Neptune Wellness Solutions Inc.

Good morning, ladies and gentlemen, and welcome to the Neptune Wellness Solutions, Inc. First Quarter 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Valter Pinto. Managing Director KCSA, please go ahead.

Thank you, Operator, and hello, everyone. Thank you for joining us today for the Neptune Well and Solutions Fiscal First Quarter 2024 Earnings Conference Call. With me today are Michael Camerata, President and Chief Executive Officer, and Lisa Gainsbourg, 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. 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. 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 a substitute for, or in isolation from, measures prepared in accordance with GAAP. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put under 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 found on CDAR and EDGAR. I'd now like to turn the call over to Michael.

Thank you, Walter, and hello, everyone. Thank you for joining us today for our fiscal first quarter 2024 financial results conference call for the period ending June 30th, 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. Let me first discuss Sprout, our leading organic children's food and snack brand. Over the first fiscal quarter, we continued 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. 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. However, there is 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's 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. 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. 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 Waffles, Sprout Crinkles, and Sprout Big Kids. We are proud that Sprout products are available in 90% of the market. in all 50 US states, Canada, as well as shipping direct to consumers through the Sprout website. 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 Demola Supermarkets added incremental SKU count in Q1. Sprout also launched two club pack offers onto online retail platform, SAMS.com. Last quarter, we announced that four of Sprout's most popular cocoa melon, 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. Kiwi Banana Spinach is currently the number one 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 five new items, bringing our total to 10 items, including cocoa melon pouches, banana bars, waffles, curls, and Sprout toddler meals. We are pleased that Sprout's portfolio at Walmart is showing strong sell, through which is meeting projections. The Cocoa Melon Banana Bar has achieved number one product ranking in the last 13 weeks in Sprout Snacks category at Walmart. Nielsen Data Total USAOC, 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, Waffles, and Cocoa Melon Bars are performing especially well. 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 waffles, which achieved 52.8% growth in the latest 13 weeks, and Sprout Bars, which ranked second in the Sprout Snack portfolio in the latest four-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 Inline with shifting customer demands. Our Cocomelon partnership also continues to perform as standout products in the Sprout range. The Yes! Yes! Veggie Pouch has maintained the number one pouch in unit sales in Sprout's Cocomelon portfolio, while the Cocomelon Banana Snack Bar is number one in dollar and unit sales in the Cocomelon snack portfolio. Sprout's fill rate sits between 80 to 90 percent, but our goal is to maintain a level above 90%. Sprout is focused on managing supply chain processes to continually improve the fill rate. 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. Q2 sales are expected to pick back up as we have seen improved growth momentum during the current quarter. Our Maximal 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. 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 Maximal 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 Maximil and its monoglyceride technology across new Asian markets. 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. I will now hand the call over to Lisa to cover our financial results in detail.