Good afternoon, welcome to Numinus Wellness Inc's fiscal Q2 2023 results conference call. A question and answer session for analysts and institutional investors will follow the formal remarks. As a reminder, this call is being recorded. I would now like to turn the conference call over to your host, Jamie Kokoska, Vice President, Investor Relations. Please proceed.
Thank you, Emma. Good afternoon, everyone, and thank you for joining us for our fiscal Q2 2023 results conference call. Discussing Numinus's performance today are Payton Nyquvest, Founder and CEO, and John Fong, Chief Financial Officer. Joining them for analyst questions at the end of our formal remarks are Reid Robison, Chief Clinical Officer, and Paul Thielking, Chief Science Officer. The following discussion may include forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. The risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward-looking statements are detailed in our MD&A for the quarter ended February 28, 2023, and in our other Canadian securities filings available on SEDAR.
Numinus does not undertake to update or revise any forward-looking statements to reflect new events or circumstances, except as required by law. Our Q2 results were made available earlier this afternoon. We encourage you to review our earnings release, MD&A, and financial statements, which are available on our website as well as on SEDAR. As a reminder, all figures discussed on today's call are in Canadian dollars. I'll now turn the call over to Payton Nyquvest, Chief Executive Officer.
Thanks, Jamie. Good afternoon, everybody. I'd like to start with extending the utmost gratitude that our work is conducted on the unceded homelands of the Musqueam, Squamish, and Tsleil-Waututh peoples and on other sovereign indigenous lands across territories and across Turtle Island. We are committed towards a path of truth and reconciliation through continuous learning, reciprocity, and humility. Before I jump into our Q2 results, I'd like to take a moment to address recent sector dynamics and showcase how Numinus remains well-positioned for success and today and for the future. First, Numinus operates multiple business lines with diversified revenue streams, which together complement each other, drive broader brand awareness, and diversify our client and market exposure. Second, we have taken a more measured, thoughtful approach to growth, only pursuing acquisitions and opening clinics where it makes financial sense.
Our recently announced Numinus Network licensing model, which I'll explain later on today's call, is a great example of how we identify growth strategies to expand our platform and patient accessibility while also driving higher margins. We continue to believe that dose therapy sessions should be provided within a clinical setting in almost all scenarios. As a result, we are not affected by the recent changes to the U.S. regulation disallowing at-home ketamine services. We strongly believe there is a place for digital support services to assist patients in preparing for and integrating after certain treatments. Our dosing sessions will always be provided with proper and safe therapeutic environment at one of our wellness clinics. Finally, we're much better positioned financially than many others in our space who have recently struggled.
Our clinics and CRO business are generating healthy revenue streams. Our margins have grown substantially in the past year. We have nearly CAD 20 million of cash on hand. While we would always like to see others in our space succeed and prosper, as it speaks to the evolution and growth of our industry, sector consolidation will ultimately lower competition for those of us who are in stronger positions. While dynamics in our sector are changing and that volatility has impacted sector-wide stock performance, in the long term, recent changes to the competitive landscape should affect, should actually benefit Numinus. We're already taking the initiative to grow our market and our client relationships in regions where our competitors have closed down operations.
We're happy to be able to step in wherever possible to allow patients to continue with their important mental health treatments. Turning over to our quarterly performance. Our fiscal Q2 continues to demonstrate the strength of our diversified service offering, taking into account that there were fewer operating days in the period due to February and December holidays. The Q2 is typically a seasonally lower, slower quarter for us, given there are 6.5% fewer revenue-producing days compared to the prior quarter. However, we produced higher revenue per operating day than the previous quarter. Just as important, 4.4% more client appointments during the operating day.
Due to the anticipated impact of seasonality, we generated CAD 5.4 million of revenue during fiscal Q2, a 5.5% decline from Q1, a 581% increase compared to the same quarter last year, due mostly to the acquisition of Novamind. All of our revenue-producing business lines contributed meaningfully to our performance during the quarter. Our wellness clinics generated CAD 4.7 million in revenue with a healthy 39% gross margin. Our U.S.-based clinics continue to drive stronger revenue and margin contribution, due mostly to those clinics being more mature than many of our Canadian-based clinics. U.S. clinics comprise of 84.3% of the total revenue produced by our wellness clinics. Appointments at our wellness clinics continue to grow.
