Cannabis Extraction Ramp Up Now Underway

Q3 Financial and Operational Highlights for the 3-month period ended December 31, 2018 compared to the 3-month period ended December 31, 20171

Standard Cannabis Processing Licence received from Health Canada on January 4 th , 2019.

, 2019. Cannabis inventories on site and initial production underway.

Ethanol (solvent) processing capacity expansion toward 200,000 kg on track for completion by the end of March 2019 , with startup expected early next fiscal year upon regulatory approval.

, with startup expected early next fiscal year upon regulatory approval. Expansion of manufacturing capability to offer cannabis oil speciality capsules in partnership with Lonza announced on December 21, 2018 – consistent with value-added, differentiated strategy.

– consistent with value-added, differentiated strategy. Comparable nutraceutical revenues increased 2% to $6.5 million in the current quarter versus revenues of $6.4 million for the three-month period ended December 31, 2017 (excluding krill oil manufacturing business).

in the current quarter versus revenues of for the three-month period ended (excluding krill oil manufacturing business). Net loss of $3.7 million versus a net income of $5.9 million in the comparative quarter reflecting investment in cannabis business development in the current quarter, and a gain of $8.8 million realized from the deconsolidation of Acasti Pharma (non-control position) in the comparative quarter.

versus a net income of in the comparative quarter reflecting investment in cannabis business development in the current quarter, and a gain of realized from the deconsolidation of Acasti Pharma (non-control position) in the comparative quarter. Non-IFRS operating loss 2 was $1.9 million compared to $1.3 million in the comparative quarter reflecting investment in cannabis business development and corporate development expenses.

was compared to in the comparative quarter reflecting investment in cannabis business development and corporate development expenses. Cash balance of $15.6 million as at December 31, 2018 .

as at . Subsequent to quarter-end, on February 13, 2019 , Neptune filed a base shelf prospectus intended to give added flexibility to finance future business opportunities by accessing the capital markets on a timely and cost-effective basis.

LAVAL, QC, Feb. 13, 2019 /PRNewswire/ - Neptune Wellness Solutions Inc. ("Neptune" or the "Corporation") (NASDAQ: NEPT) (TSX: NEPT), today announced its financial and operating results for the 3-month period ended December 31, 2018. All amounts are in Canadian dollars.

"We are excited to have achieved licencing by Health Canada to process cannabis. Cannabis inventories are in-house and production is now ramping up!" stated Jim Hamilton, President and Chief Executive Officer of Neptune. "Our Phase II investments to expand our plant's capacity to 200,000 kg are on track for completion by the end of this fiscal year with start-up expected early in the next fiscal year, subject to obtaining the necessary regulatory approvals. Additionally, based on customer feedback and market developments, we have increased our projected processing sales volumes for the first year of commercialization to between 30 and 50 metric tons. We have also initiated planning for our Phase III expansion toward 6,000 MT (6 million kg) of processing capability. We therefore continue to expect volumes to cover our cannabis business operation costs and to achieve positive EBITDA and operational cash flow next fiscal year."











1 Excluding cardiovascular segment. 2 See "Caution Regarding Non-IFRS Financial Measures" and "Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA (non-IFRS operating segment loss) and net income (loss) to non-IFRS operating loss" which follow.

"We ended the quarter with a strong cash position of $15.6 million. The base shelf prospectus that we filed today is designed to increase our financial flexibility and readiness to respond in a timely manner to possible future growth and investment opportunities in addition to our current plans. We believe Neptune's combination of long-standing expertise in extraction and purification, our current research and development for proprietary formulations, and our ability to offer unique, value-added delivery forms positions us to emerge as a differentiated provider of science-based cannabis products. We are very excited to be moving ahead with Neptune Wellness Solutions' new growth trajectory in this expanding global market," Hamilton concluded.

Financial Results Highlights

Cannabis investments were initiated during the three-month period ended December 31, 2017. Therefore, 3 months of cannabis results are included in the comparative results indicated below.

Third Quarter Financial Results

Revenues increased at $6.5 million for the three-month period ended December 31, 2018 , versus revenues excluding krill oil manufacturing business sold on August 7, 2017 of $6.4 million for the three-month period ended December 31, 2017 .

for the three-month period ended , versus revenues excluding krill oil manufacturing business sold on of for the three-month period ended . Net loss was $3.7 million for the current quarter, versus a net income of $5.9 million for the three-month period ended December 31, 2017 .

for the current quarter, versus a net income of for the three-month period ended . Non-IFRS operating loss1 was $1.9 million for the current quarter, compared to $1.3 million for the three-month period ended December 31, 2017 . The variation of $0.6 million is mostly coming from the investment into the cannabis business.

