Q4 2021 Neptune Wellness Solutions Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the Neptune Wellness Q4 conference call.
At this time all lines are in listen only mode. Following the presentation, we'll conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Thursday July 15th 2021, I would now like to turn the conference over to Steve West. Please go ahead.
Thank you operator, and good afternoon, everyone with.
With me. This afternoon are micro <unk>, President and Chief Executive Officer, and Tony We're now Chief financial and Global operating Officer.
As a reminder, all amounts discussed today are in Canadian dollars and our remarks may contain forward looking information, representing our expectations as of today and may be subject to change.
Not undertake any obligation to update any forward looking statement, except as may be required by Canadian and U S Securities laws.
And from made in preparing these forward looking statements, which are subject to risks as laid out in our public filings on SEDAR and Edgar.
Before turning the call over to Michael I would just like to say I am excited to basically be part of the Neptune team and I look forward to meeting all of our analysts and investors with that I will now turn the call over to Michael.
Thank you, Steve and good afternoon, everyone before I begin my prepared remarks, I want to officially introduce Steve as our new Vice President of Investor Relations. Many of you already know him from his time as on Wall Street restaurant analyst and Investor relationships Officer at Panera bread, Dick's point guidance and more recently acreage holdings.
On leading MSL in the U S cannabis industry I'm excited to welcome Steve to the Neptune family to lead our Investor relationship program. The global pandemic has contributed to a challenging year for everyone. Both personally and professionally at Neptune I'm proud we met those challenges head on transforming a 22 year old company from a low.
Margin slow growth <unk> extraction company to a diversified health and wellness consumer package. Good company focused on delivering positive change across our 4 verticals cannabis nutraceuticals organic food and beverage beauty and personal care, we took a multi pronged approach to prepare our businesses for sustainable growth and margin expansion with the <unk>.
Goal of creating a long term shareholder value, we exited on traction business in both Canada, and the us streamlining our operations and moving up the value chain to create higher margin branded cannabis products, which are now selling in about 65% of the legal Canadian market, we've established new strategic partnerships rebranded and acquired <unk>.
Assets with the goal to develop strong lasting brands across our 4 verticals. We brought together a world class team with proven track records of scaling brands to the full potential we are building on decades of experience and nutraceutical innovation and extraction and leveraging our supply chain to produce widely accessible better for you consumer package goods through our products from <unk>.
Values, we've created an innovative consumer package good company, we aspire to be carbon neutral and eventually carbon negative with the highest social and environmental standards at the core of everything we do today Neptune is pioneering innovation on plant based consumer product goods with cannabinoids and other core super ingredients that go far beyond adult and medical use.
On our central to our everyday lives and wellbeing, we will continue to organically grow our existing brands by creating new innovative products and leveraging our strategic partnerships to expand our distribution and drive higher margin sales at the same time, we will continue to explore strategic M&A opportunities that align with our long term goals quite simply.
Our vision is to become a leading health and wellness consumer package. Good company with a unique portfolio of all natural plant based carbon neutral and eventually carbon negative lifestyle brand driven by a single purpose to transform that every day for a healthier tomorrow. Our suite of good for you good for the planet consumer brands across multiple verticals are prepared to tap into.
Large markets across the globe now before I turn over the call to Tony for her financial review I want to update you on a few of our business verticals and our cannabis vertical we have successfully launched our pant has on mid ring brands Pan has were developed to reflect our Quebec roots and heritage. We recently launched our high CBD oil in CBD capsule products, they're leveraging our traction experience.
While still very early the initial consumer response in terms of sales and feedback has been very encouraging other cannabis brand mood ring is currently sold in British Columbia, and Ontario with plans to begin consumer sales in Alberta. This summer as with Pan has our initial products leveraged our extraction experienced both THC and CBD oils and capsules.
Followed by our legacy <unk> product after the quarter ended we introduced 3 additional mood ring products in British Columbia, including our first ever branded flower product, Florida, citrus cash, bringing our total motoring and product assortment to 6 skus. Today, we are just scratching the surface of our full potential we are selling to consumers and markets representing about 65%.
