Neptune Technologies (NEPT) Q1 2021 Earnings Call Transcript

Neptune Technologies (NEPT)
Q1 2021 Earnings Call
Aug 11, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Neptune Wellness, Inc.'s first-quarter fiscal 2021 investor call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I'd now like to hand the conference over to your first speaker today, Scott Van Winkle, you may begin.

Scott Van Winkle -- Investor Relations

Good afternoon, everyone, and thank you for joining us. This afternoon, we issued a press release announcing our results for the first quarter of 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 of the U.S.

Securities Commission and are available on 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 statement, except as may be required by Canadian and U.S. securities laws.

A number of assumptions were made by us in preparing these forward-looking statements which are subject to risks. Results may differ materially from what is projected and details in 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 Cammarata, our president and chief executive officer; and Dr. Toni Rinow, chief financial officer.

Michael will begin for providing a strategic and operational update, and Toni will follow with a review of our first-quarter financial results. Now let me turn the call over to Michael. Michael?

Michael Cammarata -- President and Chief Executive Officer

Thank you, Scott, and good afternoon, everyone. As we embark on a new fiscal year and a new chapter for Neptune Wellness, I'm pleased to report that our first fiscal-quarter revenue has totaled more than $21.3 million, nearly quadrupling revenue year over year and more than doubling fourth-quarter revenue of fiscal-year 2020. Additionally, we generated improvements in gross profit margin, reflecting our increased volumes and efficiencies. And this is core to our financial strategy.

This is a reflection of the hard work of our team members to remain agile and responsive to the changing market conditions during the COVID-19 pandemic and the rapid execution of our new product initiatives. We have built a new Neptune with improvements across the platform in preparation for continued growth, which is being driven by our fully operational cannabis and hemp business in Canada and the United States, as well as our health and wellness innovations and our Turnkey Solutions business unit. We are starting to see momentum from our hemp-derived consumer brand and our hand sanitizer partnerships are laying the foundation for future opportunities. Moving into fiscal-year 2021, are the shift from a B2B extraction company to a fully integrated health and wellness platform with a strong B2C focus is well under way.

With now one P&L reporting on all of our business units, we stay focused on integrated growth and market share, while remaining agile in our response to the market. We will also ensure that our products and our brands are supported by the best teams, independent of the business unit. Q1 was truly a turning point for our company. Our focus for fiscal-year 2021 is to execute against the strategy of a fully integrated health and wellness business with eyes toward accelerated growth building out our brands and innovations, moving closer to the consumer, and offering exceptional service to our B2B customers.

We are building for the future with a focus on CPG, a direct-to-consumer business model, and enhancing our own IP. Never before has Neptune had more opportunities to capitalize on proven health and wellness product categories while leveraging extraction nutrition and cannabis expertise to take advantage of the plant-based revolution we are seeing expanding all around us. Our product development and logistics capabilities that have been at the foundation of our Turnkey Solutions are now being leveraged across our organization, including multiple Health and Wellness product categories, brands and innovations, and our shift to a low-cost infrastructure and scalable business model is setting our teams up for success. Our consumer and hemp-based products are selling across North America, while we expand our retail footprint and market share.

As more clarity develops around cannabis regulations and countries move toward legalization in the future, we believe we can quickly scale our brands to introduce additional cannabis products to complement our hemp and essential oil lines. We will not waste time waiting but focus on the markets where we can make an impact today. Giving us a faster path to profitability and growth than our peers in cannabis. Furthermore, our work with like-minded established CPG companies while helping to ensure that our natural and effective products can touch every room of the household from the time customers wake up in the morning until they go to bed at night.

Everything from toothpaste to deodorants to hand sanitizers and disinfectant wipes can be transformed by the antifungal antibacterial and moisturizing properties of the cannabinoids. There is an opportunity to take cannabis beyond recreational consumption. Cannabinoid and plant-based ingredients are the future of CPG, and we stand at the forefront through innovative partnerships and product development. Our emerging consumer brands are currently being sold direct-to-consumer and through a retail partnership with Albertsons, among others.

We will be launching with Amazon by Q3, and we are investing in e-commerce as a way to stay close to the consumer. Our Jane Goodall branded lines of essential oils and hand sanitizers were launched before the end of the year. And we are advancing our R&D for disinfectant wipes, products which represent several billion-dollar market opportunities. And an area that needs new products and innovations to meet the demand.