Year-to-Date Financial Results

Revenues increased at $18.8 million for the nine-month period ended December 31, 2018 , versus revenues excluding krill oil manufacturing business sold on August 7, 2017 of $17.6 million for the nine-month period ended December 31, 2017 .

for the nine-month period ended , versus revenues excluding krill oil manufacturing business sold on of for the nine-month period ended . Net loss was $10.8 million for the nine-month period ended December 31, 2018 , versus a net income of $24.7 million for the nine-month period ended December 31, 2017 .

for the nine-month period ended , versus a net income of for the nine-month period ended . Non-IFRS operating loss1 was $5.4 million for the nine-month period ended December 31, 2018 , compared to $0.8 million for the nine-month period ended December 31, 2017 . The variation of $4.6 million is mostly coming from the investment into the cannabis business.

Consolidated Results

On a consolidated basis, until the loss of control on December 27, 2017, the three-month period ended December 31, 2017 includes a net loss of $5.2 million and a Non-IFRS operating loss1 of $4.2 million for Neptune's subsidiary, Acasti, which is actively engaged in clinical studies and research and development. The nine-month period ended December 31, 2017 includes a net loss of $12.4 million and a Non-IFRS operating loss1 of $9.7 million for Acasti.

Cash and cash equivalents were $15.6 million as at December 31, 2018. Neptune's current cash position is sufficient to execute its existing business plan.











1 See "Caution Regarding Non-IFRS Financial Measures" and "Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA (non-IFRS operating segment loss) and net income (loss) to non-IFRS operating loss" which follow.

About Neptune Wellness Solutions Inc.

Neptune Wellness Solutions specializes in the extraction, purification and formulation of health and wellness products. Licensed by Health Canada to process cannabis at its 50,000 square foot facility located in Sherbrooke, Quebec, Neptune brings decades of experience in the natural products sector to the legal cannabis industry. Leveraging its scientific and technological expertise, Neptune focuses on the development of value-added and differentiated products for the Canadian and global cannabis markets. Neptune's activities also include the development and commercialization of turnkey nutrition solutions and patented ingredients such as MaxSimil®, and of a variety of marine and seed oils. Its head office is located in Laval, Quebec.

Caution Regarding Non-IFRS Financial Measures

The Corporation uses two adjusted financial measures, Adjusted Segment Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) called non-IFRS operating segment loss when a segment is in a loss position, and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) called non-IFRS operating loss when the Corporation is in a loss position, to assess its operating performance. These non-IFRS financial measures are directly derived from the Corporation's financial statements and are presented in a consistent manner. The Corporation uses these measures for the purposes of evaluating its historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the Corporation to plan and forecast for future periods as well as to make operational and strategic decisions. The Corporation believes that providing this information to investors, in addition to IFRS measures, allows them to see the Corporation's results through the eyes of management, and to better understand its historical and future financial performance.

Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Corporation uses Adjusted Segment EBITDA (or non-IFRS operating segment loss when in a loss position) and Adjusted EBITDA (or non-IFRS operating loss when in a loss position) to measure its performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because the Corporation believes it provides meaningful information on the Corporation's financial condition and operating results. Neptune's method for calculating Adjusted Segment EBITDA (or non-IFRS operating segment loss) and Adjusted EBITDA (or non-IFRS operating loss) may differ from that used by other corporations.

Neptune obtains its Adjusted Segment EBITDA (or non-IFRS operating segment loss) measurement by adding depreciation and amortization and stock-based compensation to segment income (loss) from operating activities before corporate expenses. Neptune obtains its Adjusted EBITDA (or non-IFRS operating loss) measurement by adding to net income (loss), net finance costs, depreciation and amortization, income tax expense and by subtracting income tax recovery and net finance income. Other items such as stock-based compensation, impairment loss on inventories, net gain on sale of assets, gain on loss of control of subsidiary and legal fees related to royalty settlements that do not impact core operating performance of the Corporation are excluded from the calculation as they may vary significantly from one period to another. Excluding these items does not imply they are non-recurring.

