Q2 2021 Neptune Wellness Solutions Inc Earnings Call
[music].
Q2 earnings call.
This time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
[music] if he was hurt any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, John Mills Investor Relations. Thank you. Please go ahead Sir.
Good afternoon, everyone and thank you for joining us. This afternoon, we issued a press release announcing our results for the second quarter fiscal year 2021.
We also issued our management's discussion and analysis and consolidated financial statements. These documents have been filed with the Canadian Securities and regulatory authorities.
I think Securities Commission and are available from the company's corporate website.
Before we begin I'd like to remind you that all amounts discussed today are in 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 statements, except as may be may be required by Canadian and us securities laws a.
A number of assumptions were made by us in preparing these forward looking statements, which are subject to risk results may differ materially from what is projected and details of these risks and assumptions can be found in our filings on SEDAR and with the Securities and Exchange Commission.
Joining me on the call today, we have Michael Colorado, Our President and Chief Executive Officer, and Dr., Tony Renaud Chief Financial Officer.
This morning, the company announced has been appointed global Chief operating Officer.
Tony will begin providing an operating update and a review of our second quarter financials, Mike will follow with an update on our strategic.
Now I will turn the call over to Tony Tony. Please go ahead.
Thank you John.
Good afternoon, everyone.
Before I comment on behalf of Neptunes Board of directors.
<unk> team.
And all of our staff.
Interest that you are in your box remained healthy during these unprecedented times.
Especially as cases or COVID-19 continue to search.
That's true is pleased with our second.
<unk> results and strong expansion of our product lines and strategic growth.
Our distribution channel during what has been items restructuring period over the past three months we.
We continue on the path to trumps from.
In order to be best position to meet growing comes from right across the three product groups we serve.
The health and wellness industry, the consumer packaged goods industry and the projected 130 billion global channel this market.
To that end, it's important to note that 12 months ago, the distribution of our consumer product goods represented zero revenue from that too.
To date it is responsible for 72 per cent follow gross revenue.
Our second quarter total revenue alone represents 97% of total revenues for the full fiscal.
You're 2020 this is proof that our strategic initiatives are working.
As you can see from our topline growth and channel expansion. During the first six months from fiscal year 2021, net revenue has never been better and our 20 year history as a company.
In a short period of time.
Newly assembled Brooks.
The executive team.
Executed on our shift from happy to be extraction company.
Integrated health and wellness platform.
Platform centered around EBITDA will go to market approach that focuses on delivering b to b and b to C product to millions of consumers around the globe.
Resulting in diapers and multiple revenue streams.
This approach at Neptune apart from its competition and it's yielding consistent loan from revenue opportunities.
One important example debt I'm delighted to announce your day.
It's that Neptune has secured at least $100 million purchase orders.
It should be noted that the purchase order from not guaranteed and there's no certainty that all of the orders would be completed.
That they wouldn't be force it in there it's hard to do to such things as logistics day. Nevertheless.
This is indicative of business interest at Neptune is a preferred distributor from major corporations seeking innovative and critical health and wellness products.
Despite the decline.
Global economic activity since the out from a COVID-19.
Successful steps Neptune has taken during this difficult economic period have increased sales distribution and reach at both a business to business and business to consumer segments, and the consumer packaged goods market and stuff not turned to deliver compound growth for years to come.
Trying understand the growing momentum as Neptune.
I would like to explain.
Our transformation has occurred and what lies ahead.
Sales for primary steps step one right investment phase.
We both have portfolio scale from brands, including force remedies Ocean remedies, Neptune wellness mood ring and O'shea items.
Our goal is to revolutionize the health and wellness marketplace I mean.
Consumer demands from the integration of kind of this into a holistic health and wellness formulation.
Interest goes from Neptunes owned and operated brand.
But we see it as being from more than about.
Two day, a consumer can harness <unk> range of cannabinoid benefits such as this omni farm go onto our carrier and Moisturising properties.
