
LifeSpeak Inc
TSX:LSPK

LifeSpeak Inc
LifeSpeak, Inc. engages in the provision of online platform that helps keep employees present, productive, and thriving. The company is headquartered in Toronto, Ontario. The company went IPO on 2021-07-06. The firm offers digital education platform for employee mental health and total well-being education with video training sessions, podcasts, tip sheets, and other content for mid- and enterprise-sized organizations. LifeSpeak’s content helps companies around the world support their people anytime and anywhere. The platform offers remotely to employees and health plan members, covers topics such as preventative health, mental health, including depression, anxiety, addiction, isolation and suicide, marital and relationship advice, parenting and eldercare. LifeSpeak serves a global client base across many industries and sectors, including Fortune 500 companies, government agencies, insurance providers and other health technology firms.
Earnings Calls
LifeSpeak reported third-quarter revenue of $11.8 million, maintaining adjusted EBITDA at $3 million despite ongoing market challenges. Annual Recurring Revenue (ARR) stood at $45.9 million, with a focus on strengthening enterprise client relationships, comprising 86% of ARR. The company expects ARR to stabilize in Q4, anticipating contributions from new large clients, particularly GreenShield, to start ramping up in early 2025. However, net losses increased to $5.7 million due to financing costs. LifeSpeak is concentrating on larger, high-margin opportunities while implementing anti-churn initiatives to address client turnover, primarily driven by budgetary constraints.
Good morning, and welcome to the LifeSpeak's Third Quarter 2024 Results Conference Call. [Operator Instructions]
Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding LifeSpeak and its business and disclosures regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance and business prospects and opportunities.
Such statements are made of this date hereof, and LifeSpeak assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable security laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today.
Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of the company's public filings, which include, without limitation, LifeSpeak's MD&A and its earnings press release issued today for additional information.
At this time, I would like to turn the call over to Michael Held, Chief Executive Officer of LifeSpeak. Please go ahead.
[Audio Gap] during our third quarter. First off, when comparing to the prior 2 quarters, our third quarter of 2024 featured consistent revenue of $11.8 million and strong adjusted EBITDA growth to $3 million. Our business development efforts and our ongoing focus on prudently managing our costs supported these results. We continue to believe that the business has found at baseline in terms of its financial performance, and we are optimistic that we will see consistency moving into Q4 followed by improvements in the subsequent quarters. Secondly, we continue to see strong interest for our whole person digital well-being services in our third quarter and also into the fourth quarter of 2024 because our clients value the support we provide for their mental health, physical well-being and family needs.
This interest translated into the signing of agreements in our third quarter or shortly thereafter with clients and partners, GreenShield, Allstate, Asset Health, Springbuk, Dayforce, Collective Health and Beanstalk. During the third quarter, as previously disclosed, we signed one of the most significant deals in our company's history with GreenShield. GreenShield is a leading Canadian integrated health and benefits organization. We remain very enthusiastic about this partnership and believe that it can create numerous benefits for GreenShield and LifeSpeak. This agreement is significant to LifeSpeak in its scale and its validation of our continued strategy of partnering with organizations that value the services we provide and view them as additive to their own product offering.
In August, we appointed Lee Dabberdt as our new Chief Financial Officer. Lee's contributions have already strengthened our senior leadership team and augmented our ability to scale our business. We believe that our deep and diverse experience will help the company as we pursue growth initiatives going forward that have the potential to create long-term shareholder value. Collectively, these events show that we are making progress, that has the potential to create long-term growth.
I will now pass the call to our Executive Chairman, Nolan Bederman, who will provide more color on the quarter. Nolan?
Thanks, Mike. We believe that LifeSpeak is in a solid position to build the business. Over the past several quarters, we've been disciplined with our cost structure while continuing to invest in future growth opportunities. We've remained vigilant in balancing efficiency and prudence, while ensuring we continue to innovate a market-leading product and build a world-class team. On the business development front, we've increased the productivity of our sales and marketing teams, while supporting them with an effective plan that provides a more diverse portfolio of products to offer to new prospective customers.
And with Lee's addition, we have a strong senior leadership team capable of helping the company excel in a macro business environment where corporations on both sides of the border are emboldened by interest rate cuts and improving macroeconomics. Over the past quarter, we've added several new larger potential clients into our business development pipeline, and the number of opportunities and the scale of partnerships remains robust. And as evidenced by our GreenShield partnership, larger strategic deals are closing, reinforcing our long-term strategy of providing an integrated digital well-being platform and the strong value we bring to many health and well-being environments. We're looking forward to updating you on our progress in the coming weeks and months.
I'll now turn the call over to Lee Dabberdt, who will walk us through our detailed financials. Lee?
Thank you, Nolan. We believe that our third quarter revenue and adjusted EBITDA show that we have built a foundation for the business to build on, but that we also continue to experience headwinds in the wellness software market. As Michael and Nolan has mentioned, we are very excited about the increased level of conversations we are having with potential new partners and clients and believe we are well positioned from a cost structure base to take advantage of the market upturn as it emerges.
