Neptune Wellness Solutions Inc (NEPT) 2024 Q1 法說會逐字稿

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.

早上好，女士們、先生們，歡迎參加 Neptune Wellness Solutions Inc. 2024 年第一季度收益電話會議。 （操作員指示）我現在想將會議轉交給 KCSA 董事總經理 Valter Pinto。請繼續。

Thank you, operator, and hello, everyone. Thank you for joining us today for the Neptune Wellness Solutions Fiscal First Quarter 2024 Earnings Conference Call. With me today are Michael Cammarata, President and Chief Executive Officer; and Lisa Gainsborg, Interim Chief Financial Officer. All amounts discussed today are in U.S. dollars, and our remarks may contain forward-looking information, representing our expectations as of today and may be subject to change.

謝謝接線員，大家好。感謝您今天參加我們的海王星健康解決方案 2024 年第一季度財報電話會議。今天與我在一起的有總裁兼首席執行官邁克爾·卡馬拉塔 (Michael Cammarata)；臨時首席財務官麗莎·甘斯伯格 (Lisa Gainsborg)。今天討論的所有金額均以美元為單位，我們的言論可能包含前瞻性信息，代表我們截至今天的預期，並可能會發生變化。

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

今天的電話會議包含非 GAAP 財務指標，特別是調整後的 EBITDA，為投資者提供我們經營業績的補充指標，從而突出我們核心業務的趨勢，而這些趨勢在僅依靠 GAAP 財務指標時可能不明顯。

Management also uses adjusted EBITDA in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. Adjusted EBITDA is not a recognized, defined, or standardized measure under GAAP. Our definition of adjusted EBITDA will likely differ from that used by other companies, including our peers, and therefore, comparability may be limited. Non-GAAP measures should not be considered as a substitute for or in isolation from measures prepared in accordance with GAAP.

管理層還使用調整後的 EBITDA 來促進不同時期的經營業績比較、編制年度經營預算並評估我們滿足資本支出和營運資本要求的能力。調整後 EBITDA 不是 GAAP 下公認的、定義的或標準化的衡量標準。我們對調整後 EBITDA 的定義可能與其他公司（包括我們的同行）使用的定義不同，因此可比性可能有限。非 GAAP 措施不應被視為替代或獨立於根據 GAAP 制定的措施。

Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-GAAP measures and view them in conjunction with the most comparable GAAP financial measures. We do not undertake any obligation to update any forward-looking statement except as may be required by Canadian and U.S. securities laws. Assumptions were made in preparing these forward-looking statements, which are subject to risks, as laid out in our public filings from on SEDAR and EDGAR. I'd now like to turn the call over to Michael.

我們鼓勵投資者全面審查我們的財務報表和披露信息，並告誡投資者不要過度依賴非公認會計準則衡量標準，並將其與最具可比性的公認會計準則財務衡量標準結合起來查看。除加拿大和美國證券法要求外，我們不承擔更新任何前瞻性聲明的義務。正如我們在 SEDAR 和 EDGAR 上的公開文件中所述，在準備這些前瞻性陳述時做出了一些假設，這些假設存在風險。我現在想把電話轉給邁克爾。

Thank you, Valter, and hello, everyone. Thank you for joining us today for our fiscal first quarter 2024 financial results conference call for the period ending June 30, 2023. During the quarter, our team focused on driving margin expansion and operational efficiency. Our core brands, Sprout and Biodroga, generated steady revenue while expanding margins year-over-year. Both brands also continued to develop innovative products and expand into new markets.

謝謝你，瓦爾特，大家好。感謝您今天參加我們截至 2023 年 6 月 30 日的 2024 財年第一季度財務業績電話會議。在本季度，我們的團隊專注於推動利潤率擴張和運營效率。我們的核心品牌 Sprout 和 Biodroga 創造了穩定的收入，同時利潤率逐年擴大。兩個品牌還繼續開發創新產品並拓展新市場。

Let me first discuss Sprout. Our leading organic children's food and snack brand. Over the first fiscal quarter, we continue to expand distribution across North America, grow our product portfolio and deliver innovative new SKUs for our customers. During the quarter, Sprout surpassed expectations by achieving a gross margin of 26% in Q1, outperforming our fiscal 2024 target of 22%. A pivotal element in our margin profile is our strategic inventory management.