Integrated into products from toothpaste to Deodorants hand, Sanitizers intra day household usage.
Beyond this no non recreational cannabinoids Neptune will integrate candidates into the CPG marketplace across a wide variety of categories.
These product categories are ripe for Neptune next step in.
In the months to come.
With the election of Joe Biden as the next president of the United States. It.
Decriminalization Marianna has taken a giant step forward.
And of course, he's talking about 68% up I'm are against a record high one marianna legalized.
With world as an owner, Montana in New Jersey in South Dakota, approving Marianna ballot measures. The total number of statecraft legalized Mariana Norte.
Now sits at 15.
Along with the district of Columbia.
This support our board has brought to the American opportunity for Neptune and demonstrates the value proposition for us as an organization as a world class leader and assuming sector.
Accordingly in addition to our operations at our state of the Art 25000 square foot facility in North Carolina. The organization plans to open a Florida based office from 2021 from focus around us legislation and the expectations. It's great presents for Neptune.
The second quarter was also a transitional and have a continuum from Q3.
We made additional investments, including approximately 1.9 million in Capex relates to our sharper facility and Capex.
When we transition away from low margin be tricky offerings to higher margin b to C offerings with moving our sustainable and premium kind of this product from the Canadian market.
Moving uses our proprietary cold ethanol extraction process technology to create flow spectrum extracts from the company's CPT product and newly implemented told on the extraction for THC concentrates.
These investments include a 20 million over the past two years related to production run up.
Additionally expenses related to the startup moving.
Right. It's important to know that we will continue to make investments in the third quarter. The significant investments that require significant capital has already been made.
What's more we anticipate the launch of the moving products to begin contributing revenue.
Already we have secured a footprint for moving.
550, and Retrans stores across two Canadian provinces from regulators.
With the opportunity to scares from an additional 582 retailers.
It's providing ring access to 80% of the Canadian market.
In line with that we anticipate Q4 revenue to accelerate at a greater speed than Q3.
Step two was improving our cost structure to maximize our existing business.
We are beginning to realize the momentum of our strategic initiatives.
We are working towards increasing efficiency and future profitability.
He's also reducing our headcount by 25%.
Just want to have a favorable impact on the Cisco 2021 process.
The headcount reduction represents annualized cost reduction of 3.5 million.
I understand that Neptune, we continue to reinvest in world class.
And to grow our business.
That's human capital enabled us to report the previously mentioned purchase orders.
Excess of $100 million.
Additionally, we recently succeeded in on their petition to Decertified day Union re presenting employees that are working syndicated share Burke Ben.
The benefits of this were realized immediately with increased operations. The key performance indicators toughest revenue per employee per se potential fourfold increase of efficiency in fiscal 2021.
But also from mutual our North Carolina facility to become a multi purpose and moving to use platform.
To meet large scale consumer demands the various products and they have kind of this and other health and wellness sectors.
The restructuring activities from cost largely behind US, we're now poised for expansion and profitability.
The outlook is indeed positive.
This leads me to step three and the most important facet of our business innovation.
Having re architect the business to take advantage of both internal and external supply chain, making us at <unk> and scale across all our divisions, we expect to make tangible progress in the third and fourth quarter to leveraging our extraction and formulation expertise.
Marketing.
We believe this when he steps Neptune as an industry leader and be central to securing more long term supply agreements more steady and predictable revenue and margin improvements on our brand offering.
As well as.
We sell alongside our other innovation offerings, including hand, Sanitizers, the Neptune Air and intra day, no touch for hard hat thermometers, and Neptune Halo I think got to put Oximeters Toumani talk radio and act as an oxygen saturation monitor.
You know we have now extinct skews that we have brought to market 11 in him and cannabis and five in health and wellness.
Oh ambition is to pick from the brands either in cannabis and have established a capex program to deliver new skews from the next five successive quarters.
I agree I'm not from.
As we did in March to respond to consumer demand for PPD three COVID-19, we have identified a shortage in the market force sustainable sanitizing pipes.
