Q4 2020 Neptune Wellness Solutions Inc Earnings Call
Neptune wellness fourth quarter earnings call at this time, all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
Ask a question during the session you want me to press Star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
The conference over to your Speaker today, Scott Van Winkle. Thank you. Please go ahead.
Thank you operator.
Thank you everyone and thank you for joining us today.
Earlier today, we issued a press release announcing our results for the fourth quarter and full year fiscal 2020.
We also issued our management's discussion and analysis and consolidated financial statements.
Documents filed with the Canadian Securities regulatory authorities, how the U.S. Securities Commission and are available on the company's corporate website.
Before I begin I'd like to remind you that all amounts discussed today, what Canadian dollars and today's remarks contain forward looking information that represents our expectations as of today and accordingly are subject to change.
We do not undertake any obligation to update any forward looking statement.
Captors may be required by Canadian and U.S. Securities laws.
A number of assumptions were made my gosh preparing these forward looking statements, which are subject to risks.
Results may differ materially from what is projected and detailed and these risks and assumptions can be found in our filings on C.R. and with the security and change Exchange Commission.
Joining me on the call today, we have Michael Cammarata, our President and Chief Executive Officer, and Dr., Tony We're now Chief Financial Officer, Michael will begin by providing an operational update and Tony will follow with for review of our four corner in fiscal 2020 financial results.
Let me turn it over to Michael Michael.
Thank you Scott and good afternoon, everyone.
Since I joined Neptune wellness I've been committed to doing things that right way to unlock the company's full potential.
I mean, we've had the challenge everything within this company, while rebuilding our foundation and looking towards the future.
Because of the hard work people across the organization, we are seeing results.
We are completely different company than we were only one year ago.
Yeah, we inventory health and wellness rates and we're no longer just an extraction company.
We have a new structure, new branch and a world class leadership team.
In the U.S.
Yeah, moving towards your brand strategy that lowers cost and effectively meets the needs of the market in Canada, We will soon while I first cannabis Brad.
We anticipate accelerated revenue growth in the first quarter of the fiscal year 2021 and beyond.
We expect that are 2021 Q1 results well so she never forget revenue grew approximately 300% to 400% over the same quarter last year.
Significant achievement, given the ongoing industry challenges and the impacts of the current Hogan 19 Anda.
Hasn't it crisis that our team has met with assistance and agility developing new product line and evolving to meet the needs of our customers.
Growth has been driven by the expansion of our health and wellness solutions and by significant growth in our cannabis business.
Which continues to gain momentum in the first quarter fiscal 2021.
We have new capacity, becoming operational new business wins momentum across our consumer brand and innovation in our health and wellness segments, while a onetime cost associated with our phase two investment in our cannabis business negatively impacted profitability in the fourth quarter and the full year, we've established a strong.
On to drive profitability and the set us apart from our competitors.
Additionally, we have invested to develop new brand and launch new products and I consumer brands Division.
On the beginning I've been steadfast in my view that happened cannabis our partner have broader consumer trends that she's consumers moving toward <unk> based products in the household applications for home care personal care and <unk>.
Moving forward, we are focusing on my model that keeps our overhead low while allowing us to be agile and responsive to the market without using a lot of capital.
As part of our company transformation, we have recently restructured the company into six business units with a salesforce that is in line to each business unit, helping our teams worked faster you more in response to capture the increased value across the markets that we serve.
We are already seen strong growth potential for each division the new business units, our consumer brands cannabis unhappy turnkey solutions health and wellness innovations that Tim Badger's.
And Neptune royalties.
Consumer brands includes our force remedies and Ocean remedy brands.
We have launched the brands during the fourth quarter through both retail and E commerce channels and have continued to expand our product lines.
Also announced a partnership with Dr. James It all to cope grade products that are good for the consumers and benefit that Jane Goodall Foundation, we expect these products to be available later this year.
I cannot person have.
Division includes our extraction operations in both Canada, and the U.S., we remain well positioned in these fast growing markets.
Hey, Steve Herbert recently, becoming operational has given us the opportunity to rapidly expand our Canadian operations with a significant cost and quality advantage use capabilities are evident with our recent announcement of a 16.5 million dollar extraction client win to be serviced from our sharper flat.
Turnkey solutions Division is built upon our biodroga business and important asset that drive shareholder value.
