LSPK LifeSpeak Inc

• Fourth quarter 2022 revenue of $13.8 million, an increase of 101% compared to the same period in 2021; Fiscal 2022 revenue reached $47.4 million, an increase of 104% compared to Fiscal 2021
• Consolidated Annual Recurring Revenue (ARR¹) of $52.8 million as at December 31, 2022, a 49% increase over December 31, 2021; enterprise client ARR increased 20%, on a pro forma basis
• Total Number of Clients² increased by 137% to 1,002 as at December 31, 2022, compared to 422 as at December 31, 2021; on a pro forma basis, Total Number of Clients increased by 23%
• Fourth quarter 2022 Adjusted EBITDA³ of $4.8 million, and Adjusted EBITDA Margin³ of 35%
• Announcement of a $15.0 million convertible term loan with Beedie Investments to strengthen liquidity position and improve the ability to execute on short- and long-term growth strategies
• Substantially reduced future payment obligations; approximately $1.1 million of amortization in Q4-2023, and limited cash interest payments in 2023

TORONTO, March 31, 2023 /CNW/ - LifeSpeak Inc. ("LifeSpeak" or the "Company") (TSX: LSPK), the leading, whole-person- wellbeing solution for employers, health plans, and insurance companies, announced today its financial and operational results for the three and 12 months ended December 31, 2022. All references to dollar values in this press release are in Canadian dollars, unless otherwise indicated.

"During the fourth quarter we continued to strengthen and diversify our business by cross-selling products to existing clients, signing a number of high-quality new customers (including multi-product contracts), building a large brand presence in the U.S., and executing on our product roadmap to ensure a more seamless integration of our acquired platforms," said Michael Held, CEO and Founder of LifeSpeak.

"Subsequent to quarter end, along with continued efforts to execute on our overall integration and growth strategy, we ensured that LifeSpeak will be strong financially going forward by raising additional capital to repay a portion of, and renegotiate the terms of, our existing debt to provide us with flexibility to continue to grow our business. As we look ahead to 2023 and beyond, we have built a strong foundation for our business and remain very optimistic about the opportunities ahead of us."

Consolidated Business Highlights for the Three Months Ended December 31, 2022, and Fiscal 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 and fiscal year ended December 31, 2022, unless otherwise stated)

• Fourth quarter 2022 revenue reached $13.8 million, an increase of 101% 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 fourth quarter 2022 was 92%, an increase compared to Gross Margin of 87% in the comparable period in 2021.
• ARR of $52.8 million as at December 31, 2022, an increase of 49% compared to the same date in 2021. Of the $52.8 million of ARR, approximately $43.9 million, or 83%, originated from enterprise clients, an increase of approximately 20% compared to the same date in 2021, on a pro forma basis. Of the $52.8 million of ARR, approximately 65% 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 $54.2 million as at December 31, 2022, when using a 1.35 USD:CAD exchange rate.
• Fourth quarter 2022 Adjusted EBITDA³ of $4.8 million, an increase of $3.9 million compared to the same period in 2021.
• Fourth quarter 2022 Adjusted EBITDA³ margin of 35%, an increase when compared to an Adjusted EBITDA³ margin of 24% in the third quarter of 2022, and 14% in the comparable period of 2021.
• Fourth quarter 2022 net loss of $24.5 million, an increase of $17.7 million compared to the same period in 2021.
• Total Number of Clients of 1,002 as at December 31, 2022, a 137% increase when compared to 422 at the same date in 2021, and an increase of 23% compared to the same date in 2021 when calculated on a pro forma basis.
• • Notable enterprise client additions for the fourth quarter included BJ's Wholesale Club, Inc. (U.S.), CHC Wellbeing Inc. (U.S.), and NFP Corporate Services, LLC (U.S.).
  • Subsequent to quarter end, LifeSpeak signed several additional significant enterprise clients, including UMB Financial (U.S.), Cenovus Energy Inc. (Canada), NYU Langone Health (U.S.) BBA Inc. (Canada) and BP Corporation of America, Inc. (U.S.).
  • Embedded solution client additions continued through the fourth quarter with the launch of new embedded partnerships with Manitoba Blue Cross (Canada), and channel partner agreements with CVS and WebMD.
• Cross-selling initiatives progressed significantly through the fourth quarter of 2022, with the successful closing of several cross-sale / multi-product opportunities including BC Hydro, and NYU Langone. 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.
• Subsequent to quarter end, on March 31, 2023, the Company announced a transaction to strengthen its liquidity. As previously disclosed, the Company announced that it entered into a credit agreement with Beedie Investments Ltd. ("Beedie") for a non-revolving term convertible loan in the principal amount of $15.0 million. The Company also announced a second amended and restated credit agreement with its senior lenders led by Scotiabank Technology and Innovation Banking, to amend and restate its existing credit agreement to permit the above term loan from Beedie and align the terms with the Credit Agreement. Importantly, as part of the terms of the amendment (and among other things), LifeSpeak will have no amortization of the senior lender debt other than approximately $1.1 million in Q4-2023. Under the Beedie Agreement, the Company will not have any principal payments in 2023 and limited cash interest payments through the year.

