Newtopia Reports Record First Quarter 2020 Financial Results
Newtopia Reports Record First Quarter 2020 Financial Results
Canada NewsWire
TORONTO, July 8, 2020
/NOT FOR DISSEMINATION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/
TORONTO, July 8, 2020 /CNW/ - Newtopia Inc. ("Newtopia" or the "Company") (TSX-V: NEWU), a telehealth enabled habit change platform focused on disease prevention, today reported financial results for its first quarter 2020. All amounts are expressed in Canadian dollars.
First Quarter 2020 Highlights (vs. Q1 2019):
- Revenue increased 119% to $3.86 million; led by an expanding relationship with a highly innovative Fortune 500 partner
- Gross profit1 increased 142% to $1.65 million; driven by growth in engagement fee revenue
- Gross margin percentage improves to 43%; up from 39%
"We are very pleased with our strong start to 2020. Our record revenue and gross profit in the first quarter is a significant achievement as we make the transition to a publicly-traded company in the midst of the COVID-19 pandemic," said Jeff Ruby, founder and CEO of Newtopia Inc. "This robust start sets the tone for the year, as our expanded relationships with some of the most innovative Fortune 500 partners extend into 2020 and add to our growing base of recurring monthly engagement activity."
While current COVID-19 related health restrictions have limited consumer mobility and access to a broad range of services, Newtopia's telehealth enabled platform continues to experience growing engagement with its existing client base. The platform has experienced some of its highest levels of engagement to date since the onset of the pandemic.
"As a personalized virtual engagement and habit change company we are built to perform in this challenging environment, helping to mitigate escalating healthcare costs for risk-bearing employers and insurers," adds Ruby. "Coupled with our one-size-fits-one diabetes prevention program becoming the first precision health program to receive full accreditation from the Centers for Disease Control and Prevention (CDC), it's clear that our unique approach is gaining traction in the marketplace."
______________________ | |
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, compensation expense for inspirators and care specialists and genetic testing costs. 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. |
First Quarter 2020 Financial Results
Newtopia's revenue during the three months ended March 31, 2020 was $3.86 million, an increase of 119% over the prior period ($1.76 million). This growth was propelled by a Q1 program launch with a highly innovative existing Fortune 500 partner, which added to a favourable mix of welcome revenue and a firm base of monthly engagement fee revenue coming out of 2019.
Gross profit for the three months ended March 31, 2020 increased by 142% to more than $1.65 million over the prior year period ($0.68 million). While cost of sales increased in the period due to higher Inspirator (coach) costs, overall margin improved to 43% over the prior year level of 39%. Margin growth in the period can be attributed to the move in revenue mix from 50% monthly engagement fee based in 2019 to over 60% in 2020.
Adjusted operating expenses2 in the three months ended March 31, 2020 increased by 55% to $2.35 million over the prior year period ($1.51 million) as the company added technology, sales and marketing and administrative resources during the first quarter. The company has taken a measured approach to adding expenses to support its rapid growth, as increases in these line items has been more modest than growth in revenue and gross profit. Overall, the company had an adjusted operating loss3 of $0.79 million in the quarter, an improvement from a loss of $0.83 million in the prior year period.
______________________ 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.
About Newtopia
Newtopia is a telehealth enabled habit change platform focused on disease prevention that delivers a 1:1 individualized approach for at-risk individuals by looking at social, psychological, and genetic insights. Newtopia's approach is proven to deliver value on investment for risk bearing employers and insurers. Clients experience reduced clinical risk factors, medical claims savings and increased quality of life, productivity and morale for their at-risk individuals. Newtopia's mission is to inspire people to live healthier. To learn more, visit newtopia.com.
Forward Looking Information
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. These forward-looking statements include, among other things, statements relating to: the expected filing date of the Annual Filings and Newtopia's business plans and outlook. Forward-looking statements are not a guarantee and are based on a number of estimates and assumptions management believes to be relevant and reasonable. For more information on these risks please see the "Risk Factors" in Newtopia's final long-form prospectus dated March 30, 2020.