In Canada, we recently announced the approval of a sales license from Health Canada to sell cannabis products, including edibles, extracts, and topical products. The authorization is in addition to our previously held processing license and proceeds the launch of our proprietary cannabis brands in Canada, which will be sold under the brand name Mood Ring. The authorization also complements our white label offering, providing additional value for our B2B customers. Our new hand sanitizers have emerged as an important product for our company.

Since July, our hand sanitizers have been sold in Costco stores. With initial distribution in the Northeast and Southeast United States. We have not yet found a ceiling for demand in these regions and will begin shipping to the Midwest and the West Coast in the coming months. Our hand sanitizer is effective, safe and provides a premier experience with a pleasant scent and application feel that uses essential oils, Alovera, and fruit extracts.

We currently offer six scented varieties, including Garden Mint, Fresh Linen, Orange Hibiscus, Eucalyptus, Lavender, and Fresh Lemon plus Tea Tree. We have a plan to feature seasonal scent offerings in the future. And we anticipate sustained demand for hand sanitizers as consumers maintain their healthy habits and look for products that are affordable and do more than just fill a practical need. The market for hand sanitizers is robust.

And we have seen dramatic growth this year, and we are very pleased with the consumer response thus far and working diligently to keep up with demand. On an operational side, our cold storage and additional operating space have been approved by Health Canada. And our Sherbrooke facility is now processing using cold ethanol, giving our production, our operations, products, and customers a significant advantage. At Sherbrooke, we are now processing and shipping products for all customers, including our recently announced new hemp extract customer we are positioned for strong growth in this new fiscal year.

We are continuing to build our leadership team and our sales organization to achieve the mission to redefine the health and wellness space. And the new hires from the past year are making an impact working alongside our existing and talented team. In July, Dr. Eric Gharakhanian joined our team as director of product development, health and wellness innovations.

He will be responsible for building our portfolio of products across personal and home care with a focus on sustainable sanitation wipes and hand sanitizers among other innovations. Eric joins Neptune from The Clorox Company, and his background as an organic chemist will be an asset for our product innovations pipeline and our sustainable initiatives. In addition to our strong leadership push, we are also in the process of modernizing our infrastructure and team resources, including a potential new top-tier global banking relationship that when finalized, will give us improved access to capital and credit. To further support our rapid growth, we have completed an equity financing in early July, both attracting new institutional investors and providing capital to support our rapid growth.

We are now quickly executing against our strategy and business plan. And we are starting to see the results. I look forward to sharing more updates as we center our efforts on our long-term potential of our CPG offerings, cannabis, and B2C opportunities as we are moving closer to the consumer and redefining the health and wellness experience. I will now turn it over to Toni for a detailed review of our first-quarter results.

Toni Rinow -- Chief Financial Officer

Thank you, Michael, and good afternoon, everyone. It is my pleasure to join you today. The first quarter was a strong quarter, producing robust revenue growth, led by our new health and wellness products and cannabis-related products. We also significantly improved gross margins and EBITDA with accelerated revenue growth with minimal additional capital investments.

Our growing volumes and focus on asset-light new product innovation is driving higher margins and improved returns. We are levering both our capital investments over the last couple of years and our investments in SG&A to build out a world-class team and the support for our anticipated growth. Now let me walk through the quarter. Total revenues for the three-month period ended June 30, 2020, increased 390% to over $21.3 million, compared to $4.4 million in the prior year.

On a sequential basis, compared to the fourth quarter of fiscal 2020, revenue increased 124%. Our sales growth momentum has continued into the second quarter. And we anticipate continued strong sequential and year-over-year growth during the second quarter. We anticipate second-quarter revenues between $28 million and $32 million once again up nearly fourfold from the prior year.

As Michael mentioned, we are very pleased with the strong response to our hand sanitizer introduction and are working to keep up with demand with significant further distribution opportunities. Please note that as we enter fiscal 2021, we are now operating on an integrated P&L across our entire health and wellness platform and are thus reporting as a single operating business rather than segment-based as in the past. This change reflects the full integration of our strategies for driving consumer brands, utilizing all of our capabilities. Having completed our major capital projects, we are now leveraging those assets with higher volumes and focused on new innovations that require minimal capital investments to support future growth and drive improved margins.

