NEPT - Earnings call 1 2024 | Neptune Wellness Solutions Inc.

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Operator

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

First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Valter Pinto, Managing Director, KCSA. Please go ahead.

Valter Pinto

Thank you, operator, and hello, everyone. us XXXX the Earnings joining Fiscal Wellness for Quarter First Conference you today Neptune for Solutions Thank Call. Interim With President me Financial Gainsborg, and Cammarata, Officer. Chief Chief Executive today Officer; and are Michael Lisa in are today discussed amounts U.S. All dollars, and information, expectations to of as subject contain and be representing may our today change. remarks our may forward-looking

not with thus call of may our measure contains specifically be highlighting Today's business supplemental in otherwise financial conference core adjusted EBITDA, relying GAAP performance and when a measures, non-GAAP to trends our provide solely investors measures. financial apparent operating that on

Adjusted adjusted order meet is period to budgets defined, recognized, Management EBITDA also measure not comparisons annual assess performance and facilitate our from capital uses GAAP. a period, operating EBITDA prepare standardized in requirements. or to expenditure ability operating under and our to capital working

Our used adjusted prepared for therefore, measures with that a considered likely by peers, in GAAP. differ may as other should be definition from and EBITDA from measures our Non-GAAP in isolation limited. be comparability including of accordance will not or companies, substitute

financial most encouraged measures. do reliance and by and any update are not as be them and measures except any on may our with put and statements not required financial Canadian review to entirety non-GAAP disclosures in securities undue conjunction in obligation to view comparable are cautioned GAAP Investors the their to undertake laws. We forward-looking statement U.S.

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

Michael Cammarata

XXXX period results our for XX, you ending fiscal conference everyone. call Thank first you, and hello, the joining us Valter, today XXXX. June for for financial quarter Thank

driving quarter, margin the expansion efficiency. and focused on operational team During our

while year-over-year. expand products core margins brands, brands generated new to continued innovative into and expanding Both and also develop steady revenue markets. Sprout Biodroga, Our

Let me first discuss Sprout.

organic snack brand. food and Our children's leading

grow America, across innovative and continue our fiscal our deliver to quarter, North Over expand new we the SKUs product first customers. distribution for portfolio

margin Sprout XXXX XX%. of quarter, margin the gross fiscal QX, achieving A in management. a profile in is of inventory XX% During pivotal element our outperforming surpassed our expectations strategic our by target

We've implemented positive positioned mitigate at we both QX with measures results more in yielded to our quarters, write-offs the reduced we recent improvement align and plans the These have closely These demand production processes. the have fine-tuned aim past. and to several implemented enhanced efforts personnel, evident costs. in measures recorded the right margin expenses manage our to for Sprout. encountered Over

ahead. optimize calendar However, In there's result chain particular, more changes in Sprout, of year. remainder made work million the we XXXX have the we savings to will for significant in still which $X.X for the believe supply

to further have sourcing with possible. products this cuts added in continued to We QX, progress further to made. planning, Sprout has where plan chain supply stability This restructured we production and savings by dual

In our are our of addition, goods and with in suppliers power by packaging we reducing volume cost suppliers. contracts the combining

of of and processes evolving forecasting a customer tracking and ensuring our also We've understanding enhance refined systems, precision better efficiency to needs. the our

We ensuring placement off-shelf working on- Sprout marketing growth success to our continue with and our and activation. partners through and optimization focus the of on efforts on products retail by

positive several CoComelon CoComelon awarded QX, In quarter, with Sprout During of expect feature Pouches, from partners. off-shelf key we the Big first Sprout Sprout several upside lines retail Crinklez was Wafflez, and see major on product the Kids. features to

U.S. in proud all XX% of Sprout as website. XX the shipping products consumers to available the market We are are Sprout direct well Canada states, as in through that

in the first United Canada majority nearly has for we Sprout doors that had total X,XXX store America. XX,XXX the when since stake reached North growth in of This XX,XXX count doors doors coverage XX% in Sprout is a in market XXXX. acquired the States of impressive and

supermarket our both achieved Target through this leading partnerships pharmacy retailers, major Walmart, and have including States. the reach of many and chains the in chains with United We largest national

