Newtopia Reports Second Quarter 2022 Financial Results

Rhea-AI Summary

Newtopia Inc. (TSXV: NEWU, OTCQB: NEWUF) reported Q2 2022 revenue of $2.5 million, steady year-over-year, and a 5% increase in year-to-date revenue to $5.4 million. Participant engagement reached a record 76,000, up 20%. Gross profit margin improved to 47% from 42%. Despite an adjusted operating loss of $1.9 million, the company remains optimistic about a strong second half of 2022, driven by new health plan clients and a recent engagement platform launch aimed at improving efficiencies. A conference call on results is scheduled for August 10, 2022.

Positive

• Record participant engagement of 76,000, up 20%.
• Year-to-date revenue increased by 5% to $5.4 million.
• Gross profit margin improved to 47%, up from 42% in the prior year.

Negative

• Adjusted operating loss of $1.9 million, consistent with the prior year.
• Cash position at approximately $0.7 million, with a loan balance of $2.9 million.

• Continued top line momentum, with revenue for the first six months of 2022 up 5% compared to the prior-year period
• Record participant engagement of 76,000 for the first half of 2022 up 20% compared to the prior-year period
• Launches New Engagement Platform to Increase Participant Stickiness and Improve Operational Efficiencies and Margins
• Reconfirms year-over-year revenue growth with expected strong back half to 2022
• Q2 2022 conference call scheduled for August 10, 2022 at 5 PM ET

TORONTO, Aug. 10, 2022 /PRNewswire/ - Newtopia Inc. ("Newtopia" or the "Company") (TSXV: NEWU) (OTCQB: NEWUF), a tech-enabled whole health platform creating sustainable habits that prevent, slow, and reverse chronic disease, today announced its second quarter 2022 financial results for the three months ended June 30, 2022. All amounts are expressed in Canadian dollars, unless otherwise noted.

Second Quarter 2022 Financial Highlights (vs. Q2 2021):

• Revenue of $2.5 million, consistent with the previous year
• Gross profit margin¹ of 47% compared to 42% for the prior-year period

"Newtopia had a solid second quarter in which we made notable progress with both current and prospective clients," said Jeff Ruby, Founder and CEO of Newtopia. "Revenue for the quarter was in line with our expectations. On a year-to-date basis, revenue improved and was up 5% compared to the prior-year period. With a large and growing pipeline of new business opportunities in front of us, we enter the third quarter on solid footing and anticipate even stronger performance in the back half of the year. We see particular traction in the health plan space for Medicare Advantage and fully-insured populations, where we are in active proof of concept discussions with six leading innovators that we anticipate will have a positive impact on our top line as we exit the year."

Mr. Ruby continued, "Newtopia is sitting at an inflection point. We have a new set of health plan clients on the horizon and an opportunity to enhance execution with our new and existing clients using our upgraded technology, which will improve overall participant experience, increase the degree of digital engagement and yield operational and financial efficiencies. We enter the second half of 2022 as optimistic about the future of Newtopia as we have ever been."

________________________

1

Gross profit is defined as revenue which is comprised of onboarding welcome revenue, ongoing engagement fees and success fees, less cost of sales which is comprised of Welcome Kit costs, compensation expense for Inspirators and care specialists and genetic testing costs. Gross margin percentage is calculated by dividing gross profit by total revenue for the defined period. Gross profit is considered by management to be an integral measure of financial performance and represents the amount of revenues retained by the Company after incurring direct costs. However, gross profit is not a recognized measure of profitability under IFRS.

Second Quarter 2022 Financial Results

Revenue for the three months ended June 30, 2022 was $2.5 million, consistent with the same period the previous year. On a year-to-date basis, for the six month period ending June 30, 2022, revenue totaled $5.4 million, up 5% compared to $5.1 million in the first half of 2021. The increase in revenue during the six month period ended June 30, 2022 can be attributed to stronger participant enrollments during the first quarter of 2022 and the ensuing growth in recurring engagement revenue from the build up of the participant base. Moreover, participant engagement was a record at 76,000 for the first half of 2022, up 20% from 63,000 for the same prior-year period.