首先讓我談談Sprout。我們領先的有機兒童食品和零食品牌。在第一財季，我們繼續擴大在北美的分銷範圍，擴大我們的產品組合，並為客戶提供創新的新 SKU。本季度，Sprout 超出預期，第一季度毛利率達到 26%，超出了我們 2024 財年 22% 的目標。我們的利潤狀況的一個關鍵要素是我們的戰略庫存管理。

We've positioned the right personnel, fine-tuned our production plans to align more closely with demand and implemented enhanced processes. These measures aim to mitigate the write-offs we encountered in the past. Over recent quarters, we have implemented several measures to manage costs. These efforts have yielded positive results evident in both our margin improvement and the reduced expenses recorded for Q1 at Sprout.

我們配備了合適的人員，調整了生產計劃以更緊密地滿足需求，並實施了改進的流程。這些措施旨在減少我們過去遇到的沖銷。最近幾個季度，我們實施了多項措施來管理成本。這些努力在 Sprout 第一季度的利潤率改善和費用減少方面都取得了明顯的積極成果。

However, there's still more work ahead. In particular, we have made significant changes to optimize the supply chain for Sprout, which we believe will result in $2.6 million in savings for the remainder of the 2023 calendar year. We have restructured production planning, and in Q1, we continued to progress this plan with further cuts to savings made. This has added further stability to Sprout supply chain by dual sourcing products where possible. In addition, we are reducing the cost of goods by combining our volume power in contracts with our suppliers and packaging suppliers.

然而，還有更多的工作要做。特別是，我們為優化 Sprout 的供應鏈做出了重大改變，我們相信這將為 2023 日曆年的剩餘時間節省 260 萬美元。我們重組了生產計劃，在第一季度，我們繼續推進該計劃，進一步削減成本節約。這通過盡可能使用雙重採購產品進一步增加了 Sprout 供應鏈的穩定性。此外，我們還通過與供應商和包裝供應商簽訂合同，結合我們的批量能力來降低商品成本。

We've also refined our processes to enhance the precision and efficiency of our tracking and forecasting systems, ensuring a better understanding of evolving customer needs. We continue to focus on ensuring the success and growth of our Sprout products by working with our retail partners on optimization efforts through on- and off-shelf placement and marketing activation.

我們還改進了流程，以提高跟踪和預測系統的精度和效率，確保更好地了解不斷變化的客戶需求。我們繼續專注於確保我們的 Sprout 產品的成功和增長，與我們的零售合作夥伴合作，通過貨架上和貨架下的放置以及營銷激活進行優化工作。

During the first quarter, Sprout was awarded several off-shelf features on key product lines with several major retail partners. In Q2, we expect to see positive upside from the feature of CoComelon Pouches, CoComelon Wafflez, Sprout Crinklez and Sprout Big Kids. We are proud that Sprout products are available in 90% of the market in all 50 U.S. states, Canada as well as shipping direct to consumers through the Sprout website.

在第一季度，Sprout 獲得了幾家主要零售合作夥伴在關鍵產品線上的多項現成功能。在第二季度，我們預計 CoComelon Pouches、CoComelon Wafflez、Sprout Crinklez 和 Sprout Big Kids 的功能將帶來積極的增長。我們感到自豪的是，Sprout 產品在美國所有 50 個州和加拿大 90% 的市場上均有銷售，並通過 Sprout 網站直接運送給消費者。

This is impressive growth since the 50% of market coverage that Sprout had when we first acquired the majority stake in 2021. Sprout store count has reached nearly 29,340 doors in the United States and 3,000 doors in Canada for a total of 32,340 doors in North America. We have achieved this reach through our partnerships with many leading retailers, including Target and Walmart, major supermarket chains and both of the largest national pharmacy chains in the United States. New retail partner additions include Brookshire Brothers Grocery, while existing retail partners, such as Demoulas Super Markets added incremental SKU count in Q1.

與我們在2021 年首次收購多數股權時Sprout 的市場覆蓋率達到50% 相比，這是令人印象深刻的增長。Sprout 在美國的門店數量已達到近29,340 家，在加拿大已達到3,000 家，北美地區總數為32,340 家。我們通過與許多領先零售商（包括塔吉特和沃爾瑪）、大型連鎖超市以及美國最大的全國性藥房連鎖店的合作夥伴關係實現了這一目標。新增加的零售合作夥伴包括 Brookshire Brothers Grocery，而 Demoulas Super Markets 等現有零售合作夥伴在第一季度增加了 SKU 數量。

Sprout also launched 2 club pack offers onto online retail platform, sams.com. Last quarter, we announced that 4 of Sprout's most popular CoComelon co-branded organic toddler pouches had been selected for distribution by Target. These items are now available on shelves in select stores across the country as well as target.com.

