IWINF - Irwin Naturals Shores up Mental Health Clinics as Revenue Slumps
Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) posted results that showed dipping revenue as the nutraceutical giant tries to expand its wellness clinic footprint.
The California-based natural products and supplements maker filed its results for its third quarter ending Sept. 30.
Net revenue totaled $600,000, versus $1.2 million for the same period last year. In a statement, the company attributed the slowdown in business to “volume and startup costs related to Emergence by Irwin Naturals (ketamine clinics) and Irwin Naturals Cannabis (intellectual property licensing to the cannabis industry).”
The company posted a net loss of $583,000 versus $1.46 million in net losses the same quarter in 2021.
“In Q3, Irwin Naturals moved close to becoming the world’s largest chain of dedicated psychedelic mental health clinics,” CEO Klee Irwin said . “In addition, we are rapidly on our way to doubling our profits from last year on an annualized basis based on potential acquisitions in the psychedelic mental.”
The company said that supply chain issues concerning a “key supplier” and across the CBD segment could explain the 7% decline in overall operating revenues, along with order timing and the loss of distribution of certain non-CBD mass market products.
Despite cost pressures, CFO Sean Sand touted the company’s ability to grow its gross margins by 4.8% over the quarter.
“The gross margin increase can be attributed to sales mix coupled with the early success of a targeted price increase across the market,” Sand said. “In addition, we were still able to maintain positive operating profits despite the additions in the cost base to support the early phases of the emergence and licensing businesses.”
Adjusted EBITDA fell to $500,000.
Cash provided by operating activities totaled $3.6 million since the beginning of the fiscal year 2022, versus $14.6 million in the same span of time last fiscal year.
The company said that the decrease in operating cash flows is “primarily due to lower operating revenue and temporary unfavourability to working capital led by the timing of payments to the company’s primary product manufacturer couple with increased cash related to emergence startup costs.”
Irwin had cash on hand of $1.2 million at quarter end versus $625,000 last year.
Outlook
With a strong balance sheet and access to considerable working capital, the CFO said that the company is looking to break into “high-growth cannabis and psychedelics sectors” by leveraging its household name brand status to drive an aggressive rollup of mental health clinics.
Irwin has a 28-year track record of growth, logging $100 million in revenues in nutraceuticals, but it wants to be the leader in psychedelic mental health clinics. So far, the company has bought or inked agreements to buy 17 clinics to provide ketamine-assisted psychotherapy and other psychedelics-based treatments as they become federally legal.
The company also has seven brand licensing deals to sell its nutraceutical products made with THC in six states and Canada.
Cantor Fitzgerald in October gave the company an overweight rating and a $7 price target. The stock currently trades at roughly $2.43 per share.
The analyst tempered the robust rating by noting the company has no track record in running clinics. However, the company is banking on the fact it has an 80% brand recognition and that it can do all stock deals with potential acquisitions.
With its war chest from selling supplements, he contended, Irwin will be better positioned than others in the field.
“The mental health care industry is a $1.5 trillion behemoth in desperate need of a disruptive sea change,” Irwin’s CEO said. “With standard treatments having an average effectiveness of approximately 17%, the drastic improvements of results from psychedelic treatments is that sea change.”