This is evident in the gross margin improvement we saw during the first quarter. Gross profits for the three-month period ended June 30, 2020, increased to $3.3 million or 15% of revenue compared to losses in both the previous quarter and prior year. We generated $4.4 million of increased gross profit from the fourth quarter of 2020 on $11.8 million of incremental revenue, reflecting strong incremental margins approaching 40%. This is a reflection of our ability to leverage our assets and the profile of our new innovations, and we continue to expect gross margin improvement as our volumes continue to expand.

Net loss for the three-month period ended June 30, 2020, amounted to $11.4 million, compared to a net loss of $6.5 million for the three-month period ended June 30, 2019. The decline in net loss reflects the increases in SG&A expenses and net finance costs, partly offset by increased gross profit. Adjusted EBITDA loss was $3.4 million for the three-month period ended June 30, 2020, compared to a net loss of $3.6 million in the prior-year period. The improvement in adjusted EBITDA is mainly attributable to an increase in gross profit, partially offset by an increase in SG&A expense.

Cash and cash equivalents were $25.5 million as of June 30, 2020. We recently completed a small secondary offering to provide the incremental capital to support our accelerated growth, attracting additional institutional investors and are in the process of evaluating additional non-dilutive options for capital to fund our growth and working capital needs. As I noted, we have initiated second-quarter revenue guidance of $28 million to $32 million, which reflects an estimated year-over-year growth of 330% to 390%. The anticipated growth reflects continued strong growth across our health and wellness platform, including our new club store distribution, as well as continued growth across our portfolio.

I will now turn the call over to the operator to open the line for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Gerald Pascarelli from Cowen. Your line is open.

Gerald Pascarelli -- Cowen and Company -- Analyst

Hi. Thanks very much for taking the questions. So congratulations on a really strong top line. I was hoping that you could maybe just provide us with a broad breakdown of what the contribution to the revenue number was this quarter? And again, not looking for exact amounts, but broadly speaking, I mean, did the bulk of this come from your extraction business or hand sanitizer? I know there was a lot of branded products in there this quarter.

I'm just trying to get an idea of what your mix looks like.

Toni Rinow -- Chief Financial Officer

Sure. Maybe I take this question. Thank you very much for the question. So actually, all of the business units have been doing rather fine.

This quarter. So growth was driven by the health and wellness business. And we have other products and the hand sanitizers, in that business unit, which are thermometers and oximeters. So the whole product family has been driving revenue for that business unit.

The other two business units have actually also done very well. The cannabis business unit has done very well with our existing customers and a new customer that we had announced in the prior quarter. But as well as the Turnkey and the Biodroga -- the pharma Biodroga business unit, which has actually performed well beyond expectations in the quarter. So, Gerald, actually, all of the business units have been doing rather well as we went through the quarter.

Gerald Pascarelli -- Cowen and Company -- Analyst

I guess stepping back for a second. With COVID obviously impacting foot traffic, did you see any impact, if any, on the quarter from COVID, or was it largely immune relative to what you reported? Just trying to think about if a normalized revenue number could have been even higher given the loss of foot traffic and a lot of the retail outlets?

Michael Cammarata -- President and Chief Executive Officer

Yes. I think during Q1, the opportunity for growth is there that we could have had with additional retail partners. Obviously, we are focused heavily on the club store, building relationships in grocery. There's a lot of other retailers that had shutdowns.

But as we started rolling out additional footprints in Q2 and also expanded into the hand sanitizer starting into Q2. So I think that there was an additional opportunity that was a little bit impacted on some of the retailers. But we were actually strategically positioned well for the pandemic because we started rolling out our drugstore and grocery partners early. And that was our focus initially.

Gerald Pascarelli -- Cowen and Company -- Analyst

Got it. Super helpful. One more, if I could squeeze it in. Just on the adult-use cannabis branding in Canada.

Can you just talk about -- provide some more color on your plans and maybe a time line to commercialization?

Michael Cammarata -- President and Chief Executive Officer

Yes. So we've actually been working on that for a while, and we got our license recently. We start to expect that our brand will site rolling out over the coming months. And we expect that that will be priced appropriately for the market, and we'll also be utilizing a lot of innovation.

So the brand Mood Ring would be our brand that we'll be launching in Canada.

Gerald Pascarelli -- Cowen and Company -- Analyst

Really great. Thanks for the color. I will hop back into the queue.

Operator

Your next question comes from Aaron Grey from Alliance Global Partners. Your line is open.

