LifeSpeak Inc. Announces Third Quarter 2022 Results
- Third quarter 2022 revenue of $12.8 million, an increase of 116% compared to the same period in 2021
- Consolidated Annual Recurring Revenue (or ARR1) as at September 30, 2022 reached $52.2 million, a 117% increase over the same period in 2021; on a pro forma basis, enterprise client ARR increased 31% over the comparable period
- Third quarter 2022 Adjusted EBITDA3 of $3.1 million, and Adjusted EBITDA Margin3 of 24%
- Total Number of Clients2 increased by 266% to 987 as at September 30, 2022, following record client additions within a 2022 quarter; on a pro forma basis, Total Number of Clients increased by 34%
TORONTO, Nov. 10, 2022 /CNW/ - LifeSpeak Inc. ("LifeSpeak" or the "Company") (TSX: LSPK), an integrated, whole-person- wellbeing platform for employers, health plans, and insurance companies, today announced its financial and operational results for the three and nine months ended September 30, 2022. All references to dollar values in this press release are in Canadian dollars, unless otherwise indicated.
"LifeSpeak has become the premier platform for comprehensive wellbeing content and support for employers throughout North America, and a leader in the space across the globe," said Michael Held, CEO and Founder of LifeSpeak. "During the third quarter, we continued to integrate the products of our acquired platforms, cross-sold products to existing clients, signed a significant number of new clients, and executed on our core strategy of building a platform to improve the wellbeing of individuals. Despite broad economic headwinds, we have built a company that is stronger than ever, with limited customer concentration and multiple paths to expand our existing revenue base, and win new customers. The continued integration of the platform and team across the organization has resulted in increased profitability, and we believe we are well positioned to execute on our focused growth strategy for the balance of 2022, and into 2023."
Mr. Held continued, "The integration of our four acquired businesses - Lift session, ALAViDA, Torchlight and Wellbeats – continued as planned in the third quarter and we are now becoming a single, powerful brand that unites our products' missions and elevates LifeSpeak globally as a leader in holistic wellbeing. With the successful ongoing integration of our acquired business, we are now focused on accelerating growth by leveraging our expanded SaaS-based offering, complementary client bases, enhanced cross-selling opportunities, and expanded geographic presence."
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1 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition of "ARR" |
2 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition of "Number of Clients" |
3 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition of "Adjusted EBITDA" and "Adjusted EBITDA Margin" |
Consolidated Business Highlights for the Three Months Ended September 30, 2022
(All capitalized terms not defined herein shall have the meaning ascribed to them in the Management's Discussion and Analysis for the three months ended September 30, 2022, unless otherwise stated)
- Third quarter 2022 revenue reached $12.8 million, an increase of 116% compared to the same period in 2021, representing a continuing trend of growth in the adoption of the Company's platform.
- Gross Margin for the third quarter 2022 was 91%, an increase compared to Gross Margin of 89% in the comparable period in 2021.
- Annual Recurring Revenue (ARR) of $52.2 million as at September 30, 2022, an increase of 117% over the same period in 2021. Of the $52.2 million of ARR, approximately $43.1 million, or 83%, originated from enterprise clients, an increase of approximately 31% compared to the same period in 2021 on a pro forma basis. Of the $52.2 million of ARR, approximately 64% originated from clients outside of Canada.
- ARR is reported on a constant currency basis using a 1.30 USD:CAD exchange rate. Given exposure to the US dollar and movement in exchange rates over the quarter, when adjusting for the strength of the US Dollar ARR would have been approximately $54.0 million as at September 30, 2022, when using a 1.37 USD:CAD exchange rate.
- Third quarter 2022 Adjusted EBITDA3 of $3.1 million, an increase of $1.5 million compared to the same period in 2021.
- Third quarter 2022 Adjusted EBITDA3 margin of $24%, an increase when compared to an Adjusted EBITDA3 margin of 20% in the second quarter of 2022, and a slight decrease from 26% when comparable to the same period in 2021.
- Third quarter 2022 net loss of $1.4 million, a decrease of $18.7 million compared to the same period in 2021, largely due to a decrease in restructuring and other costs.
- Total Number of Clients of 987 as at September 30, 2022, a 266% increase when compared to 270 at the same date in 2021, and an increase of 34% compared to the same period in 2021 when calculated on a pro forma basis.
- Notable enterprise client additions for the quarter included Common Spirit Health (Catholic Health Initiatives) (U.S.), Stanley Black and Decker (U.S.), the Workers Compensation Board of Nova Scotia (Canada), and H&M Canada (Canada).