<unk> of Canada's total legal market and once we launch into our birthday. This summer we will be selling our products into about 85% of the total legal market today. Our products are sold in about 400 of approximately 1900 existing and licensed stores. We have access to so we have high expectations to continue ramping our cannabis business through the addition of.
New stores as well as new products and form factors moving to Nutraceuticals. We are focused on expanding this division through by Droga on a leading nutraceutical company with patented technologies like Maxwell our exclusive Omega 3 delivery technology during the quarter using the on maximal technology, we have developed and supplied to new supplement to our customers. These included.
<unk> enhanced fish oil supplement as well as the CBD enhanced fish oil supplement both of which will be marketed and license through by drug. This customer base. Additionally, we've extended our product line and partnerships with the largest privately held vitamin catalog retailer in the U S by launching 3 new Softgel products as we continue to leverage on maximal technology at <unk>.
New supplementary territories. This quarter, we haven't reached an important milestone with the publication of our first ever clinical study in the journal of Nutrition by Oxford University Press, which showed superior efficacy of maximal versus other fish oil supplement an omega 3 absorptions. Furthermore, we are undergoing a second study that compares the efficacy and bioavailability of <unk>.
Maximo when combined with co Q10 against other fish oils and supplements we have several other ongoing studies to evaluate the impact of Maxwell as an oral carrier when combined with vitamin K, 2 curcumin or even THC and CBD.
We believe this groundbreaking research will help to support the long term growth looking forward. Our nutraceutical growth strategy is focused on the expansion of our supply chain and manufacturing pace, which should lead to lowering production costs higher gross profit margins and increased return on invested capital, while we're not yet in a position to discuss further details on our growth plans.
Our nutraceutical group is working around the clock and around the globe to drive profitable new growth turning to our newest vertical organic food and beverage towards the end of the fiscal year, we acquired a controlling interest in sprouts scrap is organic plant based baby food and toddler snack company. The acquisition supports our diversification and also our vision to.
Come a leading plant toward health and wellness consumer package. Good company, we acquired shroud with intend to rapidly grow sales by leveraging our strong global distribution network and we have already done that by expanding sprouts baby food and to target across the United States and expansion of Walmart Dot Com. This was all achieved within just a few months after the quarter ended we.
Also announced an exclusive licensing agreement with Coca Mellon the dominant number 1 children's entertainment show with more than 10 billion views on Youtube alone worldwide Cocoa Melon has consistently ranked in the top 10 of all genres on Netflix securing an exclusive license agreement with the world's number 1 Kindle Entertainment show was a no brainer with.
More than 110 million subscribers on Youtube, we are targeting parents across North America to associate cocoa Mellon with sprouts and a purchase our organic nutritious food for their children. We believe the future for sprout is very bright while we've made significant progress on the distribution and marketing front theres still much more to come.
Summing up our progress throughout this transition we have exited slow growth cannabis extraction business to move upstream in the value chain to launch of our Q cannabis brands mood ring and Pan has have exceeded our expectations and we are preparing to scale and take market share. We have made significant progress with our <unk> acquisition through retail expansion and strong <unk>.
<unk> with more to come on maximal technology is being leveraged across our new supplement with supporting clinical studies to establish claims where possible I am proud to say, we are fully tranche, 1 from a BTB cannabis and hemp extract it to a full scale disruptive and diversified consumer packaged food company with an open run rate of growth opportunities across the globe.
I will now turn over the call to Tony to discuss our financial results.
Thank you Michael and good afternoon, everyone.
Good day, we reported fourth quarter and fiscal year end 2020.
'twenty 1 on default.
Our fourth quarter reported revenue was $6.8 million.
Which decreased about 29% versus day $9.5 million reported in the fourth quarter, our fiscal 2020.
Approximately 104% versus our third quarter reported revenue of $3.3 million.
This year over year decline was primarily due to their transformation from a more diversified.
Thank you Mel package from Bobby.