Brookshire such incremental SKU additions Grocery, as while include New Markets retail added Super partners, retail existing Demoulas QX. Brothers count partner in

also well pack sams.com. These are retail Sprout's that shelves had for in by X across announced offers country organic popular X quarter, Last stores Sprout we launched online been of selected on select club available now as distribution onto items target.com. co-branded the pouches as most CoComelon platform, Target. toddler

launching partnership currently All to continues increased XXX continue Sprout's grow pouch #X banana in is versus positive also CoComelon with meals. Sprout sales to Target to pouches, awarded the pouches in since new the spinach banana Sprout bringing was of with X,XXX an XX assortment. store bars, total items XXXX. Walmart items, our Kiwi and CoComelon March in growth show Curlz Toddler count previously. Wafflez, average including momentum distribution X of

projections. We Walmart are which meeting pleased showing Sprout's that portfolio through strong is is sell at

last Banana ranking latest ending XX, average weeks their in category. in are Snacks the beating Bar Nielsen Wafflez, of shows AOC week CoComelon Walmart. U.S. XXXX, achieved some XX that CoComelon new performance Bars especially at total the #X are product weeks, products data, has performing in Toddler The category well. June meals, and XX Sprout's Sprout

categories right that in total shifting line in in Sprout new Wafflez, while customer demonstrates launched of growth was new driven the category. the with in category, growth demand. latest which into the XX% ranked This Sprout versus pivot the portfolio the XX.X% read. recorded and a weeks and was period and the XX.X% strategic latest meals Sprout expansion second X-week products many for for in of Snack baby Bars, which the growth toddler the of Snacks XX.X% recent XX Sprout by This XX.X% total Toddler achieved showed versus growth

and Snack standout Dollar unit in in pouch Our portfolio, CoComelon the to has sales partnership Banana also pouch unit Yes maintained the in the Sprout CoComelon sales CoComelon Yes, CoComelon is Veggie #X range. the as perform continues in products bar Sprout's while in snack The #X portfolio.

maintain but to XX%. is XX%, is fill between processes on above Sprout rate to the XX% a supply improve fill Sprout's focused continually rate. managing level chain sits our goal to

growth continued of XXXX brand. raw maintain Biodroga for This now strong achieved quarter margin Biodroga, our was in material to on pressure first nutraceutical procurement. Moving continued of XX%. the of spite to

sales we improve strong orders. expect from sales softened QX Biodroga client While in QX results, per a fluctuate can to slightly Sales quarter because through on QX business. large is BXB depending

momentum improved QX quarter. have up sales the are current growth we back expected as to pick seen during

levels monoglyceride grade, superior Our MaxSimil in far in and saw brand product and order the continued QX oil Biodroga's leading pleasing technology, fish is so QX. receiving success and

international market. monoglyceride brand reach addressable and Biodroga rolling into markets, are and its We the technology increasing new out

reported are launched the Korea to sales of MaxSimil In we the partner monoglyceride our South into first the QX. we Mexico first QX, technology in Korean the in During brand shipment to with new its demand Biodroga QX, local quarter. ship also South with India. place of over partner starting our sales raw growing taking of to doubling material market

in discussions Taiwan progress increased monoglyceride We demonstrating and clients new Singapore, demand its Asian MaxSimil are and in technology in with markets. new also across

and streamlining key example in business. one importantly, warehouses growth but A the up, implement have becoming but To the We margin Biodroga the making Biodroga behind of of operationally cost-saving we efficient. have increases, the recent factors to more more consolidation progress, demand also continued sum are initiatives and have maintained. more as Canada. Western we throughout the of is Sprout steady This we is improve measures implementing do, to are operational

I over will now call results our the hand financial to cover Lisa to in detail.

Lisa Gainsborg

XXXX. the results hello, Consolidated pleased the be for and decrease of fiscal XXXX. first revenues of numbers net revenue financial $XX.X All from $X.X U.S. GAAP. presenting Neptune's to Michael, June in you, includes a now-divested business. QX fiscal XX, XXXX XXXX million dollars totaled for to U.S. ending are I'm everyone. million in quarter compared for of for the Thank This and period Cannabis million QX fiscal $XX.X Cannabis

increase 'XX, XXXX, fiscal as basis grew offset XX.X% food The shipping QX XX.X% the increase by $X.X increase of revenues in $X.X as compared revenues, was in XX revenues. mainly gross royalty an of a for decrease XXXX points. well to an profit for of of period QX million same to XX%, which beverage in timing of QX decrease of attributable million consolidated or and by nutraceutical products Compared to partially of consolidated

we Sprout for our during sales. increase significant of over taken of a gross ahead the manage drive previously is result XX% steps the of XX% the have quarter margins target QX, past This of XXXX. fiscal and achieved year costs to in guided

the factors our of spoken Michael is improvement of margin has As our management inventory. the to, key already

actively place the in have QX experience manage people we we We are and ensure write-offs continuing QX, and and we to right processes to had that not put in the this. do that

manage to several taken both expenses lower the and business margin level has have costs, results this a Sprout year steps in shown improvement for recorded for and past QX. in over of We

full measures XXXX optimize supply the these year. in savings recorded made We particular, QX. of savings changes expect chain on to to in the are calendar Sprout $X.X that million for have for we result confident the we significant in will remainder see the In

