Field Trip Health Ltd.

Greetings and welcome to the Field Trip Health and Wellness Fiscal First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Anyone to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Phil Carson, Managing Director with KCSA. Thank you. You may begin.

Thank you, Operator. Good morning, everyone, and welcome to the Fiscal First Quarter 2023 Earnings Conference Call for Fieldtrip Health and Wellness Limited. Before I begin the call, I'm obligated to remind everyone that during the course of this conference call, management may be making some forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These results are outlined in the risk factors section of the company filings and disclosure materials. Any forward-looking statements should be considered in light of these factors. Please also note, as safe harbor, any outlook presented is as of today, and management does not undertake any obligations to revise any forward-looking statements in the future. Presenting today will be Ronan Levy, Chairman and CEO, Mujib Jafri, President, and Donna Wong, CFO. I'll now hand the call over to Ronan, who will provide an update on field trip health and wellness strategies going forward.

Thank you, Phil, and welcome everyone. Thank you for joining us this morning. We are excited to be holding the first ever call as the newly independent Fieldtrip Health and Wellness Limited. Four years ago, when we started the company that would become Fieldtrip Health Limited, we set out to both trailblaze a new approach to mental health treatments, leveraging the incredible potential of psychedelics and to bring these therapies into the mainstream. And I believe unequivocally we have achieved that objective. It's nearly impossible these days to read any major news or lifestyle publication without some mention of a study hailing the potential of psychedelics or some heartwarming anecdote about how psychedelics have saved or transformed someone's life. Looking at Fieldtrip's share of voice in North American media coverage of psychedelics shows how much the work we've been doing has contributed to the awareness and ongoing success of these treatments. Now that we've separated from reunion neuroscience, as field trip health and wellness, we are able to reach the next step of making psychedelic assisted treatments more accessible. Today, we are leveraging our first mover advantage in this rapidly growing market to build a global psychedelics brand through our 12 operating field trip health centers and digital platform. Reflecting back on the approach we embarked on four years ago, one limitation we imposed upon ourselves was that Even though the techniques we were developing were new, they were still very much couched in the conventional language and mindset of psychiatry. Our ketamine-assisted therapies were very much thought of as a medical mental health intervention. But let's face it, as it pertains to depression, anxiety, and PTSD, modern psychiatry has but simply not been effective. Simply look at the data. One in five Americans suffer from a mental health condition. At the start of 2022, more than 24% of Americans were taking prescription mental health medications. Yet a recent study published in the BMJ found that only 15% of people respond to conventional antidepressants, meaning 85% of people don't. Compare that to the results we've generated at Fieldtrip, where, on average, most people who complete our ketamine-assisted therapy protocols see their depression and anxiety scores improve from severe to mild, and those improvements last for four months or longer. As far as I'm aware, there are no current treatments offering nearly this efficacy. It is now very evident that the traditional belief of psychiatry that prescription medication on its own has the ability to effectively and substantially treat mental health conditions is flawed. And so just as field trip trailblazed a path to psychedelic medicine four years ago, now with the birth of field trip health and wellness, we are setting out to lead a whole new approach to mental and emotional health and well-being. One that recognizes that depression and anxiety are not just functions of our brains, but also very much a function of how we live our lives. Over the coming weeks and months, you're going to see Fieldtrip evolve into a company that not only leverages the power of psychedelics as treatments for mental health conditions, but also through tools like our app, Trip, help people dive deeper into self-discovery and self-awareness and change their lives as much as their minds. This will help people to find their motivations, to discover their passions, and to find the freedom to be happy, connected, and free from depression and anxiety, and simply to be themselves. Of course, elevating mental health in such a manner is not going to be without its challenges, but we are well capitalized to execute upon this strategy. The unmet social need is urgent and the market opportunity significant. According to a recent industry report issued by H.D. Wainwright, the future of psychedelic medicine is incredibly bright. It is expected to up to 10 million people will be treated annually in the U.S. alone by 2025 using psychedelic therapies and is projected to potentially generate upwards of $400 billion in annual revenue at its peak. Fieldtrip Health and Wellness is well positioned to lead the way in this incredible market opportunity. I will now hand the call over to Wajib to provide an update on operational highlights for the first quarter and our digital platforms.

Thank you, Ronan. During the first fiscal quarter, Fieldtrip continued to deliver innovative psychedelic-assisted treatments across our 12 operating clinics to help people access life-changing therapies. We achieved increased revenue growth of 110% over the prior year's first fiscal quarter while also reducing costs This is driven by continued operational improvements, increased automation of client acquisition processes, expanded service offerings, and optimization of new client conversions. As Ronan has spoken to, the future of Fieldtrip is going to be digital forward with a focus on integrating psychedelic-assisted treatments with community and technology. We have already built a successful digital offering to foster healing and well-being, and we will be leveraging the learnings and experience from this going forward as a means to grow and provide support for people at scale. Through our leading digital psychedelic platform trip, we have created one of the largest and most engaged digital communities for psychedelic therapies, which provides access to ongoing support and information inside and outside clinical settings. The recently released community chat feature in the app has been well received and will help increase user engagement and awareness about psychedelic treatments and field trip. In May, we launched Field Trip at Home, powered by New Life, a new service offering which provides ketamine treatments from the comfort of a client's home. Through this arrangement, we now offer increased accessibility and convenience for those interested in pursuing the treatment outcomes of ketamine therapy outside of a clinic setting through new life at home and telehealth offerings. This quarter, our technology team has also built several new enhancements to the client platform portal that will be released in the coming weeks. These updates will improve the client experience and create greater efficiency for back office, clinical operations, and client scheduling. We're also pleased to announce that through Health Canada's Special Access Program, Fieldtrip has also successfully now dosed its first patient in Canada with psilocybin, leveraging protocols developed in our Amsterdam clinic. I will now turn the call over to Donna Wong to discuss her financial results.