Aaron Grey -- Alliance Global Partners -- Analyst

Good evening. And I'll second that in terms of good to see the top-line trends for the quarter. First question for me is around the hand sanitizers. Great to see you guys in Costco now and the color in terms of starting off on the East Coast and moving west.

Would love to get some additional color in terms of your plans to support that growth, either internally or through partnership capabilities and whether or not that's kind of -- what's in kind of going nationally initially? And then also how that can help you to potentially add additional retailers or going to commercialize our hospital channels?

Michael Cammarata -- President and Chief Executive Officer

Yes. So we started rolling out on the East Coast, basically moving our way West. We've had some good problems that we haven't found our ceiling yet. So we're now going toward the Midwest and product will start showing up on the West Coast shortly.

But all regions, we have yet defined our ceilings when it comes to the hand sanitizers. And we've also been focusing on additional SKUs for that retail partner. In addition, we've been working with additional retailers that are starting to open back up especially in the home repair or market as well, like the Home depots and the levels of the world. So we will expect to see an additional retail footprint growing.

We've been very uniquely focusing on increasing our capacity and having the highest quality product in the market. And I think that that's resonated. We're seeing that products are selling out the day they land in the retail stores. So as we're working with our supply chains and our partners like IFF, that has been really crucial to helping increase capacity.

That has really been able to allow us to grab such a large share of a market that is very important not only for our hand sanitizer business but also for the cannabinoids because I think that we've done something very unique as far as taking the approach, getting closer to the consumer as well as looking at areas like cannabinoids and research is showing us that can improve products. Like I talked about a little bit earlier, in toothpaste, deodorant, sanitizers, and wipes, we can actually make products safer for the consumer that they want more alternatives to plant-based. And Cannabinoid is a unique ingredient that allows us to get there. And so we're definitely increasing our footprint in hand sanitizers as it will be evident in Q2 and we'll continue to ramp up over the quarters as well as be adding disinfectant wipes shortly.

Aaron Grey -- Alliance Global Partners -- Analyst

That's super helpful. And then if I could ask a question, on Canada as well. Just as we think as the Turnkey Solution white label opportunities on top of your own BGC initiatives that you have, how best to think about now that you have your sales license kind of allocating the resources and time between your own products as well as kind of bringing on potential white label Turnkey Solution partners? And then also in terms of your route to market, can you talk about how your conversation with providences have been evolving? And whether or not you plan to use your own sales team or potentially utilize a third-party distributor to be your own kind of brand ambassador. So any plans there would be helpful.

Michael Cammarata -- President and Chief Executive Officer

Yes. So we'll be rolling out our campaign for our brand in Canada shortly. The providences have been well received. We focus on identifying two areas.

Right? We wanted to show off a lot of our innovations and capabilities that the market in Canada hasn't really had a lot of products available in. So we're going to show off some innovations. At the same time, we want to be price-appropriate because we want to not only get market share from -- we want to bring people that we're buying on the black market into legal stores. So we want to make sure we price ourselves appropriate and take advantage of the opportunities of the biomass.

So I think we have an in-house sales team that's been working with the providences. And really, we've been doing the work for the last several months even in anticipation of our sales license to be able to move fast. And I think that's a theme that you're going to hear a lot, especially if you listen to our AGM tomorrow and get to see all of our staff and talk about what we're working on and some previews of new products that we're developing. I think that that's something that's going to be evident in that Neptune is really focusing on getting that market share going to market and really focusing on increasing our margins quarter over quarter and our revenue growth quarter over quarter.

And I think that the footprint that we have right now and the low-cost infrastructure compared to a lot of the LPs is going to give us that edge, like if you look at our improvement in our gross profit and you look at just in Q1 and then you look to Q2 and onward, you're going to see that our burn rate is very low. And then we've also been working with a -- and hopefully, we'll have this wrapped up shortly, but a very large -- one of the largest banks in the world to provide us credit facility and handle our banking to allow us to continue supporting our massive growth, both in the U.S. and Canada.

Aaron Grey -- Alliance Global Partners -- Analyst

And just one last quick one, just going off what you set at the end of that. In terms of the gross margin kind of evolution, it was nice to see that pick up quarter over quarter, and it sounds like there's more opportunity from your commentary right there. So is the biggest thing there just kind of building out scale still and also in terms of the mix? Is there anything to think about in terms of what's going to be the main driver news going forward on the revenue side going forward that might be different in terms of whether or not we see more or less margin expansion? So any kind of color on how we should think about that over the near term would be helpful.

