Neptune Wellness Archives - Green Market Report

Neptune Wellness Solutions Inc. (NASDAQ: NEPT) (TSX: NEPT) announced its financial results for the fourth quarter and full-year ending March 31, 2022. The fiscal fourth-quarter revenue totaled $11.5 million, an increase of 147% versus $4.7 million for the same period the year prior. However, it was a big drop from the company’s fiscal third-quarter revenues of $18 million.  Neptune also trimmed its fourth-quarter net loss to $36.2 million versus a net loss of $43.5 million for the same quarter in 2021.

“Neptune made significant progress on our path to become a pure-play CPG company, with growth year-over-year and positive momentum in our key focus areas of Sprout and Biodroga during the fourth quarter. We expect this trend to continue into our fiscal 2023, with both Sprout and Biodroga continuing to expand their existing popular product offerings, as well as releasing new product lines that cater to different customer groups.”

Since the year ended, Neptune announced the appointment of Raymond Silcock as Chief Financial Officer. and launched a new line of CoComelon co-branded organic snack bars.

“Neptune’s management and Board have made several strategic decisions recently that we believe are in the best interest of the company and its shareholders. In particular, significant cost saving initiatives, the planned divestiture of our cannabis business, and a refocusing of resources on our renewed mission of becoming a leading CPG company. In addition, we have continued our strategic review to help identify further synergies and cost savings. We are looking forward to the next phase for Neptune as we seek to capitalize on our large target addressable markets of personal care & beauty and organic food & beverages, which we believe have the most exciting growth potential. We remain steadfast in our goal to deliver on profitability and shareholder value.”

The company also noted that it has been granted a 180-day extension by NASDAQ in order to meet the minimum bid requirement.

Neptune Wellness Solutions Inc.  (NASDAQ: NEPT) (TSX: NEPT) announced the launch of a new Consumer Packaged Goods (CPG) focused strategic plan to reduce costs, improve the company’s path to profitability and enhance current shareholder value. Neptune is also selling its Canadian cannabis businesses.

The sale of the cannabis business would include the sale of the Mood Ring and PanHash brands, along with the company’s Sherbrooke, Quebec facility, in one or more transactions. The value of the facility was recently appraised at C$21 million by a third-party appraisal company. In order to accelerate its cost savings, Neptune said it will focus on winding up its cannabis operations pending a transaction.

Layoffs

This divestiture will result in a 50% reduction in workforce, over 30% reduction of total payroll costs and an estimated annual cost savings of C$5.8 million. In addition, the company said it expects to see additional cost savings from corresponding reductions in corporate overhead costs and professional fees.

“This is the final stage of our transition to a pure play, purpose driven consumer packaged goods Company. This strategic divestiture greatly simplifies our overall structure, enabling us to hyper-focus on those areas of the business we believe are best positioned for profitability and growth,” said Michael Cammarata, President and CEO of Neptune. “Of course, the most difficult part of the Company and Board making this decision is the impact on our workforce. We are committed to working with those employees to ensure they are supported throughout this transition.”

Finally, the exit of the Canadian cannabis business may impact the amount and structure of financing the company is currently seeking. It is expected to reduce the amount of financing the company seeks, given a lower anticipated expense structure, along with anticipated cash inflows from the planned divestiture. Additionally, the divestiture is expected to facilitate working with a broader set of financing sources – including traditional banks and financial institutions that have policies restricting dealing with businesses exposed to regulated cannabis operations.

Sprout Organics

As part of the company’s renewed focus on its CPG brands and Sprout Organics, in particular, Neptune announced Sarah Tynan, current Sprout Chief Customer Officer, is promoted to CEO of Sprout, effective immediately. Tynan has been instrumental in garnering big distribution gains for Sprout, including Walmart and Target, and leading the highly successful CoComelon partnership.