Sprout 還在在線零售平台 sams.com 上推出了 2 個俱樂部套裝優惠。上季度，我們宣布 Sprout 最受歡迎的 4 款 CoComelon 聯合品牌有機幼兒袋已被 Target 選擇分銷。這些商品現已在全國精選商店以及 target.com 的貨架上出售。

Kiwi banana spinach is currently the #1 pouch in the Target CoComelon assortment. All pouches continue to show positive momentum in sales growth since launching in March 2023. Sprout's partnership with Walmart also continues to grow with an increased store count average of 2,300 versus 900 previously. Sprout was awarded distribution of 5 new items bringing our total to 10 items, including CoComelon pouches, banana bars, Wafflez, Curlz and Sprout Toddler meals. We are pleased that Sprout's portfolio at Walmart is showing strong sell through which is meeting projections.

獼猴桃香蕉菠菜目前是 Target CoComelon 產品系列中排名第一的袋裝食品。自 2023 年 3 月推出以來，所有袋裝產品繼續呈現出積極的銷售增長勢頭。Sprout 與沃爾瑪的合作夥伴關係也繼續發展，平均商店數量從之前的 900 家增加到 2,300 家。 Sprout 獲得了 5 種新商品的分銷權，使我們的商品總數達到 10 種，包括 CoComelon 袋裝、香蕉棒、Wafflez、Curlz 和 Sprout 幼兒餐。我們很高興看到沃爾瑪的 Sprout 產品組合表現強勁，符合預期。

The CoComelon Banana Bar has achieved #1 product ranking in the last 13 weeks in Sprout's Snacks category at Walmart. Nielsen data, total U.S. AOC latest 13 weeks, week ending June 17, 2023, shows that some of the new Sprout products are beating average performance in their category. Toddler meals, Wafflez, and CoComelon Bars are performing especially well.

CoComelon 香蕉棒在過去 13 週內在沃爾瑪的 Sprout 零食類別中排名第一。尼爾森數據顯示，最近 13 週（截至 2023 年 6 月 17 日的一周）美國 AOC 總量顯示，一些新的 Sprout 產品的表現超出了同類產品的平均水平。幼兒餐、華夫餅和 CoComelon Bars 的表現尤其出色。

Toddler meals recorded 22.7% growth for the recent period versus 11% of the total category, while Sprout Snacks showed 28.8% growth versus 19.4% growth of the total category. This was driven by Wafflez, which achieved 52.8% growth in the latest 13 weeks in Sprout Bars, which ranked second in the Sprout Snack portfolio in the latest 4-week read. This demonstrates that many of the new products launched and the expansion into new baby and toddler categories was a right strategic pivot for Sprout and in line with shifting customer demand.

幼兒餐近期增長 22.7%，佔總類別的 11%；芽菜零食增長 28.8%，佔總類別的 19.4%。這是由 Wafflez 推動的，Sprout Bars 在最近 13 週內實現了 52.8% 的增長，在最新 4 週的讀數中，Sprout Bars 在 Sprout Snack 組合中排名第二。這表明，推出的許多新產品以及向新嬰幼兒類別的擴張對於 Sprout 來說是正確的戰略支點，並且符合不斷變化的客戶需求。

Our CoComelon partnership also continues to perform as standout products in the Sprout range. The Yes, Yes Veggie pouch has maintained the #1 pouch in unit sales in Sprout's CoComelon portfolio, while the CoComelon Banana snack bar is #1 in Dollar and unit sales in the CoComelon Snack portfolio.

我們與 CoComelon 的合作夥伴關係也繼續在 Sprout 系列中表現出色。 Yes, Yes 素食袋在 Sprout 的 CoComelon 產品組合中保持單位銷量第一的袋裝，而 CoComelon 香蕉零食棒在 CoComelon 零食產品組合中以美元計算和單位銷量排名第一。

Sprout's fill rate sits between 80% to 90%, but our goal is to maintain a level above 90%. Sprout is focused on managing supply chain processes to continually improve the fill rate.

Sprout 的填充率在 80% 到 90% 之間，但我們的目標是保持在 90% 以上的水平。 Sprout 專注於管理供應鏈流程，以不斷提高填充率。

Moving now to Biodroga, our nutraceutical brand. Biodroga continued to maintain strong margin growth for the first quarter of 2024 of 28%. This was achieved in spite of continued pressure on raw material procurement. While sales softened slightly in Q1 from Q4 strong results, we expect sales to improve through Q2 because Biodroga is a B2B business. Sales per quarter can fluctuate depending on large client orders.