Michael Cammarata -- President and Chief Executive Officer

Yes. I think as we move more closer to this consumer, not only are we increasing our gross profit potential and the opportunity for profit. It allowed us to build more efficiencies. So I think we have a state of the art facility that allows us to do multiple steps in Canada and utilizing that for our own brands and a lot of our revenue is really going to start coming from our brands.

And I think that that's why we really focused on that one P&L and the hybrid margin because our brand revenue and our brand margins are going to be definitely more evident as we grow our margin profile as we have one of the lowest cost infrastructures and extraction.

Aaron Grey -- Alliance Global Partners -- Analyst

Great. Thanks. I'll jump back in the queue.

Operator

[Operator instructions] Your next question comes from John Chu from Desjardins Capital Markets. Your line is open.

John Chu -- Desjardins Capital Markets -- Analyst

Hi. Good afternoon. Maybe -- I mean, Toni provided some good color in terms of the revenue breakdown for the quarter. So can you maybe give us a sense on the guidance you provided and how that revenue mix is going to shift a bit.

It looks like you've got this temp agreement contract that's going to start weighing in a lot more than what it had in the first quarter. And then I'm trying to understand to what extent the hand sanitizers and some of those related products are going to help drive that $28 million to $32 million guidance?

Toni Rinow -- Chief Financial Officer

Yes. Thank you very much for the question, John. So in terms of the guidance for this quarter and the breakdown, what we're going to see is that we are really completing the transition into Neptune health and wellness, a diversified innovation company, which means that we'll have good sales mix within that guidance. And I can tell you that the majority of this going forward will be the Neptune innovation product lines.

Which are the thermometers, the oximeters, the hand sanitizers, and some other products that we are currently working on? They will be the revenue driver, John, going forward. We are kind of a health and wellness company with a call option for cannabis revenues, is important for us, but as a ratio and it's a fraction of overall total revenues, that fraction will become smaller just because of that accelerated growth out of the Neptune Innovation product line.

John Chu -- Desjardins Capital Markets -- Analyst

OK. That's very helpful. And so Michael mentioned Costco is one of the retailers that the company is involved with. And then on your most recent investor deck, I also noticed that there is also Nestle, Clorox, and Webber Naturals being listed as partners.

Maybe a little bit more color on that? There hasn't been much talked about that previously so.

Michael Cammarata -- President and Chief Executive Officer

Yes. So I'll jump in. I think that that's something that's very unique about Neptune, and it's going to become more and more apparent that we've been working with a lot of consumer packaged good companies. Just really look at how Cannabinoids and innovations and/or IP play a role in the household and the Health and Wellness.

So Clorox is obviously a company that we've been working within our Turnkey Solutions business. And Nestle, and there's other ones that we're working with that we'll hopefully be able to talk more about shortly. As we're really focusing on cannabis, not just as adult consumption, but how it plays a role in every single product because it's really important right now and during these times, that we focus on and making sure that we work with the best partners from the consumer packaged goods companies as well as the retailers. Because we want to make sure that when people look at Neptune, they know that we're focusing from everything we do from like IFF, International Fragrance Flavors, to the partners that we're developing products with, the brands that we're creating with big consumer packaging companies to the brands that we're creating internally and the innovations that we focus on real estate.

That's the most prominent in the health and wellness space because cannabis is really much more than just consumption and medical. It really focuses on products that haven't been changed in decades, and the consumers, the millennials and Gen Zs are really focusing on plant-based alternatives. And so we're going to have solutions that will be available with our partnerships and that we're working on as well as also with our brand that we'll be bringing to the market over the next couple of quarters. So we'll get more -- we'll provide more and more color on our relationship with the consumer package good companies, shortly, and how it all ties together into the products that consumers are using on a day as we move closer to the consumer.

John Chu -- Desjardins Capital Markets -- Analyst

Great. OK. That's very helpful, too. And then maybe just an update on the U.S.

operations, SugarLeaf in terms of any revenue contribution there and just how things are progressing with the CBD side of the angle, especially with some of the relationships you're building about Costco and maybe that's connected with Nestle, Clorox, and Webber too, but just any insight you can give there would be helpful.