Forward Looking Statements

Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the U.S. securities laws and Canadian securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of Neptune to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes," "belief," "expects," "intends," "projects," "anticipates," "will," "should," or "plans" to be uncertain and forward-looking. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Forward-looking information in this press release includes, but is not limited to, information or statements about our ability to successfully develop, produce, supply, promote or generate any revenue from the sale of any cannabis-based products in the legal cannabis market.

The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement and the "Cautionary Note Regarding Forward-Looking Information" section contained in Neptune's latest Annual Information Form (the "AIF"), which also forms part of Neptune's latest annual report on Form 40-F, and which is available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on the investor section of Neptune's website at www.neptunecorp.com. All forward-looking statements in this press release are made as of the date of this press release. Neptune does not undertake to update any such forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in Neptune public securities filings with the Securities and Exchange Commission and the Canadian securities commissions. Additional information about these assumptions and risks and uncertainties is contained in the AIF under "Risk Factors".

Neither NASDAQ nor the Toronto Stock Exchange accepts responsibility for the adequacy or accuracy of this release.

Conference Call Details

Neptune will be holding a conference call on February 13, 2019, at 5:00 PM (EST) to discuss its third quarter results for the three months period ended December 31, 2018.

Date: Wednesday, February 13, 2019 Time: 5:00 PM Eastern Standard Time Call: 1-888-231-8191 Conference ID: 6499408 Webcast: A live webcast and presentation of the results can be accessed at:

https://neptunecorp.com/en/investors/events-and-presentations/

A replay of the call will be available for replay shortly after the call's completion, until March 13, 2019. The replay can be accessed online in the Investors section of Neptune's website under Investor Events and Presentations. It is also under this section that you will find the archive of the webcast, along with its accompanying presentation.

Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 and net loss to non-IFRS operating loss1

(Expressed in thousands of dollars)

Three-month period ended December 31, 2018



Nutraceutical

Cannabis

Corporate

Total



$

$

$

$ Total revenues

6,538

–





6,538 Gross margin

2,228

–





2,228

















R&D expenses, net of tax credits and grants

(130)

(1,647)





(1,777) SG&A expenses

(1,203)

(497)





(1,700) Segment income (loss) from operating activities before corporate expenses

895

(2,144)





(1,249)

















Unallocated costs:















Corporate general and administrative expenses









(2,378)

(2,378) Net finance income









31

31 Income tax expense









(62)

(62) Net loss













(3,658)

















Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 reconciliation















Segment income (loss) from operating activities before corporate expenses

895

(2,144)







Add:















Depreciation and amortization

188

561







Stock-based compensation

126

277







Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1

1,209

(1,306)

























Non-IFRS operating loss1 reconciliation















Net loss













(3,658) Add (deduct):















Depreciation and amortization













804 Net finance income













(31) Stock-based compensation













900 Income tax expense













62 Non-IFRS operating loss1













(1,923)





1 See "Caution Regarding Non-IFRS Financial Measures".

Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 and net income to non-IFRS operating loss1

(Expressed in thousands of dollars)

Three-month period ended December 31, 2017



















Inter-segment







Nutraceutical

Cannabis

Cardiovascular

Corporate

eliminations

Total



$

$

$

$

$

$ Total revenues

7,315

–

–





–

7,315 Gross margin

2,015

–

–





–

2,015

























R&D expenses, net of tax credits and grants

(42)

(1,441)

(4,261)





581

(5,163) SG&A expenses

(1,023)

(289)

(908)





–

(2,220) Other income - net gain on sale of assets

(147)

–

–





–

(147) Segment income (loss) from operating activities before corporate expenses

803

(1,730)

(5,169)





581

(5,515)

























Gain on loss of control of subsidiary

–

–

–

8,783

–

8,783

























Unallocated costs:























Corporate general and administrative expenses













(1,455)





(1,455) Net finance costs













(419)





(419) Income tax expense













(53)





(53) Net income





















1,341

























Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 reconciliation























Segment income (loss) from operating activities before corporate expenses

803

(1,730)

(5,169)





581



Add:























Depreciation and amortization

186

524

670





(581)



Stock-based compensation

4

66

330





–



Other income - net gain on sale of assets

147

–

–





–



Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1

1,140

(1,140)

(4,169)





–





























Non-IFRS operating loss1 reconciliation























Net income





















1,341 Add (deduct):























Depreciation and amortization





















852 Net finance costs





















419 Stock-based compensation





















529 Other income - net gain on sale of assets





















147 Gain on loss of control of subsidiary





















(8,783) Income tax expense





















53 Non-IFRS operating loss1





















(5,442)





