Revitalist Lifestyle and Wellness gets a target cut from Clarus

After reporting its third quarter earnings, Clarus Securities analyst Noel Atkinson has a more conservative outlook on Revitalist Lifestyle and Wellness (Revitalist Stock Quote, Chart, News, Analysts, Financials CSE:CALM). Atkinson maintained a “Speculative Buy” rating but lowered his target price from $1.50/share to $1.00/share for a projected return of 308 per cent in an update to clients on Tuesday.

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.

Looking at Revitalist’s Q3 financials, Atkinson said they were in-line with projections. Driven primarily by the company’s original location in Knoxville, Revitalist’s reported revenue of $595,000 in the quarter was right around the Clarus estimate of $605,000, though the company did open four more locations in the quarter, with more in the pipeline.

“Management has noted that it should be easier to bring clinics in existing service areas (i.e., the second location in Knoxville, TN) to profitability than to expand into new locations,” Atkinson said. “Consequently, Revitalist management seems a bit more focused with their expansion efforts than what we have heard in the past.”

On top of the second Knoxville location, Revitalist has entered two new markets in the last week, opening a new clinic on November 24 in Novi, Mich., approximately 30 miles west of Detroit, as well as announcing a lease today for a new location in Bethesda, Md., which is expected to open by the end of the calendar year; Atkinson also notes that another new market entry is in the works through the ongoing acquisition of an operating clinic in Richmond, Va.

“Maryland is home to a number of important medical, military and research institutions, so gaining a presence in this jurisdiction was an important step in our expansion plan,” said Kathryn Walker, CEO of Revitalist in the company’s November 30 press release. “We look forward to opening the Bethesda location soon and growing our offering of clinics to prospective patients in the United States. Mental health continues to be a national health crisis as rates of anxiety, depression and PTSD keep climbing. Revitalist’s treatments provide important relief and offer hope to those struggling with these illnesses.”

Though Revitalist did not provide an official adjusted EBITDA number, Atkinson calculated a loss of $2.8 million for the quarter, missing on the initial Clarus estimate of a $1.5 million loss, with management attributing the loss to selling, general and administrative expenses being higher than anticipated on account of building out its team to support future expansion as well as increased corporate and clinic advertising and promotion.

However, despite the ongoing expansions, Atkinson’s target drop came from adopting a more conservative outlook on expansion numbers, lowering his 2022 target from 33 clinics to 27 and his 2023 estimate from 60 clinics to 45. In addition, Atkinson has now assumed a more gradual pace for clinics to reach a “stabilized” revenue level of about US$1.5 million per year

Consequently, Atkinson modified his financial estimates with immediate effect, lowering his fourth quarter estimates to $700,000 in revenue (previously $1.5 million) with a new adjusted EBITDA estimate of a $3.2 million loss (previously $1.7 million).

The quarter revisions lead to lowered expectations for the overall 2021 picture, as Atkinson now projects revenue at $1.8 million (previously $2.6 million), with an adjusted EBITDA loss of $7.3 million (previously a $4.6 million loss). The 2022 projections see a similar softening, with Atkinson now projecting $13 million in revenue (previously $24.6 million) and adjusted EBITDA loss of $11.6 million (previously projected at a $4.1 million loss).

Atkinson expects the company’s adjusted EBITDA to turn positive in the second quarter of 2023, two quarters later than originally thought, with the lowered projection of $10.5 million (previously $15 million) presenting a margin of 20.2 per cent on the revised revenue estimate of $52 million (previously $76.2 million).

In addition, Atkinson’s model continues to assume two placeholder equity raises in 2022 for net proceeds of $14.6 million to cover capex and operating expenses on top of the raise already completed in November.

Despite the lower target, Atkinson continues to believe in Revitalist’s path forward.

“We still expect Revitalist to achieve one of the highest rates of organic revenue growth in the entire psychedelic products and services sector during 2022 and 2023, and we continue to believe that Revitalist could grow to have the largest portfolio of ketamine-focused treatment clinics in the U.S. by late 2022, if not sooner,” Atkinson said.

Since it began trading on the Canadian Securities Exchange on August 24, Revitalist’s stock price is down 61.5 per cent, cooling off from an initial high point of $0.73/share on September 1 and further tumbling by 63.8 per cent since November 12, bottoming out at $0.25/share.