Executive Summary

Fiscal Q3 2024 deteriorated sharply: revenue fell to $7.60M (-37.7% y/y) and gross profit declined to $1.04M, while SG&A surged to $18.7M, driving a net loss of $19.17M and Adjusted EBITDA loss of $18.45M .
The company issued a going-concern warning citing a minimal cash balance ($1.23M at quarter-end), near-term funding needs, and risks to its NASDAQ listing if capital cannot be raised; management is evaluating debt financing and asset divestitures, including Sprout Organics .
Strategic actions in Q3 included appointing Stifel as exclusive advisor for potential Sprout divestiture, securing a receivables factoring facility for Biodroga ($3M capacity, expandable to $8M), and pursuing (then reassessing) a Datasys LOI; operational results nonetheless weakened, largely from Food & Beverage revenue declines .
No Q3 2024 earnings call transcript was available in the document catalog; the Q3 press release did not include conference call details, limiting visibility into intra-quarter trends and guidance .
Street consensus (S&P Global) for revenue/EPS was unavailable, preventing an estimates-based beat/miss assessment for Q3 2024; investors should focus on liquidity, legal expense spikes, and strategic alternatives disclosure for stock reaction catalysts .

What Went Well and What Went Wrong

What Went Well

Secured additional liquidity levers: Biodroga entered an A/R factoring facility with $3M available, expandable to $8M, which can support working capital needs for the nutraceuticals business .
Initiated strategic review steps for Sprout: Stifel appointed as exclusive financial advisor to explore divestiture alternatives for Sprout Organics, potentially unlocking value and reducing cash burn .
Derivative revaluation provided non-cash other income: Q3 showed a $1.60M gain on revaluation of derivatives (though overshadowed by other expense items), evidencing some financial offset mechanisms .

What Went Wrong

Revenue and profitability deterioration: Q3 total revenue fell to $7.60M from $12.21M y/y, gross profit dropped to $1.04M, and net loss ballooned to $19.17M (vs. $(0.50)M y/y), driven primarily by Food & Beverage revenue declines and elevated costs .
SG&A spiked materially: SG&A increased to $18.7M from $8.7M y/y (+115%), primarily due to a $13.5M rise in legal fees and settlements, pressuring margins and cash .
Liquidity risk escalated: Cash was $1.23M at Q3-end; management disclosed “minimal cash balance,” near-term funding needs, and possible need to cease operations absent financing, highlighting acute going-concern risk .

Financial Results

Consolidated P&L and EPS (USD)

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Total Revenues ($USD)	$12.209M	$10.628M	$8.740M	$7.600M
Gross Profit ($USD)	$1.881M	$2.811M	$(0.568)M	$1.035M
SG&A ($USD)	$8.727M	$10.041M	$3.836M	$18.733M
Net Income (Loss) ($USD)	$(0.497)M	$(6.400)M	$(5.337)M	$(19.170)M
Adjusted EBITDA ($USD, non-GAAP)	$0.459M	$(7.267)M	$(3.220)M	$(18.453)M
Basic EPS ($USD)	$2.34	$(0.30)	$(1.38)	$(4.14)

Margins (computed from cited data)

Margin	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Gross Margin %	15.4%	26.4%	-6.5%	13.6%
Net Income Margin %	-4.1%	-60.2%	-61.1%	-252.2%
Adjusted EBITDA Margin % (non-GAAP)	3.8%	-68.4%	-36.8%	-242.8%

Balance Sheet KPIs (quarter-end, USD)

KPI	Q3 2023 (Dec 31, 2022)	Q1 2024 (Jun 30, 2023)	Q2 2024 (Sep 30, 2023)	Q3 2024 (Dec 31, 2023)
Cash & Cash Equivalents	n/a	$1.380M	$4.751M	$1.233M
Total Current Assets	n/a	$23.399M	$23.447M	$16.600M
Total Current Liabilities	n/a	$45.026M	$49.761M	$73.417M
Working Capital	n/a	$(21.627)M	$(26.314)M	$(56.817)M
Total Assets	n/a	$30.538M	$30.093M	$23.026M
Equity (Deficiency) attributable to equity holders	n/a	$(14.998)M	$(16.706)M	$(31.247)M

Notes:

“n/a” for Q3 2023 balance sheet items reflects focus on the income statement comparative disclosures provided in the Q3 2024 8-K .
Working capital as defined by the company: current assets minus current liabilities .

