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Newtopia Reports Second Quarter 2023 Financial Results

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  • Cash Flow Positive from Operations in May & June, ahead of 2023 plan
  • Q2 2023 Gross Margin (non IFRS)1 up 1150 basis points year over year
  • Operating Expenses down $1.3 million (41%) year over year
  • Quarterly conference call scheduled for Aug 9, 2023 at 5 pm ET

TORONTO, Aug 9, 2023 /PRNewswire/ - Newtopia Inc. ("Newtopia" or the "Company") (TSXV: NEWU) (OTCQB: NEWUF), a tech-enabled whole health platform creating sustainable healthy habits that prevent, slow, and reverse chronic disease, today announced its second quarter 2023 financial results, operational highlights and the filing of the Company's quarterly financial statements. These results pertain to the three and six months ended June 30, 2023. All amounts are expressed in Canadian dollars, unless otherwise noted.

Second Quarter 2023 Financial Highlights (vs. Q2 2022):

  • Revenue of $2.4 million, as compared to $2.5 million.
  • Gross profit margin1 of 58.5%, as compared to 47.0%.

"Newtopia had a very productive second quarter, as we continued to effectively manage our costs in a challenging macro environment to achieve cash flow positive from operations well ahead of our internal plan," said Jeff Ruby, Founder and CEO of Newtopia.  "Top line growth was slightly down as compared to the prior year largely due to organic expansion timing and the deepening of our value based contracting expertise. The proactive efforts we have exerted across the Company to reduce operating expenses and increase our gross profit margins are quickly coming to fruition.  Our acute focus on profitability will continue throughout the year as we also make our way toward EBITDA positive."

Ruby continued, "We anticipate that our recent multi-year contract renewals with large clients will enhance our revenue and profitability in the second half of the year. In addition to growth with existing clients, our pipeline of new business development with risk-bearing entities, including self-insured employers and innovative health plans, remains robust. Not only have we made progress with existing, in-contracting deals, but we've also added opportunities to the contracting queue. Importantly, our clients continue to see high participant engagement and satisfaction with Newtopia, alongside healthy habit change results. Newtopia's position at the forefront of preventing, slowing and reversing chronic disease ideally fits with larger healthcare macro trends including the massive interest and market size for GLP-1 medications for weight loss and the shift by employers and commercial populations towards value based advanced primary care. These trends provide fertile ground for continued expansion. To maintain this positive momentum, we have developed a special committee within our Board of Directors who will be working to explore avenues and partnerships to accelerate our growth. We look forward to sharing our progress along the way."  

Second Quarter 2023 Financial Results

Revenue for the three months ended June 30, 2023 was $2.4 million, compared to $2.5 million in the prior-year period. Enrollment fee revenue, or revenue from Welcome Kit sales, totaled 13% of revenue for the quarter, in line with Q2 2022.

Non-IFRS gross profit for the second quarter 2023 totaled $1.4 million, as compared to $1.2 million in the prior-year period. This calculation consists of Newtopia's revenue less direct expenses, which include the cost of Welcome Kits sold to new participants and labor costs associated with hiring and training the Company's coaching team of Inspirators (health coaches). As a percentage of revenue, gross profit year to date has totaled 59%, compared to 47% in the prior-year period.

Operating expenses2 for the three months ended June 30, 2023 totaled $1.8 million, compared to $3.1 million in the prior-year period and $2.3 million in Q1 2023. For the second quarter, EBITDA3 totaled a loss of $0.4 million, compared to a loss of $1.9 million in the prior-year period and $0.7 million in Q1 2023.

The Company ended the second quarter 2023 with approximately $0.3 million in cash, with additional access to its revolving line of credit with a Canadian Schedule-1 bank and a previously announced $1.5 million debenture issuance that closed in July 2023.

2023 Outlook

Newtopia continues to expect full-year revenue growth in 2023 as compared to the prior year. Newtopia anticipates that the Company is also on a clear path to EBITDA and cash flow positivity within 2023 by continuing to exert strategic expense management. Profitability is anticipated to build throughout the year, with the bottom line improving incrementally each quarter.

Grants of Stock Options

Newtopia further announced today that its Board of Directors has approved the grant of 250,000 stock options to certain tenured employees. The issued options will be at an exercise price of CAD$0.105 per common share and will expire five years from the grant date.

Conference Call

The Company will host a conference call today at 5 p.m. Eastern Time to discuss the second quarter 2023 results in further detail. To access the conference call, please dial (888) 886-7786 (U.S.) or (416) 764-8658 (International) 10 minutes prior to the start time and reference Conference ID number 03837842. 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 August 30, 2023 which can be accessed by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the passcode 03837842. The webcast will also be archived on the Company's website.

