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Novo Integrated Sciences, Inc. (NVOS)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue was $3.15M, down 0.6% QoQ and down 4% YoY, with gross margin compression to 28.5% as product sales declined while healthcare services grew 8.1% YoY .
  • EPS deteriorated sharply to ($0.74) from ($0.16) in Q2 and ($0.10) in Q3 FY2023, driven by a $6.72M loss from the change in fair value of derivative liability, $2.90M amortization of debt discount, and $1.41M FX losses .
  • Liquidity improved sequentially with cash rising to $1.54M; however, liabilities increased to $25.66M due to recognition of a $14.05M derivative liability, pressuring equity to $9.96M .
  • Management emphasized non-traditional financing: executed a $6.21M Streeterville Note (10.9% interest, 12-month maturity) in April and announced commencement of SBLC monetization disbursement (~$78M gross proceeds expected) on July 18, potentially a near-term catalyst pending actual funding .
  • No Wall Street consensus estimates or earnings call transcript were available, limiting “beat/miss” framing; focus remains on financing milestones, margin trajectory, and operating cost control .

What Went Well and What Went Wrong

What Went Well

  • Healthcare services revenue grew 8.1% YoY despite overall sales decline; management is “committed to the commercialization of its proprietary product offerings” and “maximizing operational efficiencies” .
  • Liquidity improved sequentially with cash increasing to $1.54M in Q3 from $0.65M in Q2, aided by financing inflows .
  • Financing progress: executed a $6.21M Streeterville Note (10.9% interest, 12-month maturity) and initiated SBLC monetization disbursement with expected ~$78M gross proceeds, which management described as the “first payments in the process of full monetization” .

What Went Wrong

  • Gross margin compression to 28.5% (from 41.8% in Q2) due to product sales weakness and higher cost of revenues; operating costs rose 25% YoY, citing inflationary impact .
  • Net loss widened to ($13.74M), reflecting a $6.72M derivative liability fair value loss, $2.90M debt discount amortization, and $1.41M FX loss; operating loss also increased to ($2.52M) .
  • Balance sheet leverage and complexity increased: derivative liability of $14.05M recognized, with total liabilities up to $25.66M and equity down to $9.96M, intensifying solvency concerns ahead of financing execution .

Financial Results

Consolidated Performance (Q1 → Q2 → Q3 FY2024)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD)$3,891,218 $3,170,592 $3,151,851
Cost of Revenues ($USD)$1,947,200 $1,846,506 $2,254,958
Gross Profit ($USD)$1,944,018 $1,324,086 $896,893
Gross Margin (%)50.0% (calc) 41.8% (calc) 28.5% (calc)
Operating Expenses ($USD)$5,261,655 $2,863,854 $3,417,096
Loss from Operations ($USD)($3,317,637) ($1,539,768) ($2,520,203)
Total Other Expense ($USD)($1,343,086) ($1,205,792) ($11,216,097)
Net Loss ($USD)($4,660,723) ($2,745,560) ($13,736,300)
EPS (Basic & Diluted) ($)($0.28) ($0.16) ($0.74)

Notes: Gross Margin % calculated from reported gross profit and revenue figures (citations reflect source data).

Non-operating Drivers (Q3 FY2024 detail)

ItemQ3 2024
Change in fair value of derivative liability ($USD)($6,724,690)
Amortization of debt discount ($USD)($2,904,830)
FX loss ($USD)($1,406,915)

Segment/KPI Detail

MetricQ1 2024Q2 2024Q3 2024
Acenzia Revenue ($USD)$1,683,850 $884,396 $884,396
Terragenx Revenue ($USD)$16,971 $103,399 $103,399
Healthcare Services YoY Growth (%)1.2% 3.4% 8.1%

Balance Sheet KPIs

MetricQ1 2024Q2 2024Q3 2024
Cash & Equivalents ($USD)$1,640,007 $651,747 $1,539,771
Total Assets ($USD)$37,244,384 $34,949,271 $35,327,000
Total Liabilities ($USD)$13,960,336 $13,058,987 $25,663,779
Stockholders’ Equity ($USD)$23,284,048 $21,890,284 $9,663,221
Derivative Liability ($USD)$2,686,260 $2,312,921 $14,048,576

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2024/Q3None providedNone providedMaintained (no formal guidance)
MarginsFY2024/Q3None providedNone providedMaintained (no formal guidance)
OpExFY2024/Q3None providedInflationary impact cited, no numeric guidanceN/A
FinancingFY2024/Q3Pending SBLC monetizationSBLC disbursement commenced; ~$78M gross proceeds projectedUpdate (process commenced)
Debt/InterestFY2024/Q3N/AStreeterville Note: $6.21M, 10.9% interest, 12-month maturityNew disclosure