現在轉向我們的營養保健品品牌寶迪佳 (Biodroga)。寶迪佳在 2024 年第一季度繼續保持 28% 的強勁利潤增長。儘管原材料採購持續面臨壓力，但仍實現了這一目標。雖然第一季度的銷售額較第四季度的強勁業績略有疲軟，但我們預計第二季度的銷售額將有所改善，因為寶迪嘉是一家 B2B 業務。每季度的銷售額可能會根據大客戶訂單而波動。

Q2 sales are expected to pick back up as we have seen improved growth momentum during the current quarter. Our MaxSimil brand and the monoglyceride superior fish oil grade, Biodroga's leading product and technology, saw continued success in Q1 and is receiving pleasing order levels so far in Q2. We are rolling Biodroga and the monoglyceride technology out into new international markets, increasing its brand reach and addressable market.

由於我們看到本季度增長勢頭有所改善，預計第二季度銷售額將回升。我們的 MaxSimil 品牌和優質魚油單甘油酯（Biodroga 的領先產品和技術）在第一季度持續取得成功，並且在第二季度迄今為止收到了令人滿意的訂單水平。我們正在將寶迪佳和單甘油酯技術推向新的國際市場，擴大其品牌影響力和潛在市場。

During Q1, we launched the monoglyceride technology into South Korea with the first shipment of raw material to our South Korean partner taking place in Q1. Biodroga also reported growing sales of its MaxSimil brand in Mexico with our local partner doubling sales demand over the first quarter. In Q2, we are starting to ship to the new market of India. We are also in progress discussions with new clients in Taiwan and Singapore, demonstrating increased demand in MaxSimil and its monoglyceride technology across new Asian markets.

第一季度，我們將單酸甘油酯技術引入韓國，並於第一季度向韓國合作夥伴運送了第一批原材料。 Biodroga 還報告稱，其 MaxSimil 品牌在墨西哥的銷量不斷增長，我們的當地合作夥伴第一季度的銷售需求翻了一番。第二季度，我們開始向印度新市場發貨。我們還在與台灣和新加坡的新客戶進行討論，這表明亞洲新市場對 MaxSimil 及其單酸甘油酯技術的需求不斷增加。

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

我們還繼續實施成本節約舉措並改善整個寶迪佳業務的運營精簡。這是我們維持利潤增長的關鍵因素之一。我們最近實施的措施的一個例子是整合加拿大西部的倉庫。總而言之，隨著需求的增加，我們有更多的事情要做，但 Sprout 和 Biodroga 正在穩步取得進展，但更重要的是，運營效率變得更高。

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

我現在將電話轉交給麗莎，詳細介紹我們的財務業績。

Thank you, Michael, and hello, everyone. I'm pleased to be presenting Neptune's financial results for the fiscal first quarter of fiscal 2024 for the period ending June 30, 2023. All numbers are in U.S. dollars and U.S. GAAP. Consolidated net revenue for Q1 2024 totaled $10.6 million compared to $16.3 million for Q1 of fiscal 2023. This includes a decrease of $2.7 million in Cannabis revenues from the now-divested Cannabis business.

謝謝你，邁克爾，大家好。我很高興介紹海王星截至 2023 年 6 月 30 日的 2024 財年第一季度的財務業績。所有數據均以美元和美國公認會計準則為單位。 2024 年第一季度的合併淨收入總計 1060 萬美元，而 2023 財年第一季度的合併淨收入為 1630 萬美元。這其中包括現已剝離的大麻業務帶來的大麻收入減少了 270 萬美元。

Compared to Q4 of fiscal 2023, consolidated revenues grew by $1.5 million or 13%, which was mainly attributable to timing of shipping of nutraceutical products as well as decrease in royalty revenues, partially offset by an increase of $0.4 million in food and beverage revenues. The consolidated gross profit increase of 16.2% for Q1 2024 compared to a decrease of 17.8% for the same period in Q1 '23, an increase of 34 basis points.