In processes understanding more for efficient more and ensure customer accounting addition, and at needs. details we've to also refined our tracking systems forecasting

including quarter was segment, in BXB to of challenges. our margin for supply XXXX This first growth leading maintain chain Biodroga of strong achieved to our Moving XX%. Biodroga. brand, spite nutraceutical continued continued of the

is and improved as operational the cost throughout We sales. key have behind Biodroga well of have also that This reduced of margin the implement continued one cost growth initiatives streamlining as maintained to business. we savings the factors

$X controls. This Consolidated of the is Moving amounted expenses or XX%, cost million XXXX to million prior strategic the compared the a for now of the continued to to corporate. due period primarily to same for decrease and year. review benefits QX SG&A $X $XX million

balance with promissory term structure. for option announced scrap existing had to XX, would to term sheet June Sprout on providing with The XX, amendments for debt operating remain an a entered to the date This sheet maturity XXXX. week, further equity cost debt. XXXX. to extending Neptune We substantially we into we for Sprout its prior binding Sprout's sheet exchange our provides focused improving on November remaining reduce Morgan or notes, and This Sprout Stanley

receivable Sprout plan on Sprout for children's organic million. with QX, extended food the growth up also million to notes Sprout allow to Morgan of for $X accounts strategic Sprout capital. its security with In an brand. its $XX its facility path actions for factoring promissory existing execute secured to continue These expansion maturity Stanley its

public of $X during closed first million. the Neptune Additionally, offering quarter, a

by EBITDA quarter adjusted decrease the to in of or $XX.X compensation driven of prioritizing the depreciation, Consolidated by was XX, ended adjusted of for We stock-based of improvement of SG&A compared million adjusted are is $X.X an quarter ended EBITDA an first the operating XXXX, actively $X.X million to June an also $X.X XXXX, to EBITDA impairment million, loss June million the The and improved related the equity-classified quarter first compared loss a of compensation, $X.X prior. including of by quarter expenses. non-employee for expenses, offset activities control warrants in to This $X.X to of million. measures reduction year million. XX% for loss XX, add-back operating losses

$X.X on in in loss costs million driven or derivatives X.X%, the This of prior of the the to million expenses loss by the $X.X increase $X.X in of R&D period. $X.X million, impairment of million, of amounted $X.X $X.X reduction finance exchange for gain increase increase million, in to value Net of $X.X offset is million which of $X.X compared million. of decrease million million, was the the fair in expenses $X.X loss corresponding quarter the an by foreign gross for profit million, increase and $X.X SG&A of the

XXXX, growth balance the quarter consistent the of equivalents XX, cash of and XXXX. To sheet. liquidity Neptune position for of company's The first sum at strong at margin up, $X.X Looking million. fiscal achieved cash June

to are and on reducing expenses achieve corporate savings cost operational We improvements. and focused costs additional

I for remain capital. focused and us capital remarks. call [ Neptune's and shore turn to to improving Thank actions up on continuing back now today, over will That joining also concludes Michael. you We are to the position prepared ] review our

Michael Cammarata

a as see to step happy Interim for appointed role. I critical am have Recently CFO, Thank Neptune, and you you, important this Lisa. team been player leadership into you

Fund food option in and an Now like children's next XX to We've NH Expansion to organic brand. with Credit share us equity. significant Holdings. our agreement debt I'd developments binding This entered into Morgan the for existing Sprout, Stanley's provides a some regarding sheet exchange over days snack with term our Sprout leading

promissory be If an route, notes. remaining stake maturity Their increase This Sprout's trading the will guarantee sheet modifications we existing to also XX, in could line. for Sprout Sprout becoming date which would the Sprout Should to decide this entity XXXX, will be possibility pushed term there approximately will our to to terminated. to of and take fruition, significantly the XX.X%, stage exchange the Neptune this sets June come debt. the be down by independent reduce

evaluation comprehensive and like However, ongoing fully the company. or plans, there's completed. exchange our which deliver all evaluation emphasize phase believe review the us for to strategic acts our this the the will that step leverage of options and I'd are process, be that strategic will allowing as and We a recently no announced these assets subsequent certainty comprehensive our absolute a review of next strategic We for value stakeholders. toward our include that to transaction of options

fiscal QX before our stakeholders. year. challenging end currently the it The of We are want the customers, partners, review conditions retail will investors, fully extend acknowledge intent calendar the our the announce with sincerest action take gratitude to all XXXX by navigating. plan Board of conclude to and this the anticipates we to We and strategic