Gross profit for the second quarter 2022 totaled $1.2 million, an increase of 11% from the prior-year period. Gross profit is comprised of Newtopia's revenue less direct expenses, which include the cost of Welcome Kits sold to new participants as well as labour costs associated with hiring and training of the Company's coaching team of Inspirators (health coaches). As a percentage of revenue, gross profit totaled 47%, compared to 42% in the prior-year period.

Adjusted operating expenses² for the three months ended June 30, 2022 totaled $3.1 million, compared to $3.0 million in the prior-year period. On a non-adjusted basis, operating expenses declined year-over-year, however greater stock base compensation in Q2 2021 resulted in a slight increase in adjusted operating expenses by comparison in Q2 2022.

For the quarter, the Company had an adjusted operating loss³ of $1.9 million, consistent with the prior-year period.

The Company ended the second quarter 2022 with approximately $0.7 million in cash and an outstanding loan balance of $2.9 million against its $7.5 million credit facility. In April, at the start of the second quarter, Newtopia successfully closed a brokered private placement facility offering of 16,950,000 units at a price of $0.20 per Unit, for aggregate proceeds of $3,390,000. The Company also concurrently completed a non-brokered private placement of 550,000 units for aggregate gross proceeds of $110,000.

2022 Outlook

The Company continues to anticipate achieving full year revenue growth for 2022 over full year 2021. This top-line improvement will be more heavily weighted towards the second half of the year. With an expanded business development effort and a more efficient tech-enabled platform in place, Newtopia is currently at an inflection point in its growth trajectory. In the coming quarters, the Company will look to onboard a new set of health plan clients in addition to growing organically with its current set of self-insured employer customers, positioning Newtopia strongly for continued revenue improvements in 2023. 

In July 2022, the Company announced the launch of its new engagement platform. This new and improved platform includes a state-of-the-art participant experience for habit change and enhanced participant communications and nudges which help create and enable the personalized programs that are core to Newtopia. By improving operational and technological efficiencies, this new platform is expected to lead to improved Inspirator-to-participant service ratios which will in turn enhance gross margin.

Grants of Stock Options

Newtopia further announced today that its Board of Directors has approved the grant of 606,140 stock options to certain directors and tenured employees. The options will be at an exercise price of $0.20 per common share and will expire five years from the grant date.

__________________
2	Adjusted operating expenses consist of all cash-based technology, sales and marketing and administrative expenses including employment expenses for these functions excluding equity-settled share-based compensation. Adjusted operating expense is not a measure of financial performance under IFRS and should not be considered a substitute for total operating expenses, which we believe to be the most directly comparable IFRS measure.
3	Adjusted operating loss consists of gross profit less adjusted operating income. Adjusted operating loss is not a measure of financial performance under IFRS and should not be considered a substitute for loss from operations which we believe to be the most directly comparable IFRS measure.

Conference Call

The Company will host a conference call today at 5:00 p.m. Eastern Time to discuss the second quarter 2022 results in further detail. To access the conference call, please dial (877) 407-3982 (U.S.) or (201) 493-6780 (International) ten minutes prior to the start time and reference Conference ID number 13730415. The call will also be available via live webcast on the investor relations portion of the Company's website located at investor.newtopia.com.

A replay of the conference call will be available through Wednesday, August 24, 2022 which can be accessed by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the passcode 13730415. The webcast will also be archived on the Company's website.

About Newtopia

Newtopia is a tech-enabled whole health platform helping people create positive lifelong habits that prevent, slow, or reverse chronic disease while reducing healthcare costs. The platform leverages genetic, social and behavioural insights to create individualized prevention programs with a focus on metabolic disease, diabetes, mental health challenges, hypertension, weight management and musculoskeletal disorders. With a person-centered approach that combines virtual care, digital tools, connected devices and actionable data science, Newtopia delivers sustainable clinical and financial outcomes. Newtopia serves some of the largest nationwide employers and health plans and is currently listed in Canada on the Toronto Stock Exchange (TSXV: NEWU) and is quoted in the US on the OTCQB® Venture Market (OTCQB: NEWUF). To learn more, visit newtopia.com, LinkedIn or Twitter.