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

ARR was approximately $52.8 million as at December 31, 2022 on a pro forma basis, and core enterprise client ARR was approximately $43.9 million. This demonstrates the continued strength of the core enterprise business. The continued pattern of growth in the enterprise client demographic, which comprises approximately 83% of overall ARR as at December 31, 2022, and the diversity in overall customer, industry, and sector concentration demonstrates the strength of the business and lays a strong foundation for resilience and growth at the core of the LifeSpeak portfolio. As at December 31, 2022 no client represented more than 3% of overall ARR.

Additionally, growth in the Number of Clients continued quarter-over-quarter. Total Number of Clients increased to 1,002 as at December 31, 2022, or by approximately 137% when compared to the same date in 2021 on an as-reported basis.

Consolidated Net Dollar Retention Rate⁵ for the quarter was 76%, a 1% decrease from the previous period, primarily lower due to the continued impact of the loss of the large, embedded solutions client referenced in previous disclosure. Despite the negative impact of the large, embedded solutions client to consolidated Net Dollar Retention, the Net Dollar Retention Rate for enterprise clients remained compelling at approximately 94% as at December 31, 2022, and though enterprise Net Dollar Retention is lower than the prior period, primarily due to an overall increase in enterprise client churn for Fiscal 2022, churn has been counteracted by cross-sell within the existing enterprise client base. 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.

Logo Retention Rate⁶ was 85% as at December 31, 2022. As retention is measured on an LTM basis, the lower Logo Retention Rate is primarily attributable to the loss of smaller enterprise client logos following the acquisition of Wellbeats, and an increase in overall enterprise client churn for Fiscal 2022. Despite a lower Logo Retention Rate, 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 has also made significant 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. This focus on integration has created significant momentum and efficiencies in sales and the sales process, and has also allowed the Company to generate significant annualized cost savings. In the fourth quarter of 2022, the Company generated annualized cost savings of approximately $1.9 million, bringing the total annualized savings to approximately $9.8 million since the integration plan began in Q1 2022. The Company views its current operating state as more than capable of executing on its growth plan into the future.

Financial Results for the Three and Twelve Months Ended December 31, 2022

Goodwill Impairment

The uncertain macroeconomic environment and consistently rising interest rates has put pressure on valuations of companies in our sector, and with similar operating profiles. Furthermore, there was a significant decline in the Company's share price from December 31, 2021, which other companies in our industry also experienced in the latter half of 2022. This resulted in the Company's carrying value being greater than its current market enterprise value as of December 31, 2022. Due to these conditions, and with operating segment results falling short of previous estimates and an outlook that is less robust, a non-cash goodwill impairment charge of $26.5 million was recorded. 

Matter of Emphasis

At the end of each quarter, the Company asses the ability of the Company to continue as a going concern and operate in the normal course. The Company's audit report will be unmodified but is expected to reference a matter of emphasis as a result of the Company's net loss for 2022 and an accumulated deficit.  As noted in the notes to the Company's financial statements, the Company's determination of its ability to continue as a going concern is fulsome in nature and is supported by the enhanced liquidity offered by a series of prudent financial transactions including the Beedie financing, the amendment to the Company's senior credit facility which includes the elimination of substantially all amortization payments in 2023, and the highly discounted settlement of the Wellbeats earn-out consideration.

Conference Call Notification

The Company will hold a conference call to provide a business update on Friday, March 31, 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/710357881

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 730209.    

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), goodwill impairment, 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.

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 Institutional Investors and 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 goodwill impairment. These 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.

 "embedded solutions and other ARR" is ARR at a particular date attributable to our embedded solutions clients, and ARR associated with clients who are not of sufficient size to be considered enterprise 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 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, EBIDTA, EBITDA margin, adjusted EBITDA, adjusted Net Income (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 amortization of the senior lender debt, 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 obtain financing on acceptable terms; the ability of the Company to satisfy its obligations in the form anticipated when due; 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 December 31, 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.