1 See "Caution Regarding Non-IFRS Financial Measures".

Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 and net loss to non-IFRS operating loss1

(Expressed in thousands of dollars)

Nine-month period ended December 31, 2018



Nutraceutical

Cannabis

Corporate

Total



$

$

$

$ Total revenues

18,778

–





18,778 Gross margin

6,078

–





6,078

















R&D expenses, net of tax credits and grants

(316)

(4,825)





(5,141) SG&A expenses

(3,386)

(1,473)





(4,859) Segment income (loss) from operating activities before corporate expenses

2,376

(6,298)





(3,922)

















Unallocated costs:















Corporate general and administrative expenses









(6,561)

(6,561) Net finance costs









(171)

(171) Income tax expense









(154)

(154) Net loss













(10,808)

















Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 reconciliation















Segment income (loss) from operating activities before corporate expenses

2,376

(6,298)







Add:















Depreciation and amortization

562

1,571







Stock-based compensation

369

802







Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1

3,307

(3,925)

























Non-IFRS operating loss1 reconciliation















Net loss













(10,808) Add (deduct):















Depreciation and amortization













2,291 Net finance costs













171 Stock-based compensation













2,785 Income tax expense













154 Non-IFRS operating loss1













(5,407)

















Total assets3

21,097

49,434

22,085

92,616 Cash, cash equivalents, and restricted short-term investment

918

–

14,725

15,643 Working capital2

2,069

(1,366)

13,721

14,424











1 See "Caution Regarding Non-IFRS Financial Measures".

2 The working capital is presented for information purposes only and represents a measurement of the Corporation's short-term financial health mostly used in financial circles. The working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by IFRS, the results may not be comparable to similar measurements presented by other public companies.

3 The corporate reportable segment assets include the investment in Acasti.

Reconciliation of Segment income (loss) from operating activities before corporate expenses to Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 and net income to non-IFRS operating loss1

(Expressed in thousands of dollars)

Nine-month period ended December 31, 2017



















Inter-segment







Nutraceutical

Cannabis

Cardiovascular

Corporate

eliminations

Total



$

$

$

$

$

$ Total revenues

20,640

–

–





–

20,640 Gross margin

4,866

–

–





–

4,866

























R&D expenses, net of tax credits and grants

(780)

(1,441)

(9,592)





1,742

(10,071) SG&A expenses

(3,950)

(289)

(2,761)





–

(7,000) Other income - net gain on sale of assets

23,724

–

–





–

23,724 Segment income (loss) from operating activities before corporate expenses

23,860

(1,730)

(12,353)





1,742

11,519

























Gain on loss of control of subsidiary

–

–

–

8,783

–

8,783

























Unallocated costs:























Corporate general and administrative expenses













(4,324)





(4,324) Net finance costs













(1,847)





(1,847) Income tax expense













(40)





(40) Net income





















14,091

























Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1 reconciliation























Segment income (loss) from operating activities before corporate expenses

23,860

(1,730)

(12,353)





1,742



Add:























Depreciation and amortization

1,630

524

2,005





(1,742)



Stock-based compensation

157

66

661





–



Impairment loss on inventories

1,719

–

–





–



Other income – net gain on sale of assets

(23,724)

–

–





–



Legal fees related to royalty settlements

91

–

–





–



Adjusted Segment EBITDA1 (non-IFRS operating segment loss)1

3,733

(1,140)

(9,687)





–





























Non-IFRS operating loss1 reconciliation























Net income





















14,091 Add (deduct):























Depreciation and amortization





















2,774 Net finance costs





















1,847 Stock-based compensation





















1,442 Impairment loss on inventories





















1,719 Other income - net gain on sale of assets





















(23,724) Gain on loss of control of subsidiary





















(8,783) Legal fees related to royalty settlements





















91 Income tax expense





















40 Non-IFRS operating loss1





















(10,503)

























Total assets

24,636

41,381

6,079

27,661

–

99,757 Cash, cash equivalents, short-term investment and restricted short-term investment

2,395

–

–

26,191

–

28,586 Working capital2

4,363

379

–

25,202

–

29,944











1 See "Caution Regarding Non-IFRS Financial Measures".

2 The working capital is presented for information purposes only and represents a measurement of the Corporation's short-term financial health mostly used in financial circles. The working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by IFRS, the results may not be comparable to similar measurements presented by other public companies.

SOURCE Neptune Wellness Solutions Inc.

Related Links

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