscal all XXth, that increase period XXXX. results. the to company revenue U.S. also the the $XX.X in numbers financial U.S. million, three ended The month dollars QX and and also million. $XX.X period first the note, XXXX $XX.X GAAP. a in a same Please reported of reported fiscal our meaningful from up ago revenue of the QX And Turning are quarter June quarter first ‘XX million from year

industry-wide our pleased challenges revenue were navigate to adverse with QX. such While have issues ability continue these to and chain post during growth we to an impact, supply strong

transition are our and on shift. a right focused we to we translating strategic revenue that explained, CPG pure-play company the to are taking are with growth Michael the support to As steps track

seen successful combined increases. releases we include Walmart to on food quarter, million have for of Sprout $X.X with now into quarter consumers no underlying first in organic recent previously and continued in innovative net pushback results gains record. Sprout. our our in Market Moving revenue to brand, from initiatives the driving a Sprouts quarter, Sprout's reported sales price We launch children's these product instituted largest share quarters. the The

QX fiscal up in materially first compared of We double as of expect to margins fiscal Gross trends quarter to continue percentage improve for balance a on digits and these basis. the XXXX. the ’XX,

through key gross Michael to expect and improve a to when expect earlier, margin, already we through. Michael into four result XXXX as drivers margins gross Sprout’s As we said XX% the went of XXXX reach primarily

beauty, we onto segment, Moving Biodroga years and personal the QX leads, of care which improvement as up and XX% includes year two report care over Forest million, personal lines. new well previously product were This compared the primarily to in fulfillment driven Remedies, as to $X.X quarter in ago. by acquired and revenue into orders beauty largest of for expansion sales from our was from pleased period BXB our same

to to in and Biodroga’s years. the personal chain approximately for beauty as included existing a promotion, translated was million supply launch. growth prior new a quarter XXXX. steps quarter, in as the dollars the delays, QX the timing from new of QX successful first fiscal all quarters QX even that While initiatives attendance, to taken contributed which sales to trade related came significant customers, two well fiscal growth we in increase still show of expect lines through Other to factors through and this continue new that care revenue our increase without best Biodroga’s These marketing product effective website in presence

in Last in the quarter only just this business time Finally, fiscal quarter. cannabis we for process fiscal brands, cannabis comparable first revenue which the to $X.X of not are was last branded of million beginning year. revenue million the divesting, as first the cannabis year's in is recorded $X.X scale

balance now to the in costs corporate Moving sheet.

since from Michael of million on measures basis. XX% fall, after approximately on XX, As million the have cutting strategic headcount with headcounts and reductions operating for laser million end have in the XXXX addition elimination costs QX, focused Many of substantially. the of of the earlier, $X.X reductions internal expense cost cost total continue the XXX both since and to This payroll a external have have during $XX At throughout $XX some level, million the $X.X be implemented to end by an corporate cost we the by reduced Cannabis the review strategic said business. units Reductions we to payroll reducing included In the and of annualized reduced beginning and of our corporate business XX%. expenses Corporate last reduced includes corporate the and reduced announced total, across reduction expenses or our in review. cuts consultants.

review cost our continues. operational of improvement We to opportunities for efficiencies look strategic business and streamlining continue additional as

of same the expenses XX%. subsidies compared decrease quarter, a period $XX.X year, million For of to for $X.X million, total the $XX first were net SG&A last million

adjusted from that business an with fiscal $XX.X from explained, during in a measures of our $XX.X period million, streamlining improvement lower of million the been over was is EBITDA primarily loss and the comparable our quarter I ago Adjusted saving $X.X loss have adjusted EBITDA revenue year XXXX. implemented versus in months. direct the increased and year-over-year. this EBITDA improvement As cost past XX is loss million expenses The QX in incurred we the result

a Post confidence The investment from maximum sheet, $XX.X and the Looking notes becoming a in growth from promissory secured company hand. existing Sprout The Neptune's million strategic notes balance to amendment announced as Sprouts. million expanded well Sprouts of towards we million with quarter an the of entered expansion $X.X secured the we quarter the $XX.X million. CPG a at facility ended Sprout’s shift cash in pure-play end, shows Morgan into led amendment $X by opportunity promissory as of expanded for that Stanley. notes on