Accordingly, Neptune submitted to the FDA registration for this product and believe issuance of the code is imminent.
Furthermore, Neptune has no agreements with multinational retailers such as our strategic partner cost growth to start our products.
Oh, and Neptune run the solution hand, Sanitizers gel into owns 24 packs made from the United States and not tested on animals.
Good day, just offering from the innovations team.
From last Friday, the product became available for sale on Amazon the world's largest equal net spend from.
Number three additional skews on our school from.
Additionally, Neptune has partnered with their eating CPG companies to expenses distribution channel in the personal care and hygiene products much.
This agreement is expected to generate revenue in the range of U.S. 65 to U.S. $37 billion over the next 18 months.
This deal we serve consumers at both wholesale and retail levels has been our us and Canadian Master distributor for these products.
Got to her expertise and distribution and channel management.
Which is as it directly supports our strategic best in class hires over the past six months, we will expand our reach into major North American retailers to create you an additional cash distribution opportunities from Neptune owned and operated consumer packaged goods products.
Step poor is the execution phase.
We're working on delivering on those very large purchase orders over the course over the next several quarters.
Also expect to leverage these distribution agreements even further to generate from from multimillion dollar purchase orders and sales.
We are extremely well positioned for an absolute to capitalize on these opportunities.
At the end of the second quarter, we had $9 million in cash and cash equivalents and be recently completed subsequent to the end of Q2 at U.S. $35 million.
Private placement for working capital.
We also announced we have entered into a U.S. $45 million credit facility to support the fulfillment of.
Block purchase orders.
Our strategic decision to focus on the innovation.
Health and wellness based on our belief that we are standing on the edge of expense base transformation, driven largely by consumer demand.
When we look at the market or behavior inside research has identified two primary wellness consumers and the candidates market one millennials tend to baby boomers.
He's starting from first nature of these demographics is EPS growth at is phenomenal per hour future growth as a business.
We know that people are still getting used to the idea of cannabis, but overall acceptance is high across generations and other nations.
With recent research showing 40, plus countries are exploring and legal cannabis framework.
A great example of how we are expanding into plant based product line. It's a collaboration with legendary animal behavior expert and Conservativeness Dr., Jay and go after the first from maybe Brett.
The one that's on Africa essential oils that celebrates from both remark of passion and work.
This quarter. The collection includes four essential oils that are all source from Africa to promote saumen harmony and vibrant.
Inspired by from though I free time passion for protecting bought.
Neptune field with a world recognized leader International flavor and fragrances. This exclusive line of Metro Fendt baseband products.
Is what we call a partnership port change.
It's directly supports the legendary Conservatives efforts to create a better vote for old moving things so.
Disruptive this product line and receive earned media in leading publications such as Spok.
Yeah, Yeah finance.
Yes.
Neptune is fully aligned with Dr. <unk> approach to creating a sustainable growth for generations to come where consumers want more ecological products and corporations like Neptune have a moral responsibility to minimize their environmental impact.
Which is why every purchase we don't like 5% of the sales price to the James <unk> Institute and their mission to protect <unk> and non power local communities.
It's not just the beauty.
It's good for business too, we know from our own research that consumers want to support companies or.
Taking a standard or urgent so from an inbound from environmental issues.
Oh, differentiating merchandising assortment comprehensive set of convenient fulfillment options.
From a balance sheet and our deeply dedicated team net.
Neptune is well equipped to navigate the ongoing challenges from the COVID-19 pandemic and continue on the path we have created to grow profitability in the years ahead.
No I would like to walk through the results or second quarter of fiscal 2021.
Second quarter revenue was in line expectations and generated almost as much revenue and all of fiscal 2020.
We have unlocked growth build Neptune port better future.
With strong brands and strategic investments in the growth from our competitors.
Oh RF do we'll go to market strategy has yielded results that our business model.
Cash on the consumer as we are compelling value proposition.