- Subsequent to quarter end, LifeSpeak signed several additional significant enterprise clients, including BJ's Wholesale Club, Inc. (U.S.) and Best Western Hotels & Resorts (U.S.).
- Partnerships and embedded solutions client additions continued through the third quarter with the launch of new embedded partnerships with MetLife Gulf, LifeSpeak's first Gulf region client, highlighting the global nature of the platform, and the launch of our partnership with WebMD.
- Subsequent to quarter end, LifeSpeak signed additional embedded clients, including Manitoba Blue Cross (Canada).
- Cross-selling initiatives progressed through the third quarter of 2022, with the successful closing of several cross-sale / multi-product opportunities including Maximus Inc. (U.S.) – LifeSpeak's largest cross-sale to date – PricewaterhouseCoopers (U.S. & Canada), and Grant Thornton (Canada). The Company anticipates continued cross-sale growth in the fourth quarter of 2022, as net new clients are added with multi-product solutions, and as the current portfolio of client cross-sell opportunities are harvested.
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3 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition of "Adjusted EBITDA" and "Adjusted EBITDA Margin" |
Review of Operations and Outlook
Demand for the Company's SaaS-based mental health and whole-person- wellbeing platform continues to be strong as evidenced by growth in the Company's ARR and Number of Clients.
Similar to the Company's second quarter, LifeSpeak's third quarter key performance indicators were impacted by reduced recognizable revenue related to a large, embedded solutions client. Although we continue to pursue renewal discussions with this client, as the Company does with all existing and previous clients of our platform, there has yet to be any significant developments in these discussions and the client has not renewed its contract.
Despite this impact, the fundamentals of LifeSpeak's core business remain robust. When excluding the large, embedded client, and accounting for acquisitions, ARR growth was approximately 22% over the LTM period on a pro forma basis, and core enterprise client ARR growth was approximately 31%. The historical and continued pattern of growth in the enterprise client demographic, which comprises approximately 83% of overall ARR as at September 30, 2022, and the diversity of customer, industry, and sector concentration demonstrate the continued strength of the core enterprise business and lay a strong foundation for growth and resilience within the core LifeSpeak portfolio.
Pro Forma ARR4 | ||||||||||||||
In C$ millions, unless otherwise noted | Q3-2021 | Q4-2021 | Q1-2022 | Q2-2022 | Q3-2022 | YoY Growth | ||||||||
Total Enterprise ARR | $32.9 | $36.7 | $39.4 | $41.0 | $43.1 | 31 % | ||||||||
Total Embedded Solutions & Other ARR | $18.7 | $19.0 | $11.7 | $9.2 | $9.1 | (7 %) | ||||||||
Total ARR | $51.5 | $55.6 | $51.1 | $50.2 | $52.2 | 1 % | ||||||||
Total ARR (Ex Large Embedded Solutions | $42.7 | $46.4 | $49.6 | $50.2 | $52.2 | 22 % |
Additionally, growth in the Number of Clients continued quarter-over-quarter, with strong net adds in the enterprise client base. Total Number of Clients increased to 987, or by approximately 266% when compared to the 2021 comparable period on an as-reported basis. On a pro forma basis, Number of Clients grew by approximately 35% year-over-year. Q3 is traditionally impacted by lower activity within the quarter given seasonality, however, on a net new pro forma basis, LifeSpeak added 65 new enterprise customers, exceeding the number added in the respective Q1 and Q2 periods. This indicates strong underlying momentum for Q4, which is traditionally the busiest quarter for new enterprise customer additions.
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4 | Pro Forma ARR is calculated assuming that the acquisitions of "Lift session", "ALAViDA", "Torchlight" and "Wellbeats" as described in our AIF had been completed prior to the applicable period. This metric is provided for illustrative purposes to provide a comparative measure to show ARR as if all businesses had been reporting as a combined entity. |
Pro Forma Number of Clients5 | |||||||
Q3-2021 | Q4-2021 | Q1-2022 | Q2-2022 | Q3-2022 | YoY Growth | ||
Total Enterprise Clients | 720 | 803 | 847 | 903 | 968 | 34 % | |
Total Embedded Solutions Clients | 12 | 14 | 15 | 18 | 19 | 58 % | |
Total Number of Clients | 732 | 817 | 862 | 921 | 987 | 35 % |
Consolidated Net Dollar Retention Rate6 for the quarter was 78%, an increase from 76% in the previous period, largely due to expansion and cross-sell within enterprise clients, and growth within embedded solutions clients. Despite the negative impact of the large, embedded solutions client to consolidated Net Dollar Retention Rate, the Net Dollar Retention Rate for enterprise clients remained strong at approximately 97% as at September 30, 2022.