與2023 財年第四季度相比，合併收入增長了150 萬美元，即13%，這主要歸因於營養保健品的發貨時間以及特許權使用費收入的減少，但部分被食品和飲料收入增加的40 萬美元所抵消。 2024 年第一季度綜合毛利潤增長 16.2%，而 2023 年第一季度同期下降 17.8%，增幅達 34 個基點。

This significant increase is a result of the steps we have taken over the past year to manage costs and drive sales. Sprout during the quarter achieved gross margins of 26% in Q1, ahead of our previously guided target of 22% for fiscal 2024. As Michael has already spoken to, the key factors of our margin improvement is the management of our inventory. We have put the right people and processes in place to ensure that we do not experience the write-offs that we had in Q4 and Q1, and we are continuing to actively manage this.

這一顯著增長是我們在過去一年中採取的管理成本和推動銷售措施的結果。 Sprout 在第一季度實現了 26% 的毛利率，超過了我們之前製定的 2024 財年 22% 的指導目標。正如 Michael 已經談到的，我們利潤率改善的關鍵因素是庫存管理。我們已經安排了合適的人員和流程，以確保我們不會經歷第四季度和第一季度的沖銷，並且我們正在繼續積極管理這一點。

We have taken several steps for Sprout business over the past year to manage costs, and this has shown results in both margin improvement and in a lower level of expenses recorded for Q1. We expect to see full savings on these measures recorded in Q2. In particular, we are confident that the significant changes we have made to optimize the supply chain for Sprout will result in $2.6 million in savings for the remainder of the 2023 calendar year.

過去一年中，我們對 Sprout 業務採取了多項措施來管理成本，這已顯示出利潤率改善和第一季度費用水平降低的結果。我們預計這些措施將在第二季度實現全額節省。特別是，我們相信，我們為優化 Sprout 供應鏈而做出的重大改變將在 2023 日曆年的剩餘時間內節省 260 萬美元。

In addition, we've also refined our accounting processes to ensure tracking and forecasting systems for more details and more efficient at understanding customer needs. Moving to our B2B nutraceutical segment, including our leading brand, Biodroga. Biodroga continued to maintain strong margin growth for the first quarter of 2024 of 28%. This was achieved in spite of continued supply chain challenges.

此外，我們還改進了會計流程，以確保跟踪和預測系統能夠提供更多詳細信息並更有效地了解客戶需求。轉向我們的 B2B 營養保健品領域，包括我們的領先品牌 Biodroga。寶迪佳在 2024 年第一季度繼續保持 28% 的強勁利潤增長。儘管供應鏈面臨持續挑戰，但仍實現了這一目標。

We have also continued to implement cost savings initiatives and improved operational streamlining throughout the Biodroga business. This is one of the key factors behind the margin growth that we have maintained as well as reduced cost of sales. Moving now to corporate. Consolidated SG&A expenses for Q1 2024 amounted to $10 million compared to $9 million for the same period the prior year. This is a decrease of $1 million or 10%, primarily due to the benefits of the strategic review and continued cost controls.

我們還繼續實施成本節約舉措並改進整個寶迪佳業務的運營精簡。這是我們保持利潤增長以及銷售成本降低的關鍵因素之一。現在轉向公司。 2024 年第一季度的綜合 SG&A 費用為 1,000 萬美元，而上年同期為 900 萬美元。減少了 100 萬美元或 10%，主要是由於戰略審查和持續成本控制的好處。

We remain focused on improving our balance sheet and operating cost structure. This week, we announced we had entered into a binding term sheet with Morgan Stanley for Sprout providing Neptune with an option to exchange its existing Sprout debt for scrap equity on or prior to November 13, 2023. This would substantially reduce Sprout's debt. The term sheet further provides for amendments to remaining Sprout promissory notes, extending the maturity date to June 30, 2025.

我們仍然專注於改善我們的資產負債表和運營成本結構。本週，我們宣布已與摩根士丹利就Sprout 簽訂具有約束力的條款清單，為Neptune 提供在2023 年11 月13 日或之前將其現有Sprout 債務換成廢股權的選擇權。這將大幅減少Sprout 的債務。條款清單進一步規定了對剩餘 Sprout 本票的修訂，將到期日延長至 2025 年 6 月 30 日。

In Q1, Sprout extended the maturity of its existing $13 million security promissory notes with Morgan Stanley expansion capital. Sprout also secured an accounts receivable factoring facility for Sprout for up to $5 million. These actions allow Sprout to execute on its strategic plan to continue with its growth path for its organic children's food brand.

