- 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%
"
_____________________________ | |
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
(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
- 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 atSeptember 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 ofCanada . - 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 atSeptember 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 ofNova 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. ) andBest 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, includingManitoba 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 ), andGrant 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.
________________________________ | |
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,
Despite this impact, the fundamentals of
Pro Forma ARR4 | ||||||||||||||
In C$ millions, unless otherwise noted | Q3-2021 | Q4-2021 | Q1-2022 | Q2-2022 | Q3-2022 | YoY Growth | ||||||||
Total Enterprise ARR | 31 % | |||||||||||||
Total Embedded Solutions & Other ARR | (7 %) | |||||||||||||
Total ARR | 1 % | |||||||||||||
Total ARR (Ex Large Embedded Solutions | 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,
____________________________ | |
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
Logo Retention Rate7 was 87% as at
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
________________________________ | |
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
Selected Consolidated Financial Information (in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||||
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 |
(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
Nolan Bederman , Executive ChairmanMichael Held , CEOMichael McKenna , CFO
A question-and-answer session will follow the business update.
CONFERENCE CALL DETAILS | |
DATE: | |
TIME: | |
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
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
"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 | Nine Months Ended | ||||||
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)... | (405) | -- | (2,051) | -- | ||||
EBITDA (1)................................... | 6,415 | (19,775) | (8,316) | (18,810) | ||||
Add: | ||||||||
Restructuring and other costs(2).. | 686 | 16,587 | 10,435 | 17,502 | ||||
Share-based compensation......... | 1,587 | 3,865 | 7,431 | 5,198 | ||||
Foreign exchange loss (gain) ..... | (4,031) | (103) | (3,591) | (26) | ||||
Revaluation gain on contingent consideration | (2,216) | -- | (3,951) | -- | ||||
Shareholders distributions (3)....... | -- | -- | -- | 600 | ||||
Synergies realized (4) ................... | 472 | -- | 2,410 | -- | ||||
Additional one-time costs (5) ...... | 166 | 987 | 1,454 | 1,189 | ||||
Adjusted EBITDA (6)................ | 3,078 | 1,561 | 5,872 | 5,653 | ||||
Adjusted EBITDA Margin (7) ........ | 24 % | 26 % | 17 % | 34 % |
Notes: | |
(1) | "EBITDA" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(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 |
(3) | Shareholders distributions includes private company legacy profit sharing payment to shareholders. |
(4) | Synergies realized relates to the impact of the full period of cost synergies related to the reduction of employees and professional services in relation to acquisitions. |
(5) | One-time costs related to IPO specific adjustments, acquisitions specific adjustments and transition costs related to the Wellbeats acquisition. |
(6) | "Adjusted EBITDA" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
(7) | "Adjusted EBITDA Margin" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures, Non-IFRS Ratios and Key Performance Indicators". |
Adjusted Net Income (Loss) / Adjusted Earnings (Loss)
"Adjusted Net Income (Loss)" is defined as net income (loss) before non-recurring restructuring and other costs related to the entry of the Company's credit agreement and recapitalization distributions, expenses related to the investment by the
"Adjusted earnings (loss) per share – basic" is defined as Adjusted Net Income (Loss) divided by the weighted average number of shares outstanding – basic for the relevant period.
"Adjusted earnings (loss) per share – diluted" is defined as Adjusted Net Income (Loss) divided by the weighted average number of shares outstanding – diluted for the relevant period.
Selected Consolidated Financial Information (In thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||
2022 | 2021 | 2022 | 2021 | |||
Net income (loss)........................ | (1,406) | (20,076) | (24,217) | (19,478) | ||
Add: | ||||||
Restructuring and other costs(1).. | 686 | 16,587 | 10,435 | 17,502 | ||
Share-based compensation......... | 1,586 | 3,865 | 7,431 | 5,198 | ||
Foreign exchange loss (gain) ..... | (4,032) | (103) | (3,591) | (26) | ||
Revaluation gain on contingent consideration | (2,216) | -- | (3,951) | -- | ||
Shareholders distributions (2)....... | -- | -- | -- | 600 | ||
Synergies realized (3) ................... | 472 | -- | 2,410 | -- | ||
Additional one-time costs (4) ...... | 166 | 987 | 1,454 | 1,189 | ||
Adjusted Net Income (Loss) (5) | (4,743) | 1,260 | (10,028) | 4,986 | ||
Adjusted earnings per share – basic (6) | (0.09) | 0.03 | (0.20) | 0.17 | ||
Adjusted earnings per share – diluted (7) | (0.09) | 0.03 | (0.20) | 0.17 |
Notes: | |
(1) | 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 |
(2) | Shareholders distributions includes private company legacy profit sharing payment to shareholders. |
(3) | Synergies realized relates to the impact of the full period of cost synergies related to the reduction of employees and professional services in relation to acquisitions. |
(4) | One-time costs related to IPO specific adjustments, acquisitions specific adjustments and transition costs related to the Wellbeats acquisition. |
(5) | "Adjusted Net Income (Loss)" has the meaning ascribed herein under "Cautionary Note Regarding Non-IFRS Measures 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". |
Key Performance Indicators
Annual Recurring Revenue
"Annual Recurring Revenue" or "ARR" is equal to the annualized value of contracted recurring revenue from all clients of our platform at the date being measured. Contracted recurring revenue is revenue generated from clients who are, as of the date being measured, party to contracts with
"embedded solutions client ARR" is ARR at a particular date attributable to our embedded solutions clients.