Logo Retention Rate7 was 87% as at September 30, 2022, however upsell and cross-sell within the portfolio of existing enterprise clients is effectively maintaining the overall Net Dollar Retention Rate near where the Company would expect it to be. As retention is measured on an LTM basis, the lower Logo Retention Rate is primarily attributable to the loss of smaller client logos following the acquisition of Wellbeats in the first quarter of 2022 and is expected to normalize through the balance of the year. Despite a slightly lower Logo Retention Rate, new logo additions are, on average, larger on an ARR basis than those of logos being lost. In addition, as the cross-sell and up-sell efforts continue, the Company expects Net Dollar Retention Rate to increase as existing clients are sold additional products and services over time.
In addition to the continued focus on revenue growth, the Company has also made progress in acquisition integration, which has led to the ability to generate significant cost savings. While there has been a reduction in headcount, largely through identified redundancies, the Company has been focused on optimizing the cost base in all areas. The focus on integration has resulted in significant annualized cost savings, and in the third quarter of 2022 the Company generated annualized cost savings of approximately $1.2 million, bringing total annualized savings to approximately $7.8 million. The implementation of these synergies is largely complete, and the Company views its current operating state as more than capable to execute on its growth plan into the future.
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5 | Pro Forma Number of Clients is calculated assuming that the acquisitions of "Lift session", "ALAViDA", "Torchlight" and "Wellbeats" as described in our AIF had been completed prior to the applicable period. This metric is provided for illustrative purposes to provide a comparative measure to show Number of Clients as if all businesses had been reporting as a combined entity. |
6 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition, "Net Dollar Retention Rate". |
7 | See "Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators" for a definition, "Logo Retention Rate". |
Financial Results for the Three and Nine Months Ended September 30, 2022
Selected Consolidated Financial Information (in thousands of Canadian dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
Revenue | 12,766 | 5,921 | 33,616 | 16,428 | ||||||||||
Less: | ||||||||||||||
Product Development and Content | 1,179 | 671 | 3,613 | 1,455 | ||||||||||
Gross Profit................................................. | 11,587 | 5,250 | 30,003 | 14,974 | ||||||||||
Gross Profit Margin (1) | ||||||||||||||
Gross Profit Margin...................................... | 91 % | 89 % | 89 % | 91 % | ||||||||||
Deduct Expenses: | ||||||||||||||
Sales and marketing..................................... | 2,662 | 2,525 | 9,686 | 6,150 | ||||||||||
General and administrative......................... | 6,485 | 2,151 | 20,309 | 4,960 | ||||||||||
Share-based compensation.......................... | 1,587 | 3,865 | 7,431 | 5,198 | ||||||||||
Foreign exchange loss (gain)....................... | (4,032) | (103) | (3,591) | (26) | ||||||||||
Depreciation and amortization.................... | 4,421 | 28 | 11,277 | 56 | ||||||||||
11,123 | 8,466 | 45,111 | 16,339 | |||||||||||
Income (loss) before restructuring and other |
464 |
(3,216) |
(15,109)) |
(1,365) | ||||||||||
Restructuring and other costs (2).................. | 686 | 16,587 | 10,435 | 17,502 | ||||||||||
Revaluation gain on contingent consideration | (2,216) | -- | (3,951) | -- | ||||||||||
Finance expense, net................................... | 3,804 | 273 | 6,675 | 661 | ||||||||||
Income (loss) before income taxes............. | (1,810) | (20,076) | (26,268) | (19,478) | ||||||||||
Income taxes (recovery) .............................. | (405) | -- | (2,051) | -- | ||||||||||
Net income (loss) ......................... | (1,406) | (20,076) | (24,217) | (19,478) | ||||||||||
Earning (loss) per share - basic.................. | (0.03) | (0.43) | (0.49) | (0.65) | ||||||||||
Earnings (loss) per share- diluted............... | (0.03) | (0.43) | (0.49) | (0.65) | ||||||||||
Non-IFRS Measures | ||||||||||||||
EBITDA (3)...................................................... | 6,415 | (19,775) | (8,316) | (18,810) | ||||||||||
Adjusted EBITDA (4) ...................................... | 3,078 | 1,561 | 5,872 | 5,653 | ||||||||||
Adjusted Net Income (Loss) (5)..................... | (4,743) | 1,260 | (10,028) | 4,986 | ||||||||||
Adjusted earnings (loss) per share – basic (6) | (0.09) | 0.03 | (0.20) | 0.17 | ||||||||||
Adjusted earnings (loss) per share – diluted(7) | (0.09) | 0.03 | (0.20) | 0.17 |
Notes: | |
(1) | Gross profit margin is calculated as gross profit divided by revenue for the relevant period. |
(2) | Restructuring and other costs are costs related to the entry into of the Company's credit agreement and recapitalization distributions and expenses related to the investment by the Institutional Investors, costs and expenses in connection with the Company's IPO and related matters and costs and expenses in connection with the Company's acquisitions, including potential transaction bonuses (for the purposes of calculating Adjusted EBITDA and Adjusted Net Income). |
(3) | "EBITDA" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(4) | "Adjusted EBITDA" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(5) | "Adjusted Net Income (Loss)" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(6) | "Adjusted earnings (loss) per share – basic" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(7) | "Adjusted earnings (loss) per share – diluted" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
Conference Call Notification
The Company will hold a conference call to provide a business update on Thursday, November 10, 2022, at 8:30 a.m. ET hosted by:
- Nolan Bederman, Executive Chairman
- Michael Held, CEO
- Michael McKenna, CFO
A question-and-answer session will follow the business update.
