LSPK LifeSpeak Inc

• Second quarter 2023 revenue of $13.2 million, an increase of 8% compared to the second quarter of 2022
• Consolidated Annual Recurring Revenue (or ARR¹) of $52.2 million, a 4% increase over the second quarter of 2022; enterprise client ARR increased 7% over the comparable period
• Total Number of Clients² increased by 8% to 996 as at June 30, 2023, compared to 921 in the second quarter of 2022
• Second quarter 2023 Adjusted EBITDA³ of $3.3 million, up 38% compared to the second quarter of 2022
• Second quarter 2023 Adjusted EBITDA Margin³ of 25% compared to 20% in the second quarter of 2022

TORONTO, Aug. 9, 2023 /CNW/ - LifeSpeak Inc. ("LifeSpeak" or the "Company") (TSX: LSPK), the leading whole-person wellbeing solution for employers, health plans and other organizations, announced today its financial and operational results for the three and six months ended June 30, 2023. All references to dollar values in this press release are in Canadian dollars, unless otherwise indicated.

"Our second quarter marked another period of consistent year-over-year revenue and Adjusted EBITDA growth, and increasing Adjusted EBITDA margins," said Michael Held, CEO and Founder of LifeSpeak. "During the reporting period, our overall sales integration initiatives progressed with the successful closing of several multi-product opportunities. The success was led by the ramp-up of our Torchlight product into the Canadian market, an initiative that continues to gain traction."

Consolidated Business Highlights for the Three Months Ended June 30, 2023
(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 June 30, 2023, unless otherwise stated)

• Second quarter 2023 revenue reached $13.2 million, an increase of 8% compared to the same period in 2022, representing a continuing trend of growth in the adoption of the Company's platform.
• Gross Margin for the second quarter 2023 was 91%, which is consistent with the comparable period in 2022.
• ARR of $52.2 million as at June 30, 2023, an increase of 4% over the same period in 2022. Of the $52.2 million of ARR, approximately $44.0 million, or 84%, originated from enterprise clients, an increase of approximately 7% compared to the same period in 2022. Of the $52.2 million of ARR, approximately 67% originated from clients outside of Canada.
• ARR is reported on a constant currency basis using a 1.30 USD:CAD exchange rate. When adjusting for the exchange rate at the end of the quarter of 1.32 USD:CAD, which is a consideration given the amount of ARR from outside of Canada, ARR is approximately $52.8 million.
• Second quarter 2023 Adjusted EBITDA³ of $3.3 million, an increase of $0.9 million compared to the same period in 2022.
• Second quarter 2023 Adjusted EBITDA³ Margin of 25%, a strong increase when compared to an Adjusted EBITDA³ margin of 20% in the comparable quarter of 2022.
• Second quarter 2023 net loss of $6.3 million, compared to a net loss of $6.0 million in the same period in 2022.
• Total Number of Clients of 996 as at June 30, 2023, an 8% increase when compared to 921 as at June 30, 2022.
• • Notable enterprise client additions for the second quarter included Farm Credit Foundations, Nutrien and Skillsoft.
• Channel partnership growth continued through the second quarter of 2023, as well as embedded client expansion, with the highlight being the closing of a U.S. based transaction with Medikeeper, servicing Blue Cross Blue Shield of Massachusetts. 
• Cross-selling initiatives progressed through the second quarter of 2023, with the successful closing of several cross-sale / multi-product opportunities including with Manitoba Blue Cross, and our largest cross-sell to date, the sale of the Torchlight product to Health Canada.
• The Company anticipates continued cross-sale growth in 2023, as net new clients are added with multi-product solutions, and as the current portfolio of client cross-sell opportunities are realized.
• Consideration of pathways to leverage artificial intelligence to further enhance and optimize the Company's vast, multi-modal content library, which could provide additional opportunities for growth in the future.

ARR, Consolidated Net Dollar Retention Rate and Logo Retention Rate Breakdown

ARR was approximately $52.2 million as at June 30, 2023, with core enterprise client ARR of approximately $44.0 million. This demonstrates the continued strength of the Company's core enterprise business. The historical and continued pattern of growth of enterprise clients, which comprises approximately 84% of overall ARR as at June 30, 2023, and the diversity of the customer base continues to build a strong foundation for growth of the LifeSpeak portfolio.

Additionally, growth in the Number of Clients continued year-over-year. Total Number of Clients was 996 as at June 30, 2023, an increase of approximately 8% when compared to the same period in 2022.

Consolidated Net Dollar Retention Rate⁴ for the quarter was 89%, a 13% increase from the same period in 2022, primarily due to the reference period no longer being affected by the loss of the large, embedded solutions client as first disclosed in the management discussion and analysis for the first quarter of 2022, offset by an increase in overall enterprise client churn. Net Dollar Retention Rate for enterprise clients was approximately 89% as at June 30, 2023.