Product development and supply chain capabilities and relationships allow us to rapidly provide end to end consumer solutions that are well respected in the health and wellness industry health and wellness innovations Division is where we have and well continue to rapidly respond to the evolving consumer trends, our hand, sanitizers and Neptune area.
The monitors are two of the first significant renovations and this business yet we will continue to develop additional health and wellness products, we will work with a low cost supply chain infrastructure to rapidly scale up and down based on to that.
Our Neptune ventures is a platform for significant future opportunities through strategic investments and providing an incubator for emerging technologies ranks and other innovations.
Tim Ventures is an important contributor to our long term growth and shareholder value creation.
Finally, our Neptune royalty business unit is focused on growing and capitalizing on our intellectual property licensing opportunities.
We have significant intellectual property and capabilities across our whole organization that can provide a high margin high valued returned to our shareholders through the Neptune loyalties unit.
With this reorganization, we have positioned Neptune to accelerate growth and capture significantly larger share of the health and wellness market.
As I mentioned earlier, we have made significant additions to our leadership team sales organizations over the last several months and enhanced our board.
We are attracting candidates with significant expansion proven track records across the consumer products industry, you see our value and want to be part of our team.
We have added proven leadership to our C suite with strong additions across our operations sales and finance functions and continue to have a pipeline of new talent to support growth over the last several months, we've introduced David Maris as our Chief operating Officer, David is the former Chief operating officer of metaphor.
Arms labs.
As quickly become an integral part of our executive leadership team and has been instrumental in the commercialization of our share Brook expansion. His experience will help us optimize our cannabis and have divisions and area of our businesses with strong growth potential.
In April docket, Tony Marino joined Us as Chief Financial Officer, and it's my pleasure to introduce Tony to you today and I will turn the call over to her in a few moments.
Tony has hit the ground running making changes and leveraging her significant experience in operations and finance to have enough gentium.
Tony has made an immediate impact on every aspect of napkins operations or technology background will be an asset for our future.
In addition to David and Tony You bet as Scott asked me, a senior Vice President of our U.S. retail sales.
Scott came to us from Unilever, adding significant consumer product sales experience.
Russell Jay joined Us as VP of sales, bringing additional food drug and mass sales leadership and just last week, we announced that Robert the payback joined to obtain a senior vice president of our health and wellness innovations Division. He joined our team from Walmart, where he was the director of territory and global export sales.
We are successfully building an exchange team of leaders that are making an immediate impact on ochra.
These new hires reflect a significant enhancements to modernize our teams with talent, having professional experience at companies such as Unilever, Colgate Palmolive, Hanes and smarty pants vitamins to name a few.
Regarding about B to B business, we've addressed operational challenges in our extraction business and phase two and Cherbak is now producing products from multiple customers.
We also closed or a further enhancement of phase two let's continue testing of our call. The ethanol technology that is expected to further cement our productivity and cost leadership in a growing cannabis extraction mark.
Rapidly built a consumer brand business with the launch a force remedies and ocean remedies, including the expansion of retail distribution.
We also leveraging our turnkey solutions and our CPG talent to rapidly deployed health and wellness innovations product opportunities are highly efficient structures that allow us to ramp up and down the supply chain capabilities quickly and maximize profit and are already contributing to significant revenue in the first quarter.
Yeah, Bill strategic partnerships, expanding our product development supply chain sales and marketing capabilities to the organization, including partnering with <unk> International Fragrances in flavors American media and Dr. change at all you have built a platform that will continue to bill dry and accelerate growth and shareholder value.
Lastly, I want to reiterate that Neptune has successfully become integrated health and wellness platform that includes strong positioning and cannabis and have only leveraging this production and development capabilities to respond the consumers' needs.
We have built the team the strategic partnerships and have the production capabilities to drive long term growth.
We have built the culture to be nimble fast and aggressive that will provide for rapid go to market solutions, while driving both our b to B b to C business opportunities, we're hoping brands, we're innovating for the future, we're delivering value to all of our business partners.
It is an exciting time at Neptune.
And the whole organization is energized to deliver I will now turn it over to Tony for a detailed review of our fourth quarter results.
Thank you Michael.
Good afternoon, everyone.
It's my pleasure to join you to date.
I joined Neptune, two months ago, and happy and excited about all lumpy activities happening across the company.
Our tremendous opportunity.