On average, we completed more than 322 client appointments per operating day in the Q2 compared to 309 in the prior quarter. In total, our wellness clinics welcomed 19,350 appointments in Q2 2022, and nearly 9% of those were booked by new clients. The mix of our client appointments during the quarter continues to demonstrate the effectiveness of offering an assortment of mental health services rather than focusing on just one type of treatment. By offering a wide range of mental health and wellness services, we're able to provide our clients with the best possible outcomes based on their unique situations and treatment needs. 16% of all appointments during the Q2 were ketamine-assisted therapy, ketamine, or Spravato-related bookings. 6.3% of appointments were for transcranial magnetic stimulation.
The vast majority of the rest were for traditional talk therapy services, which is often a first step for new clients and a gateway to other treatment services. Our practitioners are at the frontline of our business and continue to be one of the most important elements of providing top quality patient care. At the end of the quarter, we had 133 practitioners available for client treatment. This is a slight decrease from 138 at the end of the prior quarter due to a strategic shift in how we employ practitioners in Canada. You may recall that in Canada, many of our practitioners had traditionally operated on a part-time contract model.
We are in the process of moving our Canadian practitioner model towards a more full-time role, similar to how we operate in the United States. This shift is expected to drive greater practitioner engagement and clinic utilization rates, so it may temporarily result in fewer practitioners as each can accept more client appointments. Practitioner training remains a key enabler of our growth for Numinus and the overall sector. To facilitate this, we were excited to have launched many new programs within the Numinus Certification Pathway. Through this pathway, which is open to both external and internal Numinus practitioners, students will build competencies through a blended learning model that utilizes a combination of self-paced modules, online classes, and in-person practical application.
Once all course requirements in the certification pathway are complete, trained practitioners will receive a formal certification from Numinus to designate competency in providing PAT using specific medicines. This is a unique opportunity for therapists and medical professionals to learn our psychedelic-assisted therapy protocols and interact with our established Numinus practitioners as they share their real-life experiences in providing integrated and transformative mental health, mental wellness. Our training team launched our inaugural Fundamentals of Psychedelic-Assisted Therapy course in October 2022, hosting 36 learners through to early December 2022. In January, we launched the second cohort of the Fundamentals course with 41 registered learners. Today, there are 13 live cohorts available to be registered for through the end of 2023. In total, more than 150 students have completed or are in the process of completing courses from the Numinus training program.
We continue to see this as an important growth opportunity for us, especially as MDMA and psilocybin-assisted therapies move through regulatory pathways. Our clinical research operations continue to be a key strategic asset for Numinus, with our research team building a growing number of trusted relationships with drug development companies across our sector, and more broadly, with companies across the entire biotech industry. In total, our research division generated CAD 615,000 of revenue during Q2 as a result of Cedar Clinical Research managing 16 clinical trials for third-party clients during the quarter, up from 14 last quarter. In total, 152 clinical trial patient appointments were completed during the quarter. We continue to see great opportunities for CCR, which is why we expanded the business in February into Arizona with the opening of a third CCR research clinic in Phoenix.
This site is already accepting new clinical trial volunteers for a third-party study that began a few weeks ago. We're pleased to confirm that a second research study has been approved to take place at the new Arizona site. Before I pass the call to John to go through our quarterly performance in more detail, I'd like to take a step back and highlight the importance of clinical practitioner and support infrastructure for the sector. Billions of dollars have been invested into drug development companies and clinical trials to move psychedelic-assisted therapies through appropriate regulatory pathways. We are absolutely supportive and excited about the future of these therapies and the work these organizations do to enable novel mental health drugs to reach a growing population of people in need.