CONFERENCE CALL DETAILS | |
DATE: | Thursday, November 10, 2022 |
TIME: | 8:30 a.m. ET |
DIAL-IN NUMBERS: | 1.833.950.0062 or 1.844.200.6205 |
REFERENCE NUMBER: | 479506 |
This live call is also being webcast and can be accessed by going to:
https://events.q4inc.com/attendee/599245852
An archived telephone replay of the call will be available for two weeks by dialing 1.866.813.9403 and entering access code 325147.
Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators
LifeSpeak supplements its results of operations determined in accordance with IFRS with certain non-IFRS financial measures, non-IFRS ratios and key performance indicators that the Company believes are useful to investors, lenders and others in assessing its performance and which highlight trends its core business that may not otherwise be apparent when relying solely on IFRS measures. LifeSpeak management also uses non-IFRS measures, non-IFRS ratios and key performance indicators for purposes of comparison to prior periods, to prepare annual operating budgets, for the development of future projections and earnings growth prospects, to measure the profitability of ongoing operations and in analyzing our financial condition, business performance and trends. As such, these measures and indicators are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective, including how it evaluates its financial performance and how it manages its capital structure. LifeSpeak also believes that securities analysts, investors and other interested parties frequently use these non-IFRS measures, non-IFRS ratios and key performance indicators in the evaluation of issuers. These non-IFRS measures, non-IFRS ratios and key performance indicators are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may include or exclude certain items as compared to similar IFRS measures, and such measures may not be comparable to similarly-titled measures reported by other companies. Accordingly, these measures and indicators should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
Non-IFRS Measures, Non-IFRS Ratios and Reconciliation of Non-IFRS Measures
The Company uses non-IFRS measures, including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income (Loss)", and the non-IFRS ratios, including "Adjusted earnings (loss) per share – basic", "Adjusted earnings (loss) per share – diluted" and "Adjusted EBITDA Margin". This press release also makes reference to "Annual Recurring Revenue" or "ARR", "Net Dollar Retention Rate", "Number of Clients" and "Logo Retention Rate", which are key performance indicators used in our industry.
EBITDA and Adjusted EBITDA
"EBITDA" is defined as net profit or loss before income tax expenses, finance costs and depreciation and amortization
"Adjusted EBITDA" is defined as EBITDA before non-recurring restructuring and other costs related to the entry into of the Company's credit agreement and recapitalization distributions, expenses related to the investment by the Institutional Investors, costs and expenses in connection with the Company's IPO and related matters, cost and expenses related to the Company's acquisitions, synergies realized in connection with the acquisitions, share-based compensation, foreign exchange loss (gain) and shareholders distributions. These non-recurring costs are independent events which are non-recurring in nature and incurred over several financial periods.
"Adjusted EBITDA Margin" is calculated as Adjusted EBITDA divided by revenue for the relevant period.
Selected Consolidated Financial Information (In thousands of Canadian dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | |||||
Net income (loss)........................ | (1,406) | (20,076) | (24,217) | (19,478) | ||||
Add: | ||||||||
Amortization and depreciation expense | 4,421 | 28 | 11,277 | 56 | ||||
Finance expense.......................... | 3,804 | 273 | 6,675 | 611 | ||||
Income tax expense (recovery)... |