Including our new branded cannabis launching channel.
This was partially offset by the consolidation of our rich from acquisition.
On the fiscal year 'twenty 'twenty, 1 we reported 40.
8 million in revenue, which broken approximate 68% increase versus our fiscal 2020 reported revenue of $29.6 million.
This increase was driven by significant growth.
Our beaches EBIT net.
And by the addition of the food and beverage is vertical.
<unk>, partially offset by exiting lower growth businesses.
Our recent transformation project.
Gross profit loss during the fourth quarter was $24.8 million from.
Per share profit loss of $1.1 million in the comparable year ago period.
As for fiscal year 2021, okay.
Net loss amounted to $36.2 million compared to 1.8.
Sure.
Gross profit declined primarily due to our innovation.
And ramping new channel. Please go ahead.
Net loss for the fourth quarter.
<unk> 3 million, which declined versus the net loss of $39.2 million for the comparable year ago period.
Net loss amounted to 168.6 million for the fiscal year compared to $60.9 million.
Yes.
The increase in net loss.
Hey, Paul.
Mainly to lower revenues and the decrease and positive change yet.
Fair value and revaluation on Brian.
On the prior cost of goods sold.
SG&A expense.
Partly offset by the decrease in impairment losses on assets.
Adjusted EBITDA loss during the fourth quarter were 48.
Yes.
We present, an increase from the adjusted EBITDA loss.
$5.8 million and book.
Prior year period.
The decline in adjusted EBITDA.
Mainly attributable to the transformational growth diversified CPG company it's.
As Mike previously discussed.
Moving to our balance sheet.
And our.
Approximately $75.2 million in cash on hand.
The increase in our cash position versus the third quarter was due to the $69.9 million Canadian Ingalls policy rate in an equity offering during the quarter.
Our cash position.
Mr Capital and the overall strength of our balance sheet from China to be a strength for the company.
We will not anticipate a need to raise additional capital this year.
Before turning the call back over to Michael for his concluding remarks.
I wanted to discuss our outlook for fiscal 2022.
While we do not provide quarterly guidance I do want to offer some color.
In your modeling efforts.
Thinking about revenues I wanted to touch on 2 items first Scott.
Good day extraction in Canada, and the U S.
Which were significant revenue sources.
In fiscal 2021.
While we replace those businesses with the launch of our branded cannabis products business in Canada.
Please drop started from scratch.
Okay.
To realize meaningful revenue from our branded cannabis products.
That's sad.
We are ramping quickly.
Ahead of expectation.
We expect to achieve a run rate of about $1 million per month.
The latter part of tickets per year.
Second the global Mark growth personal protective equipment or PPE.
Slowed significantly in the latter part of last year as global supply.
Alright.
You bet.
As a result.
Do not expect to fulfill the previously announced purchase order associated with BP.
Additionally, the purchase orders associated with an exclusive U S distribution agreement.
Sales viable will be much smaller in magnitude and day.
And timing due to their PPE nature.
For fiscal 2022.
Given the first quarter is over.
We pre announced our initial expectation for the first quarter revenue.
To be in the range of 10 to 12 million.
We provided this early outlook due to COVID-19.
Flow drove our fourth quarter earnings.
And do not plan to do.
Great.
Hi, Ken.
While this $10 million to $12 million revenue range represents a year over year decline. It does present, a continue significant acceleration versus on a fourth quarter revenue and sales.
<unk> value from formation.
Sure.
For our mature cash short term hit to revenue from profitability.
Fully expect the long term growth will lead to significantly improved shareholder returns.
And finally for fiscal 2020 true.
We expect quarterly reported revenue to continue accelerating from.
For the year.
Now, let me briefly touch on gross margin.
Accounting rules require all manufacturing of flow corporate score to be included in cost of goods.
Which has been significant negative impact to gross margin.
In line with our peers and to provide transparency on what we believe to be a better reflection of our true economic growth margin.
With our first quarterly financial you're going to introduce and non iron ore as gross margin, which we referred to as contribution margin.
