LifeSpeak to Acquire Wellbeats a US-Based On-Demand B2B Physical Wellbeing Platform for up to US$92.5 Million

LifeSpeak Inc., the leading mental health and total wellbeing platform for employers, health plans, and insurance companies, announced that it has signed a definitive agreement to acquire U.S.-based Wellbeats Inc. for up to US$92.5 million. Wellbeats, a Minnesota-based market-leading provider of an on-demand, software-as-a-service (“SaaS”) physical wellbeing platform, serves a diverse client base of 400+ U.S. and international enterprise clients. With a combined 30 years of experience as respective leaders in digital health education and physical wellbeing, the acquisition supercharges LifeSpeak’s ability to meet rapidly growing demand from organizations for a comprehensive, single-vendor solution to meet mental and physical health support needs.

“The acquisition of Wellbeats significantly expands and diversifies the SaaS-based behavioral health and physical wellbeing solutions LifeSpeak can offer its customers and partners. Wellbeats brings an exceptional on-demand wellbeing platform to millions of users worldwide and provides us with additional growth opportunities via channel partners”

Effective corporate wellness solutions are in high demand, driven by increasing expectations from employers to provide total wellbeing support to employees and the rapidly changing nature of the work environment. According to Global Wellness Institute, corporate wellness is expected to reach a total addressable market of US$58.4 billion by 2025. A comprehensive suite of wellbeing solutions is paramount for organizations seeking to support their employees’ mental health and physical wellbeing. Solutions supporting the inextricable link between mental health and physical wellbeing, effectively address employee total wellbeing and may serve to improve employee productivity, engagement, and retention.

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“The acquisition of Wellbeats significantly expands and diversifies the SaaS-based behavioral health and physical wellbeing solutions LifeSpeak can offer its customers and partners. Wellbeats brings an exceptional on-demand wellbeing platform to millions of users worldwide and provides us with additional growth opportunities via channel partners,” said Michael Held, CEO, LifeSpeak. “Many organizations have expressed a strong desire to streamline their wellbeing support to a smaller number of proven brands focusing on longer-term, preventive solutions. This makes the addition of Wellbeats highly complementary to LifeSpeak’s growing lineup of digital health offerings and allows us to further extend our offering to new enterprise and embedded solutions clients. Through this acquisition, we are excited to have the opportunity to cross-sell this extraordinary physical wellbeing platform around the world, as well as increase the prevalence of our industry-leading mental health and total wellbeing education platform.”

The transaction demonstrates continued disciplined execution of LifeSpeak’s strategy in several key areas and is well aligned with LifeSpeak’s core acquisition criteria, including acquiring assets with:

• A best-in-class and complementary B2B SaaS-based product offering: Wellbeats’ award-winning solution represents a strategic extension and enhancement of LifeSpeak’s digital, B2B-focused wellbeing platform and enables LifeSpeak to further address the critical needs of its client base with additional on-demand access to large and scalable physical wellbeing, health, and nutrition virtual resources.

• A large, sticky, and non-overlapping enterprise client base with a diverse geographic presence: Wellbeats will significantly increase LifeSpeak’s client count with the addition of 400+ net new global enterprise clients, bringing total LifeSpeak clients to 800+. Substantial cross-sell opportunities within LifeSpeak’s existing and net new client base, as well as additional paths to market, including new channel partners, augment LifeSpeak’s sales strategy while enhancing revenue opportunities across the client portfolio.
• A strong team with complementary skillsets and long-term strategic alignment: The Wellbeats team joins LifeSpeak with decades of experience and long-term strategic alignment in its core mission. Wellbeats’ international experience and presence accelerates LifeSpeak’s global growth efforts through the addition of strong senior management and an experienced U.S. salesforce. LifeSpeak is pleased to announce that upon the completion of the transaction, Jason Von Bank, President & CEO of Wellbeats, will assume the role of Chief Operating Officer of LifeSpeak.
• A similar financial profile: Wellbeats maintains comparable fundamental financial metrics to LifeSpeak and is expected to accelerate LifeSpeak’s overall growth strategy and enhance financial performance into 2022 and beyond.

“By joining LifeSpeak, we are advancing on our mission to provide all people the opportunity to live a healthier life, regardless of age, interest or ability. We’ve also delivered on bringing the two halves of the wellbeing equation together for our customers, who have sought mental health solutions to complement our physical wellbeing resources,” said Jason Von Bank, President & CEO, Wellbeats. “Both Wellbeats and LifeSpeak are category leaders with impressive global partners and clients, and this partnership will accelerate our combined growth dramatically. We are excited to be part of the LifeSpeak family and look forward to continuing to deliver on our mission for our clients, their employees, and shareholders.”

