Numinus Wellness Inc.

Good afternoon and welcome to Numinous Wellness Inc's fiscal second quarter 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 second quarter 2023 results conference call. Discussing new minutes of performance today are Peyton Nyquist, founder and CEO, and John Fong, chief financial officer. Joining them for analyst questions at the end of our formal remarks are Reid Robinson, chief clinical officer, and Paul Thiel-King, 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 recent 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 CDAR. NUMIDIS does not undertake to update or revise any forward-looking statements to reflect new events or circumstances, except those required by law. Our second quarter 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 CDAR. As a reminder, all figures discussed on today's call are in Canadian dollars. I'll now turn the call over to Payton Nyquist, Chief Executive Officer.

Thanks, Jamie, and 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 second quarter results, I'd like to take a moment to address recent sector dynamics and showcase how Numinous remains well positioned for success and today and for the future. First, Numinous 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 Numinous 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. Third, we continue to believe that dose therapy sessions should be provided within a clinical setting in almost all scenarios. And as a result, we are not affected by the recent changes to the US regulations 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. But our dosing sessions will always be provided with proper and safe therapeutic environment at one of our wellness clinics. And 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 $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. So 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 actually benefit Numinate. And 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 second quarter continued 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 second quarter is typically a seasonally 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. And just as important, 4.4% more client appointments during the operating day. Due to the anticipated impact of seasonality, we generated $5.4 million of revenue during fiscal Q2, a 5.5% decline from Q1, but a 581% increase compared to the same quarter last year, due mostly to the acquisition of NovoLine. All of our revenue-producing business lines contributed meaningfully to our performance during the quarter. Our wellness clinics generated $4.7 million in revenue with a healthy 39% gross margin. Our U.S.-based clinics continue to drive stronger revenue and margin contributions 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 second quarter, 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 second quarter were ketamine-assisted therapy, ketamine, or Spravato-related bookings. 6.3% of appointments were for transcranial magnetic stimulation. And 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 front line 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. There's 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, though 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. And 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 numinous practitioners, students will build competency 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 numinous to designate competency in providing Pat using specific medicine. This is a unique opportunity for therapists and medical professionals to learn our psychedelic assisted therapy protocols and interact with our established numinous practitioners as they share their real life experiences in providing integrated and transformative 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 to the end of 2023. In total, more than 150 students have completed or are in the process of completing courses from the Numinous Training Program. And 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 $615,000 of revenue during Q2 as a result of CDER 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. The site is already accepting new clinical trial volunteers for a third-party study that began a few weeks ago. And 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. But 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. Numinous is at the forefront of that part of the mental health care 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 Numinous 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. And it allows the growth to happen without significant capital requirements for numinous. 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. And it's this digital platform that we believe will ultimately enable us to rapidly scale the Numinous 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 Numinous.com. Our new Numinous 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. And with that strategic update, I'll turn the call over to John.