of on decision administrative recently the our and Stock our also legal Toronto We business, we and sale volume as administrative streamline announced efforts a a on savings, with XXXX. share the our the trading from Exchange, our of and strategic and core products. XX, This August on exchange focus to professional overall percentage delisting our conclude, continue cannabis for came fees at cost voluntary will our trading teams. effective was to and in represented finance close and market brands To additional continued market gains burdens small

already working growth XXXX. expect toward throughout to to moving to of growth questions? in profit creation. We can margins growth, XXXX. line areas our team drive I first the refined you improve to focus for open Operator, fiscal we and higher fiscal as forward newly our look profitability translated strive the has CFO please, stakeholder value our continue strategy key forward continue in and This quarter as to profitability with Neptune our

Operator

Alliance first [Operator at Aaron will from Instructions] And be your Global question Grey Partners.

Aaron Grey

think good through to know of pickup quarter, you want the was the during line, this particularly of growth the guys, there about for talk a growth be you of good forward growth past get I there that bit. it stores I but understanding to of by segment We it see because quarter some P&L? seen expanded you I distribution, terms to hitting better had going timing to on see a you flows forward? how how so just through flowing how actually little little the three amount for in want do a a sales some the issues the bit quarter, Sprout the and range to going actual in just as particularly that P&L, going know I record have about quarter

Michael Cammarata

I'll is Cammarata. this in, jump Michael

and saw into distribution, recent this with the that in and go then probably additional think expand and I gains in QX to starting obviously and fact distribution with quarter more QX, we happen QX. the

end think, should as of being year, that get the I we've we towards the all gains the capture able So we to made. start distribution

Aaron Grey

cannabis to them how you the going the timing of And came from about I then a assets where that generate sold little think you're was bit of being in do and revenue interim for. then the in looking the ahead

So there, I know off kind existing operations you're off of tailoring sung inventory.

in selling as just So how do we it, interim, line? guys about business you think are the the sales that for

Raymond Silcock

we we've been Yeah, is Ray -- have been, Silcock. this

writing inventory to accommodate We That's have set all our our can't we through. expectation been hurt it down margin. that,

we In QX, cannabis breakeven fact, of remaining modest our effect But fairly likely margin go forward, the a future, to without it's a in impact writedown. is on our to the don't go [indiscernible] be business modest. that but would've been we as the

Aaron Grey

notable timing XQ, kind And terms a there. million record of that in your a level quarter? like for on so in we in normalize that out pretty fiscal had so quarterly of last out seen nutraceutical, about anything How of about guys there the call should came where quarter that norm you earnings called this think some of in Was guys ahead kind does and back timing, think have guided you to that we swing to of did $X basis? -- it historically kind

Michael Cammarata

Yes, think there I million was a --

Raymond Silcock

-- sorry I'm

Michael Cammarata

Go on, Ray.

QX. solid core. QX, see new saw you to with take some to expect good dollar QX out I that growth that you should we if in growth even coming a think still impact products But out from a on million in million impact, --

Aaron Grey

gross you out quarter. it to That's And more we just Okay. say expect the margin. forward, to so profit of guys fair going kind right, on pretty normalized inventory gross you then that when the hitting breakeven so helpful. lastly, take profit, normalized Is the much mentioned be for

Raymond Silcock

be effect expectation. don't we Well, mean, we until to going full see we're go first forward. think as our I the we in I the -- would that certainly

XX% talked in XXXX. I think to getting Michael margin about

increase it's margins progress there, a we but a it's we expect be be go to think, as make I function, not So the a forward. gradual going to – step to going of

Michael Cammarata

think the the increases and will And go profit gross them continue obviously start We'll margins. effective. already coming over quarters you I XX%, Great. realizing Yes. start Sprouts seeing and the Biodroga Sprouts’ price P&L as to to into has as positive be

effect to so And P&L, as expect think we the see then cannabis the some and over hitting of the those improve we I of business, remove time. those start

Operator

Grey? Any Mr. further questions

Aaron Grey

set. No, back queue. I'm all on I’ll jump the

Operator

Ladies does and gentlemen, Thank you would call. at to like evening. thank have This event. this questions. for no time you, today's good a your there further and conclude We are attending

Neptune Wellness Solutions (NEPTF) 16 Aug 222023 Q1 Earnings call transcript