Q1 FY 2020 Conference call Presentation - August 14, 2019 - Neptune Wellness ...
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Q1 FY 2020
Conference call
Presentation
August 14, 2019
NASDAQ/TSX: NEPT ▫ Headquartered in Laval, Quebec, Canada
1
DISCLAIMER
CAUTION REGARDING NON-IFRS FINANCIAL MEASURES
The Corporation uses two adjusted financial measures, Adjusted Segment Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted
Segment EBITDA) and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) to assess its operating performance.
These non-IFRS financial measures are directly derived from the Corporation’s financial statements and are presented in a consistent manner. The
Corporation uses these measures for the purposes of evaluating its historical and prospective financial performance, as well as its performance relative to
competitors. These measures also help the Corporation to plan and forecast for future periods as well as to make operational and strategic decisions. The
Corporation believes that providing this information to investors, in addition to IFRS measures, allows them to see the Corporation’s results through the
eyes of management, and to better understand its historical and future financial performance.
Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have
standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in
isolation. The Corporation uses Adjusted Segment EBITDA and Adjusted EBITDA to measure its performance from one period to the next without the
variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because the Corporation
believes it provides meaningful information on the Corporation’s financial condition and operating results. Neptune’s method for calculating Adjusted
Segment EBITDA and Adjusted EBITDA may differ from that used by other corporations.
Neptune obtains its Adjusted Segment EBITDA measurement by adding depreciation and amortization and stock-based compensation to segment income
(loss) from operating activities before corporate expenses. Neptune obtains its Adjusted EBITDA measurement by adding to net income (loss), net finance
costs and depreciation and amortization and by subtracting income tax recovery. Other items such as stock-based compensation, litigation provisions,
acquisition costs and severance and related costs that do not impact core operating performance 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.
2
DISCLAIMER
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements in this presentation that are not statements of historical or current fact constitute ‟forward-looking statements” within the meaning of the
U.S. securities laws and Canadian 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," "anticipates," "will," "should," or "plans" to be uncertain and
forward-looking. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this
presentation. Forward-looking information in this presentation includes, but is not limited to, information or statements about our ability to successfully
develop, produce, supply, promote or generate any revenue from the sale of any cannabis-based and hemp-based products in the legal market.
The forward-looking statements contained in this presentation 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 Information Form (the ‟AIF”), which also forms part of
Neptune’s latest annual report on Form 40-F, and which is available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on
the Investors section of Neptune’s website at www.neptunecorp.com. All forward-looking statements in this presentation are made as of the date of this
presentation. 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. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that
are described from time to time in Neptune public securities filings with the Securities and Exchange Commission and the Canadian securities
commissions. Additional information about these assumptions and risks and uncertainties is contained in the AIF under ‟Risk Factors”.
3
AGENDA
Q1 FY2020 Corporate Highlights
Q1 FY2020 Financials Highlights
Update on Canadian expansion (Phase II & IIIA)
SugarLeaf acquisition
Outlook & Vision of New Leadership
Q&A
4
CORPORATE HIGHLIGHTS
3-year contract with Tilray to extract a minimum of
125,000 kg of biomass
3-year agreement with TGOD for extraction and
turnkey packaging solutions
On June 17, Neptune received a license amendment
at its Sherbrooke facility
5
FINANCIAL HIGHLIGHTS
Nutraceutical revenues for Q1FY20 of $4.3 million, decreased slightly vs $5.2
million in Q1FY19
Cannabis revenues were impacted by capacity constraints
Net loss of $6.5 million for Q1FY20 versus a net loss of $4.1 million in Q1FY20
Q1FY20 Adjusted EBITDA loss of $3.6 million compared to Q1FY19 Adjusted EBITDA
loss of $2.3 million, reflecting investments in our cannabis operations
6
CLOSING OF US$41M PRIVATE PLACEMENT
Strengthen our balance sheet
Pro-Forma cash balance of C$39m
Capital Structure
Successful financing realized in a difficult macro context
Fully Diluted Common Shares 115,084,273
Perceptive Advisors were the lead participant
Solid endorsement from our main shareholder Fully Diluted Market Cap (C$6.57) C$756,104,000
Pro-Forma Cash Position¹ C$38,975,000¹
Strong participation by management & Directors
Chairman & CEO invested $5m Total Debt² C$4,567,445²
Aligns leadership with shareholders
¹Pro-forma Neptune’s US$41m private placement and the US$12m initial cash consideration paid to acquire the assets of SugarLeaf Labs with related
transaction costs
² As at June 30, 2019
7
CANADIAN CAPACITY EXPANSION UNDERWAY
Phase II capacity is expected to increase capacity by ~7x
Cold ethanol equipment to be commissioned in coming weeks
Capacity to increase from 30,000 kg to 200,000 kg
Initiating Phase IIIA expansion of ~1,300,000 kg
Retrofit expected to be completed by calendar year-end
Health Canada approval expected thereafter
Capacity expansion expected to translate into significant
revenue growth in coming quarters
Phase II expansion fully committed
8
SUGARLEAF – NEPTUNE’S ENTRY INTO THE
U.S. MARKET
Provides a platform to capture the CBD wellness opportunity in the US
Tolling services, formulation, blending
Complete white label turnkey solutions
Forest Remedies our B2C brand
Cold ethanol technology produces high quality extracts
Broad spectrum extracts and refined full spectrum extracts are in high demand
Rigorous testing protocols to ensure traceability back to the farm
Acquisition closed on July 24, 2019
Initial consideration of US$18m which could reach US$150m with performance
milestones
Purchase price would represent a 5x EBITDA multiple
Capacity expected to reach 1,500,000 kg by December 2019
Opportunity to further expand if warranted
9
STRONG EARNINGS POWER
Existing facilities could support in excess of $450 million in revenues
Long-term contracts provide revenue visibility
Assuming a conservative 50% capacity utilization rate
Adjusted EBITDA margins could exceed 40%
High automation at Sherbrooke facility expected to reduce operational costs
Expansion plans fully funded
10VISION & STRATEGY FORWARD
Vision Become a leading supplier of cannabis and hemp extracts ingredients and finished products
Strategy
Establish large scale extraction capabilities in Canada and the United-States
Innovate and acquire unique delivery forms and technologies
Invest in product development to create new verticals
Focus on the Health & Wellness and CPG sectors
Create an incubator of technologies with Neptune Ventures
11APPENDIX
Financial Information
12FINANCIAL RESULTS
Income Statement Q1 FY2020 (1)
(in thousands of CAD $)
Nutraceutical Cannabis Corporate Total
Revenues 4,293 38 30 4,361
Adjusted EBITDA 530 (1,623) (2,490) (3,583)
Net income (loss) - (6,452)
Income Statement Q1 FY2019 (1)
(in thousands of CAD $)
Nutraceutical Cannabis Corporate Total
Revenues 5,168 - - 5,168
Adjusted EBITDA 633 (1,302) (1,588) (2,257)
Net income (loss) - (4,100)
(1) Nutraceutical and Cannabis are two segments of Neptune. The corporate column represents unallocated costs which are corporate G&A expenses, net finance costs and income taxes.
13FINANCIAL POSITION
Financial Position June 30, 2019 March 30, 2019
(in thousands of CAD $)
Cash, cash equivalents and short-term investments 5,375 9,867
Total debt 4,567 3,467
Net proceeds from the private placement 51,600 -
Initial cash consideration for SugarLeaf ¹ (18,000) -
Proforma net cash position 34,408 6,400
(1) Includes transaction costs
14Bringing Decades of
Wellness and Nutrition
Experience to the
Cannabis Industry
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