Once these drugs and protocols are approved by the FDA or Health Canada, they require systems, clinical infrastructure, insurance payer expertise, and patient communities to effectively deliver these treatments to. Numinus is at the forefront of that part of the mental healthcare revolution, and we're nearing an inflection point with several psychedelic-assisted therapy protocols and drugs in final phases of clinical trials. Our recently announced licensing model named the Numinus Network, is an important strategy for us and the sector at large as it grows a greater number of practitioners to leverage our proven protocols, marketing strategies, and insurance payer expertise to grow the number of clinics offering psychedelic-assisted therapy faster. It allows the growth to happen without significant capital requirements for Numinus.
We're extremely excited about the significant potential of this offering and already have a strong pipeline of interested, qualified clinic licensees. Related to our efforts to advance mental health treatment and therapeutic delivery infrastructure needed for the sector, we're also actively investing in our digital platform. While we continue to believe that in-person dose therapy sessions will be foundational to patient success, we recognize that many elements of a clinic operation, such as booking systems, patient support tools, training, and invoicing, can be efficiently accomplished through online programs and platforms. It's this digital platform that we believe will ultimately enable us to rapidly scale the Numinus Network as well corporately owned clinics. As a first step of that digital platform, I'm pleased to announce that we are launching our new client website tonight at numinus.com.
Our new Numinus website features enhanced navigation, which may help clients seeking mental wellness services find treatments specific to their needs, indications, and locations more easily. Supported by leading technology and tools, the site utilizes geolocation technology to ensure that services offered to clients within each region accurately reflect those services which are or may be available to them where they reside. This functionality is of key importance as we believe the timelines for future regulatory approvals for MDMA-assisted therapy and psilocybin-assisted therapy may vary between the jurisdictions where they currently operate. We expect our digital platform could become a key driver of growth as we continue to pursue industry partnerships. With that strategic update, I'll turn the call over to John.
Thanks, Peyton. Good afternoon, everybody. Despite the seasonal impact, we're pleased with how our business performed during this fiscal Q2. Total revenues for the quarter were CAD 5.4 million, a 581% increase from revenue generated the same quarter last year, but a 5.5% decline from the prior quarter, due mostly to there being 6.5% fewer operating days in Q2. Revenues from our wellness clinic network comprised 88.5% of total revenues during the Q2, in line with what we've seen in the prior six months. US operations comprised 86% of total revenue for the quarter, also nearly consistent with last quarter.
Overall, revenue generated by our wellness clinics was $4.7 million for the quarter, a 4.9% decline compared to just last quarter due to, again, 6.5% fewer revenue-producing days. Our US-based CRO business, CCR, generated $615,000 of revenue, a 9.9% decline from last quarter, due mostly to the impact of December holidays and seasonality. CCR continues to show great opportunities for growth, especially with the recent addition of a third clinical research site. Q2 gross margins were 39.3%, a slight decline from 41.9% last quarter, but a significant increase compared to 29.1% in the same quarter last year. Gross profit for the Q2 was $2.1 million compared to $2.4 million in the prior quarter.
Cost containment initiatives are still very much underway. Several annual expenses were paid for during the second fiscal quarter of each year, and these contributed to higher than normal expenses. This includes insurance premiums that were prepaid for the year, annual public company and AGM fees, and one-time costs associated with the launch of our new website. Net loss for the quarter was CAD 7.3 million or CAD 0.03 per share, compared to CAD 7.8 million or CAD 0.04 per share in the comparable quarter last year. Total net cash outflow during the quarter was CAD 6.7 million. In terms of liquidity, we ended the quarter with CAD 19.7 million of cash on hand.
With growing, excuse me, with growing revenue streams and margins offsetting some of our expenses, we continue to believe we are well-positioned financially to sustain our business model, pursue our long-term growth strategy, and achieve operating profitability. With that overview of our financial results, I'll turn the call back over to Payton for some closing remarks. Payton.
Thanks, John. With the launch of our new Numinus Network licensing platform to accelerate our clinic growth ahead of the expected regulatory reform, a new training certification to both support a pipeline of practitioners for Numinus and build training relationships for others in our sector, and a new digital platform underway to support our capital-light growth strategy, we've never been more excited about the future of our business. As regulatory reform becomes closer to a reality, we expect many drug developers, clinic operators, and other sector participants will begin recognizing the need and importance of partnering with a strong patient-facing channel, complete with proven patient protocols, systems, and infrastructure. For many, Numinus is uniquely positioned to be this partner. I look forward to sharing many new important sector relationships with you in the future, whether those be new Numinus Network licensees, therapeutic partnerships with key patient communities, or strategic sector partnerships.