And that team that has failed embedded.
Last year.
Neptune has a respected history in the health and wellness industry and has always that with quality products.
No basin.
<unk>.
Over the last many years.
The company has broadened its exposure to the cannot be sector.
And we are no further broadening our exposure across that sector I'm excited to partner with such strong leaders and built a leading companies in this space.
The company is progressing at a rapid pace and all of our team is fully engaged to building out and industry leading platform.
I'm truly energized by the pay the progress its quality off the team.
And the foundation in place at Neptune.
I look forward speaking with our investors about the developments that are and will continue.
Sure that's not true.
Turning to over recent resolved and current trends.
Let me provide.
Yes.
Total revenue for the three month period ended March 31, 2020 increased 68% to 9.5 million.
Parents, except not quite 47 million in the prior year.
On a sequential basis compared to the third quarter fiscal 2020.
Revenue increased 12%.
Revenues from the Cabot segment increased sequentially by 42% form known him up from 2.8 million in the third quarter ended December 31 for 19 in the prior year.
I was revenue Diminimus, given you already stage of our market entry.
This significant development year over year.
Nexpose the acquisition not sure Burley during fiscal 2020.
And the continued development Neptunes cannabis operations across North America at the end of the fourth quarter on page two of our sharper price LNG became operational.
Allowing us to expand our cannabis operations to 200000 keno.
And supports additional revenue from both existing and new extraction customers in May we announced a new 16.5 million extraction partnership.
Utilizing this expense passage.
Revenues from the Nutraceutical check my for three months period ended March 31 trendy trending.
Thank you to 5.5 million compared to 5.7 million in the prior year period.
As we enter the first quarter trendy 21.
Look I had to on a revenue developments across our segments.
We anticipate significant growth across our health and wellness platform.
Reflecting recent innovations.
Categories, and utilizing our significantly expanded sales team and distribution capabilities.
We are focused on driving perfectibility utilizing existing manufacturing footprint and I didn't quite incremental asset light business opportunities that leverage our most significant product development and supply chain capabilities.
These efforts have already resolved in several new products and distribution wins.
Across our warehouse bonds platform.
As a result.
We expect to drive accelerating sales growth without any significant incremental capital investments favorably impacting margins and running.
This accelerated growth is evident in our first quarter fiscal 2021 guidance.
Net loss for the three month period ended March 31 for any for any amounted to 39.2 million compared to a net loss of 12.4 million for three months period ended March 31, 29 cheap.
Net loss reflects noncash impacts, including non cash impairment well and non cash change in fair value contingent considerations during the fourth quarter and an increase in long cash marketing expenses.
During the fourth quarter as well, that's an increase start up expenses into cannot based segments compared to the prior year.
And just.
This was 25.4 million for three months period, ending March 31, 2020, compared to a loss of 2.7 million [noise].
In the prior year period did decrease in adjusted EBITDA or its main attribute to significant investments in the cannabis segment in anticipation of increased sales volume.
As well as an increase in corporate expenses to build the organization to support our expanded market and business development.
And an increase in noncash marketing expense associated with American media partnerships.
Cash and cash equivalents were 16 point Sixmillion as of March 31, 2020.
During fourth quarter to company raised gross proceeds from 7.1 billion true utilization office aftermarket program and continues to have significant capacity for additional capital.
<unk> its growth objectives.
As we look.
For the first quarter fiscal 2020 months, we remain confident in our guidance revenue 18 to 22 million, reflecting a 300% to 400% year over year increase.
There are anticipated growth reflects strong growth across our health and wellness platform.
Including new partnerships your product categories.
Hi, its leadership in sales team.
And successful implementation implementation phase two operations in Chicago.
Increased utilization of our assets and the rapid and successful expansion, we have seen it using your product categories, it's expected to improve profitability.
I look forward to discussing old continued success.
Building out the natural platform.
Well now trying to close.
Operator.
But the mindful questions operator.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.
Please standby, what we compiled acuity roster.
And your first question comes from Doug CLO from echelon wealth partners.
Please go ahead.
Yeah, Thanks, very much operator, and a good afternoon. All thanks very much for a the overview there talking like stood at two of your board that Neptune and thanks for participating in our conference last month really appreciate it.
Wanted to one of the start with <unk> you mentioned in your press release. The obviously your your relationship with I got that Michael or Tony just wondered if you would want to flush out just what your longer term for transportation might be well it will probably that's up and whether or not you had any or other potential alliances with good.