Forward Looking Information

This press release contains forward-looking information and forward-looking statements, within the meaning of applicable Canadian securities legislation, and forward looking statements, within the meaning of applicable United States securities legislation (collectively, "forward-looking statements"), which reflects management's expectations regarding Newtopia's future growth, results from operations (including, without limitation, future production and capital expenditures), performance (both operational and financial) and business prospects and opportunities. Wherever possible, words such as "predicts", "projects", "targets", "plans", "expects", "does not expect", "budget", "scheduled", "estimates", "forecasts", "anticipate" or "does not anticipate", "believe", "intend" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative or grammatical variation or other variations thereof, or comparable terminology have been used to identify forward-looking statements. All statements other than statements of historical fact may be forward-looking ‎information. Such statements reflect Newtopia's current views and intentions with respect to future ‎events, based on information available to Newtopia, and are subject to certain risks, uncertainties and ‎assumptions, including without limitation, the Company's successful completion of its strategic technology projects (including on budget), continued and sustained high levels of client engagement and low client churn, the expansion of client relationships, the rollout of new clients, the conversion of pilot projects into full blown rollouts, the Company's ability to continue to grow its sales pipeline, and current financial trends remaining at or above the current levels in respect of revenue, gross profit, gross margin percentage and adjusted operating expenses. Material factors or assumptions were applied in providing forward-looking information. While forward-looking statements are based on data, assumptions and analyses that Newtopia believes are reasonable under the circumstances, whether actual results, performance or developments will meet Newtopia's expectations and predictions depends on a number of risks and uncertainties that could cause the actual results, performance and financial condition of Newtopia to differ materially from its expectations. 

Certain of the "risk factors" that could cause ‎actual results to differ materially from Newtopia's forward-looking statements in this press release ‎include, without limitation: the termination of contracts by clients, risks related to COVID-19 including various recommendations, orders and measures of ‎‎governmental authorities to try to limit the pandemic, including travel restrictions, border closures, ‎‎non-essential business closures, quarantines, self-isolations, shelters-in-place and social ‎distancing, ‎disruptions to markets, economic activity, financing, supply chains and sales channels, ‎and a ‎deterioration of general economic conditions including a possible national or global ‎recession; and other general economic, market and business conditions and factors, including the risk factors discussed or referred to in Newtopia's disclosure documents, filed with the securities ‎regulatory authorities in certain provinces of Canada and available at www.sedar.com.

Should any factor affect Newtopia in an unexpected manner or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, Newtopia does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in this press release is made as of the date of this press release, and Newtopia undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

Non-GAAP Financial Measures

The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Management uses certain non-GAAP measures, which are defined in the appropriate sections of this press release, to better assess the Company's underlying performance. These measures are reviewed regularly by management and the Company's Board of Directors in assessing the Company's performance and in making decisions about ongoing operations. In addition, we use certain non-GAAP measures to determine the components of management compensation. We believe that these measures are also used by investors as an indicator of the Company's operating performance. Readers are cautioned that these terms are not recognized GAAP measures and do not have a standardized GAAP meaning under IFRS and should not be construed as alternatives to IFRS terms, such as net income.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Key Financial Measures and Schedule of Non-GAAP Reconciliations

		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
		$		$		$		$
Revenue		2,531,986		2,529,021		5,398,700		5,148,192
Cost of sales		(1,341,941)		(1,457,764)		(2,859,777)		(2,758,631)
Gross profit		1,190,045		1,071,257		2,538,923		2,389,561
Gross margin		47 %		42 %		47 %		46 %

 

Reconciliation of Total Operating Expenses to Adjusted Operating Expenses ^[2]