Neptune Wellness Solutions Inc.(NASDAQ: NEPT) (TSX: NEPT) delivered its financial and operating results for the first-quarter ending on June 30, 2021 as revenues rose slightly to $12.4 million versus $11.2 million in the fiscal year 2021. Neptune said it exceeded its pre-announced revenue range of $10 to $12 million. First-quarter revenues of $12.4 million increased 83% versus revenues of $6.8 million in the fourth quarter of the fiscal year 2021. Still, Neptune delivered a net loss of $23 million versus last year’s net loss of $11.4 million for the same time period.

Despite the company’s ability to bring in revenue, the executive management team said it had asked the Board of Directors to form a Strategic Review Committee to evaluate the company’s business plan, capital deployment, and long-term strategy to identify alternatives to enhance shareholder value.  These strategic options could include but are not limited to, changes in strategy or operations, strategic business combinations, divestitures, or spin-off of a portion of the company, or continuing to execute the company’s current business plan.

“Our first-quarter revenue exceeded our expectations with sequential improvement of 83% as we delivered innovative products across multiple verticals and expanded our Sprout distribution,” said Michael Cammarata, President and Chief Executive Officer of Neptune Wellness.  “The executive team recognized more needs to be done to maximize shareholder value, and we asked the Board of Directors to establish a Strategic Review Committee to explore options to accelerate our path to profitability.”

Gross profit loss of $2.9 million or (23.0%) compared to gross profit of $3.3 million or 29.0% for the comparable period in fiscal 2021. By excluding from costs of sales: depreciation and amortization expenses, various fixed and indirect costs, as well as costs related to SugarLeaf, a consolidated gross profit of 13% could be derived, a positive difference of 36 percentage points when compared to the 23% gross profit loss of the quarter. The adjusted EBITDA loss was $15.9 million compared to an Adjusted EBITDA loss of $2.5 million in the comparable period in fiscal year 2021.

Neptune Wellness Solutions, Inc.  (NASDAQ: NEPT) (TSX: NEPT) said has entered into an agreement with institutional investors for the purchase of 27,500,000 common shares that will bring the company gross proceeds of approximately $55.0 million before deducting fees and other estimated offering expenses. Neptune said it expects to use the net proceeds for working capital and other general corporate purposes. The Offering is expected to close on or about February 19, 2021.

A.G.P./Alliance Global Partners is acting as the sole placement agent for the Offering. This follows a separate announcement that the company terminated its “at-the-market” equity offering program with Jefferies, LLC as a sales agent. “The termination of the ATM Offering is effective as of February 16, 2021 and Neptune will make no further sales under the ATM Offering. As of the date of this announcement, Neptune had sold 9,570,735 of its common shares under the ATM Offering, raising approximately US$18.6 million in gross proceeds.”

Weak Quarter

This comes on the heels of a weak fiscal third-quarter report. The company said it had total revenues for the three-month period ending December 31, 2020, of $3.3million, a decrease from $9.1 million for the three-month period ended December 31, 2019. The net loss was $73 million compared to net income of $5 million for the three-month period ended December 31, 2019. Included in the net loss for the quarter ended December 31, 2020 is a $35 million impairment of goodwill and a $2 million impairment of property, plant and equipment and right-of-use assets related to the acquisition of SugarLeaf in July 2019. In addition, the net loss also includes accelerated amortization of $13 million also related to the SugarLeaf acquisition.

“The third quarter represented a pivotal point in Neptune’s transformation to a B2C provider of plant-based health and wellness products. I am excited about the prospects and opportunities ahead for Neptune as we transition to a branded consumer-packaged-goods company and the endless possibilities that come with that: from M&A, to the development of new products that disrupt traditional consumption habits, and of course, the cannabis movement in the United States. We are very encouraged by the recent comments of Senate Majority Leader Chuck Schumer (D-NY). The success of our recent launch of Mood Ring™ in British Columbia with rapid sell-through at the retail level reinforces our confidence.”