Net contribution margin will be in addition to the required <unk>.
Reported and excludes manufacturing related corporate and support expenses.
Yes, Jeff noncash depreciation and amortization expense.
For fiscal 2022, we generally expect reported gross margin to enfold SB.
As we lap the company transformation efforts.
Our new branded product launches and candidate.
And expand distribution and organic growth.
Beverages.
I will now turn the call back to Michael.
Concluding remarks.
Michael.
Thank you Tony before opening the call for questions I would like to recap some of our recent transformation, which we are very proud of and I've heard from some of you that we have changed the direction and the strategy of the company several times over the past year.
I understand that sentiment our vision to be a leading health and wellness company remains the same today as it did more than 20 years ago. Ultimately our goal is to drive significant top line growth and improve margins and returns what did change is the how we achieve those financial goals just as the world changes around us our board and management team are faced with the decision to.
Rapidly evolve unlikely enduring bleak long term outlook, while all of us face and on President Global pandemic Neptune with its exposure to global supply chain networks was significantly impacted arguably more so than most given our size to offer some insights global supply chains were disrupted by the global pandemic more than in any time in history since <unk>.
World War 2 additionally, the reality set in that cannabis extraction was a race to the bottom it was clear that Neptune could not generate long term shareholder value while focused on slow growth low margin businesses. So we exited the extraction businesses, both in Canada and in the United States and focus instead on moving up the value chain to higher margin higher.
Growth products under Neptunes proprietary brands in conjunction with our upstream move in cannabis. We also felt there was critical to diversify our business. We moved to fill short term voids caused by global supply chain disruption to quickly manufacturer in south personal protective equipment or PPE, which also help in the fight.
Against the spread of COVID-19, while the move helped us in our transition the global supply chain of PPE quickly caught up and quickly suppressed as demand for this business. So we continue to diversify moving into organic foods and beverages, which led us to our strategic acquisition of sprouts food, we rapidly expanded the distribution.
Into global retailers, such as target and Walmart Dot com with more to come and we also executed a ground breaking exclusive licensing agreement with the world's largest children's entertainment show, which we believe will lead to significant parent influence share purchases over time looking forward. The transition period is largely complete I believe we have gotten through the worst.
Part and Candy, a brighter future ahead, driven by our core business segment, including cannabis Nutraceuticals organic food and beverage. These 3 business units, we will continue to contribute to the growth of our revenue this year and beyond we remain cautiously optimistic for future opportunities from our innovation team, which can prove to be much chunkier and less predictable.
And then the other 3 Neptune topline growth will be fueled by innovative brands and high growth verticals like cannabis on organic foods and beverages, which can also lead to higher margins and returns our growth can be distilled into 2 key pillars first driving significant top line growth and leveraged fixed cost secondly, complementing.
Organic growth strategy with acquisitions and partnerships such as the recent sprouts acquisition and our cocoa Melon licensing agreement. We expect the main growth pillars will lead to improved margins and profitability and ultimately outsized shareholder returns over the long term I cannot be more optimistic about net print future as we have built a modern consumer.
Packaged food company, that's a force for good in the World Finally, I would like to thank our Neptune associates for their amazing work to rapidly transition the company into a diversified health and wellness consumer package. Good company with multiple run rates for growth for the foreseeable future. Operator, you may now open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by 1 on your Touchtone phone Youll hear a 3 tone prop acknowledging your request and your questions will be pulled in the order. They are received this should you wish.
The decline from the polling process. Please press star followed by 2 if you're using a speaker phone. Please lift the handset before pressing any keys 1 moment for your first question.
And your first question comes from Aaron Grey from Alliance Global Partners. Aaron. Please go ahead.
Hi, good evening and thank you for the questions.
The first question from me.
1 on <unk>.
Kind of high level, 1 on so we look forward to fiscal year 2022.
The recent expectations.
We're pursuing this kind of no longer it can be.
Included within the forward expectations.
Do we think about kind.
Kind of force ranking kind of those growth drivers you gave some good color.