Logo Retention Rate⁵ was 82% as at June 30, 2023 compared to 89% for the comparable period in 2022. As retention is measured on a last twelve-month basis, the lower Logo Retention Rate is primarily attributable to the loss of smaller enterprise client logos within the portfolio of customers. New internal initiatives focused on cross-selling products to existing clients, and strong uptake to date in the opportunity to discuss multiproduct solutions with at-risk clients is trending positively, and new logo additions are, on average, larger on an ARR basis than those of logos being lost.

In addition to the continued focus on revenue growth, the Company continues to monitor the cost base of the business and optimize for efficiencies where possible. This focus on costs has allowed the Company to continue to realize cost savings following the acquisitions. In the second quarter of 2023, the Company generated annualized cost savings of approximately $1.3 million, bringing total annualized savings implemented following the acquisitions to approximately $12.4 million.

Financial Results for the Three and Six Months Ended June 30, 2023:

Working Capital & Capital Structure

As of June 30, 2023, the Company was required to present the borrowings as current on the statement of financial position in accordance with the requirements of IAS 1, due to the timing of an amendment received in regard to the monthly ARR test for June 2023.

Subsequent to June 30, 2023, the Company and the lender entered into an amending agreement that removed the requirement to test the covenants for the months of June 2023 and July 2023. At no time was there an event of default as defined within the Convertible Term Loan agreement or in the senior lender credit agreement. 

Had the Company not been required to present all borrowings as current in accordance with IAS 1, as of June 30, 2023, the current liability balance would have been $20.9 million, of which $nil relates to the Beedie Convertible Loan and $5.3 million relates to the senior credit facility. As of today all borrowings, which would be classified as long-term in the normal course of the business are as such.

Conference Call Notification

The Company will hold a conference call to provide a business update on Wednesday, August 9, 2023, at 8:00 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.

This live call is also being webcast and can be accessed by going to:
https://events.q4inc.com/attendee/320829741

An archived telephone replay of the call will be available for two weeks by dialing 1.226.828.7578 or 1.866.813.9403 and entering access code 526102.   

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 income or loss before income tax expenses, finance costs and depreciation and amortization.

"Adjusted EBITDA" is defined as EBITDA before acquisition and other costs, share based compensation, foreign exchange loss (gain), impairment of goodwill, changes in fair value of contingent consideration, synergies realized and additional one time items. These non-cash and 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.

Adjusted Net Income (Loss) / Adjusted Earnings (Loss)

"Adjusted Net Income (Loss)" is defined as net income (loss) before acquisition and other costs, share based compensation, foreign exchange loss (gain), impairment of goodwill, changes in fair value of contingent consideration, synergies realized and additional one time items. These non-cash and non-recurring costs are independent events which are non-recurring in nature and incurred over several financial periods.

"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.

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 LifeSpeak. Such revenue is annualized by: (i) in the case where a contract was in existence for the entire month, multiplying recognized revenue in the calendar month of the date measured by 12; and (ii) in the case where a contract was entered into mid-month, extrapolating recognized revenue at the date measured for the entire calendar month, and then multiplying by 12. Contract lengths typically range from one to three years and, based on our past experience, the vast majority of clients renew their contracts upon expiry. ARR is mainly comprised of revenue from enterprise and embedded solutions and includes revenue from small business and ancillary services (comprised of portals, kits and events purchased by our existing clients or distributed through our channel partners). ARR provides a consolidated measure by which we can monitor the longer-term trends in our business.

"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 LifeSpeak Inc.

LifeSpeak is the leading whole-person-wellbeing platform for employers and other organizations that brings together digital education with human support. Our suite of wellbeing products allows organizations to provide best-in-class content and expertise that scales, meeting each individual wherever they are on their personal wellbeing journeys. As the parent company to LIFT Digital, ALAViDA Health, Torchlight, and Wellbeats, LifeSpeak provides in-depth expertise across mental health, wellness, physical fitness, substance use, and caregiving. With more than 30 years of collective experience working directly with Fortune 500 companies, government agencies, insurance providers, and others across the globe, we understand the complexities of addressing wellbeing within organizations, which is why our digital and data-driven approach provides insights that uncover gaps in wellbeing at the organizational level, ultimately enhancing performance outcomes. To learn more, follow LifeSpeak on LinkedIn (http://www.linkedin.com/company/lifespeak-inc), or visit www.LifeSpeak.com.

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, EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted Net Income (Loss), adjusted Earnings (Loss), Number of Clients, Net Dollar Retention Rate, Logo Retention Rate, performance, synergies, achievements, prospects, industry trends, advancement of its strategy and acceleration of its growth, the use of proceeds of the loan advance from the credit agreement with Beedie, amortization 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 continue investing in infrastructure to support its growth and brand recognition; the Company's ability to continue maintaining and enhancing its technological infrastructure and functionality of its platform; the Company's ability to grow through the use of artificial intelligence to enhance and optimize its content library; to 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 2022. Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not currently known to the Company or that the Company currently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information.

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.

SOURCE LifeSpeak Inc.