The company said in a statement, “During the third fiscal quarter, Neptune substantially completed its strategic transition from extraction of hemp and cannabis to the production and sale of consumer-packaged goods and branded products. Neptune believes the shift to consumer-packaged goods and branded products will ultimately result in higher margins and lower risk and will enable the company to generate positive adjusted EBITDA sooner than in its prior B2B model. In addition, the transition has allowed Neptune to prepare logistics to build scale and situated the Company for accelerated growth.”

 Neptune Wellness Solutions Inc. (NASDAQ: NEPT) (TSX: NEPT) reported revenue increased 155%  sequentially to $28 million for the second quarter ending September 30, 2020.  Revenues in the first quarter were restated to $11.2 million. It was a big jump over last year’s total revenues of $6 million for the 2019 second quarter. The stock was jumping over 15% in after hours trading to sell near $2.18.

The company delivered a net loss $21 million slightly more than last year’s net loss of $20 million. All figures are canadian dollars unless otherwise stated.

“I am pleased with our strong top line growth and the successful strategic investments we made during the second quarter of fiscal 2021,” said Michael Cammarata, Chief Executive Officer of Neptune. “We are on track for our CPG products to exceed 70% of our revenues in the third quarter of fiscal 2021 and expect this segment of our business to continue to generate very strong growth. The investments and operating efficiencies we implemented in the first and second quarters of fiscal 2021 and will continue to make in the third quarter of 2021, have us well positioned to begin realizing the tremendous revenue from our purchase orders to come.  These orders combined with the growth of our other areas will drive profitable accretive growth with limited incremental capital investment, ultimately driving higher margins and higher returns.”

On a positive note, Neptune said it has received over US$100 million in purchase orders for its Biodroga and Innovations divisions.  The purchase orders come from six different Neptune clients and the booked sales of about $100 million are scheduled to ship in the next 2 quarters. A company spokesman said, “We remain committed to increasing shareholder value as well as confidence and these Purchase Orders are evidence that our B2B and B2C dual go-to-market strategy to serve consumers at both wholesale and retail levels, is yielding consistent, long-term revenue opportunities.” It should be noted, however, that the purchase orders are not guaranteed, and there is no certainty that all of the orders will be completed or that they will be fulfilled in their entirety.

C-Suite Changes

Neptune also announced in a company statement that David Myers, who was previously Chief Operating Officer, recently left the company for personal reasons. Dr. Toni Rinow has been appointed as Global Operating Officer in addition to her current role as Chief Financial Officer, effective immediately.  Dr. Rinow has been instrumental in increasing efficiencies and future profitability across Neptune’s business units, reducing its headcount by 25% to focus on forward-thinking initiatives and to accelerate growth with less focus on long-term, asset heavy investments.

Dr. Toni Rinow , Chief Financial Officer and Global Operating Officer of Neptune, added: “During the second quarter we saw continued growth to our top line while we made additional strategic investments in the future of the Company and in our distribution channels. These investments were an important steppingstone into the next phase of growth. Moving into the back half of fiscal 2021 we are sufficiently capitalized and well positioned to deliver on  growth in purchase orders in the fourth fiscal quarter of 2021 and as we move into the first half of fiscal 2022. We remain focused on innovation that will continue to help customers, from the time they wake up to when they go to sleep.”

Restatement

Neptune  restated its previously filed condensed consolidated interim financial statementsthe first quarter ending June 30, 2020 with respect to recognition of revenue relating to one transaction that was initially recognized at the gross amount and was restated to present the net amount of the transaction. There is no impact on the net loss in the condensed consolidated interim statement of loss and comprehensive loss resulting form this restatement. The restatement of the June 30, 2020 interim statements includes management’s conclusion that Company’s internal control over financial reporting (“ICFR”) was not effective as at June 30, 2020 , due to the existence of a material weakness in its design and the Company’s plans to remediate such weakness.