<unk> for Canadian you don't have Scott as well. So when you think about the revenue is kind of going forward in the next couple of quarters. How do you think about the growth opportunities and which will be the most meaningful contributions and maybe you could give some color on terms of.
What's been driving.
Day celebration in the $10 million to $12 million you expect for fiscal year.
Fiscal year quarter, 1.2020, it would be helpful. Thank you.
I'll take a stab at that and then Tony can fill in the rest I think obviously sprouts or you're going to be a big contributor in Q1, and moving forward I think that by a Drago nutraceuticals will be supporting that and then followed by our cannabis business our brands are increasing their distribution and especially <unk>.
Now that we're tapping into flower and some high volume Skus, but I'll, let Tony give more color to that.
Thank you Michael so thanks.
Thanks for the question. So yes, we currently do not provide revenue our earnings on a business vertical.
Neither for the full fiscal year 2022.
But we provided for Q1, we gave you in on.
Standing up.
And where we're going.
3 core businesses that Michael.
Are all on a growth trajectory and this revenue was announced in the press release when we did the announcement earlier in February. So it gives you on good idea for the annual.
Our run rate.
Okay, great. Thank you that's helpful.
So, let's dive a little bit deeper in terms of the Canadian opportunity on adult use day, you mentioned going into flower now, adding on some more skus theres been a lot of conversation in terms of the difficulty in terms of game.
Skus listed in Canada, you guys have gotten some good.
Initial traction going to be an 85%.
Total sales within the price that you have but can you talk about that.
You have got.
Some things Youre doing to make sure you can get those skus listed in some of these provinces to get on shelf in front of the consumer.
Yes.
Yes, I'll add a little bit of color to that and then Tony can pick up I think that how we approach the cannabis market specifically in Canada is very unique we had a lot of data to look through and what we saw with the consumer is that they werent looking for the same strand all year round that they were really like seasonal purchasers and are looking to have different variation.
Especially in the flower side of the business. So we adapted approach that is kind of like a treasure Hunt program, where you can get certain strains that are available for a limited amount of times and we have some very great product developers and 1 who won over 40 award globally for his strained development.
And we're approaching that right now you see our first flower skus rolling out, but there'll be more on different territories and more different strains, but also how we looked at the edibles and how we looked at the digestible market and how it can be different and Thats an area that I kind of talked a little bit about in my opening remarks, specifically with maximal that were.
Exploring more on should have some more clinical data available to really give us a very good edge and a consumer a better experience because as people are starting to enter the digestible market and new consumers and adult consumption. They want an experience that they can they will be heard feedback that they want to experience within 2 minutes into the wait 30 minutes.
They want to have a lower potency, but a higher <unk> for a shorter period of time, so when on when we're looking at our development and R&D and what we've been researching and specialty pacifically for our brands that we have in Canada. We wanted to come out with unique formats and unique skus. It wasn't about how many skus and how many skus, we can put on shelf theres about the ones that we felt.
Could have the biggest impact with the consumer and their usage. So we have a very strategic plan on how we're rolling out in Canada, and we've seen some great success, especially in our capsules in certain markets, we've seen already competitors starting to trying to adjust their pricing and adjust our offerings and so we are starting to take.
Good chunk in the beginning but.
Or just starting to rollout. So we definitely are really excited about the cannabis business. We have a different approach when it comes to flowers, we have some strategic value that especially because of our background on extraction. When it comes to potentially vapor and other format that will be entering into the markets. Later on that I think will give us the ads and the feedback that we've gotten from the province.
And territories have been really good and I and I think we've made a good choice by focusing on on 4 right off the bat and really getting on the ground with the consumer and making sure that we're listening to the consumer and coming out from the offerings that are unique but also address the problems that the consumers are having.
So I think that we have a very good competitive edge and I think the strategy that we're going to be deploying and already started deploying something thats a little bit unique into the market and really connect with the consumer and Tony can add additional color.
Thanks, Michael So, yes, 4 assets now all about ROI.