The other global splits we chemical companies that could be an established a new on footprint, it's out of a split.
Yeah of course thanks.
I ever it's actually been are very strategic partner and a couple different ways. It gives us access to their back I people have over 12000 ickes.
Patents that we can access.
It's giving us access to over 35000 customers that they work with around the world. It's also enhanced our capabilities and extraction, because I guess assets for do it extraction for decades.
And then on top of that it has helped us improve and go to market speed. So quite recently, we actually had a large retailer come in play with us and you get a turnaround.
On a product within a matter of days and I Assaf was able to get us the amount of saying that we needed and work with Oscar to accomplish that so I asked that has been a strategic partner on my brands and helping us build the infrastructure, but also we've been able to tap into a vast variety of IP and knowledge and expertise and it really be.
Synergistic partnership and I think that's also playing a growth factor for our Biodroga turnkey solutions business, but also our consumer brands as well. So I think they've been a strategic partner on multiple levels and we continue to work with them and it's actually allowed us to be able to go to market even faster than we anticipated in certain areas.
Yes. That's helpful. Thanks, Michael Let me start shifting gears to to should at least I mean, we're pretty strong visibility on how your capacity utilization is going to unfold sure brought a little lessons separately from of course, it took a write down in recent quarters that that we're all aware of any sort of Britain, where do you want to provide I've done a regulatory about regardless.
Or or near term production cycles or boiling structure that you might be able to give us some color on a with regard to sort of believes this is bill the child to go to figure out a bottle showed the leap little but it'll be sure books already gotten so it would be helpful.
Yeah. So obviously regularly coming from original of an acquisition and or the process of doing integrations and mapping it out we did see in the U.S. that him.
Actually had a different price points. It actually had a compression of 60 plus percent on attempt pricing, but what's been you really unique about Neptune motto is when all the cannabis companies were focusing on what I would call like devices, a smoking drinking and eating we took a holistic view of the whole household to the consumer how does have.
<unk> role in products, such as the argument, which it can add a moisturizing across our different cannabinoids.
That could use that cannot anti fungal an anti bacterial properties how did they play into the cleaning products that people use on a daily basis, and those models and those industries or actually much greater we believe.
For the potential because some of those categories. It's been around at retail so a lot longer than that as a send the marijuana categories have been in the state and obviously this water restrictions so when it looks at the model for looking at the end providers in there and that are selling it to like the state owned in the CBD in hand.
Because we cannot that's kinda bisson states.
NASDAQ listed it's kind of limited so what we've done it looked at the model on how we can expand in her personal care home care errors and that's something that were retooling and will be coming back with more detail on like a strictly gosh, it and it positions us obviously with a large capacity.
You asked which we ultimately believe that there'll be more demand for kind of us in hand, and personal care items, such as like toothpaste soaps and such.
And household cleaning products like even from hand, Sanitizers, all the way down.
In two disinfecting wipes and we believe that that will give us the growth opportunity in the states doxey or be a very good factor for a trigger lease.
Terrific. Thank you are they just one last housekeeping question I mean, we've certainly seen evidence that the bulk up at all because it's sort of increase the price in recent.
Once the presumably in no small does it to the bad for handset advisors for what's your material player. This sort of wondering how whats going to break through the book both chemicals that you might be.
But to your gross margin not just on hand, sanitizer, but perhaps in the cannabis oil extraction was based on cold ethanol expansion going forward, it's probably the best thanks.
Yeah, and I think that that's a very unique thing even going through I sure footprint like how where energy more efficient how we are how we're focusing on our uses of it and being able to recycle and reuse lowers the amount of pressure on demand on pricing of course, we obviously if you just because of the previous plant how do you still works units.
To be able to.
People still a lot of extra.
And really insane trucks that allowed us to be able to not be so price sensitive to the market. When it comes to those things. There were also big purchaser of that for the hand, Sanitizers and those markets I think that that really says Oh, the tribute to I like trace to it's what I like to say is like like phase. Two study is like the the cash.
<unk> in the in the car industry compared to competitors that maybe on horse buggy, because we're going to be able to really cut cost save money for our customers and I think that's gonna be evident in Q1 that we're able to handle a lot more capacity at a more affordable rate.
