Q2 was a strong a quarter for us with some exciting milestones accomplished. Most notably, we achieved one of the biggest milestones that startups strive for. In June we achieved profitability for the first time!
It’s OK if you want to pause now and do a happy dance before reading further, all of the Neurohacker team did when they first heard the news :)
We spent a large portion of the quarter, de-emphasizing the focus on top line growth and prioritizing a focus on profitability in order to show that we had the ability to be sustainable before diving into raising a growth round. Now that we’ve opened a new funding round and are seeing strong interest in it we’re turning our attention back to more rapid growth (while staying attentive to the bottom line).
Another big endeavor in Q2 was beginning our pilot study with the Cambridge Brain Sciences (CBS) platform to show the quantitative effects of taking Qualia Mind. The CBS platform has been used in over 300 published studies and is considered a gold standard for assessing cognitive function so we’ve been planning a trial through them for a long time but didn’t have the bandwidth to execute until recently. Though the study didn’t complete until after Q2, it’s worth bringing attention to these results as they’re quite exciting. For details you can view the press release we just put out. Based on the success of this pilot study we’re now moving forward with a new program where we’re integrating the CBS assessments directly into our shopping cart so all customer who purchase one of our cognitive products will have an option of doing before and after testing. Not only do we get the aggregate data on all of this so we can further show the effects of Qualia, the customers will also begin getting a report showing their personal results. We anticipate that once this is fully implemented it will support an increase in user retention since customers will now be able to have their subjective results along with an objective report showing the improvement in their brain function.
During Q2 we also finalized development of and testing for a new product release which will be known as Qualia Focus, scheduled for release in September. Qualia Focus is very similar in subjective effect to Qualia Mind and is designed to be more cost effective so we can reach a broader audience. We did single-blinded testing of Qualia Mind vs Qualia Focus and the results reported were virtually identical as far as the types of effects noted, with about 90% the potency. Qualia Mind will still have notably more long-term benefits than Focus and will still be our flagship product, but we wanted to make our products more accessible. When Focus launches next month, it will have a retail price of $69. We’re now making preparations for it’s launch online as well as beginning conversations with retailers to hopefully put Focus on store shelves.
In addition to Qualia Focus, we also began development on our next major product category which is cellular energy. We’ve now completed the formulation and are moving that product into testing. As that moves into testing, the product team is beginning to turn their attention to our next 2 major categories which are planned to be anxiety and sleep. Cellular energy appears to be tracking for release before the end of the year, with the other products looking at launches in the first half of next year.
There were several other highlights to the quarter, but to keep this email relatively short I’ll list the remainder below as bullet points:
Financial highlights – Q2 2018 vs. Q2 2017
The share of revenues driven by subscriptions (excluding Amazon sales) increased to 83% from 59% in Q2, 2017.
Revenues rose by 18% to $1.64M.
Profit contribution more than doubled to $603,000 (37% of revenues) due to the impact of a higher share of subscribers.
Operating loss declined by over 90% to $43,000 (3% of revenues).
Our sales to international customers rose from $0 in Q2, 2017 to $142,000 in Q2, 2018. We signed our first international distributor, based in the Netherlands. We also began the process of approval for Amazon EU. It’s a lengthy process but we appear to be on track to have the approval finalized before the end of this month.
Financial highlights – H1 2018 vs. H1 2017
Revenues rose by 40% to $3.27M.
Profit contribution almost doubled to $1.01M due to the impact of a higher share of subscribers.
Operating loss declined by 60% to $341,000 (10% of revenues).
From the way things are looking so far, Q3 is shaping up to be even more exciting than Q2. It feels like we’ve started to hit our stride as a company and are off to the races. Though I’m certain there’ll still be hiccups and challenges moving forward, our team is starting to run like a well oiled machine and our signaling in the marketplace seems quite high, both with customers and prospective JV’s. It would appear that the future looks bright!
As we look to the future, one of the major needs is to finish funding this round that we’ve opened up so we have the bandwidth necessary to hit our goals (new product development, clinical trials, expansion into retail, international expansion, etc). If you’re interested in investing in this round, click here to see our WeFunder campaign before it closes. If you’re an accredited investor and are interested in investing a larger amount please let us know and we can send you a copy of our convertible note deck.
Thank you for the support you’ve given to help get this far down the path! It wouldn’t have been possible without all the support we’ve seen from investors and the community at large.
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