Neptune Reports Fourth Quarter and Fiscal 2021 Results

Rhea-AI Summary

Neptune Wellness Solutions (NASDAQ: NEPT) reported first-quarter revenue expectations of $10 to $12 million, indicating a potential sequential growth of 47% to 76% from the previous quarter's revenue of $6.8 million. For fiscal year 2021, the company experienced a 58% revenue increase year-over-year, totaling $46.8 million. However, significant losses persisted, with a $168.6 million net loss for the year. Neptune continues focusing on expanding distribution, innovation, and strategic acquisitions to improve margins.

Positive

• First-quarter revenue guidance of $10 to $12 million indicates strong sequential growth of 47% to 76%.
• Fiscal year 2021 revenue increased by 58% year-over-year to $46.8 million.
• Acquisition of majority stake in Sprout Food, expanding into the growing baby food market.
• Agreements to sell cannabis products through multiple provincial retailers, enhancing distribution.

Negative

• Fourth quarter gross profit loss of $24.8 million, significantly increased from $1.1 million loss year-over-year.
• Fourth quarter net loss of $60.3 million compared to $39.2 million in the same quarter last year.
• Fiscal year 2021 adjusted EBITDA loss increased to $52.7 million from $19.9 million year-over-year.

Announces First Quarter Revenue Range of $10 to $12 Million

LAVAL, QC, July 15, 2021 /PRNewswire/ - Neptune Wellness Solutions Inc. ("Neptune" or the "Company") (NASDAQ: NEPT) (TSX: NEPT), a diversified and fully integrated health and wellness company focused on plant-based, sustainable and purpose-driven lifestyle brands, today announced its financial and operating results for the three-month and twelve-month periods ending March 31, 2021.

Fourth Quarter and Full Year Financial Highlights

• Reported fourth quarter revenue of $6.8 million compared to $9.5 million in the comparable period in fiscal 2020 and was a 127% acceleration versus the third quarter 2021 reported revenue of $3.3 million. Reported fiscal year 2021 revenue of $46.8 million, which increased 58% versus the full fiscal year 2020 of $46.8 million.
  
  
• Reported fourth quarter gross profit loss of $24.8 million compared to a reported gross profit loss of $1.1 million in the comparable period in fiscal 2020 and reported fiscal year 2021 gross profit loss of $36.2 million compared to a gross profit loss of $1.8 million for the fiscal year 2020.
  
  
• Reported fourth quarter net loss of $60.3 million compared to a reported net loss of $39.2 million in the comparable period in fiscal 2020 and reported fiscal year 2021 net loss of $168.6 million compared to a net loss of $60.9 million for the fiscal year 2020.
  
  
• Adjusted EBITDA loss for the fourth quarter was $38.2 million compared to an Adjusted EBITDA loss of $5.8 million in the comparable period in fiscal 2020. Adjusted EBITDA loss for fiscal year 2021 was $52.7 million compared to an Adjusted EBITDA loss of $19.9 million for the fiscal year 2020.

"Fiscal 2021 was the most challenging year in Neptune's history due to the global pandemic and our transformation into a diversified, health and wellness CPG company," said Michael Cammarata, President and Chief Executive Officer of Neptune Wellness. "As indicated in our first quarter revenue range of $10 to $12 million, we are now positioned to accelerate top-line growth and leverage costs. Neptune will continue driving organic brand growth through increased distribution and innovation, complimented by strategic, accretive acquisitions, which should lead to improved margins, and ultimately outsized shareholder returns longer-term."

Fourth Quarter Business Highlights

• Entered an agreement with Société québécoise du cannabis ("SQDC"), Quebec's sole legal retailer for recreational cannabis, for the sale of recreational cannabis products, which will be sold under the PanHash brand.
• Received amended license by Health Canada to sell dried cannabis flower and pre-rolled cannabis in Canada.
• Developed and licensed CoQ10-enhanced and CBD-enhanced fish oil supplements using our MaxSimil technology and licensed to existing customers.
• Acquired majority stake in Sprout Food, an organic baby and toddler snack food company. Sprout is currently the #5 organic baby food brand in the U.S. and #3 on Amazon.
• Raised gross proceeds of US$55 million in an equity offering to a syndicate of institutional investors.

Subsequent Events and Business Updates

• Entered a supply agreement with Alberta Gaming, Liquor and Cannabis ("AGLC"), the wholesaler and sole online retailer for recreational cannabis in Alberta. Combined with other provincial supplier agreements, Neptune can now sell recreational cannabis products, under its Mood Ring and PanHash brands, to nearly 1,900 licensed retail locations across Alberta, British Columbia, Ontario, and Quebec.
• Launched High-CBD capsules and oil under the PanHash brand in Quebec.
• Launched three new Mood Ring SKU's, including dried flower in the province of British Columbia. Mood Ring Florida Citrus Kush is Neptune's first branded flower product.
• Began selling Sprout organic baby foods into substantially all Target stores in the U.S. and Walmart.com, significantly increasing the brand's distribution.
• Announced a multi-year licensing agreement between Sprout and CoComelon. With more than 110 million YouTube subscribers, CoComelon is the #1 children's entertainment and educational show in the world.
• Given the first quarter of fiscal 2022 has ended, management announced it expects revenue for the fiscal quarter ended June 30^th to be within a range of $10 to $12 million. If achieved, this would represent a sequential growth rate of about 47% to 76% versus the fourth quarter reported revenue of $6.8 million.