<unk>.
Gaining market share and we.
We are progressing constant capes.
We launched in the Quebec market.
The STD.
Yesterday, he took all of the products that we proposed to them. So we have developed a proprietary skus.
So really it's all about.
Gaining market share now.
In Canada.
In other provinces.
Okay, Great that's really helpful color Michael.
Just 1 last 1 if I could squeeze it in just on cost Robertson.
It looks like there was.
From write downs on impacted the gross.
That number that you reported today, but just like to get some color from.
Was wondering what do you think that might prevent but positive gross profit going forward you talked about some.
Greater margin privacy expense, we saw on going forward. So do you have any expectation on that you don't usually give guidance on gross margin specifically, but just like when you might believe that might inflect positive gross margins going forward. Thank you.
Sure, Yes, we are not giving guidance on gross margins or other financial assets at this point in time, but as you know.
I said in my prepared remarks, we expect sequential revenue growth throughout the year.
So we will certainly get leverage on our fixed costs and we also believe that growth margins will improve year over year.
<unk>.
Leveraging fixed costs and growth in sales.
And I think we'll be able to be seen over a year over year growth.
Okay, great. Thank you I'll jump back in the queue.
Your next question comes from Gerald Pascarelli from Cowen Cheryl. Please go ahead.
Okay.
Thanks, very much good evening, thanks for taking the questions.
Just I guess I wanted to go back to on a aaron's previous questions and just revisit it in a different way.
The <unk> guide.
10 to 12, so nice sequential acceleration around 60% at the midpoint I guess I was just a little surprised to hear that cannabis is not really going to be a contributor to that.
And I'm trying to bridge the commentary on the prepared remarks with being in 65% of the Canadian market getting to 85%.
By summer.
And I'm, sorry, if I missed it but.
I do think that this provides a source of upside if cash.
This is not going to be included in this in these sequential acceleration at least over the near term that we're seeing so can you just talk about I guess when you expect these these cannabis specific revenues to come in and hit the P&L in a more meaningful way. Thank you.
Yes.
I'll give some color on that and then Tony can jump in so we are right now we have access to <unk> 65 per cent of the market. We're in 400.400 out of 19 on their storage and we're continuing to rollout. So cannabis will continue to grow obviously it is a little bit of a lag.
And our sales reporting because we reported from POS data so it lags behind the shipment.
When it comes to the revenue recognition, but the.
As we get into summer will be up to $85 on the market, which will decrease the amount of stores that we can get access to which also increased the amount of storage were selling in the overall volume. So yes, there is upside tremendous upside in our cannabis business.
And we're really big believers Intuit and this was also before we even rolled out fully <unk> flowers. So we only have 6 skus and the current rollout and we're obviously going to be expanding a lot more.
Targeted areas and I can add Tony if there's any other color on.
Yeah absolutely.
Ramping up rolling out and accelerating the cannabis business pretty much from.
2 quarter, it's all about inventory buildup, whatever we produce at.
Neptune, we can sell into the different provinces.
So it's just about.
Rolling it out in terms of revenue recognition on new products for Neptune.
Based on revenue recognition and inventory buildup.
Different provinces, we can recognize revenue at the point in time that the provinces are guaranteeing for us that product is not being shipped back. So it's a final sales. So this is why revenue recognition will be.
2 quarters, 2 to 3 quarters behind.
Shipments for the fiscal year 2020.
Back to you.
Thank you both.
That's helpful color.
With margins, maybe with the magnitude of call. It the declines in margin expected to improve in.
In line with the.
The quarter over quarter revenue growth that you're expecting.
As we look down the P&L is there opportunity to cut costs, maybe if it's on the SG&A line.
Anything that you can.
You can do there operationally to offset.
What is going to be a temporarily depressed which seems like.
A temporarily depress gross margin at least over the near term. Thanks.
Okay.
Yeah, and so we have.
And again.
Have not given guidance on EBITDA growth operating and.
EBITDA levels.