		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
		$		$		$		$
Total expenses		3,421,786		3,528,542		6,398,357		7,123,334
Add (Subtract)
Share-based compensation		(131,290)		(337,123)		(263,798)		(886,943)
Depreciation of property and equipment		(13,403)		(16,803)		(27,783)		(34,775)
Depreciation of right-of-use asset		(46,192)		(46,192)		(92,387)		(92,387)
Interest on lease obligations		(20,283)		(29,046)		(43,262)		(60,314)
Interest and accretion expense		(100,431)		-		(197,721)		-
Finance charges		(40,437)		(15,812)		(77,547)		(20,948)
Amortization of deferred finance charges		(64,970)		(46,120)		(123,770)		(85,036)
Foreign exchange (gain)/loss		38,497		(39,142)		23,464		(66,938)
Change in value of derivative liability		-		2,989		-		47,508
Capitalized borrowing costs		38,000		-		67,000		-
Adjusted operating expenses		3,081,277		3,001,293		5,662,553		5,923,501

 

Adjusted Operating Loss ^[3] 

		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
		$		$		$		$
Gross profit		1,190,045		1,071,257		2,538,923		2,389,561
Adjusted operating expenses		(3,081,277)		(3,001,293)		(5,662,553)		(5,923,501)
		(1,891,232)		(1,930,036)		(3,123,630)		(3,533,940)

 

NEWTOPIA INC.
Condensed Interim Statements of Financial Position (Unaudited)
As at June 30, 2022 and December 31, 2021
(Expressed in Canadian Dollars)                                                                              

			June 30, 2022	December 31, 2021  (Audited)
			$	$
Assets
Current assets
Cash			661,630	811,584
Trade and other receivables			886,815	1,381,977
Contract asset			143,000	‑
Prepaid expenses and deposits			353,015	330,992
Inventories			276,142	131,000
Deferred costs			85,033	162,872
			2,405,635	2,818,425
Property and equipment			42,193	66,147
Right‑of‑use asset			277,151	369,538
Intangible asset			3,217,747	2,251,852
			5,942,726	5,505,962
Liabilities
Current liabilities
Trade and other payables			2,449,010	1,965,420
Credit facility			2,890,126	2,331,314
Lease obligations			332,540	300,555
Deferred revenue			51,484	59,549
Contract liability			‑	144,034
			5,723,160	4,800,872
Non‑current lease obligations			190,336	367,001
Debentures			2,278,324	2,182,403
			8,191,820	7,350,276
Equity/Deficit
Common shares			47,718,385	45,177,120
Contributed surplus			12,565,589	11,652,200
Deficit			(62,533,068)	(58,673,634)
			(2,249,094)	(1,844,314)
			5,942,726	5,505,962

 

 NEWTOPIA INC.
Condensed Interim Statements of Loss and Comprehensive Loss (Unaudited)
Three and Six Months Ended June 30, 2022 and 2021
(Expressed in Canadian Dollars)

			Three Months Ended June 30,			Six Months Ended June 30,
			2022	2021		2022	2021
			$	$		$	$
Revenue			2,531,986	2,529,021		5,398,700	5,148,192
Cost of revenue			1,341,941	1,457,764		2,859,777	2,758,631
Gross profit			1,190,045	1,071,257		2,538,923	2,389,561
Operating expenses
Technology and development			844,105	982,214		1,650,400	1,712,221
Sales and marketing			868,934	923,051		1,513,145	1,899,533
General and administrative			1,368,238	1,096,028		2,499,008	2,311,747
Share‑based compensation			131,290	337,123		263,798	886,943
			3,212,567	3,338,416		5,926,351	6,810,444
Other expenses (income)
Depreciation of property and equipment			13,403	16,803		27,783	34,775
Depreciation of right‑of‑use asset			46,192	46,192		92,387	92,387
Interest and accretion expense			100,431	‑		197,721	‑
Interest on lease obligations			20,283	29,046		43,262	60,314
Finance charges			40,437	15,812		77,547	20,948
Amortization of deferred finance charges			64,970	46,120		123,770	85,036
Foreign exchange (gain)/loss			(38,497)	39,142		(23,464)	66,938
Capitalized borrowing costs			(38,000)	‑		(67,000)	‑
Change in value of derivative liability			‑	(2,989)		‑	(47,508)
			209,219	190,126		472,006	312,890
Net loss and comprehensive loss			(2,231,741)	(2,457,285)		(3,859,434)	(4,733,773)

 