"enterprise client ARR" is ARR at a particular date attributable to enterprise clients.
Net Dollar Retention Rate
"Net Dollar Retention Rate" for a period is defined by considering a cohort of clients at the beginning of the period, and dividing the ARR from enterprise and embedded solutions attributable to that cohort at the end of the period, by the ARR from enterprise and embedded solutions attributable to that cohort at the beginning of the period. Net Dollar Retention Rate provides a consolidated measure by which we can monitor the percentage of recurring ARR retained from existing clients
Number of Clients
"Number of Clients" is defined as the number of clients at the end of any particular period as the number of enterprise clients and clients of our embedded solutions for which the term of services has not ended, or with which the Company is negotiating contract renewal and which meet a minimum revenue threshold.
Logo Retention Rate
"Logo Retention Rate" for a period is defined by considering a cohort of clients at the beginning of the period, and dividing the Number of Clients from that cohort at the end of the period, by the Number of Clients from that cohort at the beginning of the period. Logo Retention Rate provides a consolidated measure by which the Company can monitor the percentage of contracted clients retained every year.
About
Forward-Looking Information
This press release may contain "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking information may relate to the Company's future business, financial outlook and anticipated events or results and may include information regarding the Company's financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, and the Company's plans and objectives. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Particularly, information regarding the Company's expectations of future results, revenue growth, ARR, EBIDTA, EBITDA margin, adjusted EBITDA, adjusted Net Income (Loss), Number of Clients, Net Dollar Retention Rate, performance, synergies, achievements, prospects, industry trends, or opportunities, including for cross-selling, or the markets in which the Company operates is forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding possible future events or circumstances.
This forward-looking information and other forward-looking information are based on opinions, estimates and assumptions in light of the Company's experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company currently believes are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. These opinions, estimates and assumptions include, but are not limited to, the following: the Company's ability to build its market share and enter new geographies; the total available market for its products; the Company's ability to retain key personnel; the Company's ability to maintain and expand geographic scope; the Company's ability to execute on its expansion plans; the Company's ability to increase Number of Clients generally and during particular time periods; the Company's ability to continue investing in infrastructure to support its growth and brand recognition; the Company's capability to execute on its growth plan in the future; the Company's ability to continue maintaining and enhancing its technological infrastructure and functionality of its platform; the Company's ability to obtain financing on acceptable terms; the Company's ability to effectively integrate its recent acquisitions; the Company's ability to generate sufficient cash to deleverage, the impact of competition; the changes and trends in the Company's industry or the global economy; and changes in laws, rules, regulations, and global standards.
The risks and uncertainties that may affect forward-looking statements include, among others: performance of the market sectors that the Company serves; general market performance including capital market conditions and availability and cost of credit; foreign currency and exchange risk; impact of factors such as increased pricing pressure and possible margin compression; the regulatory and tax environment; that expected cost and revenue synergies are not realized within the expected timeframe or at all; that revenue, ARR, EBITDA margin and cash flow expectations are not met for any number of reasons; political, labour or supplier disruptions; that our clients face recessionary pressures, and other risks detailed from time to time in the Company's filings with Canadian provincial securities regulators, including the risk factors which are described in greater detail under "Risk Factors" in the Company's annual information form for the fiscal year ended
Accordingly, prospective investors should not place undue reliance on forward-looking information. The forward-looking information contained in this press release represents the Company's expectations as of the date of this press release (or as the date it is otherwise stated to be made) and is subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws.
All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements. Prospective investors should read this entire press release and consult their own professional advisors to ascertain and assess the income tax, legal, risk factors and other aspects of an investment in the Company.
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