Thank you, Majib, and good morning, everyone. As a reminder, all figures that I will be discussing are in Canadian dollars in the first fiscal quarter of 2023 corresponds to the three-month period ended June 30, 2022. During the first quarter, the clinics earned patient services revenues of $1.8 million, an increase of 110% over the comparative quarter in the prior year and 6% sequentially quarter over quarter. There were 12 clinics in operation during the quarter compared with six in the same period of the prior year. The growth in revenue was driven by the addition of the six clinics and an increase in the volume of patient visits. This was achieved despite the fact that the summer months are traditionally a softer period. Fieldtrip reported a net loss during the quarter of $8.2 million compared with a $9.1 million loss in the same period of the prior fiscal year. This decrease was primarily due to increased revenue and a more favorable foreign exchange rate, partially offset by the increase in operating costs due to the larger number of clinics in operation. Operating expenses for the first fiscal quarter were $12 million, compared to $9.6 million for the prior comparable quarter. Operating expenses include general administration, occupancy costs, sales and marketing, research and development, depreciation and amortization, and patient services. The increase in operating expenses was primarily due to $3.4 million in non-recurring costs. These costs comprised $2.4 million related to the spin-out transaction and a $1 million impairment write-off of fixed assets arising from the deferral of our future clinic openings previously announced. Finally, turning to the balance sheet, upon closing of the spin-out transaction, Fieldtrip had approximately $17.2 million in unrestricted cash. We were well capitalized to execute upon our strategy going forward. This ends our prepared remarks. I'll now ask the operator to open the lines for the Q&A session.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for your questions. Our first questions come from the line of Andrew Parthenen with Stifel. Please proceed with your questions.

Hi, good morning. Thank you for taking my questions. Maybe just starting off with something relatively recent. Could you give a little bit of color on the New Life Partnership and how it's progressed thus far, understanding that it's still very early days, but anything that you could share could be helpful just to understand how that's going.

Hey, Andrew. Thanks for joining the call, as always. The partnership with New Life is still very much in its early days, but we are seeing some really positive signals, primarily associated with the number of leads being generated to the at-home program along with each of our clinics. as well as the conversion rates, which we seem to be finding that people coming through field trip into the partnership with New Life tend to convert at a higher rate into clients than otherwise. So again, very early indications, but positive signals overall. So we feel confident in the growth of that partnership and the at-home offering in general.

Great. And then... Thinking about your newer clinics versus your older clinics, could you share any kind of actions or learnings that you've had from your older clinics that you could apply to your newer clinics to increase the pace of ramp up or drive faster client growth?

Sure, for that I'll hand the question over to Mujeeb who tends to oversee our marketing and growth functions.

Hi Andrew, good morning. From a clinic's perspective, the one thing we've learned from our older clinics is having a robust referral network that's local that helps sort of push clients over to our side. So that is something we actively work on as we open new clinics. And also from a digital marketing perspective, organic leads that take a little bit of time to build from an organic authority perspective tend to perform a lot better than paid digital marketing. So those are some of the things we're conscious of and we try and make an attempt to sort of doing that as we open new clinics and new centers.

Thanks for that. And last one for me before getting in the queue.

I'm not sure if you're if you share this information, but could you give any color on your earliest clinics and where they are in the ramp to profitability?

Donna, do you want to handle that question, or Mujib, do you feel confident?

I can take that. Sure. From our earliest clinics, the oldest clinics are either profitable or close to being break-even at this point.

And then the newer clinics have still some work to do on them. Great. Thanks for that. I'll get back in the queue. Thanks, Andrew. Thank you.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to Ronan Levy for any closing comments.

Thank you, Operator, and thank you to everyone for joining us today. Thank you, Andrew, for your questions. I'd like to thank our investors and analysts in particular for the ongoing support. Looking ahead, we are incredibly excited to be embarking on our evolved strategy as Fieldtrip Health and Wellness. We're going to reach more people through our digital offerings. We're going to help them find out who they really are and provide them with the tools and therapies to live happier, more meaningful, and resilient lives, leveraging the power not only of psychedelics, but lifestyles and communities that support their journeys. The need is urgent, the market's significant, and the opportunity to create impact in our world unparalleled, and Fieldtrip will continue to be at the forefront. Thank you again for your continued interest in field trip. I will now ask the operator to close the lines.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.