And have a higher quality output and the we're already starting to see that with our customers and the recent wins that we're having with customers. We expect that they continue.
Thanks, Michael.
Your next question comes from John Chu from Desjardins capital markets.
Hi, Good afternoon first I wanted to touch on just yesterday.
That went up quite a bit in the quarter quarter over quarter.
I know you're growing the business just got six different skus this points now that you're.
Gonna be staffing up it looks like so maybe just give me a sense on.
How that run rate might look going forward now is it pretty well set in terms of where you need to be working that's still creep higher in the coming quarters.
Yeah, So I think that Weve I'll I'll, let the conversation Tony can add a dismal, but yeah I think what we've done very uniquely in Q4. It's the started out tradition is lowering that the capex needs. After the one in the onetime.
Costs, but when you look at our actual model that we're building here, we're trying to build a very efficient company back or that has a lower cost infrastructure that can scale up and down on demand. So yes. We have these different divisions that are going to be or speedboats and it really quick the market and be able to adapt but we've also done and we will continue to improve our cost him.
Structure, so that way our burn rate like it's a like for instance in Q4, a lot of that that is non cash oh cost and that's mainly because of the American media deal, where we use a lot of different media to assign character you're planning for launching the brands, which we had to account for so we're looking.
To build that model and I think this is a point or look at as we look at our peers and we look at where we're trying to be in our focus is really young getting on our cost and the burn rates at its lowest possible and really invest in talent and growth really unlock that hyper growth mode, and really be able to stay there well not increasing our cost substantially so I.
Got answered your question.
And Michael if you if I could add here and a four or four John on the specifics so so john or for.
The three month period you saw.
SGN AOL said 21 point $2.4 million.
And do that it's in a that includes non cash.
Expense on the warrants for the Am I partnership and Michael could talk a little bit more about am I, but the amount that this includes 17.4 million on that on that 21 million. So it's all about you know the the due to a SGN I.
What's the only a somewhat there was 3.9 million so and so that was thank you very much for that question that that'd be the response about what we're going to go forward.
John is probably a separate things out and good record SGN day independent of the am I noncash warrant expense in order to make that's more clear and crystallize Oh, what are the true as Ginny expense. So so that would be about explanation and you know I could give back.
Q2, Michael and talk maybe a little bit more volatility am I am.
Oh, it's collaborations.
Yeah, I want to add that am I has been instrumental in two parts. One why is the ability to people there could reach a certain consumer and to be able to access media because when you launch into brand in the states particular, there's only a handful of platforms that really allow you to the market have brands. So.
Am I on the branding initiatives and and magazine. This has allowed us to go to market quicker and to be able to they really get the knowledge and at the end their information to the consumer but on another side does that I really wanted to talk about and it's something that we'll be talking more about in the coming quarters is that the distribution. So every <unk> am I American.
Here for every where you see a US weekly magazine in touch magazine.
All of the other properties, they actually own no stent and are in high value position parts are up there the stores and traveling areas. So for instance, our initial partnership with Albertsons through with the Am I support is it do like a test and learn so we're really putting products at the checkout Henderson and.
Albertsons stores, where we have different packaging different price points and different sizes to be able to do this rapid deployment models and go to market strategy, we partner with am I on the distribution part as well because it allows us to be able to go everywhere. This must weekly and touched magazine and be able to merchant those stores and that's something that's very read it.
And they have 75000 locations.
With over 2.9 billion points of distribution, so multiple distribution to try different grocery stores. So as co grid is lifting and where we've gotten the data back from our initial tests and whats packaging, we like and what works well be some sign there to work more and more without a mine American media onboard the distribution part in addition to the advertising.
Right and I think that that's something that gets our brands access to real estate in high volume retailers that a lot of over competitors are struggling to be within state shops or stuff like that eve and have been CBD. So I focus is really and make sure that we matched distribution or quality retailers.
Hi credit ratings.
My name is at a highly visible to the consumers in areas that they trust so imagine walking into like Albertsons you have the magazine, which has a product on the cover next to it on a magazine stand you also see our product. So those are things that we're starting to unlock as we move to be more aggressive into the U.S. state Alan distribution.
Yes.
Okay. That's helpful. So you also mentioned your first kind of this brand launch can you give us more detailed.
Maybe timing product distribution the Cana U.S.