For this year, but as you can imagine with the growth of revenue and that we're giving you some color on with day..1 you can now see that we are starting to leverage on.
Uh huh.
Cause and then with the ramping up the candidates.
And also the sprout sales.
Michael mentioned, the cocoa Mellon so we expect <unk>.
Revenue growth in all of our.
Verticals. So that's what's certainly lead to growth margin improvement for the full year over over the last year.
But we have not we're not giving guidance on other more detailed financial.
Data.
And we've also been optimizing on the P&L as we because there's a lot of cost that are inherent with extraction business that hasnt fully rolled off so as those data we are definitely focusing on optimizing the P&L on focusing on the areas of growth that we want to be in moving forward.
Got it.
That's helpful color. Thanks, Michael Thanks, Tony I'm going to hop back in the queue.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by 1 year.
Your next question comes from John Chu from HR Day, John Please go ahead.
Hi, Good afternoon. So my first question is just on the health and wellness side.
And.
Specifically, referring back to some purchase orders on agreements that were announced over the last 6 months or so.
There was 1 that was announced back in November.
And that was listed as a conservative $100 million U S.
New purchase orders.
And there is also 1 that was in the $65 million to $137 million range, which was with Unilever and then a third agreement that was.
What we assumed was a subsidiary of craft line. So were all of those related to PPE.
Covid related protective equipment and if not can you just give us an update on on the status of where those stand and if any I mean I know there is no minimum order to touch with any of those but can you just give us an idea of what we expect from those.
Yeah sure so with regards to getting on the quarters, such as order states where.
Over $100 on these 4 mainly from 12 o'clock.
On that.
<unk> from global inventory available.
Prices are rising so fast that Savi quickbooks.
Literally.
It makes us a profitable endeavor for Neptune.
We have been.
Sourcing.
More than 200 suppliers around the world and we Couldnt wholesale.
T O.
We have a sourcing challenge and then looked at guidance that challenge.
For the moment, we don't see we don't believe that we can close sales outs.
<unk> on the PPE side.
Yeah.
Great the other.
And Alex Smith regarding what we thought was with Unilever and then craft scientists severity was there anything.
Any updates on that is there anything potential revenue coming from any of those yeah. So the union later 1.
Is definitely adapted because they did have some products that are heavily into the PPE side for the year.
1 is definitely something that we were believing and long term, we're not really focusing on the Kraft Heinz we're focusing on.
Unilever's relationship.
But regarding like anything that wasn't.
We had to look at it from a point of view of what we're focusing on to drive the biggest returns to shareholders and our balance sheet and so we wanted to stay out of things that had too much of dynamic ups and downs and that we couldn't deliver to profitably our had risks of agent versus principal revenue recognitions.
Okay, and then regarding the $1 million and most of the cannabis revenue run rate that you expect to hit later this year.
Can you just talk about is that just based on the 6 skus that you have now or is there an assumption that you need to have more skus being introduced actually reached that number.
Whats behind that $1 million per month run rate I guess.
It's definitely starting now.
Skus than expanding but Tony can go into more detail on it yeah, yeah, yeah, So and we wanted to guess it from color on the cannabis revenue.
We want them.
Increase and grow the business much more aggressively than that so if we want to be conservative and this will include all the skus. So all the strength in Quebec, which has a separate portfolio from the Skus day in the rest of the provinces.
Okay.
Okay and.
Then I guess for last question on on the sprout.
So it looks like you had $28 million in annualized revenue that they had realized.
And so presumably that $7 million a quarter, but I guess youre getting 50% on that that's how we should be looking at the contribution for the upcoming first quarter and then going forward.
How you're recognizing the revenue on the <unk>.
No.
No. These are fully consolidated Neptune acquired a controlling position with crowd. So the way we are our consolidated total revenue all sprout into their next 2 on our financial statements.
The portion of ownership.
Belongs to other equity owner at Sprouts.
Can be seen in other comprehensive income on the <unk> line in both the P&L and.
And the balance sheet.
Okay, Alright, that's it from me thank you.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Okay.