Conference Call Details

Neptune will host a conference call with management on Thursday, July 15^th at 5:00 PM EST. The call will be webcast and can be accessed at www.investors.neptunewellness.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. The webcast will be archived for approximately 30 days.

The audited consolidated financial statements of Neptune Wellness Solutions Inc., which were prepared in accordance with IFRS, and the management discussion and analysis report for the year ended on March 31, 2021 have been filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml, and may also be found on our investor relations website at www.investors.neptunewellness.com. All amounts are in Canadian dollars except if specified otherwise.

The Company restated its previously reported condensed consolidated interim financial statements as at and for the three-month and six-month periods ended September 30, 2020 and as at and for three-month and nine-month periods December 31, 2020 with respect to recognition of revenue relating to two transactions, for which revenues were recognized during the three-month period ended September 30, 2020, that did not meet the conditions for recognition of revenue pursuant to the guidance of IFRS 15, specifically related to transfer of control of goods. Accordingly, the cost of sales, trade receivables and inventories were adjusted. The related inventories were written down during the third and fourth quarters of fiscal year 2021, resulting in a restatement for the three-month and nine-month periods ended December 31, 2020.

About Neptune Wellness Solutions Inc.

Headquartered in Laval, Quebec, Neptune is a diversified health and wellness company with a mission to redefine health and wellness. Neptune is focused on building a portfolio of high quality, affordable consumer products in response to long-term secular trends and market demand for natural, plant-based, sustainable and purpose-driven lifestyle brands. The Company utilizes a highly flexible, cost-efficient manufacturing and supply chain infrastructure that can be scaled to quickly adapt to consumer demand and bring new products to market through its mass retail partners and e-commerce channels. For additional information, please visit: https://neptunewellness.com/.

Disclaimer – Safe Harbour Forward–Looking Statements

Forward-looking statements contained in this press release involve known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of Neptune Wellness Solutions to be materially different from any future results, performance or achievements expressed or implied by the said forward-looking statements.

Neither NASDAQ nor the Toronto Stock Exchange accepts responsibility for the adequacy or accuracy of this release.

NEPTUNE WELLNESS SOLUTIONS INC.
Consolidated Statements of Financial Position
As at March 31, 2021 and 2020

	March 31,		March 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	75,167,100	$	16,577,076
Short-term investment		24,050		36,000
Trade and other receivables		10,887,748		10,793,571
Prepaid expenses		4,631,422		2,296,003
Inventories		21,754,147		9,092,538
		112,464,467		38,795,188
Property, plant and equipment		46,913,688		60,028,574
Right-of-use assets		3,541,147		1,386,254
Intangible assets		32,606,969		25,518,287
Goodwill		31,974,526		42,333,174
Tax credits recoverable		—		184,470
Other assets		7,243,774		530,000
Total assets	$	234,744,571	$	168,775,947
Liabilities and Equity
Current liabilities:
Trade and other payables	$	24,975,764	$	12,451,669
Lease liabilities		288,947		450,125
Loans and borrowings		—		3,180,927
Deferred revenues		2,499,376		17,601
Provisions		2,820,995		1,115,703
		30,585,082		17,216,025
Lease liabilities		3,626,574		1,141,314
Long-term payables		—		555,440
Deferred tax liabilities		—		5,015,106
Liability related to warrants		9,879,980		—
Loans and borrowings		14,211,339		—
Other liability		2,258,449		1,217,769
Total liabilities		60,561,424		25,145,654
Equity:
Share capital		379,643,670		213,876,454
Warrants		23,947,111		18,597,776
Contributed surplus		71,991,328		69,173,313
Accumulated other comprehensive income		1,202,409		5,517,376
Deficit		(330,681,375)		(163,534,626)
Total equity attributable to equity holders of the Corporation		146,103,143		143,630,293
Non-controlling interest		28,080,004		—
Total equity attributable to non-controlling interest		28,080,004		—
Total equity		174,183,147		143,630,293
Commitments and contingencies
Total liabilities and equity	$	234,744,571	$	168,775,947

NEPTUNE WELLNESS SOLUTIONS INC.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended March 31, 2021 and 2020

