Clarus Securities analyst Noel Atkinson sees life in Revitalist Lifestyle and Wellness (Revitalist Stock Quote, Chart, News, Analysts, Financials CSE:CALM), initiating coverage on Monday with a “Speculative Buy” rating and target price of $1.50/share for a projected return of 194 per cent.
Founded in 2018 and headquartered in Knoxville, Tenn., Revitalist Lifestyle and Wellness provides patient-focused treatments for mental health and pain disorders through the operation of psychedelic-enhanced psychotherapy clinics, which guide patients through ketamine-enhanced psychotherapy.
Knoxville is also home to the company’s 6,000 square foot flagship location, and through an aggressive expansion plan in the United States, the company intends to create a global brand of psychedelic-enhanced psychotherapy clinics for ketamine-enhanced psychotherapy, psychedelic-enhanced psychotherapy, ketamine infusion therapy, vitamin infusions and transcranial magnetic stimulation focusing on mental health and pain disorders.
Of particular note, the company also has one of the first national service licenses with the U.S. Veterans Health Administration to serve qualifying military veterans.
Revitalist currently has five locations across Tennessee, Kentucky and North Carolina, with another 14 locations already in development or under acquisition letters of intent. Atkinson conservatively expects the company will have 33 locations by the end of 2022 and 60 by 2023, though he notes that management anticipates having 48 clinics by the end of 2022 and 84 by the end of 2023.
“We anticipate that a mature Revitalist clinic can conservatively achieve $1.5 million in annual revenues and $500,000 of Adj. EBITDA contribution, with significant potential upside as capacity utilization increases,” Atkinson said. “Management sees the potential for over 150 clinics nationwide by 2025.”
With the aggressive expansion plans in mind, Atkinson expects the company to undertake two placeholder equity capital raises to support operating costs and capital expenditures totalling $14 million, with a $6 million raise at $0.75/share expected in the first quarter of 2022 and an $8 million raise at $1.00/share expected in the third quarter of 2022.
As another part of Revitalist’s expansion, the company has made inroads with a view toward entering new markets, first by extending its protocols in the $1 billion transcranial magnetic stimulation (TMS) market by having its clinic locations work directly with psychiatric physicians, then by announcing the addition of intensive outpatient programs (IOP), a group therapy program provided by licensed mental health professionals designed for patients needing more structure and support than weekly outpatient therapy, to its portfolio in order to target a $25 billion market.
The IOP sessions, to be conducted three times a week for six weeks, will be led by licensed masters or PhD level clinicians with extensive experience in ketamine assisted psychotherapy, group processing, and psychoeducation.
“Our Chattanooga clinic will pilot IOP on November 1, 2021, with the remaining clinics expected to follow shortly thereafter,” said Kathryn Walker, CEO of Revitalist in the company’s October 22 press release. “Our goal is to launch IOP as a core service offering to ensure Revitalist is equipped to provide a wide scope of care available to patients in various stages of their recovery.”
Atkinson forecasts the company to bring home its first revenue in 2021 at $2.6 million, with Revitalist reporting $100,000 and $400,000 in revenue for the first two quarters, respectively. He then sees significant jumps happening as the company becomes more profitable, projecting $24.6 million in revenue for 2022 for a potential year-over-year increase of 852 per cent, before more than tripling to a projected $76.2 million by 2023, total year-over-year increase of 209 per cent.
Meanwhile, Atkinson projects the company’s EBITDA to turn positive in 2023 at $15 million for a 20 per cent margin, following projected EBITDA losses of $4.6 million in 2021 and $4.1 million in 2022.
Atkinson also includes key valuation data that puts Revitalist in a positive space, as he projects the company’s Price/Sales multiple to drop from a projected 13.9x in 2021 to 1.5x in 2022 and 0.5x in 2023, well below the average of Revitalist’s peer group in any of those years. Meanwhile, Atkinson’s first EV/adjusted EBITDA projection comes in 2023 at 2.1x.
Overall, Atkinson believes Revitalist has plenty of bright days ahead.
“As the company ramps up its clinic portfolio and the new centers stabilize and mature, we expect significant revenue and profit growth and for the valuation gap to the peer group to dissipate,” Atkinson said. “As it scales, we believe Revitalist will become an attractive M&A target for larger psychedelic drug development companies looking to add an in-house clinic network and/or to backfill their valuations.”
Since it began trading on the Canadian Securities Exchange on August 24, Revitalist’s stock price is down 16.9 per cent, cooling off from an initial high point of $0.73/share on September 1 and bottoming out at $0.44/share on September 30.
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