Mr. Jim Hamilton reports

NEPTUNE ANNOUNCES SECOND QUARTER RESULTS

Neptune Technologies & Bioressources Inc. has released its financial and operating results for the second quarter ended Aug. 31, 2016. All amounts are in Canadian dollars.

"We are very happy to report substantial year-over-year revenue growth and also a sequential increase in revenue over the first quarter of fiscal 2017," stated Jim Hamilton, president and chief executive officer of Neptune. "These results reflect continued progress in our transformation into a provider of great nutrition solutions for optimal health and well-being.

"Growth in the second quarter and the successful evolution into a nutrition solutions provider reflect the contribution of both our Biodroga turnkey solutions and our specialty ingredients business. Turnkey solutions now amount to approximately 55 per cent of revenue, and we are targeting an average annual growth of 20 per cent over the upcoming years. Furthermore, our specialty ingredients business has now recorded its first sale in the Chinese market, while we realized the first sales from our newest specialty ingredient, MaxSimil. We are very enthusiastic about MaxSimil and have secured expanded worldwide distribution rights to fully capitalize on its market potential.

"Subsequent to the quarter-end, we were pleased to announce that we have entered into a broad patent cross-licensing agreement with Aker Biomarine, thus ending all outstanding litigation. The settlement provides Neptune with $6-million (U.S.) in net royalty payments, which will strengthen the balance sheet and enable us to further invest in and grow wellness solutions.

"Our growth and diversification strategy has continued to gain momentum. As a result, we have revised our annual revenue guidance for fiscal 2017, and now expect revenues of above $45-million (from $43-million) and continue to anticipate a double-digit adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin."

Second quarter financial results

Nutraceutical business results

• Nutraceutical revenues were $11.6-million for the three-month period ended Aug. 31, 2016, versus $4.4-million in the second quarter ended Aug. 31, 2015.
• Net loss was $668,000 for the current quarter, versus a net loss of $1.9-million in the prior year.
• Adjusted EBITDA was $769,000 for the current quarter, compared with a non-IFRS (international financial reporting standards) operating loss of $1.6-million in the prior year.

The reduction of the net loss for the quarter reflects improvement of the EBITDA and finance income. The prior-year net loss also included unallocated production overhead costs. The nutraceutical segment's second quarter EBITDA improvement was mainly driven by higher revenues and a stronger gross margin, in percentage and in dollars, related to cost reduction initiatives, including plant efficiencies and the Biodroga acquisition contribution.

Project Turbo, a company-wide initiative to drive efficiencies and operating performance, was put in place during the second quarter of fiscal 2016. To date (as of Aug. 31, 2016), approximately 85 per cent of total expected cost savings, or approximately $5-million, was realized.

Consolidated results (including Acasti)

• Consolidated revenues totalled $11.6-million for the three-month period ended Aug. 31, 2016, up from $4.4-million for the quarter ended Aug. 31, 2015.
• Net loss was $2.4-million for the current quarter, versus a net loss of $2.6-million in the prior year.
• Non-IFRS operating loss was $857,000 for the current quarter, versus $3.1-million in the prior year.

On a consolidated basis, the current quarter includes a non-IFRS operating loss of $1.6-million and a net loss of $2.3-million for Neptune's subsidiary, Acasti, which is actively engaged in clinical studies and research and development. In the corresponding prior-year quarter ending Aug. 31, 2015, Acasti recorded a non-IFRS operating loss of $1.5-million and a net loss of $1.2-million.

Year-to-date financial results

Nutraceutical business results

• Nutraceutical revenues were $22.8-million for the six-month period ended Aug. 31, 2016, versus $7.4-million for the six-month period ended Aug. 31, 2015.
• Net loss was $1.9-million for the six-month period ended Aug. 31, 2016, versus a net loss of $6.4-million in the prior year.
• Adjusted EBITDA was $1.9-million for the six-month period ended Aug. 31, 2016, compared with a non-IFRS operating loss of $4.8-million in the prior year.

The reduction of the net loss reflects improvement of the EBITDA. The prior-year net loss also included unallocated production overhead costs. The nutraceutical segment year-to-date adjusted EBITDA improvement was mainly driven by higher revenues and a stronger gross margin, in percentage and in dollars, related to cost reduction initiatives, including plant efficiencies and the Biodroga acquisition contribution.

Consolidated results (including Acasti)

• Consolidated revenues totalled $22.8-million for the six-month period ended Aug. 31, 2016, up from $7.1-million for the six-month period ended Aug. 31, 2015;
• Net loss was $6.2-million for the six-month period ended Aug. 31, 2016, versus a net loss of $7.5-million in the prior year;
• Non-IFRS operating loss of $2-million for the six-month period ended Aug. 31, 2016, versus $8.3-million in the prior year.

On a consolidated basis, the six-month period ended Aug. 31, 2016, includes a non-IFRS operating loss of $3.9-million and a net loss of $5.5-million for Acasti. In the corresponding prior-year period ending Aug. 31, 2015, Acasti recorded a non-IFRS operating loss of $3.4-million and a net loss of $2.2-million.

Cash flows

Consolidated cash and short-term investments, including $3-million of restricted short-term investments, were $15.2-million as at Aug. 31, 2016, with $7.1-million for the nutraceutical segment and $8.1-million for Acasti. If Acasti does not raise additional funds, there exists a material uncertainty that casts substantial doubt about Acasti's ability to continue as a going concern, and therefore, realize its assets and discharge its liabilities in the normal course of business. Acasti's management has reasonable expectations that it will be able to raise additional funds.

Conference call details

Neptune will be holding a conference call on Oct. 12, 2016, at 5 p.m. ET to present its results for the second quarter ended Aug. 31, 2016.

Date:  Wednesday, Oct. 12, 2016

Time:  5 p.m. ET

Conference ID:  86779865

Call:  1-877-223-4471 (within Canada and the United States), 1-647-788-4922 (outside Canada and the U.S.); please dial in 15 minutes before the call begins

Webcast:  on Neptune's website

An archived recording of the conference call will also be available on Neptune's website shortly after the call.

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