About Newtopia

Newtopia is a tech-enabled habit change provider focused on disease prevention and reducing the cost of care for health insurers. As a provider of whole person care, we preventreverse and slow the progression of chronic disease while enriching mental health, resilience and overall human performance. Newtopia's programs leverage genetic, social and behavioral insights to create individualized prevention programs with a focus on type 2 diabetes, heart disease, stroke and weight. With a person-centered approach that combines virtual care, digital tools, connected devices and actionable data science, Newtopia delivers sustainable clinical and financial outcomes. To learn more, visit newtopia.comLinkedIn or Twitter.

Forward Looking Statements

This news 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 thereof 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. 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. Forward-looking statements are not a guarantee and are based on a number of estimates and assumptions management believes to be relevant and reasonable, 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 including Newtopia's final long form prospectus dated March 30, 2020.

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-IFRS Financial Measures

The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Management uses certain non-IFRS 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-IFRS 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 IFRS measures and do not have a standardized 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

Gross Profit Information [1]


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022


$


$


$


$

Revenue

2,357,034


2,531,986


5,005,691


5,398,700

Cost of revenue

(1,184,993)


(1,341,941)


(2,460,675)


(2,859,777)

Gross profit

1,172,041


1,190,045


2,545,016


2,538,923

Add Amortization of intangible asset

206,514


-


413,028


-

Non-IFRS adjusted gross profit

1,378,555


1,190,045


2,958,044


2,538,923









Gross profit margin

50 %


47 %


51 %


47 %

Non-IFRS adjusted gross profit margin

58 %


47 %


59 %


47 %

 

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


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022


$


$


$


$

Total expenses

2,403,354


3,421,786


5,149,156


6,398,357

Add (Subtract)








Share-based compensation

(215,013)


(131,290)


(308,303)


(263,798)

Depreciation of property and equipment

(2,030)


(13,403)


(3,579)


(27,783)

Depreciation of right-of-use asset

-


(46,192)


-


(92,387)

Interest on lease obligations

(8,973)


(20,283)


(21,563)


(43,262)

Interest and accretion expense

(177,728)


(100,431)


(347,423)


(197,721)

Finance charges

(122,318)


(40,437)


(231,966)


(77,547)

Capitalized borrowing costs

-


38,000


-


67,000

Foreign exchange loss (gain)

(35,821)


38,497


(54,093)


23,464

Amortization of deferred finance charges

(33,975)


(64,970)


(67,790)


(123,770)

Gain on settlement of related party payable

7,203


-


7,203


-

Adjusted operating expenses

1,814,699


3,081,277


4,121,642


5,662,553

 

EBITDA [3]


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022


$


$


$


$

Non-IFRS adjusted gross profit

1,378,555


1,190,045


2,958,044


2,538,923

Adjusted operating expenses

(1,814,699)


(3,081,277)


(4,121,642)


(5,662,553)

EBITDA

(436,144)


(1,891,232)


(1,163,598)


(3,123,630)

 

NEWTOPIA INC.
Condensed Interim Statements of Financial Position (Unaudited)
As at June 30, 2023 and December 31, 2022
(Expressed in Canadian Dollars)




June 30, 

December 31,




2023

2022




(Unaudited) 

(Audited)




$

$

Assets





Current assets





Cash



296,573

345,950

Trade and other receivables



1,520,374

1,557,640

Contract asset



-

190,000

Prepaid expenses and deposits



259,165

205,843

Inventories



140,176

325,571

Deferred costs



37,639

76,269




2,253,927

2,701,273






Property and equipment



5,572

8,052

Intangible asset



2,822,335

3,235,363




5,081,834

5,944,688






Liabilities





Current liabilities





Trade and other payables



2,433,354

2,584,039

Credit facility



4,809,913

4,823,545

Lease obligations



209,077

544,700

Deferred revenue



48,185

48,185

Contract liability



80,100

-

Debentures



3,730,523

2,409,103




11,311,152

10,409,572

Debentures



-

1,068,772




11,311,152

11,478,344






Equity/Deficit





Common shares



48,882,767

47,978,992

Contributed surplus



13,866,152

12,861,449

Deficit                                                                                            



(68,978,237)

(66,374,097)




(6,229,318)

(5,533,656)




5,081,834

5,944,688

 

NEWTOPIA INC.
Condensed Interim Statements of Loss and Comprehensive Loss (Unaudited)
Three and Six Months Ended June 30, 2023 and 2022
(Expressed in Canadian Dollars) 