第一季度，Sprout 通過摩根士丹利擴張資本延長了其現有 1300 萬美元證券本票的期限。 Sprout 還為 Sprout 獲得了高達 500 萬美元的應收賬款保理融資。這些行動使 Sprout 能夠執行其戰略計劃，繼續其有機兒童食品品牌的發展道路。

Additionally, during the first quarter, Neptune closed a public offering of $4 million. We are also prioritizing measures to actively control operating expenses. Consolidated adjusted EBITDA improved by $4.1 million or 36% for the first quarter to an adjusted EBITDA loss of $7.3 million. This is compared to $11.4 million for the first quarter of the year prior. The decrease in adjusted EBITDA loss for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, was driven by an improvement in loss of operating activities of $7.1 million, offset by a reduction of impairment losses of $0.8 million and an add-back of SG&A expenses, including depreciation, equity-classified stock-based compensation, non-employee compensation related to warrants of $2.2 million.

此外，Neptune 在第一季度完成了 400 萬美元的公開發行。我們還優先採取措施積極控制運營費用。第一季度綜合調整後 EBITDA 增加 410 萬美元，即 36%，調整後 EBITDA 虧損 730 萬美元。相比之下，去年第一季度的銷售額為 1140 萬美元。與截至 2022 年 6 月 30 日的季度相比，截至 2023 年 6 月 30 日的季度調整後 EBITDA 損失減少，原因是經營活動損失改善了 710 萬美元，但被減值損失減少 80 萬美元和SG&A費用加回，包括折舊、股權分類股票薪酬、與220 萬美元認股權證相關的非員工薪酬。

Net loss for the quarter amounted to $6.4 million compared to $6.5 million for the prior corresponding period. This is an increase of $0.1 million or 1.6%, which was driven by the increase in gross profit of $7.3 million, the decrease in R&D expenses of $0.2 million, the reduction in impairment loss of $0.8 million, offset by the increase in SG&A expenses of $1.1 million, the increase in finance costs of $0.9 million, foreign exchange loss of $1.6 million and gain on the fair value of derivatives of $4.6 million.

本季度淨虧損為 640 萬美元，而上年同期淨虧損為 650 萬美元。增加 10 萬美元或 1.6%，這是由於毛利潤增加 730 萬美元、研發費用減少 20 萬美元、減值損失減少 80 萬美元（被 SG&A 費用增加所抵消） 110 萬美元，財務成本增加90 萬美元，匯兌損失160 萬美元，衍生品公允價值收益460 萬美元。

Looking at the balance sheet. The company's liquidity position at June 30, 2023, consistent of cash and cash equivalents of $1.4 million. To sum up, Neptune achieved strong margin growth for the first quarter of fiscal 2024. We are focused on reducing corporate costs and expenses to achieve additional cost savings and operational improvements. We also remain focused on improving Neptune's capital position and are continuing to review actions to [shore up] capital. That concludes our prepared remarks. Thank you for joining us today, and I will now turn the call back over to Michael.

看資產負債表。截至 2023 年 6 月 30 日，該公司的流動性頭寸為 140 萬美元，現金和現金等價物一致。綜上所述，Neptune 在 2024 財年第一季度實現了強勁的利潤增長。我們專注於降低企業成本和開支，以實現額外的成本節約和運營改進。我們還繼續致力於改善海王星的資本狀況，並繼續審查[支撐]資本的行動。我們準備好的發言到此結束。感謝您今天加入我們，我現在將把電話轉回給邁克爾。

Thank you, Lisa. Recently appointed as Interim CFO, you have been a critical team player for Neptune, and I am happy to see you step into this important leadership role. Now I'd like to share some significant developments regarding Sprout, our leading organic children's food and snack brand. We've entered into a binding term sheet with Morgan Stanley's NH Expansion Credit Fund Holdings. This agreement provides us with an option over the next 90 days to exchange our existing debt in Sprout for equity.

謝謝你，麗莎。您最近被任命為臨時首席財務官，是 Neptune 的關鍵團隊成員，我很高興看到您擔任這一重要的領導角色。現在我想分享一下我們領先的有機兒童食品和零食品牌 Sprout 的一些重大進展。我們已與摩根士丹利的 NH Expansion Credit Fund Holdings 簽訂了具有​​約束力的條款清單。該協議為我們提供了在未來 90 天內將 Sprout 現有債務交換為股權的選擇權。

If we decide to take this route, our stake in Sprout could increase to approximately 89.5%, which would significantly reduce Sprout's debt. Should this exchange come to fruition, there will be modifications to the remaining Sprout promissory notes. Their maturity date will be pushed to June 30, 2025, and the existing guarantee by Neptune will be terminated. This term sheet also sets the stage for the possibility of Sprout becoming an independent trading entity down the line.