Rashly Spike in Canada, Canada is and what kind of perpetual agreements you have got set up for that distribution.
Yeah. So our first cannabis friends and then it's obviously going to be in Panama, we're very uniquely position.
In Quebec and have great relationships with a lot of retailer and the government that we're working with and other strategic partners that will be downstream.
But the weirdest pending or sales license, we expect any moment.
And the brands, we're going to be launching a one brand and and we'll have a more detailed coming very shortly on it.
Separately.
And the additional brands as well so we've looked at the market and want to see where we could really benefit as far as the consumer because one of the things that we noticed by watching the Canadian market play is that the consumers wanting to be proud products that were affordable and accessible.
And also have innovations and with kind of is 2.0 coming online that was able to unlock a lot of all our unique capabilities that will set us apart because we've been developing a for the whole household and looking at all the different users we were able to take that knowledge and applied to the candidate this industry, whether it be maximo, which is something that we'll talk also.
More about which is our IP, which is patented which has over three clinical studies on.
Which is essentially like an enzyme that bypasses digestive system. So for instance.
We want to look at how we can make in edible safer. In addition to having a good strength and in a unique delivery mechanism. So with a maximo essentially what happens is weekends.
Offer the consumer in edible that as a near term onset without having to do a late onset. So basically if somebody has to make gummies you don't have that issue with our product lines, because with the maximal combination and using that technology and that's just one example of an IP, obviously with 5000 lots of others, we've created a database.
And we've started working on how we're not only gonna be a unique cannabis brand, that's gonna be affordable and accessible to the consumer and but it's not just gonna be another gummy, it's gonna be safer. So we want to make sure that were person has taught products that it's an instant onsat not a delayed onsite and that's just one example on on the consumption side, but we do I want to focus on two.
Price 0.1 was the highest it's products, which we will be talking a little bit more about and then on a day to day high volume run rates, because what we noticed as I in the beginning is that we saw data that consumers were were used airplanes on the black market, 57% higher than what they were pain and Oh excuse me 50.
Lower than what they're paying in stores. So we want to make sure that we make it affordable to consumer and accessible to the consumer so on a delivery forms we got a unique once with three or multiple technology that we kind of talked about a little bit and the task order.
But we also have unique IP and proprietary formulas that a patented that can apply to us industry that will make products safer and more effective because not only that safer because of some near media onset. It's three times stronger so less is more.
So those are just as an example of one of the IP is that that we're going to be rolling out into the market.
Sure I did you say for phase two that your its operational but did you see you were continuing to tell us the corn ethanol. So is it actually fully ready to go or are you still more or less than the testing okay now.
Well, we actually we've been testing because we've also been inherently and so we're right now.
Your capacity at phase two so were Oh God benefiting a couple of products were trying to find line time to do the switch over a two to liquid nitrogen, which we are planned on my books for doing that next month, so between customer batches, we won't be switching over to the liquid nitrogen and that will allow.
That's true in that phase two to get product quality, a increasing and purity increased its its like and deliver a oh distillate form so essentially our phase two as I keep making a joke that it's the it's the Tesla.
Extraction Ministry and it's definitely something that a lot of people stayed away from going into liquid nitrogen and there the unique.
Extracted out we had because of the costs, but what what it ended up doing for us is position us in a very unique position.
One because we're able to to make extraction faster with a high purity form and get it via distillate form which is actually you can allow us to allow customers to save a lot of money that are that are using our extraction and we can increase our margins because it's almost completely automated.
And then on top of that we can take a multiple forms a biomass. So typically farmers would have to pay for somebody to to go and cut the trend before they can send it to an extractor a and other extracted would have to run it multiple times if it wasn't there.
Certain biomass, great, whereas phase two were able to accept multiple grades of biomass and were able to process. It even if they didn't so saves the farmers money I when it comes to it and that's a unique thing because what we're seeing is demand for hampus skyrocketing and there wasn't a lot of people that were going to be able to play in volume in that game. So what.
We've also done Oh look we talked about this yet, but we have over a three story storage facility that we can.
Go to below freezing and so farmers when they have that one of your crop instead of extracting that losing it we can actually story.
So a lot for almost a definitely.
So we got the ability to store and its I think the largest stock a storage.
Facility in Canada, So we're able to store more biomass were able to play in HAMP, which is for us volume increases profitability. So the margins well.
