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Akili, Inc. (AKLI)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 marked an inflection from Akili’s pivot to a direct-to-consumer non‑prescription model: revenue rose 5x sequentially to $0.702M and gross margin turned positive at ~60%, driven primarily by EndeavorOTC momentum in adult ADHD .
  • Operating expenses rose sequentially on marketing and restructuring, but non‑GAAP OpEx stayed within the FY23 guidance range ($55–$60M, reiterated), and cash runway extended into 2H 2025, improving capital visibility .
  • Regulatory catalysts are building: EndeavorOTC 510(k) submitted Oct 30, EndeavorRx adolescent label expansion under FDA review, and Shionogi’s Japan Phase 3 readout expected by end of Q1 2024 .
  • Leadership and structure realigned for the consumer model: 40% workforce reduction announced in September; Matt Franklin named CEO in October, emphasizing marketing, profitability, and DTC execution .
  • Wall Street consensus (S&P Global) for Q3 2023 was unavailable; estimate comparisons cannot be provided—investors should focus on DTC traction, margin trajectory, and regulatory milestones [GetEstimates error noted].

What Went Well and What Went Wrong

What Went Well

  • Positive gross margin profile achieved: total gross margins improved to ~60% in Q3 from ~‑32% in Q2, reflecting EndeavorOTC unit economics and DTC model leverage .
  • Rapid EndeavorOTC adoption: 176,559 first‑time app downloads, 7,535 active subscribers, $93 ARPU, and $553k EndeavorOTC revenue in Q3, underscoring strong consumer demand and monetization .
  • Regulatory progress: the company submitted EndeavorOTC for FDA OTC authorization on Oct 30 and continued the EndeavorRx adolescent label expansion process; Shionogi’s pediatric ADHD Phase 3 in Japan targets completion by end Q1 2024 .
    • “Our direct‑to‑consumer strategy removes accessibility barriers… will accelerate the path to profitability,” said CEO Matt Franklin .

What Went Wrong

  • Sequential increase in GAAP total operating expenses ($18.8M vs $15.3M in Q2) due to higher EndeavorOTC marketing spend and severance from September headcount reduction; GAAP net loss widened to $(15.9)M vs $(11.8)M in Q2 .
  • Nasdaq minimum bid price non‑compliance notice in October increases risk of future listing actions absent remediation (e.g., reverse split) if bid compliance is not regained .
  • Workforce reduction (~40%) and termination of TALi agreement highlight near‑term execution risks from restructuring and portfolio focus, even as they support long‑term cash discipline .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarters

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Revenue ($USD Thousands)$82 $113 $114 $702
GAAP Net Income (Loss) ($USD Thousands)$53,236 $(20,711) $(11,759) $(15,876)
Total Operating Expenses ($USD Thousands)$24,465 $19,095 $15,281 $18,848
Gross Margin %N/AN/A~‑32% ~60%

Segment/Source Detail

MetricQ1 2023Q2 2023Q3 2023
EndeavorOTC Revenues ($USD Thousands)N/A (product released June 6, 2023) $5 $553
Total Revenues ($USD Thousands)$113 $114 $702
EndeavorOTC Billings ($USD Thousands)N/A $25 $533

Non-GAAP Reconciliation (Select Items)

MetricQ2 2023Q3 2023
Non-GAAP Total Operating Expenses ($USD Thousands)$13,060 $14,732
Non-GAAP Net Loss ($USD Thousands)$(12,605) $(13,888)
Key Adjustments (Q3)Stock-based comp $1,655; Workforce reduction $2,461; Earn-out FV change $(2,128) —

KPIs (EndeavorOTC)

KPIJun 6–Sep 5, 2023Q3 2023
First-time App Downloads125,971 176,559
Active Subscribers4,170 7,535
ARPU ($)$81.88 $93
EndeavorOTC Revenues ($USD Thousands)$341 $553
EndeavorOTC Billings ($USD Thousands)$341 $533

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP Total Operating ExpensesFY 2023$55M–$60M $55M–$60M Maintained
Non-GAAP Total Operating ExpensesFY 2024N/A$42M–$47M New
Cash Runway—Sufficient into Q1 2025 Sufficient into 2H 2025 Raised/Extended
Gross Margins (non‑Rx model)Late 202560–70% 60–70% Maintained

Earnings Call Themes & Trends

Note: The Q3 2023 earnings call transcript could not be retrieved due to a document database inconsistency; themes summarized from company press releases and 8‑Ks.