Michael Cammarata -- President and Chief Executive Officer

Yes. So in the U.S., there's obviously -- we're watching very closely the regulatory environment. We've also been able to expand capacity for focusing on uses for personal care, home care, and beauty products that we're developing. So I think there's a lot of innovation that will be coming out of the state that really focuses on the personal care, home care, and duty product lines.

As we move from more from B2B to really going closer to the consumer with our brands and our partnered brands that we're creating with some of the biggest companies in the world. In preparation for launch, that capacity and that utilization is starting to focus on that. So we're kind of looking at how the hand sanitizers and the cannabinoids and how they apply to those day-to-day products, and that's definitely where we're going to see the growth in North Carolina. And I'd also add that in event that depending on how elections and the regulatory parties change, we're ready for several different scenarios.

And so that's why we do have a huge upside. And we do have a huge capacity in North Carolina, that we'll be able to take first move to the market-based on regulations. So there's a couple of different things that we're focusing on in North Carolina, and it's really getting R&D and getting closer to the consumer and working with CPG companies on developing brands and also working with retailers because there's a lot of retailers right now that are looking at the private label businesses. So I think that you'll see that a lot of our B2B will go into retailers that are looking for private labels and you'll see them alongside our own brands and even some of our CPG partner brands.

So I think we're really building a great portfolio of products with partners that we want to be in business with that have been around for decades or almost 100 years. So I think that we're well-positioned both in the U.S. and in Canada, and we'll continue to support those businesses.

John Chu -- Desjardins Capital Markets -- Analyst

So could we hear something in the next couple of quarters with what you've been working on with SugarLeaf. Is that a fair statement or?

Michael Cammarata -- President and Chief Executive Officer

Yes. I think you'll see more and more evidence as our products are rolling out, and you can see where they manufactured and what part of the supply chain that should lead to supporting because I think that that's something as cannabinoids become more prevalent in personal care, home care, and beauty products. We want to be able to support those initiatives and even in the cleaning like disinfectant wipes and hand sanitizers.

John Chu -- Desjardins Capital Markets -- Analyst

OK. Great. Thanks.

Operator

Your next question comes from Doug Loe from Echelon Wealth Partners. Your line is open.

Doug Loe -- Echelon Wealth Partners -- Analyst

Yeah. Thanks, operator, and good afternoon, all. Just a couple of small housekeeping things. Michael, Toni, you mentioned in your MD&A regarding hand sanitizers about shortages of raw materials, including ethanol and isopropanol, and we've certainly seen some macro commentary about price escalation on raw material there.

Just wondering if you just had any comments on how the global supply of those raw materials might impact your supply chain there? And any global pricing trends that might impact your gross margin specifically the hand sanitizer space? And then secondly, you haven't mentioned your alliance with Lonza for a while with regard to manufacturing hard gelatin cannabis oil capsule. Just wondering if there's any update there on the logistics of putting together the production line or if there are any specific time frames you want to share there? And that's it for me.

Michael Cammarata -- President and Chief Executive Officer

So when we're rolling out the products, and that's why I say that margin will grow over time because there's components in packaging that the prices were a lot higher initially. And we had to fight for supply and I thank God we had IFF, who was able to help us break down some of those barriers and support us in initial stages. And so our cost for certain packaging was a lot higher in certain components, but our costs are going down with our volume going up. So we're in a very good situation to see our margin improve quarter over quarter and continually.

And going to Lonza, obviously, we're commissioning the equipment and they will be working with -- even we're looking at for our own brand and stuff that we'll be talking a little bit more about coming up shortly, so I don't want to pre-empt that. But I think that the component costs and the availability, I think we've gotten really good supply and redundancies that we're building when it comes to launching our personal care and beauty and home care products. And particularly with the hand sanitizers, we could see a higher cost initially and now our cost has gone down and our volumes going up. So we're in a good spot on that.

Doug Loe -- Echelon Wealth Partners -- Analyst

That's good. Thanks, Michael.

Operator

[Operator signoff]

Duration: 38 minutes

Call participants:

Scott Van Winkle -- Investor Relations

Michael Cammarata -- President and Chief Executive Officer

Toni Rinow -- Chief Financial Officer

Gerald Pascarelli -- Cowen and Company -- Analyst

Aaron Grey -- Alliance Global Partners -- Analyst

John Chu -- Desjardins Capital Markets -- Analyst

Doug Loe -- Echelon Wealth Partners -- Analyst

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