Your for vision patience, your belief please our line understanding support. the words even questions. you more amidst to than us complexities Operator, mean can and for Thank convey. these open in

Operator

comes Instructions] Aaron from Your first from Grey Partners. Global Alliance question [Operator

Aaron Grey

were First Sprout. for up but one Sales me sequentially. down for year-over-year,

So spoken of we think might you can and you've overall And impacting on of of to, how comment e-commerce do be in distribution more you trends? sales trends some when some that that see might P&L? growth the that into then terms the

Michael Cammarata

to like the and that Curlz Sprout, take shift had obviously, Stage during Curlz. demand X distribution, a I'll X had experiencing cuts we're in lot a had growth QX, question. related customer also Michael. a and that, we We've Stage it's particularly. our in manufacturing and Aaron, of issue.

points, a in affect those little for at sales bit and did we QX, So it QX. anticipate

hopefully start We chain regaining to the and that are QX. in supply on addressing expect that

a seeing that and retail Walmart go and the customers partners. But to We're Target we definitely lot are try grocery the also to on to are traditional starting level economics. more seeing shift on a customer of versus towards save

adjusting we the to overall are market So with trends.

Aaron Grey

good point to forward for in the And Do on gross [ that's for had Great. these the levels the a that Biodroga terms rationalization think improvement nice some had? of of a base you ] quarter. either you've and think go you kind it Sprout SKU time Do the Okay. the in to margins now margin of year? at we're see good gross remainder of

Michael Cammarata

Yes.

a -- we're XX%, was think that bit but coming that. the our think focus at -- I we're I exceeding gross margins in always is fluctuate already little may quarters, the and

eliminating have and and focus margin profitability soon possible. we on to improvements, the in as we're we're all really as made units the So on costs hyper-focused trying as gain

Aaron Grey

of still... the you any and quantify And guys some additional do savings mentioned you Great. Okay. in you way can remarks? the What cuts prepared

Michael Cammarata

Yes.

resetting now X, able that So as production time Phases online. -- we more X as on focusing the between customers so our as start coming have production on savings were products we in plan, switching real new are in well the are to plans

to rightsizing production So in currently, $X.X we about we to active and the be we and what savings had by match million continue customer it. the on to just we'll demand that, monitor anticipate be runs

Sprout's save on the did on we So level. that

the Sprout's savings We level in which anticipate also as corporate. restructured we in well the teams, additional on of some as

Aaron Grey

just announced. And on lastly binding then the that you me, agreement Okay. for guys terms

within maybe So and of the days considerations to Stanley to that and debt, the some you Neptune of separate Morgan next kind [indiscernible] independently well. you XX -- just hoping what some for be the how have you the also exchange like of promissory than towards sounds cause equity looking as be and it Sprout then Sprout that that also might might with because trading debt we might

would that So just any more on appreciated? color be

Michael Cammarata

Yes.

to grow in revenue, eventually Neptune to acquire And to it be exit over this either and we're So being net $XXX at brands term platform hold we on always scenarios, that go net on a building. case may publicly between then potentially long traded million them the other best able to platform, million opportunity scenario, and are hopefully million owned in focused $XX bring revenues. vehicle, or for $XX control is the Sprout's potentially to based able with have believe the value that strategic in which its into to we looking them

to And efficient I grown definitely even to -- improve. think became with we've distribution. Sprout, to operations opportunities the continue We've more the on way have

have assets of considering what organization to want at assets looking term we're the of focusing period. something to to part are that's really review. that part those long where profitability the reasonable going Phase X And on X we do and a So be as that then Phase was we time do and that. in strategic are bring

wrapping we're that and to year. hopefully to And the create Board where be in be with realigning we're review, to as core to for assets focusing structural stakeholders. have X value -- believe that strategic we assets made the going stakeholders be as the for monetize in end now to and all of in we the Phase So look assets able the be Phase announce create QX the clarity going that now give changes long X. on able better with on that for term, up that's And the will something to the to we value well the able we're how all now by goal focusing we're of of

Operator

you. are gentlemen, conference and no for Ladies lines. disconnect concludes may this Thank joining, for There call this today. you thank you your We time. further questions and your at now

Neptune Wellness Solutions (NEPTF) 18 Aug 232024 Q1 Earnings call transcript