如果我們決定採取這條路線，我們在 Sprout 的股份可能會增加到約 89.5%，這將大大減少 Sprout 的債務。如果此次交換取得成果，剩餘的 Sprout 本票將會發生修改。其到期日將推遲至2025年6月30日，並且Neptune的現有擔保將終止。該條款清單還為 Sprout 成為獨立貿易實體的可能性奠定了基礎。

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

不過，我想強調的是，這些都是正在進行的計劃，並不能絕對確定交換或後續交易是否會完成。我們最近宣布了下一階段的戰略審查流程，其中將包括對公司戰略選擇的全面審查和評估。我們相信，對我們戰略選擇的全面評估是我們充分利用我們的資產並為所有利益相關者創造價值的一步。

The Board anticipates it will conclude this review and announce the strategic plan by Q2 fiscal of 2024 with the intent to take action before the end of the calendar year. We want to extend our sincerest gratitude to our investors, retail partners, customers, and all stakeholders. We fully acknowledge the challenging conditions we are currently navigating. Your patience, understanding and belief in our vision even amidst these complexities mean more to us than words can convey. Thank you for your support. Operator, please open the line for questions.

董事會預計將在 2024 年第二季度之前完成此項審查並宣布戰略計劃，並打算在今年年底前採取行動。我們要向我們的投資者、零售合作夥伴、客戶和所有利益相關者致以最誠摯的謝意。我們充分認識到我們目前面臨的挑戰。即使在這些複雜的情況下，您的耐心、理解和對我們願景的信念對我們來說意義非凡。感謝您的支持。接線員，請開通提問線路。

(Operator Instructions) Your first question comes from Aaron Grey from Alliance Global Partners.

（操作員說明）您的第一個問題來自 Alliance Global Partners 的 Aaron Gray。

First one for me for Sprout. Sales were up year-over-year, but down sequentially. So in terms of some of the distribution growth you've spoken to, when do you think that we might see some more of that into the P&L? And then can you comment on e-commerce trends and how that might be impacting overall sales trends?

我的第一個是《Sprout》。銷售額同比增長，但環比下降。那麼，就您談到的一些分銷增長而言，您認為我們什麼時候可能會在損益表中看到更多的增長？那麼您能否評論一下電子商務趨勢以及這可能如何影響整體銷售趨勢？

Aaron, it's Michael. I'll take that question. Sprout, during Q1, and obviously, we're experiencing growth in distribution, we also had a shift in customer demand like Stage 3 and our Curlz. Stage 3 particularly. We've had a lot of cuts related to that, and the Curlz had a manufacturing issue. So at those points, it did affect sales for Q1, and we anticipate a little bit in Q2. We are addressing that on the supply chain and expect that to start regaining hopefully in Q3.

亞倫，這是邁克爾。我來回答這個問題。 Sprout，在第一季度，顯然，我們正在經歷分銷增長，我們的客戶需求也發生了變化，例如 Stage 3 和我們的 Curlz。特別是第三階段。我們已經進行了很多與此相關的削減，而 Curlz 存在製造問題。因此，在這些點上，它確實影響了第一季度的銷售，我們預計第二季度會有一點影響。我們正在解決供應鏈上的問題，並預計這一問題將在第三季度開始有望恢復。

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

但我們肯定也看到了零售合作夥伴在客戶層面的轉變。我們看到很多顧客開始更多地轉向塔吉特和沃爾瑪，而不是傳統雜貨店，以試圖節省開支。所以我們正在適應整體市場趨勢。

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

好的。偉大的。該季度的毛利率有了一些不錯的改善。您認為這是否為您已經擁有的 [SKU] 合理化奠定了良好的基礎？您認為現在寶迪嘉和 Sprout 是否正處於在今年剩餘時間裡看到這些毛利率水平的好時機？

Yes. I think we're -- I think the gross margins may fluctuate a little bit in the coming quarters, but that is -- our focus was always at 22%, and we're already exceeding that. So we have made improvements, and we're really hyper-focused on margin as we're trying to focus on eliminating costs and gain the profitability in all the units as soon as possible.

是的。我認為我們——我認為未來幾個季度的毛利率可能會略有波動，但那就是——我們的重點始終是 22%，而且我們已經超過了這個數字。因此，我們已經做出了改進，並且我們非常關注利潤率，因為我們正努力專注於消除成本並儘快獲得所有部門的盈利能力。

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

好的。偉大的。您可以通過什麼方式量化您在準備好的評論中提到的一些額外削減和節省？你們還做什麼...