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 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.
NEWTOPIA INC.
Key Financial Measures and Schedule of Non-GAAP Reconciliations
Gross Profit Information [1]
Three Months Ended March 31, | |||
2020 | 2019 | ||
$ | $ | ||
Revenue | 3,862,986 | 1,761,046 | |
Cost of sales | (2,208,557) | (1,076,185) | |
Gross profit | 1,654,429 | 684,861 | |
Gross margin | 43% | 39% | |
[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, compensation expense for inspirators and care specialists and genetic testing costs. 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 |
Reconciliation of Total Operating Expenses to Adjusted Operating Expenses [2]
Three Months Ended March 31, | |||
2020 | 2019 | ||
$ | $ | ||
Total operating expenses | 3,162,510 | 2,703,327 | |
Add (Subtract) | |||
Stock-based compensation | (134,432) | (332,108) | |
Depreciation of property and equipment | (21,554) | (11,553) | |
Depreciation of right-of-use asset | (46,195) | (46,192) | |
Interest and accretion expense | (233,542) | (713,663) | |
Interest on lease obligations | (37,849) | (40,149) | |
Foreign exchange gain | 203,111 | 3,458 | |
Change in value of convertible debenture derivative liabilities | (270,993) | (43,497) | |
Change in value of derivative liability | (13,628) | (9,556) | |
Loss on settlement of debt | (167,716) | - | |
Adjusted operating expenses | 2,439,712 | 1,510,067 | |
[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. |
NEWTOPIA INC.
Key Financial Measures and Schedule of Non-GAAP Reconciliations
Adjusted Operating Loss [3]
Three Months Ended March 31, | |||
2020 | 2019 | ||
$ | $ | ||
Gross profit | 1,654,429 | 684,861 | |
Adjusted operating expenses | (2,439,712) | (1,510,067) | |
(785,283) | (825,206) | ||
[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. |
NEWTOPIA INC. | ||||
March 31, | December 31, | |||
2020 | 2019 | |||
$ | $ | |||
Assets | ||||
Current assets | ||||
Cash | 2,107,272 | 2,386,341 | ||
Trade and other receivables | 1,382,133 | 1,247,858 | ||
Prepaid expenses and deposits | 338,588 | 462,605 | ||
Inventories | 356,798 | 604,920 | ||
4,184,791 | 4,701,724 | |||
Property and equipment | 176,664 | 186,376 | ||
Right–of–use asset | 692,877 | 739,072 | ||
5,054,332 | 5,627,172 | |||
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | 1,996,188 | 2,254,894 | ||
Lease obligations | 188,501 | 156,340 | ||
Convertible debentures | 4,227,300 | 3,993,758 | ||
Convertible debentures derivative liabilities | 2,223,631 | 1,952,638 | ||
Retractable preferred shares | 7,420,265 | 7,420,265 | ||
Derivative liability | 192,298 | 178,670 | ||
16,248,183 | 15,956,565 | |||
Non–current lease obligations | 824,565 | 883,090 | ||
17,072,748 | 16,839,655 | |||
Equity/Deficit | ||||
Common shares | 4,643,945 | 4,643,945 | ||
Shares to be issued | 528,168 | – | ||
Preferred shares | 13,011,033 | 13,011,033 | ||
Special Warrants | 9,164,731 | 9,164,731 | ||
Contributed surplus | 5,346,172 | 5,172,192 | ||
Deficit | (44,712,465) | (43,204,384) | ||
(12,018,416) | (11,212,483) | |||
5,054,332 | 5,627,172 |
NEWTOPIA INC. | ||||
2020 | 2019 | |||
$ | $ | |||
Revenue | 3,862,986 | 1,761,046 | ||
Cost of revenue | 2,208,557 | 1,076,185 | ||
Gross profit | 1,654,429 | 684,861 | ||
Operating expenses | ||||
Technology | 776,666 | 525,806 | ||
Sales and marketing | 728,482 | 360,995 | ||
Administrative | 934,564 | 623,266 | ||