Earnings Call Themes & Trends

No Q3 FY2024 earnings call transcript was found; themes inferred from quarterly press releases.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Non-dilutive financing / liquidityQ1: Pursuing $70M unsecured debt, Ophir Collection monetization, gold-backed bond collateral transfer; capital markets tight . Q2: Continued focus on operational efficiencies and financing .Executed $6.21M Streeterville Note; SBLC monetization disbursement commenced with ~$78M gross proceeds projected .Intensifying focus; progressing from pursuit to execution/disbursement.
Product commercializationQ1: Emphasis on proprietary products; Acenzia strong, Terragenx minimal . Q2: Product-led revenue growth vs prior year .Q3: Product sales decline cited; services grew 8.1% YoY .Mixed; product softness in Q3; services improving.
Healthcare services performanceQ1: +1.2% YoY . Q2: +3.4% YoY .+8.1% YoY .Improving growth trajectory.
Operating cost disciplineQ1: OpEx up due to stock issuance and warrant exercise . Q2: OpEx modest +4% YoY .Q3: OpEx +25% YoY, “inflationary impact” .Deteriorated in Q3; inflation pressure.
Legal/regulatory (Ophir)Q1: Court approval received; monetization intended .No Q3 update in earnings release.Dormant in Q3 disclosure.
Debt/derivative impactsQ1: Derivative liability present; debt discount amortization elevated . Q2: Positive change in derivative liability; amortization continued .Large derivative loss ($6.72M) and amortization ($2.90M) plus FX losses .Adverse Q3 impact on P&L.

Management Commentary

  • “The Company’s fiscal year 2024 third quarter emphasized maximizing operational efficiencies for all business units… [and] non-traditional financing opportunities to raise foundational capital… [We] remain committed to the commercialization of [our] proprietary product offerings…” — CEO Robert Mattacchione .
  • On SBLC monetization: “The commencement of distribution marks the first payments in the process of full monetization… This step will now lead us to receiving our full expected payout…” — CEO Robert Mattacchione .
  • Business model pillars (Services, Technology, Products) reiterated across quarters to support “decentralizing” non-catastrophic care to the patient’s home through technology and personalized products .

Q&A Highlights

No earnings call transcript was available for Q3 FY2024; no Q&A themes to report [ListDocuments found none between 2024-06-01 and 2024-09-30].

Estimates Context

  • Wall Street consensus (S&P Global) for revenue/EPS/EBITDA was unavailable due to missing CIQ mapping for NVOS; therefore, we cannot quantify a beat or miss versus consensus for Q3 FY2024. Values retrieved from S&P Global were unavailable for NVOS.

Key Takeaways for Investors

  • Sequential liquidity uptick alongside rising balance sheet risk: cash improved to $1.54M, but liabilities surged with a $14.05M derivative liability recognized; equity fell to $9.96M, increasing reliance on financing execution .
  • Operating performance mixed: services up 8.1% YoY, but product sales weakness and inflation-driven OpEx growth drove margin compression and higher operating loss .
  • P&L dominated by non-operating items in Q3: derivative fair value loss ($6.72M), debt discount amortization ($2.90M), and FX losses ($1.41M) drove EPS to ($0.74) .
  • Financing milestones are the near-term narrative: Streeterville Note closed in April; SBLC monetization disbursement commenced in July with ~$78M gross proceeds projected—actual receipt and use of proceeds are key trading catalysts .
  • Watch product trajectory and cost control: margin recovery depends on stabilizing product sales and containing inflationary OpEx; services momentum is positive but currently insufficient to offset broader pressures .
  • Absence of consensus estimates and a formal guidance framework shifts focus to reported KPIs and financing execution risk; stock moves likely tied to funding confirmations and derivative liability dynamics .
  • Monitor subsequent disclosures: SBLC distribution completion timing (targeted by early August per press release) and any updates to non-traditional financing initiatives could materially alter liquidity and equity positioning .

Appendix: Additional Financing Details

  • Streeterville Note: $6.21M executed April 5, 2024; 10.9% interest; 12-month maturity; used to retire Mast Hill ($3.23M principal + $30.6K interest) and First Fire ($82.8K principal + $1.6K interest) obligations .
  • SBLC monetization: disbursement commenced July 18, 2024; Company projected ~$78M gross proceeds; final distribution expected on or before August 2, 2024 (per release) .