Here are some financial metrics from the quarter. Revenue for the third quarter of '24 was $11.8 million. Despite the decline in revenue, our ongoing focus on operational efficiencies has helped us generate adjusted EBITDA of $3 million or 26% for the third quarter of 2024. While this is slightly lower on a comparative basis to the third quarter of '23, it is 17% higher as compared to the second quarter of '24. annual recurring revenue, or ARR, came in at $45.9 million. We continue to feel the lagging effects of earlier headwinds but also feel the momentum changing positively going forward, evidenced by some of our recently signed significant partners, as Michael mentioned. As a reminder, we report ARR on a constant currency basis using a CAD 1.3 to U.S. dollar exchange rate. Given our exposure to the U.S. dollar and the movement in rates through the quarter, we think it's helpful to note that our ARR would have been approximately $47 million as of September 30, 2024, when adjusting for the quarter end exchange rate.
To provide a further breakdown on the base of $45.9 million of ARR, approximately $39.4 million or 86% originated from our 839 enterprise clients, while the remainder came from the embedded and other verticals. With respect to geographic diversification, approximately 67% of this quarter's ARR originated from markets outside of Canada, and overall, no client accounted for more than 5% of ARR as of September 30, '24.
Our third quarter financial results, press release and MD&A provide further detail on our ARR breakdown for the quarter as well as on a historical basis for comparative purposes. Net loss for the third quarter was $5.7 million, an increase from a net loss of $2 million in the third quarter of '23 and $2.2 million in the second quarter of '24. The increase in net loss is largely due to financing expenses incurred in connection with our debt agreements. In addition to the previously mentioned metrics, we also track other KPIs that continue to help us evaluate our business. Consolidated net dollar retention rate, or NDR, provides a consolidated measure by which we can monitor the percentage of ARR retained from our existing clients.
NDR for the third quarter of '24 was 82%, approximately 6% lower compared to the third quarter '23 and slightly lower than second quarter '24 at 84%. Logo retention rate, which is measured on an LTM basis, was 73% for the third quarter of '24, approximately 8% lower compared to the third quarter of '23 and slightly lower than 75% for the second quarter of '24. These year-over-year decreases are largely due to the continued transformation of our go-to-market strategy to focus on larger customer and high-margin opportunities given the potential for multiproduct sales.
With respect to our debt, on September 27, 2024, LifeSpeak announced that it entered into a forbearance and amending agreement with Beedie Investments. Concurrently, we also entered into a forbearance agreement with our senior lenders. This is a continued indication of our strong relationship with our lenders and that they are working with us productively and constructively towards optimization of our capital structure.
Regarding our outlook for the fourth quarter of '24. Based on what Michael referenced earlier on the call, and the continued implementation of our business strategy, we anticipate that our results for the fourth quarter of '24 will be largely consistent with third quarter '24 results. Thank you, everyone, for your participation in the call this morning. We'll now open the call up to questions. Operator?
[Operator Instructions]
Your first question comes from the line of David Kwan with TD Cowen.
I apologize if this might have been dressed on the call, it took a little while to get into it. But I know, I guess, Lee talked about the outlook for Q4, I guess, being consistent with Q3. I was just curious to get a sense of when you guys think ARR and revenue growth could start growing again? And what are some of the kind of concrete data points that you see for this?
David, thanks for your question. I appreciate it. As we mentioned, we do believe Q4 is going to be consistent with Q3. We are expecting our ARR to begin to stabilize in Q4. We are going to start to see the ramp-up of the contributions from GreenShield and other large clients that we have recently acquired beginning of '25. But that is pretty much the guidance that we're giving right now.
That's helpful. So I guess like from the GreenShield perspective, is it something where it seems like you think that the growth there and maybe some of the other clients and partners you've signed up recently would more than offset any expected potential churn.
That's actually more than we're willing to provide guidance on right now, but we are -- we have a number of churn initiatives -- anti-churn initiatives, I should say, that we put in place recently and we've hired a recent senior leader to be the SVP over customer success that's going to be taking a deep dive on churn and trying to turn that around as well. So I think just consistency is expected for Q4, and then we do expect to see some more growth starting in the beginning of 2025. .
Okay. And from -- in terms of the churn, where are you guys seeing? Are you seeing that within specific offerings? Or has it kind of been fairly consistent across the board?
I would say it is consistent across the board. We are still getting feedback that budgetary constraints are definitely the #1 concern and reason for the churn. We do still have a number of the small clients that we have acquired from one of our acquisitions that is -- our focus going forward is larger customers, higher dollar margin opportunities. And so we are still continuing to see some churn of those smaller customers. But budgetary constraints, macroeconomic environment is still the #1 reason that we are seeing.
I guess on those small clients, like this isn't happening for many quarters now. Like how much longer do you think that the churn there to be a headwind? And what percentage of ARR to these smaller customers account for?
I don't -- we're not publicly disclosing that information, but the smaller customers more affect the logo retention rate. The NDR is more driven by the higher dollar customers that we've recently churned. But the reason for the smaller dollar customer churn is it's a market area, the multifamily housing that we are no longer pursuing significantly. It's not a part of our go-to-market strategy. So we do expect to continue to see some of that churn. But again, those are not as impacting on the total ARR number.
[Operator Instructions] There are no further questions at this time. I will now turn the call back to the management team for closing remarks.
Thank you. Thanks, everybody, for joining. We look forward to talking to you again soon. Thank you very much.
This concludes today's conference. You may now disconnect.