Numinus Wellness Q1 2024 Financial Results

The TDR Three Takeaways:

1. Numinus Wellness reported mixed financial results in Q1 2024, with a gross profit increase to $2.1 million, countered by a revenue decline to $5.9 million and strategic shifts towards more profitable operations.
2. The company faces a cash burn challenge, with a current burn rate under $1 million per month and only a 4- to 5-month window before potentially needing to raise additional capital.
3. Numinus has initiated a strategic review in collaboration with Stifel Nicolaus Canada Inc. to explore growth strategies and enhance shareholder value, responding to its current financial situation.

Numinus Wellness (TSX: NUMI, OTCQX: NUMIF), specializing in psychedelic-assisted therapies, reported its financial results for the first quarter of the fiscal year 2024, ending November 30, 2023. The results indicated a complex financial situation, combining both progress and challenges.

In Q1 2024, Numinus achieved a gross profit of $2.1 million, an increase of 18.8% from the previous quarter. However, this was counterbalanced by a revenue decline of 3.0%, bringing total revenue down to $5.9 million. The company attributes this decrease to fewer appointments in their wellness clinics, suggesting a shift in strategy towards more profitable operations. Despite the revenue reduction, Numinus successfully cut operating expenditures by 19.9% compared to the fourth quarter of 2023. This cost management, together with a strategic move towards higher-margin services, led to a gross margin increase to 36.1%, up from 29.5% in the preceding quarter.

Numinus Wellness operational data also sheds light on its strategic orientation. Wellness clinic revenues slightly dipped to $4.9 million, driven by a decrease in the total number of clinical appointments. The company’s focus on higher-margin services like Ketamine/Spravato treatments and Transcranial Magnetic stimulation services aligns with this trend. Additionally, Numinus is closing its clinic and research services in Phoenix, aiming to focus on more sustainable operations.

The revenue from clinical research showed a 12.9% decrease from the fourth quarter of 2023 but marked a 49.5% increase compared to the first quarter of 2023. This indicates a growing emphasis on research, highlighted by new programs and participation in a Phase 2b clinical trial for a synthetic psychedelic compound.

The training program experienced notable growth, with enrollment surpassing 700 students, indicating an expanding role in education within the field of psychedelic-assisted therapy.

On the financial front, Numinus Wellness concluded the quarter with a cash balance of $4.7 million and total current assets amounting to $8.6 million. However, these figures are somewhat mitigated by current liabilities totaling $4.1 million, raising concerns about the company’s liquidity and overall financial health. The company’s efforts to contain costs, initiated in Q3 2020, have resulted in a reduced monthly cash burn rate of under $1 million. Yet, given this current rate of expenditure, Numinus may only have a 4- to 5-month window before needing to secure additional capital to sustain operations.

A strategic review, initiated by the Board and executed by Stifel Nicolaus Canada Inc., emerges as a crucial development. This review is a response to the mixed financial results and aims to identify growth strategies and enhance shareholder value. The review includes assessing new markets and business models, and considering mergers or acquisitions. The Board has not committed to a timeline for this review, allowing for a thorough and unbiased evaluation. The company has stated that the review’s outcomes are not guaranteed to lead to immediate changes or transactions.

Numinus Wellness Inc.’s Q1 2024 financial report and the subsequent strategic review highlights a company undergoing significant change. While grappling with challenges like reduced revenue and client appointments, Numinus demonstrates a commitment to improving operational efficiency and managing costs. The emphasis on research and training indicates a strategic focus on long-term growth in the field of psychedelic-assisted therapy. However, the company’s financial position, especially considering the near-equivalence of its cash balance and current liabilities, raises concerns about its liquidity and overall financial stability. This context makes the ongoing strategic review even more critical as it seeks to steer the company towards sustainable growth and profitability.