We are leveraging both our capital investments over the last couple of years and our investment as Ginny to build out our world class team and the support from <unk>.
Anticipate continued maturation.
[music].
Total revenue for the three month period ended September Thirtyth 2020.
Increased 340% to about $28.7 million compared to 6.5 million from the same period.
The prior year on a sequential basis compared to the restated first quarter of fiscal 2021 revenue increased 155% yes.
Year to date in fiscal 2021 revenue snow totaled $40 million compared to $10.9 million, an increase of 267 per cent.
In the same period last year.
The increase from the three month and six month period ended September 30. These trainees training were mainly attributable to new health and wellness products such as from all meters hand, sanitizers ex cannabis related products.
Gross profit for the free month period ended September 30 is trendy trendy decreased to a loss of 4.6 net.
From patch, where profit of 9000 in the prior year period, and a profit from 3.3 million in the first quarter fiscal 2021.
The decline in gross margin, it's a reflection of the strategic decision to invest in the company as we position ourselves for strong long term growth.
Neptune launched numerous new products since the beginning of fiscal 2021, causing high production ramp up costs through temporary reduce the girls marks from those new products.
The situation is expected to stabilize over the course of the next few quarters.
Net loss for the quarter ended September Thirtyth, Twentytwenty amounted to 21.8 million compared to a net loss of $20.8 million for the quarter ended September Thirtyth 2019 point increase of about 1.1 million.
The increase is attributable mainly to the decrease in gross margin and the increase in SGN expenses, partially offset by the decrease.
2.4 million in net finance cost and.
By 2.8 million increase in income tax recovery.
Adjusted EBITDA loss was $12.9 million free month period ended Septemberthirty 2020, compared to a loss of $4.6 million in the prior year period.
Decline and just as a tour is mainly attributable to the change in net loss that decrease in acquisition cost $1.8 million in stock based compensation 5.2 million, excluding net finance costs 2.4 million.
Net income tax recovery 2.8 million.
Partially offset by the cost related to a one time cyber security incidents for 2 million the increase in non employee compensation related to warrants 2.5 million and depreciation and amortization per.
Point 7 million.
When we consider when reconciling interest the editor to the net loss.
You can see that there was 5.5 million in non cash transactions. There were just that all the time and only 3.5 million of the adjustments that debt touched the company's liquidity, including a little less than 2 million for cyber security incident that was resolved by Neptune with no expected material effect on the upper right.
And going forward.
Cash and cash equivalents were 9.1 million as of September 30 is 2026.
Sequentially the quarter end, we completed a U.S. 35 million private placement for working capital and other general corporate purposes.
We also recently announced we have entered into with 45 million credit facility with perceptive visors to support the pool from them and look to purchase orders placed by went up from our customers.
This product is being sourced by us from oversea supplier and we are thrilled to have the support from perceptive, which is recognized leader in growth capital financing to support the increasing volume on for our products.
We are also exploring a number of long day to financing options with top banking partners.
I should also no debt management, it's no longer issuing quarterly revenue guidance given the uncertainty in the timing of the sales in relation to production and transportation issues related to the pandemic situation such as ASCII a requirement.
Lack of raw materials worldwide and global supply chain challenges.
Mobile growth due to the world quite cold at 19 pandemic supply chain by experience many challenges such as delays and unexpected probably two years from third party manufacturers fence logistics, including delights customers.
Port of entry.
I will now turn the call over to our Chief Executive Officer, and President Microtel Marotta to discuss the Companys strategic initiatives.
Thank you Tony and good afternoon, everyone.
As we are transforming into a fully integrated health and wellness platform. We are crazy came from expanding brands that will change the world through state of the art plant based ingredients and will have a positive impact on planet people and pets.
Every day, we can both for the World, we want with the products, we purchase consumers preferences go beyond Martha Stewart first Dr. Jane get all product lines as consumers demand that brands deliver a broader impact on social and environmental issues.
We will always put the consumer first in everything we do.
