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Wednesday, Oct 5, 2022
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

The weed wire

Neptune Wellness forecasts big growth despite reporting big losses

Revenues grew by just 4% in the last quarter, but company projects 90% growth over the current period

Neptune Wellness forecasts big growth despite reporting big losses

Despite booking significant impairment charges and sluggish revenue growth in the last fiscal quarter, extractor Neptune Wellness Solutions Inc. (TSX: NEPT and Nasdaq: NEPT) is providing guidance that revenues are increasing by up to 132 per cent in the current quarter.

On Wednesday, Neptune released its earnings report for the three months ended March 31.

The company reported total revenues of $9.5 million, an increase of four per cent over the previous sequential quarter. Cannabis revenues were up 43 per cent to nearly $4 million, while its neutraceutical segment was down 13 per cent to $5.5 million.

Its stock was down 2 per cent to $4 on the Toronto Stock Exchange, but its valuation is up by $0.50 on the year overall.

Net losses for the company increased 217 per cent to $39.24 million over the quarter. Neptune attributed the loss largely to an impairment charge of $41.5 million, which it said was partially offset by a gain of $36.8 million related to a fair value assessment in connection with its acquisition of SugarLeaf Labs.

Read more: Neptune Wellness Solutions signs $16.5M extraction deal with unnamed partner

Neptune’s adjusted earnings before interest, taxes, depreciation and amortization came in at a reported loss of negative $25.4 million, a staggering increase of 837 per cent from the previous quarter.

The decrease in adjusted EBITDA, Neptune says, is mainly due to growing its workforce in anticipation of increased sales volumes, start-up costs associated with expanded capacity, and increased investments to support the commercialization of new brands and products, as well as an increase in salaries and benefits at the corporate level.

But despite the losses, Neptune reiterated revenue guidance for the next sequential quarter where it anticipates total revenues of $18 million$22 million, or an increase of 90–132 per cent quarter over quarter.

While other businesses in the cannabis sector have recently cut operations and narrowed their focus, Neptune CEO Michael Cammarata says his company is expanding its breadth.

Read more: Hand sanitizer pivot pumps Neptune stock over 25%

“We made significant progress in the ongoing transformation of Neptune to a diversified and fully integrated health and wellness company during the fourth quarter and throughout fiscal 2020,” he said in a statement. “We have leaned into our health and wellness roots, our team’s deep experience in consumer packaged goods, and significantly broadened our business beyond extraction.”

CFO Toni Rinow says Neptune has made investments to expand now-operational capacity to innovate and bring new products to market.

“While these investments have negatively impacted near-term profitability, we have built the platform to drive accelerated growth and leverage these investments,” he said. “We have completed our phase of heightened capital investment and have the assets in place to drive an improving margin profile and higher capital returns.”

Top image via Neptune Wellness Solutions Inc.

 

nick@mugglehead.com

@nick_laba

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