With that, we'll open the call to questions from analysts and institutional investors. Operator?
Thank you. If you would like to ask a question today, press star followed by the number 1 on your telephone keypad. Your first question today comes from the line of Michael Okunewitch with Maxim Group. Your line is now open.
Hey there. Thank you for taking the question, and congrats on the quarter.
Thanks, Michael.
I guess first I'd like to ask just if you could provide a few more details on the mechanics behind the Numinus Network partnership model. Are you looking at a similar approach from like what Awakn is doing in alcohol use with an access fee and then a share of the per treatment? What sort of support are you providing to these clinics? Does it give access to the relationships you have with drug developers like MAPS as well?
Yeah, it's a great question. I'll maybe answer the first part of the question first, which is exactly right. It's an opportunity for us to scale out those relationships, inclusive of training, so that we can help grow accessibility for different drug developers who obviously are looking to bring drugs into market. In regards to, you know, why it's beneficial for the licensee, a number of reasons, including, you know, a brand and recognized support in regards to industry expertise. Also, you know, a little bit different than what Awakn is doing in regards to licensing a protocol. We're also helping license the clinical infrastructure and the ability to run and operate a clinic.
Psychedelic-focused clinics in particular are quite resource-intensive to set up and operate for, you know, someone that might be an owner-operated clinic and might price them out of the ability to be able to offer psychedelic therapy treatments. This licensing model essentially gives a turnkey solution for licensees who are wanting to be able to offer different psychedelic therapy treatments but might not have the resources of a larger multi-site clinic operator. So really it's all of the back-end side of running and operating a psychedelic therapy clinic, inclusive of training, protocols, clinic SOPs, and even relationships with payers to allow people to get set up and started without needing the upfront resources that it does take to establish that kind of a clinical location.
Yeah, thank you for that. I also wanted to see if you could touch on the appointment mix this quarter. It seems like there was something of a, you know, a lower proportion coming from the interventional approaches like the ketamine-assisted therapy and TMS. Is this just, you know, run-of-the-mill variability between quarters, or is there anything to read into? Could this suggest that there's a potential sales pipeline there as patients introduced via talks therapy may in the future look towards the interventional approaches?
Yeah. Yeah. We continue to see, you know, obviously two big benefits of just offering traditional therapy. One is it's a huge part of just what we offer as a business, but also continues to build the pipeline of people who might be looking for other more intervention-based therapy. Really with that it more so just comes down to seasonality, the holidays, you know, for folks who are looking for a more intervention-based model. There's just more time requirements and things like that. Typically during the holidays, we see a little bit of a shift. Certainly not something that I would read too much into.
All right. Thank you. Just one last one for me, and I'll hop back into the queue. I'd like to ask about the, your changes to the Canadian practitioner model. Could you kind of quantify what changes you're implementing and how this could impact the growth? Is that in part the reason for the slight decline in the number of practitioners over the quarter?
Yeah. Just very quickly on that note, you know, as I mentioned in the intro, really it's just moving more of those practitioners so that more of their full-time hours are in-house. Still be able to contract through versus, you know, having maybe more practitioners that are contributing a less amounts of time to us on a weekly basis. That just we find also helps with practitioner retention, client retention, and being able to also have higher engagement from both the practitioners and the clients so that when they look at other services that we offer, there's a natural, you know, ability to move them into other services as well.
All right. Thank you, Payton. I really appreciate the additional color.
No problem. Thanks, Michael.
Your next question comes from the line of Robert Sassoon with Water Tower Research. Your line is now open.
Hi, thank you for taking my questions. Talking about the licensing model, could you give us some sort of context as to how this newly launched model actually came about?
You know, it was really out of looking at how do we continue to scale and support access for psychedelic therapy? You know, after operating psychedelic therapy clinics and also being very much involved obviously on the research side, the recognition that in order to reach the kind of scale that we need, you know, being able to take all of the work that we've done and the resources that we've contributed to fine-tuning and specializing what is needed in regards to a psychedelic therapy clinic. Also going through the process of getting a very good look under the hood of what an average, you know, owner-operated clinic looks like and requires. There was just a huge gap in regards to being able to scale that out.