It's not too long ago that people looked at US is only an extraction company. We are leading the transformation in record time to a company with brands and the consumer packaged goods space. This allows us to have unmatched product distribution opportunities in Canada. We will soon have access to more than 80% of the cannabis market.
In the United States, we are building extending and collaborating on brands for some of the largest retailers and global consumer packaged goods companies in short Neptune has never been better.
We are building a sizeable head start on the competition and one of the largest third party cannabinoids product manufacturers.
Our extraction capabilities are diverse and we have multiple revenue streams from both our beat or B and B to C businesses.
We have moved closer to the consumer with our force remedies Ocean remedies, and Neptune brands as well as our newly launched moving cannabis spread with more brands coming soon.
We continue to improve our efficiencies as we move towards the new vision and optimize the bottom line we.
We are focused and agile and able to respond in real time, which is unique in the industry. When I joined Neptune in July 2019, we were tasked with making the transition from a b to b to a diverse and fully integrated health and wellness company focused on national plant based and sustainable brands to do that we've had to identify the opera.
Tunis that can be improved by cannabinoids and plant free CBD assets, such as adult recreation medical but also consumer package good uses well.
Well, we still have work to do to accomplish our goals. Our DTC business is growing and we remain strong b to B initiatives. This do go to market strategy says Neptune apart from its competition and is yielding results long term revenue opportunities for the company. The time for cannabis is now and the many uses for cannabinoids habit.
Central to disrupt industries and supply chains for the better legalization of cannabis is gaining momentum in the United States with additional states, including Arizona, Montana, New Jersey, and South Dakota changing their restrictions in the recent election.
We believe the legalization of cannabis has never been closer Neptune to women the recreational markets the medical market and the consumer packaged goods uses for cannabis cannabinoids drive from him and or candidates as we look to the next phase of growth Neptune is focused on innovations the possibilities of called multiple categories and the legal markets.
Within the United States, it's antifungal anti bacterial and most rising properties can be used in products from toothpaste second fight interest by these to plant based deodorants that can compete with clinical strength our products to hand, sanitizers that are better for the skin in the coming months, we believe cannabis will be important part the strengthening.
The U.S. economic recovery and raising revenues for both state and federal governments in Canada, Neptune will bring its moving cannabis brain to more than 534 retail stores with the opportunity to scale to an additional 582 retailers. This provides moving with access to 81% of the can.
Median market and we will soon be launching a second brand exclusively for Quebec.
Recently Neptune has launched his hand, sanitizers on Amazon Dot com in one liter and two pounds 24 packs additional sizes and products will be added to the Neptune storefronts in the coming in with some of these products will also be available at Cosco.
Online and in store you can also expect to see storefronts on Amazon from other brands coming soon we remain focused on new product opportunities for hygiene, including sanitation wipes, we have submitted additional products to the FDA EPA for registration and look forward to making those announcements soon we remain committed to enhancing lifestyles of people around.
Around the world through eco friendly and groundbreaking products together, we can create a more sustainable world that with every purchase makes a difference.
And now I'm going to turn it over to the operator for questions.
Thank you as a reminder to ask question, you'll need to press star one on your telephone to withdraw your question press the pound or hash key please standby we compiled acuity roster.
Your first question comes from the line of Erinn, Great from Alliance Global Partners. Your line is open.
Hi, good evening and thanks for the question.
So first question for me just Oh, just want to clarify something really quickly understand how you're not giving guidance going forward, but just looking back on the guidance you provided.
For the quarter of 20 to 32, just given the restatement that you had last quarter would that based off like apples to apples basis would have been higher if you were still doing the gross versus net one ex that clarifying question first and how that guidance was given back then versus I reported now.
I think that would go to a Michael Kim rather go to technical accounting measured related to Canada. So Ah Tony would be more of the expert on to that but what we're looking for is the amount of products at that and as you can see with over $100 million from purchase orders were starting the pile a nice backlog.