Yes. So we have -- in savings on the production plan, so we were able to start now focusing on resetting our production plans in more real time as customers are switching between Phases 2, 3 as well as the new products that are coming online. So we had about $2.6 million in savings just by rightsizing the production runs to match what we anticipate the customer demand to be currently, and we continue to monitor that, and we'll be active on it.

是的。因此，我們節省了生產計劃，因此我們現在能夠開始專注於更實時地重置我們的生產計劃，因為客戶在第 2 階段、第 3 階段以及即將上線的新產品之間切換。因此，僅通過調整生產規模來滿足我們預期的客戶當前需求，我們就節省了約 260 萬美元，我們將繼續監控這一情況，並將積極採取行動。

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

所以我們確實在 Sprout 的層面上節省了開支。我們還重組了一些團隊，我們預計在 Sprout 層面以及企業層面將節省更多資金。

Okay. And then lastly for me, just on the binding terms agreement that you guys announced. So just hoping to separate kind of some of the debt, Sprout and Neptune and also the promissory to Morgan Stanley than maybe some of the considerations that you have within the next 90 days that might cause you then exchange that debt for equity and how -- what we might (inaudible) be looking towards because it sounds like you might also be trading independently with Sprout as well. So just any more color on that would be appreciated?

好的。最後對我來說，就是你們宣布的具有約束力的條款協議。因此，我只是希望將一些債務、Sprout 和Neptune 以及摩根士丹利的本票分開，而不是你在接下來的90 天內考慮的一些因素，這些因素可能會導致你將債務換成股權，以及如何——我們可能（聽不清）期待什麼，因為聽起來您也可能也在與 Sprout 進行獨立交易。那麼如果再多一點顏色的話，我們會很感激嗎？

Yes. So Neptune is always focused on this platform, looking at the opportunity for brands that are between $10 million to $70 million in net revenue, being able to acquire control and grow them to hopefully eventually over $100 million net revenues. And then either in a best case scenario, which we believe we may have with Sprout's to be able to go and bring it into potentially its owned publicly traded vehicle, in other scenarios, potentially exit or hold them long term based on the strategic value to the platform that we're building.

是的。因此，Neptune 始終專注於這個平台，為淨收入在 1000 萬美元到 7000 萬美元之間的品牌尋找機會，能夠獲得控制權並將其發展到最終有望超過 1 億美元的淨收入。然後，在最好的情況下，我們相信我們可能會與 Sprout's 合作，將其帶入其可能擁有的公開交易工具中，在其他情況下，可能會根據戰略價值退出或長期持有它們我們正在構建的平台。

And I think with Sprout, we've definitely grown the distribution. We've -- became way more efficient on the operations to continue to even have opportunities to improve. So that's something that we're considering as part of the Phase 2 strategic review. Phase 1 was really focusing on where do we want to be long term and what assets do we have that are part of that. And then looking at are those assets going to bring profitability to the organization and in a reasonable time period.

我認為通過 Sprout，我們確實擴大了發行量。我們的運營效率已經大大提高，甚至還有改進的機會。因此，我們正在考慮將其作為第二階段戰略審查的一部分。第一階段真正關注的是我們想要長期發展的方向以及我們擁有哪些資產。然後看看這些資產是否會在合理的時間內為組織帶來盈利。

So we made the structural changes in Phase 1. And now in Phase 2 of the strategic review, we're focusing with the Board on how to better monetize the assets as well as look for value to be able to create for all stakeholders. And that's -- now that we have the core assets that we're focusing on and where we're going long term, now we're going to be realigning the assets to create value for all stakeholders that we believe will hopefully be able to give clarity and be able to announce something in Q2 with the goal of wrapping that up by the end of the year.

因此，我們在第一階段進行了結構性變革。現在在戰略審查的第二階段，我們與董事會一起關注如何更好地使資產貨幣化，並尋找能夠為所有利益相關者創造的價值。那就是——現在我們擁有了我們關注的核心資產以及我們的長期目標，現在我們將重新調整資產，為所有利益相關者創造價值，我們相信這將能夠明確並能夠在第二季度宣布一些事情，目標是在年底前完成。

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

目前沒有其他問題。女士們、先生們，今天的電話會議到此結束。我們感謝您的加入，您現在可以斷開線路了。謝謝。