You know, if you take, as I kind of spoke about in regards to the investments that have been made now, you know, and highlighted by obviously where MAPS is at as an organization. You've seen about $2.9 billion be invested into psychedelic-related organizations, but less than 5% of that has actually been contributed to building the infrastructure to be able to actually administer these therapies. You know, MAPS now being at a point where they're gonna need tens of thousands of therapists to be able to offer the MDMA protocol and having less than 2,000 that are currently in training, is just a real scale issue.
We just saw a way to greatly support and take the opportunity to scale while making sure that we're being very capital conscious and looking to do so in a way that required a lot less capital from Numinus going forward, as we do look to continue to expand and improve the margins as well.
I see. That's interesting. Does that mark a shift in your growing your own owner network, clinic network? Or is it just an addition to the strategy?
It's more of an addition to the strategy. You know, we continue to assess different acquisitions or even purpose-built facilities. It doesn't deter us necessarily from that. I would say it's just another way of us continuing to grow the business.
Are there sort of regional priorities in terms of that strategy, in terms of your licensing platform?
Absolutely. There, there's certainly regions that we look to continue to expand in. With that, you know, one of the big learnings that we took from acquiring Novamind was also, you know, the opportunity of being able to expand within a certain location and consolidating marketing resources and operational resources within a certain geography allows for a lot of expansion within a certain geography before moving to the next one, as opposed to trying to expand too broadly to different jurisdictions. With, you know, the launching of this licensee platform, we already see a number of opportunities in the United States and Canada.
Got it. Just one more question on, moving to the Cedar Clinical Research, operations. How is the new Phoenix site actually performing?
Yeah. So far, been very successful. As I mentioned, one trial well underway with another one up and on the go. One of the things that Cedar has really done an exceptional job of is being able to offer a very high quality standard of care and ability to operate, which within and maybe not too well known to listeners. The nuances and specialization of running psychedelic clinical trials is very significant. It's not an easy thing to do, drug developers have an increasingly challenging time finding good operators for being able to administer psychedelic therapy clinical trials. I'll maybe hand it over to Paul Thielking, who heads up the research division, if he's got any comments about that.
Good.
Yeah, hi, this is Paul. I think, as Payton mentioned, you know, it is challenging to run psychedelic studies, and you need to put a lot of time into de-developing the infrastructure and training the team. And we've done a really good job of that here at our Utah clinic, clinical research site. We've learned a lot in building what we've got here in Utah and we've taken what we've learned now and are applying that to the new research site in Phoenix. I've just been really proud of the team there for getting a site up and running very quickly and efficiently. We've
You know, we've got a clinic infrastructure there to kind of start from, and we've been training team members, and so we can, you know, kind of cross-utilize them between clinic work and research work. We've got now two clinical trials that we're getting off the ground, and we're actively enrolling patients this month in one of them and hope to be enrolling patients in the second one in the next month. It's a great start, and we intend to just continue to rapidly build that clinic alongside the others that we're operating.
Okay. Thanks very much. Thanks, Paul and Payton, and I'll pop back into the queue.
Thanks, Robert.
Your next question comes from the line of Pablo Zuanic from Zuanic & Associates. Your line is now open.
Thank you. Thank you, Alex. Just a couple of questions on the, on this expansion plan. I know you just announced it a couple of days ago, do you have a number of clinics that you would have under license, you know, say, by end of the year or end of 2024? The same question on the corporate owned site. Related to that, I know it's a separate question, is that there are other operators out there that are trying to acquire clinics or also offer licensing models. Here you are, you know, you have 5 what I would call mental health ketamine clinics in Utah, right? The ones in Arizona are more pediatric, less, I don't think even ketamine there. You know, just talk about what's the pitch there.
Numinus only five ketamine clinics in one state, Utah, you know, compared to other companies that are a bit more established. I mean, can you talk about that also? Thank you.