Segment/Business Notes

Management attributed the y/y revenue decline primarily to Food & Beverage weakness; quantitative segment breakdown was not disclosed in Q3 materials .
Prior quarter KPIs indicated Sprout gross margin at 26% and Biodroga at 28% in Q1 2024; no Q3 margin disclosure by segment was provided .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q4 outlook	Not provided	Not provided	Maintained: no formal guidance
Margins (Gross/Adj. EBITDA)	FY/Q4 outlook	Not provided	Not provided	Maintained: no formal guidance
OpEx/SG&A	FY/Q4 outlook	Not provided	Not provided	Maintained: no formal guidance
Liquidity/Capital Actions	Near term	Strategic alternatives under review	Considering debt financing and asset divestitures due to minimal cash balance and going-concern risk	New disclosure of heightened risk
NASDAQ Listing Risk	Near term	Not explicitly guided	Risk to maintain listing given lack of cash and share price	New disclosure

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available; the Q3 press release did not include conference call details . Themes are drawn from company disclosures across Q1–Q3 FY2024.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2024)	Trend
Sprout strategic alternatives	Q2: Board approved plan to spin out majority of Sprout stake; converted Sprout debt to equity, raising ownership to ~89.5% . Q1: Term sheet with Morgan Stanley to exchange Sprout debt for equity; extended note maturity; expanded inventory financing .	Stifel appointed as exclusive advisor to review Sprout divestiture alternatives .	Increasing focus on separation/divestiture
Liquidity and financing	Q2: Repaid $2.3M senior secured notes; raised ~$4.5M in offering . Q1: Closed ~$4M offering; expanded financing facilities .	Biodroga A/R factoring facility ($3M, expandable to $8M); minimal cash; considering financing and asset sales .	Liquidity stress intensifying
Legal/settlements expense	Q1/Q2: No extraordinary legal spike noted in highlights .	SG&A increase driven by $13.5M legal fees and settlements .	New material headwind
Food & Beverage performance	Q1: Food & Beverage drove gross profit improvement; Sprout margin 26% . Q2: Revenues down y/y largely due to Food & Beverage .	Revenue decline “largely due to decrease in Food & Beverage revenues” .	Deteriorating
M&A/partnerships	Q2: Operational/financing actions; no M&A . Q1: Term sheet (Morgan Stanley) .	LOI to acquire Datasys later deemed non-viable under original terms; exploring revised structure .	Evaluating but uncertain

Management Commentary

“As of the date this press release, there is minimal cash balance at the Company. The Company requires funding in the very near term… The Company’s lack of cash resources and current share price may adversely affect its ability to raise new capital, maintain its NASDAQ listing… If the Company is unable to obtain funding in the near term, it may have to cease operations.”
“Consolidated SG&A expenses of $18.7 million… primarily due to a $13.5 million increase in legal fees and settlements…”
“Consolidated net revenue of $7.6 million, down $4.6 million for the same period last year… largely due to a decrease in Food & Beverage revenues…”
Strategic updates: “Stifel… to act as exclusive financial advisor… regarding divestiture alternatives related to Sprout Organics”; “Biodroga… entered into an accounts receivable factoring facility… $3 million… up to $8 million”; “LOI to acquire Datasys… no longer viable… discussions regarding a revised transaction structure…”

Q&A Highlights

No Q3 2024 conference call transcript was available, and the Q3 press release did not include conference call details; therefore, no Q&A highlights could be sourced from primary documents for this quarter .

Estimates Context

S&P Global consensus estimates for NEPT’s Q3 2024 revenue and EPS were unavailable; as a result, an estimates-based beat/miss analysis cannot be provided. Values retrieved from S&P Global were unavailable due to missing mapping in SPGI data infrastructure.*

Implications: Without consensus anchors, revisions are likely to skew downward for FY trajectories given revenue contraction, legal-driven SG&A spike, and going-concern disclosure .

Key Takeaways for Investors

Liquidity risk is acute: minimal cash and a large working capital deficit ($56.8M) materially constrain operations; near-term financing or asset sales are pivotal to continuity .
Profitability deteriorated sharply: net loss expanded to $19.17M and Adjusted EBITDA to $(18.45)M in Q3, with gross margin compressing to 13.6% and SG&A rising on legal costs .
Strategic alternatives are accelerating: Stifel advising on Sprout divestiture; factoring supports Biodroga; Datasys LOI reconsidered—expect headline risk around transactions and capital raises .
NASDAQ listing is at risk per management disclosure; potential delisting could pressure the share price and limit institutional participation .
Food & Beverage weakness is the primary revenue drag; absent a near-term recovery or portfolio action, revenue trend remains negative .
With no formal guidance and limited call disclosure, trading will be driven by funding announcements, legal developments, and divestiture progress; headline sensitivity is high .
Near-term stance: prioritize downside protection and monitor liquidity milestones; medium-term thesis depends on successful restructuring/divestiture and cost normalization, especially legal/settlement costs .

Neptune Wellness Solutions Inc. (NEPT)·Q3 2024 Earnings Summary