	March 31, 2021		March 31, 2020
Revenue from sales and services	$	45,304,176	$	27,722,571
Royalty revenues		1,467,327		1,630,717
Other revenues		38,339		224,516
Total revenues		46,809,842		29,577,804
Cost of sales		(83,005,929)		(31,416,251)
Gross profit		(36,196,087)		(1,838,447)
Research and development expenses, net of tax credits and grants of $16,227 (2020 - $73,930)		(2,155,332)		(2,870,497)
Selling, general and administrative expenses		(88,196,284)		(64,664,389)
Impairment loss related to property, plant and equipment		(14,211,673)		—
Impairment loss related to right-of-use assets		(142,345)		—
Impairment loss related to goodwill		(35,567,246)		(85,548,266)
Loss from operating activities		(176,468,967)		(154,921,599)
Finance income		1,091,882		151,219
Finance costs		(2,471,281)		(583,707)
Foreign exchange gain (loss)		(5,344,763)		1,883,999
Revaluation of derivatives		10,000,929		—
Change in fair value of contingent consideration		—		97,208,166
		3,276,767		98,659,677
Loss before income taxes		(173,192,200)		(56,261,922)
Income tax recovery (expense)		4,598,577		(4,601,340)
Net loss		(168,593,623)		(60,863,262)
Other comprehensive income
Unrealized gains on investments		192,279		1,320,431
Net change in unrealized foreign currency losses on translation of net investments in foreign operations		(4,805,991)		3,438,879
Total other comprehensive income (loss)		(4,613,712)		4,759,310
Total comprehensive loss	$	(173,207,335)	$	(56,103,952)
Net loss attributable to:
Equity holders of the Corporation	$	(167,146,749)	$	(60,863,262)
Non-controlling interest		(1,446,874)		—
Net loss	$	(168,593,623)	$	(60,863,262)
Total comprehensive loss attributable to:
Equity holders of the Corporation	$	(171,461,716)	$	(56,103,952)
Non-controlling interest		(1,745,619)		—
Total comprehensive loss	$	(173,207,335)	$	(56,103,952)
Basic and diluted loss per share attributable to the equity holders of the Corporation	$	(1.38)	$	(0.68)
Basic and diluted weighted average number of common shares		121,277,033		89,972,395

ADJUSTED EBITDA

Although the concept of Adjusted EBITDA is not a financial or accounting measure defined under IFRS and it may not be comparable to other issuers, it is widely used by companies. Neptune obtains its Adjusted EBITDA measurement by adding to net loss, net finance costs and depreciation and amortization, and by subtracting income tax recovery. Other items such as stock-based compensation, non-employee compensation related to warrants, litigation provisions, acquisition costs, signing bonuses, severances and related costs, impairment losses, write-downs, revaluations, and changes in fair values of the Corporation are also added back as they may vary significantly from one period to another. Adjusting for these items does not imply they are non-recurring.

Adjusted EBITDA¹ reconciliation, in thousands of dollars

	Three-month periods ended				Twelve-month periods ended
	March 31,		March 31,		March 31,		March 31,
	2021		2020		2021		2020
Net income (loss) for the period	$	(60,328)	$	(39,239)	$	(168,594)	$	(60,863)
Add (deduct):
Depreciation and amortization		3,360		2,612		11,725		8,384
Acceleration of amortization of long-lived non-financial assets		—		—		13,953		—
Revaluation of derivatives		(4,635)		—		(10,001)		—
Net finance costs		(11,752)		(1,545)		6,724		(1,452)
Stock-based compensation		3,340		3,356		13,069		16,595
Non-employee compensation related to warrants		238		17,544		5,349		18,598
Provisions		1,145		62		1,705		293
Acquisition costs		396		—		396		2,211
Signing bonuses, severances and related costs		—		—		601		1,263
Cybersecurity incident		—		—		1,983		—
Write-down of inventories and deposits		17,683		2,082		25,074		2,082
Impairment loss on long-lived assets		12,213		41,452		49,921		85,548
Change in fair value of contingent consideration		—		(36,782)		—		(97,208)
Income tax expense (recovery)		91		4,675		(4,599)		4,601
Adjusted EBITDA1	$	(38,249)	$	(5,783)	$	(52,694)	$	(19,948)

Please note that non-employee compensation related to warrants and signing bonuses are new additions to the Company's calculation methodology since the quarter ended September 30, 2020.  Signing bonuses did not occur previously, so no restatement of the previous periods was needed, but there were non-employee compensation expenses related to warrants in previous quarters; consequently, the amounts for the years ended March 31, 2021 and 2020 reflect the sum of those expenses for all quarters of respective fiscal years. Please also note that the change in fair value of the contingent consideration and the write-down of inventories and deposits were also added to the calculation of the adjusted EBITDA for the comparative periods. 

____________________

1.The Adjusted EBITDA is not a standard measure endorsed by IFRS requirements.

 

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SOURCE Neptune Wellness Solutions Inc.

FAQ

What is Neptune Wellness' expected revenue for the first quarter of 2022?

Neptune Wellness expects first-quarter revenue between $10 to $12 million.

How did Neptune Wellness perform financially in fiscal year 2021?

In fiscal year 2021, Neptune Wellness reported a revenue increase of 58% to $46.8 million, but also a net loss of $168.6 million.

What were the significant losses reported by Neptune Wellness in the last quarter?

Neptune reported a fourth quarter net loss of $60.3 million and a gross profit loss of $24.8 million.

What strategic moves did Neptune Wellness make in the cannabis market?

Neptune entered agreements to sell cannabis products under its brands across several Canadian provinces.