Transaction Details, Financing, and Concurrent Private Placement

An upfront payment of US$80 million is payable in cash on closing, with the remaining US$12.5 million payable in cash in the form of an earnout on the achievement of predetermined 2022 milestones. The transaction is expected to close in March 2022 and is subject to customary closing conditions for a transaction of this nature.

The transaction will be funded through cash on hand and a committed $97.5 million credit facility to be entered into with Scotiabank’s Technology Innovation and Banking Group. The credit facility will be a revolving facility, bearing interest at an annual rate determined based upon a Net Debt-to-Adjusted Bank EBITDA¹ multiple. An additional $30 million will be available through an accordion facility. Minimum availability is 5.00x Net Debt-to-Adjusted Bank EBITDA through 2022, and the credit facility will contain customary terms and conditions for a senior secured facility of this nature. At the closing of the transaction, LifeSpeak expects to have Net Debt of approximately $91 million excluding the proceeds of the Private Placement described below and a Net Debt-to-Adjusted Bank EBITDA multiple of 4.4x². Such Net Debt will be used to partially fund the transaction and to repay all amounts owing under LifeSpeak’s current credit facility in the amount of approximately $16 million.

Concurrent to the acquisition of Wellbeats, LifeSpeak has entered into subscription agreements with a group of investors led by Beedie Capital, and Scotia Capital Inc. and Roth Canada, ULC as agents, whereby the investors will purchase 2,953,020 common shares at a price of $7.45 per common share for gross proceeds of approximately $22 million, through a private placement (the “Private Placement”). The net proceeds of the Private Placement will be used to fund a portion of the purchase price of the transaction. The completion of the Private Placement is subject to applicable regulatory approval of the Toronto Stock Exchange and to the completion of the acquisition. At the closing of the transaction, Net Debt, including the net proceeds of the Private Placement, is expected to be approximately $70 million with a Net Debt-to-Adjusted Bank EBITDA multiple of 3.4x², and this multiple is expected to be reduced to approximately 2.5x one year after the closing.

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Financial and Operational Highlights

Wellbeats brings a compelling financial profile with a strong base of revenue and Annual Recurring Revenue (“ARR”). In 2021, Wellbeats is expected to have generated approximately $17.4 million of revenue derived from 400+ enterprise clients and achieved a 41%+ year-over-year growth in the Number of Clients for the twelve-month period ending September 30, 2021 (see “Financial Estimates” below). Wellbeats’ ARR is expected to have been approximately $19.2 million as at December 31, 2021 (see “Financial Estimates” below). In addition, Wellbeats achieved a Net Dollar Retention rate of 108%+ for the twelve-month period ending September 30, 2021.

The acquisition of Wellbeats, once complete, will be LifeSpeak’s fourth acquisition following its IPO in July of 2021. On a pro forma basis, LifeSpeak is expected to have 800+ enterprise and embedded solutions clients and approximately $54.4 million of ARR as at December 31, 2021 (see “Financial Estimates” below). This compares to 225+ clients and ARR of approximately $21.0 million at the time of IPO³, representing a significant increase in the opportunity set for the overall LifeSpeak product and platform.

“LifeSpeak continues to aggressively build its solution offerings to meet global demand through strategic acquisitions,” said Nolan Bederman, Executive Chair, LifeSpeak. “Wellbeats fits synergistically with our platform, allowing us to enhance and expand our mental health and wellness support capabilities. With the addition of Wellbeats’ incredible virtual physical wellbeing platform to our Company, we have a tremendous opportunity to cross-sell additional valuable solutions to our clients and partners, adding significant value to their health and wellbeing investments.”

2022 Projected Financial Performance

The combined companies are expected to deliver strong core organic revenue and ARR growth, enhanced through the significant revenue synergies and cross-sell opportunities across the pro forma client base. The strong revenue growth and profitable nature of the pro forma company supports LifeSpeak’s ability to fund future growth internally while tactically managing debt levels and continuing to execute on its global expansion and growth via acquisition strategy.

Based on current sales pipeline visibility, the successful integration of the LIFT, ALAViDA and Torchlight, and the anticipated closing and integration of Wellbeats, LifeSpeak expects 2022 revenue growth to be in the range of 180% – 200% for the year ending December 31, 2022. This assumes estimated preliminary revenue of $23.4 million for the year ending December 31, 2021.

LifeSpeak expects ARR to be in the range of $75 million – $85 million as at December 31, 2022 and expects Adjusted EBITDA Margin to be in the range of 30% – 40% for the year ending December 31, 2022. This guidance is being provided to give context to the effect of the acquisition on LifeSpeak and LifeSpeak does not intend to provide such guidance on an ongoing basis.

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