Three Months Ended


Six Months Ended




June 30,  


June 30,




2023

2022


2023

2022




$

$


$

$

Revenue



2,357,034

2,531,986


5,005,691

5,398,700

Cost of revenue



1,184,993

1,341,941


2,460,675

2,859,777

Gross profit



1,172,041

1,190,045


2,545,016

2,538,923

Operating expenses








Technology and development



522,707

844,105


1,444,772

1,650,400

Sales and marketing



351,262

868,934


777,432

1,513,145

General and administrative



940,730

1,368,238


1,899,438

2,499,008

Share-based compensation



215,013

131,290


308,303

263,798

Depreciation of property and equipment



2,030

13,403


3,579

27,783

Depreciation of right-of-use asset



-

46,192


-

92,387




2,031,742

3,272,162


4,433,524

6,046,521

Other expenses (income)








Interest and accretion expense      



177,728

100,431


347,423

197,721

Interest on lease obligations          



8,973

20,283


21,563

43,262

Finance charges                               



122,318

40,437


231,966

77,547

Amortization of deferred finance charges



33,975

64,970


67,790

123,770

Foreign exchange (gain)/loss        



35,821

(38,497)


54,093

(23,464)

Capitalized borrowing costs           



-

(38,000)


-

(67,000)

Gain on settlement of related party payable



(7,203)

-


(7,203)

-




371,612

149,624


715,632

351,836

Net loss and comprehensive loss    



(1,231,313)

(2,231,741)


(2,604,140)

(3,859,434)

 

NEWTOPIA INC.
Condensed Interim Statements of Changes in Equity (Deficit) (Unaudited)
Six Months Ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)


 

Common

Shares

 

Contributed

Surplus

Deficit

 

Total



$

$

$

$

Balance, December 31, 2022


47,978,992

12,861,449

(66,374,097)

(5,533,656)

Net loss and comprehensive loss


-

-

(2,604,140)

(2,604,140)

Share-based compensation


-

308,303

-

308,303

Settlement of related party payable


-

132,880

-

132,880

March 2023 private placement offering, net of issuance costs


930,218

537,077

-

1,467,295

Compensation options


(26,443)

26,443

-

-

Balance, June 30, 2023


48,882,767

13,866,152

(68,978,237)

(6,229,318)

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

Settlement of related party payable


-

54,522

-

54,522

April 2022 private placement offering, net of issuance costs


2,624,495

511,839

-

3,136,334

Compensation options issued to brokers


(83,230)

83,230

-

-

Balance, June 30, 2022


47,718,385

12,565,589

(62,533,068)

(2,249,094)







 

NEWTOPIA INC.
Condensed Interim Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2023 and 2022
(Expressed in Canadian Dollars) 




Six Months Ended June 30,




2023

2022




$

$

Cash flows used in operating activities:





Net loss and comprehensive loss



(2,604,140)

(3,859,434)

Items not involving cash:





Depreciation of property and equipment



3,579

27,783

Depreciation of right-of-use asset



-

92,387

Amortization of intangible asset



413,028

-

Amortization of deferred finance charges



67,790

123,770

Capitalized borrowing costs



-

(67,000)

Share-based compensation



308,303

263,798

Interest and accretion expense



252,648

95,921

Interest on lease obligations                                                     



21,563

43,262

Gain on settlement of related party payable                         



(7,203)

-




(1,544,432)

(3,279,513)

Net change in non-cash working capital





Trade and other receivables                                                     



37,266

495,162

Contract asset/liability                                                                



270,100

(287,034)

Inventories                                                                                    



185,395

(145,142)

Prepaid expenses and deposits                                              



(53,322)

(22,023)

Trade and other payables                                                         



(10,602)

538,112

Deferred revenue                                                                       



-

(8,065)




(1,115,595)

(2,708,503)

Cash flows used in investing activities:





Purchase of property and equipment



(1,099)

(3,829)

Intangible asset development costs



-

(898,895)




(1,099)

(902,724)

Cash flows from (used in) financing activities:





Credit facility withdrawals                                                         



2,864,097

5,633,116

Credit facility repayments                                                         



(2,877,729)

(5,074,304)

Credit facility financing costs                                                    



(29,160)

(45,931)

Repayment of lease obligations



(357,186)

(187,942)

Proceeds from private placement offerings, net of issuance costs



1,467,295

3,136,334




1,067,317

3,461,273

Decrease in cash                                                                                  



(49,377)

(149,954)

Cash, beginning of period                                                                  



345,950

811,584

Cash, end of period                                                                             



296,573

661,630

 

___________

1

Gross profit is defined as revenue, which is comprised of onboarding Welcome Kit 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, genetic testing costs and the amortization of intangible assets. 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. The Company defines Non-IFRS gross profit as gross profit plus amortization of intangible assets, for a true revenue less direct cost calculation and an "apples to apples" comparison vs. prior periods.

2

Adjusted operating expenses consist of all cash-based technology, sales and marketing and administrative expenses. 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

EBITDA stands for "earnings before interest, tax, depreciation and amortization". Although a commonly used financial metric, EBITDA 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.

 

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SOURCE Newtopia Inc.

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