Neptune Wellness Solutions Inc.

Good morning, ladies and gentlemen, and welcome to the Neptune Wellness Solutions, Inc. Second 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 Walter Pinto, Managing Director, KCSA. Please go ahead.

Thank you, Operator, and hello, everyone. Thank you for joining us today for the Neptune Wellness Solutions Fiscal Second Quarter 2024 Earnings Conference Call. With me today are Michael Camerata, President and Chief Executive Officer, Lisa Gainsbourg, Interim Chief Financial Officer, Nika Pacheco, President of Sprout Organics, and Cedric Bilkey, President of Biodroga Nutraceuticals. 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 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 or 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. I appreciate your participation in today's call to discuss Neptune's fiscal second quarter 2024 results, ending September 30th, 2023. Our conversation today centers on both financial and operational developments. First and foremost, we wish to highlight Neptune's strategic evolution. Our dedication to guiding the company through a transformative phase is both strong and deliberate. As we approach the completion of our strategic review, we have made critical decisions that resonate with the best interests of our stakeholders. A pivotal aspect of this strategy is the board's approval of a significant restructuring, the spin-out of a majority of our equity interest in Sprout. Subject to shareholder consent and specific conditions, Neptune plans to redistribute most of its Sprout equity to our current shareholders, retaining an approximate 10% to 15% interest. This strategic move follows our agreement with Morgan Stanley to convert our Sprout's debt into equity. This endeavor aims to empower Sprout to operate independently, unlocking its full potential. Simultaneously, Biodroga, our esteemed nutraceutical brand, continues to be a vital part of Neptune's portfolio. We are committed to strengthening our role as the preferred partner for retailers and CPG companies in the competitive dietary supplements industry. This anticipated spin-out is a strategic initiative to streamline Neptune's operational costs and minimize our debt exposure, thereby bolstering our financial strength and enhancing cash flow. We will keep you updated as we finalize the specifics of this transaction. I encourage our shareholders to understand the strategic importance of the Sprout spin-out. Your support is crucial in strategically repositioning both Neptune and Sprout for enduring growth and success. In recognizing our financial journey, we have made significant strides in fortifying our fiscal position, yet there remains more to accomplish. The recent conversion of Neptune's debt in Sprout to equity is a strategic turning point increasing our ownership stake from 50.1% to about 89.5%. This move not only enhances the strategic positioning of both entities, but also reduces financial burdens paving the way for Sprout's independent operation, subject to required consents. Moreover, we have proactively settled our obligations with CCUR Holdings, Inc. and Symbolic Logic, Inc. by prepaying our senior secured notes. This decisive step significantly reduces our annual interest expense. As we delve into a detailed financial analysis, I will first pass the floor to Nikki Pacheco, president of Sprout Organics. Following Nikki, Cedric Biloque will provide an insight into Biodroga's performance, and then Lisa Gainsbourg, our interim CFO, will wrap up before we open the floor for question. Lastly, I want to address the inherent risks and opportunities ahead. As always, business endeavors carry inherent risks, and we are actively evaluating these as part of our strategic planning. In parallel, we are exploring opportunities for acquisitions with the support of Morgan Stanley to bolster both Neptune and Sprout's market position. Stay tuned for more updates in this exciting phase of our journey.