And we're working the teams around the clock to continue to fill orders, but some of those orders we would classify the profit from in some of those orders we would classify the day.
The revenue and the profit from that's obviously related to technical measure are related to Canada.
Okay, all right great. Thanks, and then Mike just as you continue to focus on distribution specifically within the U.S. can you talk about you know the strategy of right now how you're looking to expand you know that distribution through the partnerships that you have you know with the large.
Did you companies that you guys have announced and how that really is going to be as you look at kind of the the top line opportunities and also the margin opportunity. How are you looking to set up to get as much distribution as possible. You know now. So you do have you know scale and shelf space. When there is time for you to implement either the plant based or CBD type C products up your own as you kind of moving.
Forward.
Yeah. So we're actively focusing on action and we took a unique approach to try and make sure that we optimize our bottom line. After we're focusing heavily on non.
Offerability so the distribution that we've set up was evident with the hand sanitizer blocks, we set up the distribution pipeline that allowed us within.
Weeks to the scale of the brand and I would also point out that our hand Sanitizers, we started off with an international supply chain and then at the request of a U.S. retail we actually switched it completely to be made in the U.S.
And we did that within a matter of weeks and maybe a month. So our supply chain is robust fast and can change from dime and that's something that's very unique and also a lot of our consumer package. Good companies that we partnered with have actually also looked at us and an optimized cost for enhancing their supply chains. So we are in the process right now.
Now in enabling different retailers and the drug market.
Like.
Drug stores as well as club stores like Costco, we went up to about a and not quarter sales.
50% of the Costco stores.
Then had to regroup and then we'll be expanding hopefully in December the RASK on will also be rolling out one of our CPG partners products during December.
They had a share revenue from August to December so as.
As we are seeing international supply chain some of our CPG partners are more reliant on a global supply chains, and whether there with the new launches of.
Ex box and HP and a lot of other products happening simultaneously and Uh Huh. This holiday season, we've seen a increased a shortage of airfreight availability in some cargo credibility, but we're definitely.
Domestically building the supply chain and utilizing our manufacturing capabilities to make sure that we could bring product directly to the consumer as fast as possible at the same time, we're helping our international consumer package good companies enhance their supply chain again to bring product quickly to the consumer.
[laughter].
I appreciate that color and just one more quick one from me and I'll jump back in the queue. So congrats on on the $100 million in first order. So we sort of understand that it is not guaranteed and it's kind of some uncertainty on timing, but I'm just kind of any insight you can provide in terms of like if it looks like it was six clients. So in terms of the frequency and kind of how big those.
Per source might be just as we think about how much potential lumpiness from might see in the quarters. If you do get it you know within one quarter from customers and then the Nexus as we look to a you know might off the next couple of quarters. Thanks.
Yeah. So we are these the size of the orders a day where.
We wouldn't start day that used to be a couple of hundred thousand dollars purchase orders from single. We're now seeing orders that are in excess of a million 10 million to $25 million in a single order.
So there is potential for Lumpiness and that's why we want to make sure that we didn't.
Guide Opportunistically.
Anything from quarter to quarter, because at the end of the quarter, depending on customs and shipping.
That could affect the it could go like we had orders from Q2 Q3 Q2 that went into Q3 and so we it's a very hard as we're in this hyper growth mode to look at it but it's actually a good spot to be and I think we have successfully gone.
I remember when I first from people would compare me to track this on a daily basis, but I think weve definitely done really good in that peer group and she did and I think now we're starting to gain momentum, especially with our cannabis brand.
And then now with the opportunities and the states as we mentioned earlier, we'll be opening up an office in the U.S. to heavily focused on making sure Neptune first position and and.
And ready to take advantage of opportunities as we're planning for it.
Hi, great. Thanks, I'll jump back in the queue.
Your next question comes from the line of Carol Pascarelli from Cowen Your line is open.
Hi, good EBIT. It. Thank you very much for taking the question share stick on the top line as well fully understand that given kind of the uncertainty and timing disparities, but you're not going to guide anymore, but regarding the large distribution partnership.