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2023)Trend
Regulatory/LegalSTARS‑ADHD Adult pivotal results; preparing EndeavorOTC OTC submission; EndeavorRx adolescent label expansion filing under review EndeavorOTC 510(k) submitted Oct 30; adolescent label expansion remains under review; Shionogi Japan Phase 3 expected complete by end Q1 2024 Increasing regulatory momentum
Product PerformanceEndeavorRx pediatric prescriptions +27% QoQ; growing unique and repeat prescribers EndeavorOTC DTC traction: 176,559 downloads, 7,535 subscribers, $93 ARPU; $553k EndeavorOTC revenue Shift to adult DTC driver
R&D ExecutionAdult pivotal showed significant attention gains; adolescent data submitted to FDA Continued FDA interactions; partner Shionogi progressing Phase 3 Steady progress
Macro/AccessQ1 highlighted mental health crisis and medication shortages; intent to accelerate solutions DTC model “removes accessibility barriers” and reduces reliance on intermediaries Improving access via DTC
Leadership/Organization—CEO transition to Matt Franklin; workforce reduction ~40% to align with non‑Rx model Realignment to DTC
Financial DisciplineFY23 non‑GAAP OpEx $55–$60M reiterated FY24 non‑GAAP OpEx $42–$47M; cash runway extended to 2H 2025; gross margin targets reiterated Tightening OpEx, extending runway

Management Commentary

  • “We are pleased with early results of our previously‑announced strategic shift from a prescription to a non‑prescription business model focused on EndeavorOTC… We’ve submitted EndeavorOTC for FDA review and authorization as an over‑the‑counter medical product in the adult ADHD market, and anticipate that these business model changes… will accelerate the path to profitability.” — Matt Franklin, CEO .
  • “We’re seeing continued adoption of EndeavorRx in our initial pediatric market, and we are excited to have entered the sizable adult market with the introduction of EndeavorOTC… we are pursuing FDA authorization as an over‑the‑counter treatment in the adult market.” — Eddie Martucci, then CEO (Q2 press) .
  • “We’re seeing steady, increasing uptake of EndeavorRx… With… positive results from our pivotal trial in adults… we now have the potential to greatly expand our current market.” — Eddie Martucci (Q1 press) .
  • On leadership transition: “Akili’s transition to a non‑prescription business is a springboard to transform the company…” — Eddie Martucci; “There is a monumental opportunity… to revolutionize the medical industry by bringing clinically validated, consumer‑focused treatments directly…” — Matt Franklin .

Q&A Highlights

  • The Q3 2023 earnings call transcript could not be retrieved due to a document database inconsistency, so Q&A highlights and any clarifications from live remarks are unavailable. Webcast logistics were provided in the press release (Nov 9, 2023) .

Estimates Context

  • S&P Global/Capital IQ consensus EPS and revenue estimates for Q3 2023 were unavailable due to missing CIQ mapping for AKLI; as a result, comparisons to Wall Street estimates cannot be provided at this time [GetEstimates error].
  • Investors should monitor future consensus availability post‑pivot; meanwhile, focus on sequential revenue acceleration, gross margin trajectory, and operating expense guidance .

Key Takeaways for Investors

  • DTC pivot is working: revenue surged to $0.702M (+5x QoQ) with ~60% gross margin, signaling attractive unit economics as consumer traction scales .
  • EndeavorOTC is the growth engine: 176,559 downloads and 7,535 subscribers, ARPU $93; EndeavorOTC contributed $553k of Q3 revenue, validating direct monetization .
  • Cash discipline and runway improved: FY23 non‑GAAP OpEx maintained ($55–$60M); FY24 OpEx guided lower ($42–$47M); liquidity expected to fund operations into 2H 2025 .
  • Regulatory catalysts ahead: EndeavorOTC 510(k) submission (adult ADHD), EndeavorRx adolescent label expansion under review, and Shionogi’s Japan Phase 3 timeline—each could expand TAM and support adoption .
  • Organizational alignment: 40% workforce reduction and CEO transition should streamline the non‑prescription model and concentrate spend on consumer marketing and product enhancement .
  • Watch listing compliance: Nasdaq minimum bid price deficiency highlights potential need for corporate actions if compliance is not regained; monitor management’s remediation path .
  • Non‑GAAP adjustments meaningful: workforce reduction and stock‑based comp affected reported losses; non‑GAAP net loss of $(13.9)M vs GAAP $(15.9)M in Q3 better reflects operating performance amid the pivot .