Yeah. I think maybe answering your first question, while there's other ketamine clinics out there who do offer, ketamine-assisted therapy, you know, the clustered effect that we've seen help drive margin, but also, you know, for us from an insurance reimbursement standpoint, we've continued to really kind of lead the charge in regards to clinics who are getting insurance reimbursement, for ketamine-assisted therapy. Not only that, but, you know, while ketamine continues to be an exciting program for people, as we've seen in the current marketplace, a lot of clinics having challenges with operating a ketamine-only financial model. We continue to offer support outside of just ketamine itself and also getting prepared for when MDMA is available.
You know, we've taken a very close look at pretty much all of the ketamine service providers out there. You know, while they might have physical infrastructure that, you know, in some ways supports ketamine-assisted therapy, from what we've seen, very little of them are able to actually convert into being able to offer other psychedelic therapy treatments. As we look towards the future, that's definitely something that we continue to focus on. We actually expect that the network clinic growth will probably outpace corporate clinic growth this year.
Obviously with a, with a market that's been challenging, wanting to really make sure that we're conserving resources, and prioritizing towards either businesses that operate, and generate revenue or opportunities for expansion, that support margin improvement, will be the focus going forward. Hesitant to put out a number just yet as we've just recently announced this, but I do expect over the coming couple of months that you'll hear much more in regards to the Numinus Network.
Right. Thank you. Just to differentiate between the two solutions, that's, you know, that's for, I guess, new people that want to enter the industry and have pretty much a rented, ready-made operation versus the licensing platform, which is for established practitioners, right? I know, again, it's too early to say, but I'm assuming you'll probably have more demand and a bigger pipeline on current operators than necessarily people are trying to enter the industry, or is that the wrong assumption?
Yeah. I would say that that's accurate in a number of ways. You know, mainly people who are operating a clinic that might be doing just one service, like talk therapy or something like that, or they've had a ketamine clinic that's struggled, where they've, you know, maybe engaged with clients and they've seen an uptake there but have had struggles getting a clinic operationally sound.
Also with that, you know, there's a huge opportunity to work alongside, you know, whether it's geographies that have patient communities who are, you know, getting different forms of care where psychedelic therapy may, you know, greatly enhance or improve that, but is not core to what, you know, whether it's a VA hospital or something like that where, you know, there's care that's happening, but not a focus in psychedelic therapy, but something that they wanna be able to offer to their patients and communities as well.
Right. Thank you. Look, just one more. You know, on the one hand, we hear from people that there's a big demand out there, right? Especially for ketamine-assisted therapy right now. Not enough locations, not enough clinics in some areas. I heard in a conference today that Tucson is underpenetrated compared to Phoenix, for example, on this type of ketamine clinics. On the one hand, there's that narrative, right? Not enough clinics. On the other hand, we talk to some operators that they think the market is somewhat oversupplied, that, you know, that there is a purchasing power issue and not enough, of course, no insurance coverage for most.
Some people paint a picture of a very strong demand, other people paint a picture of a, you know, an oversupplied market with a lot of challenges for existing operators. What's your take right now? Thanks.
Yeah. I don't think that there is oversaturation in the market. I think there's a real challenge in regards to best practices, but also you mentioned insurance coverage, and I think that's a big contributing factor from what we see. The demand continues to be very, very high. But insurance is definitely a place of challenge for a lot of operators. You know, for us, we've seen over 80% of our ketamine services get it covered under insurance, including not just Spravato, but actually off-label ketamine-assisted therapy. We've put a lot of emphasis on driving insurance-covered or insurance-reimbursed ketamine services. You know, that's another thing that we look to obviously continue to contribute and scale with the Numinus Network licensing program as well.
Right. Thank you.
Thanks, Pablo.
As a reminder, if you would like to ask a question, press star followed by 1 on your telephone keypad. We'll pause for just a moment to assemble any last-minute questions. There are no further questions at this time. Payton Nyquvest, I turn the call back over to yourself.
Thanks, operator, and thanks everybody for joining us on the conference call today. I look forward to speaking with you in July when we'll report our fiscal Q3 2023 results.
This concludes today's conference call. Thank you for attending. You may now disconnect.