NEWTOPIA INC.
Condensed Interim Statements of Changes in Equity (Deficit) (Unaudited)
Six Months Ended June 30, 2022 and 2021
(Expressed in Canadian Dollars)

	Common Shares	Shares To Be Issued		Contributed Surplus		Deficit			Total
	$	$		$		$			$
Balance, December 31, 2021	45,177,120	‑		11,652,200		(58,673,634)			(1,844,314)
Net loss and comprehensive loss	‑	‑		‑		(3,859,434)			(3,859,434)
Share‑based compensation	‑	‑		263,798		‑			263,798
Private Placement Offering of Units, net of issuance costs	2,624,495			511,839					3,136,334
Compensation options issued to brokers	(83,230)	‑		83,230		‑			‑
Settlement of related party payable	‑	‑		54,522		‑			54,522
Balance, June 30, 2022	47,718,385	‑		12,565,589		(62,533,068)			(2,249,094)
Balance, December 31, 2020	44,648,952	528,168		10,046,621		(51,023,880)			4,199,861
Net loss and comprehensive loss	‑	‑		‑		(4,733,773)			(4,733,773)
Share‑based compensation	‑	‑		886,943		‑			886,943
Issuance of shares	528,168	(528,168)		‑		‑			‑
Settlement of related party payable	‑	‑		159,875		‑			159,875
Balance, June 30, 2021	45,177,120	‑		11,093,439		(55,757,653)			512,906

 

NEWTOPIA INC.
Condensed Interim Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2022 and 2021
(Expressed in Canadian Dollars)

			Six Months Ended June 30,
			2022	2021
			$	$
Cash flows used in operating activities:
Net loss and comprehensive loss			(3,859,434)	(4,733,773)
Items not involving cash:
Depreciation of property and equipment			27,783	34,775
Depreciation of right‑of‑use asset			92,387	92,387
Amortization of deferred finance charges			123,770	85,036
Capitalized borrowing costs			(67,000)	‑
Share‑based compensation			263,798	886,943
Accretion expense			95,921	‑
Interest on lease obligations			43,262	60,314
Change in value of derivative liability			‑	(47,508)
			(3,279,513)	(3,621,826)
Net change in non‑cash working capital
Trade and other receivables			495,162	(258,776)
Contract asset/liability			(287,034)	349,000
Inventories			(145,142)	30,177
Prepaid expenses and deposits			(22,023)	98,947
Trade and other payables			538,112	(601,890)
Deferred revenue			(8,065)	‑
			(2,708,503)	(4,004,368)
Cash flows used in investing activities
Purchase of property and equipment			(3,829)	‑
Intangible asset development costs			(898,895)	(912,152)
			(902,724)	(912,152)
Cash flows from (used in) financing activities:
Credit facility withdrawals			5,633,116	1,279,189
Credit facility repayments			(5,074,304)	(207,914)
Credit facility financing costs			(45,931)	(10,990)
Repayment of lease obligations			(187,942)	(179,590)
Proceeds from private placement issuance of Units, net of issuance costs			3,136,334	‑
			3,461,273	880,695
Decrease in cash			(149,954)	(4,035,825)
Cash, beginning of period			811,584	4,673,683
Cash, end of period			661,630	637,858
Supplemental disclosure of cash flow information
Non‑cash settlement of related party payable		54,522		159,875
Interest paid		217,072		60,314

 

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SOURCE Newtopia Inc.

FAQ

What is Newtopia's revenue for Q2 2022?

Newtopia reported revenue of $2.5 million for Q2 2022.

How much did Newtopia's year-to-date revenue grow?

Newtopia's year-to-date revenue grew by 5% to $5.4 million.

What participant engagement record did Newtopia achieve in 2022?

Newtopia achieved record participant engagement of 76,000, which is up 20% year-over-year.

What was Newtopia's gross profit margin for Q2 2022?

Newtopia's gross profit margin for Q2 2022 was 47%, compared to 42% in the prior-year period.

When is Newtopia's Q2 2022 conference call?

Newtopia's Q2 2022 conference call is scheduled for August 10, 2022, at 5 PM ET.