The CPG company you did offer the 65 to 137 and so I guess any more color you can provide on how you came up with that range and then maybe what's embedded at the low end of the expectation versus the.
The higher debt.
Helpful. Yeah.
Yeah, So that range would work on obviously by that partner.
With our teams we did see that they.
Had a product change that they made that would you originally would you ever launched in August and then ended up walk to work stream for shipments in December [noise].
We feel very confident in that range and and see opportunities to.
Actually expand.
But again as far as went from being one product orders of 100000 dollar purchase orders. These are very large orders.
Through looked very large customers as well.
One of the unique things that weve, even been able to secure is its distribution across even professional opportunities like theme parks and cruise ships.
And obviously the.
The frequency of those when they start kicking in in the cruise ship, sorry going back a every seven days product that on their ships and theme parks almost daily so as we're scaling up from our customer distribution capabilities not only for physical retail.
In the U.S., but also for the professional retail or the size of the orders are much larger.
Then a Ah I studied smaller group of purchase orders, so we feel very confident.
In partnership with our CPG customer they do have more overseas manufacturing utilization.
Utilization the Neptune has been focusing heavily on building out its share in North America, and specifically in the U.S.
In Canada.
So we would hopefully you see in the next couple of quarters, a steady flow, but again, we are in a hyper growth mode.
And.
We have to make sure that the auditors and everybody sign off on the timing of the shipments when we receive the product after they clear customs. We are seeing that used to take a day from customs were seeing up to 14 days.
For some a large shipment.
[noise] Genco Wow, that's yeah Doug.
I want to clarify yeah free.
From a response.
Oh from.
Great response, and Michael I would also add that there was.
Opportunity for growth well beyond.
Moving company. So that's one of the components.
And there is opportunity for growth in our other.
The segments, so growth will accelerate as we never go into you know the.
The successfully into the cannabis and B to C sector.
And also expanding further on some other products from the innovation team, so that CTG or it will be one of the girls segments and they would contributor to growth and there's opportunities beyond that.
Got it Super helpful. Thank you well next question Tony This is probably for you all but she's done last year day, obviously when you provided your business of your operational update you alluded to Cogs.
I guess as we look forward if you could just maybe give us a cadence from what we can expect job just in terms of the guest year day, why maybe over the back half of this year that into next year I think that'd be helpful from modeling purposes. Thank you.
So.
Hey has been increasing.
So and then as it relates to the talent additions on the innovation and the team and that has been showing.
Very good success as as proven by the large T O <unk> hundred million dollar on our behalf and being.
Able to secure so investment into land team has being already been successful.
However.
I also would like to be no more revenue growth.
Okay, Yeah, I, such as revenue per employee and I would like to see that KCI I, a growing overtime as faster and that's that's the projection. So if there is growth.
In in S.A. I need to see you know proportionally more growth on the revenue side in order to meet you know the day increase in Capex targets that we have.
Understood. Thank you very much I'll pass it on.
Again, if you if I could ask a question. Please press Star then one on your flow from Keypad from next question comes from the line of John Chu from danger, Dan Capital markets. Your line is open.
Hi, good afternoon. So.
So just following up on that $100 million order that you announced and I can appreciate timeframe in terms of shipping the uncertainty with customs and supply chain, but if all of that were not an issue.
Under the circumstances can you give us a sense of.
If everything was going smoothly on all those fronts, what kind of timeframe could you see and obviously, we know what they can spillover share.
From a quarters beyond that but can you can you give us a sense on that.
Ideally what that could look like.
I would love to and would make me.
Airports are extremely happy if I have visibility on getting those orders and add about John during these times, we just have seen so many variables.
That are affecting does from a raw materials, our worldwide challenges from global supply chain.
Challenges to logistics cargo.
Getting on flights and fitting.