Stock–based compensation | 134,432 | 332,108 | ||
2,574,144 | 1,842,175 | |||
Other expenses | ||||
Depreciation of property and equipment | 21,554 | 11,553 | ||
Depreciation of right–of–use asset | 46,195 | 46,192 | ||
Interest and accretion expense | 233,542 | 713,663 | ||
Interest on lease obligations | 37,849 | 40,149 | ||
Foreign exchange gain | (203,111) | (3,458) | ||
Change in value of convertible debenture derivative liabilities | 270,993 | 43,497 | ||
Change in value of derivative liability | 13,628 | 9,556 | ||
Loss on settlement of debt | 167,716 | – | ||
588,366 | 861,152 | |||
Net loss and comprehensive loss | (1,508,081) | (2,018,466) | ||
Loss per share | ||||
Basic and diluted | (0.10) | (0.13) | ||
Weighted average number of common shares outstanding | ||||
Basic and diluted | 15,535,919 | 15,535,919 |
NEWTOPIA INC. | ||||||||||||||
Common | Shares To | Preferred | Special | Contributed | Deficit | Total | ||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||
Balance, December 31, 2019 | 4,643,945 | – | 13,011,033 | 9,164,731 | 5,172,192 | (43,204,384) | (11,212,483) | |||||||
Net loss and comprehensive loss | – | – | – | – | – | (1,508,081) | (1,508,081) | |||||||
Stock–based compensation | – | – | – | – | 134,432 | – | 134,432 | |||||||
Settlement of debt | – | 528,168 | – | – | 39,548 | – | 567,716 | |||||||
Balance, March 31, 2020 | 4,643,945 | 528,168 | 13,011,033 | 9,164,731 | 5,346,172 | (44,712,465) | (12,018,416) | |||||||
Balance, December 31, 2018 | 4,643,945 | – | 13,011,033 | – | 2,701,639 | (32,799,372) | (12,442,755) | |||||||
Net loss and comprehensive loss | – | – | – | – | – | (2,018,466) | (2,018,466) | |||||||
Stock–based compensation | – | – | – | – | 332,108 | – | 332,108 | |||||||
Balance, March 31, 2019 | 4,643,945 | – | 13,011,033 | – | 3,033,747 | (34,817,838) | (14,129,113) | |||||||
NEWTOPIA INC. | ||||
2020 | 2019 | |||
$ | $ | |||
Cash flows used in operating activities | ||||
Net loss and comprehensive loss | (1,508,081) | (2,018,466) | ||
Depreciation of property and equipment | 21,554 | 11,553 | ||
Depreciation of right–of–use asset | 46,195 | 46,192 | ||
Interest and accretion expense | 233,542 | 713,663 | ||
Interest on lease obligations | 37,849 | 40,149 | ||
Change in value of convertible debenture derivative liabilities | 270,993 | 43,497 | ||
Change in value of derivative liability | 13,628 | 9,556 | ||
Stock–based compensation | 134,432 | 332,108 | ||
Loss on settlement of debt | 167,716 | – | ||
(582,172) | (821,748) | |||
Change in non–cash working capital | ||||
Trade and other receivables | (134,275) | (844,054) | ||
Prepaid expenses and deposits | 124,017 | 36,356 | ||
Inventories | 248,122 | 251,187 | ||
Accounts payable and accrued liabilities | 141,294 | 259,313 | ||
(203,014) | (1,118,946) | |||
Cash flows used in investing activities | ||||
Purchase of property and equipment | (11,842) | (14,299) | ||
(11,842) | (14,299) | |||
Cash flows used in financing activities: | ||||
Repayment of lease obligation | (64,213) | (40,721) | ||
(64,213) | (40,721) | |||
Net change in cash during the period | (279,069) | (1,173,966) | ||
Cash, beginning of period | 2,386,341 | 1,428,558 | ||
Cash, end of period | 2,107,272 | 254,592 | ||
Supplemental cash flow information | ||||
Non–cash settlement of debt | 400,000 | – |
SOURCE Newtopia Inc.
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