Get better with more volume so the fact that were at near.
There are a capacity already on phase two is a good sign and now as before we even real about that next phase I phase two and switching over to liquid nitrogen and also the utilization of I three storey Uh huh facility in store that can actually go below zero freeze the the product for longer Stuart So.
The reasons why we were focused on hand, it gave us the I'd just because we've done we took that approach to look at what products can be using the CPG world. The consumer package goods like big believers that PMT is the clorox is when they start putting hence into their products. We wanted to be able to be at that that standard we wanted to be able to process. It extremely fast and we wanted to be.
Well the have large amount of biomass that we can start for a longer period of time at the same time in the supply chain be able to lower the cost to the consumer at retail.
Whether it be through a customer hard brand.
And at the same time, the farmer, because the farmers having to pay a lot more money and was for extraction last minute.
As well as having the have somebody a do the clippings on it so by providing the the biomass it gave us a unique position in the market. So there's a lot of unique things that phase two is and we're really excited and probably hitting my voice and I'm excited because now we get the finally start talking more and more about these.
Okay, that's great I'll get back into queue. Thanks.
Your next question comes from travel task really from Cowen.
Hi, good evening, thanks, very much for taking the questions.
So just to go back to the topline obviously, you know one Q revenue growth.
What's going to be 350% at the midpoint is clearly encouraging in particular.
In this respect given this backdrop, but.
Michael I guess as we think about post one Q.
Hi, Good line of sight do you have in the sustainability of these revenues and how should we think about I guess the cadence of revenues on a go forward basis. Thanks.
Yeah, I think Q1 really starts to show a phase two Ah so as I can't give us revenues are starting to increase dramatically with consumers starting in <unk> with its commission interface to and the ramping up and and the consumer starting to use the customer starting to use it.
I think that wasn't good position because the diversity of our customer base, what and whether our products that we're making for her hands for household uses oh, it doesn't cannabinoids or distillates that are in a unique product forms that we'll be adding a in above and beyond I said it all for Gary I think we're gonna be.
Rent growth from all of our divisions and I think that it's something that really was the turning point for the company was arc you want it and we're excited now in the first time in history, that's going to that I believe that we actually gave out guidance.
And so what it shows years that we've gotten really more transparent from the top all the way to the floor.
I technologies, and our divisions are ramping up and now and execution mode, and and we're well positioned with where the current pricing in the markets that that we're going to.
Got it very helpful. Thank you.
Moving down to gross margin in May and maybe this is a question for Tony but obviously like over the course of last year was depressed given your pure build out of your kind of its operations, but now in light of all these new growth initiatives I mean, you're not just an attractive anymore radio branded products you have a lot of different growth initiatives I guess like any color there.
You can provide on on maybe what a normalized margin could look like I think would be helpful. Thank you.
So yeah.
I'll, let Tony or go into detail on hours over that and then I'll add some color too long.
Yes.
So we haven't disclosed margins.
Yet and Oh, and the most important for us for the moment, it's really to kind of no brought the land and brought their market share. So all of the all of the business segments or what are the experience very rapid growth they are required.
Some investments for them you sales leadership that you have seen that we announced but all of these segments all pretty no from in Capex investment perspective, So we will be running very very agile and these things can be scaled up and down with the market demands.
So at this point in terms of guidance on margins are we haven't provided.
Anything that's currently the focus is really on growing the top line and you know building market share for Neptune has this been different business segments.
Got it. Thank you very much I think were.
Yeah.
I was going to.
[noise], yeah, so well basically saying, it's like right now where do you need positions that were entering that phase of execution in our technology to coming online. Our divisions are highly focused and we're going after market share.
And obviously there are some as I've talked about earlier, there is fixed costs that that don't change, but we haven't been able to optimize some of those so as our volume and as we grab more marketshare and I cannabis divisions, particularly start broke those margin to will grow rapidly, but we haven't given guidance on that and we definitely are.
Excited though to a make sure we get the opportunity that's before US and then obviously take it from two to look at it from a different division point of view at some point.
Thanks very much.
Sure.
And that was our last question at this time I will turn the call back over to the presenters.
And Scott I'm going to take other way.
Well, we just want to thank everyone for joining and I look forward to connecting me too early next quarterly cool.
After a first quarter results. Thank you everyone.
Yeah, we wanted to thank you everyone.
And the time thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
[music].