Sitting imports so it's extremely difficult to kind of get to a kind of a normalized scenario, especially knowing that we are interest in this property for another let's say two or three quarter in the index pandemic situation. So it's very hard to predict.
What I can say is the fact that we all know and secure.
Picture and purchase orders.
And then I forgot to $200 million and I quit.
I would like to qualify that hundred million dollar as conservative.
Yeah, that's really a very strong and I [noise].
[noise] indicator for the interest into Neptune innovation products and also its distribution and channel management capabilities.
And presumably when you say that it's not guaranteed and the orders may not actually reach that number.
Is it a function of just.
How the products are performing presumably in terms of the demand and.
And obviously, if it's not performing up to standard to order the mass just thought there then from.
And the customers what effectively adds.
Go below that number.
[laughter] simple enough.
I think we have.
From has gone from <unk>.
[noise], Yeah, we have seen a lot of the waste weighted piece. The NP also under these circumstances, our people are desperately seeking products in the P.E. space.
During the year the dependent EBIT. So many of our customers that I'm speaking to pursue me they tell me.
Whatever product you can get.
Net and kick it into its inventory interest should their trip that.
They will take so so the bottleneck.
During these times, it's not at the consumer and fund it at.
The manufacturer and so that provides a lot of variables.
But the biggest hundred million per.
Purchase orders you know again I.
Qualify them as being conservative free, which you know, which tells you that I feel pretty comfortable that we can bring them home.
And.
And I don't you know hopefully I don't see any issues with them.
But again these are unprecedented times and we have seen that as the pandemic and EPS COVID-19 surgery.
Economic instability, it should increase thing and that.
At least me attitude to.
Thinking about or I haven't said certain disclaimer.
Now you say in your release that then you're one thing I would add to that too yeah. It's like we're seeing not just in the P.P., but even with the launching of mood ring in Canada.
We actually are very fortunate to have a launch as a partner and the capsules. So we're seeing demand.
Our capsules and our high CBD based products. So we're seeing demand across the board on different products.
And I think that if anything weve had too you.
You know limit the and allocate the amount of products that we have on order and two different customers and retailers. Because we're also working with the retailers directly decide propping and helping them build out there.
Sure.
CBD or hemp lines as well as our other product lines that were working with them in a collaborative way in the United States and I'd also like we talked about with Quebec, we're going to be launching an exclusive brand just for that that that territory. So we have a lot of great initiatives that are going on right now and.
We have a lot of demand for the products because weve taken a unique approach like I I would like anybody that go on Amazon and by our two ounces and sanitizer because.
Because it is the formulation on that two ounce, which is our latest day. The art. It's it's pretty amazing when you look at the performance and then followed up by a Doctor Jane Goodall hand, Sanitizer product line and and then on hemp.
CBD and product lines, we're definitely starting to see a heavy demand for high quality products and Neptune has been very fortunate not only to develop high quality products and do it affordably, but also have a purpose with each purchase and I think that that's something that that sets us apart and we'll also be talking later this year about our U.S.G. it and.
Really bringing to market all the initiatives that we do as a company internally and externally as well so I just want that items.
Okay can you help me reconcile though that there is a statement in the mdna about you're seeing lower demand for sanitizer. So is there a risk that for some of the other P.P.E. that that presumably that $100 million is.
Focused on that at some point.
Good to see more of those.
Right all right.
It's a variable when it comes to demand like there's different skews that have a lot higher demand and it goes up and down so its not these orders aren't a week's launch these products several months ago. So it's been an opt rocket, but we definitely do see that in hand, sanitizers, there's a change in formulation people want products.
And that's why do you if you go to Amazon and buy the product.
You will see the performance that we use that is almost hospital greater exceeding it as well as with the Samsung and the smells that's something we work really closely with <unk> Stefan So we see up.
And again, we scale with the demand it does take a couple of weeks to the ramp up in a couple of weeks to slow it down [noise].
But there's other P products and stuff that we're working on with the CPG partners and our other retail partners for their private label swell.
Okay. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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