MindBeacon Announces Second Quarter 2021 Financial Results

SECOND QUARTER AND SUBSEQUENT HIGHLIGHTS

• Revenue of $5.6 million compared to $2.2 million in Q2 2020.
• Asynchronous cases of 9,393, up 274% compared to prior year.
• Synchronous sessions of 11,415, up 63% compared to prior year.
• Gross profit of $2.5 million (45% margin) compared $1.0 million (44% margin) in Q2 2020.
• Net loss of $3.6 million compared to loss of $2.1 million in Q2 2020.
• MindBeacon announced the appointment of Dan Clark as President and Chief Executive Officer, effective, July 26th, 2021. Sam Duboc, the incumbent CEO, was appointed Executive Chair. Adam Kelly, Chief Commercial Officer, has assumed the additional role as President of Canada.
• MindBeacon entered the addictions space with the launch of a new digital therapy targeting alcohol use developed in consultation with the Centre for Addiction and Mental Health (CAMH).
• With the launch of our new Navigation Assistant program in July, MindBeacon users get enriched, personalized guidance to help them better navigate the healthcare system and remove any barriers to achieving optimal health and wellbeing.

TORONTO, July 27, 2021 /CNW/ - MindBeacon Holdings Inc. ("MindBeacon" or the "Company") (TSX: MBCN), a company specializing in the delivery of a comprehensive continuum of mental healthcare, using digital technologies, announces its financial results for the three months ended June 30, 2021. All amounts are in thousands of Canadian dollars unless otherwise stated.  

OPERATING RESULTS SUMMARY

"We are continuing to build on our successes and have strengthened our solid foundation in the second quarter as we experienced further acceleration in demand growth", said Sam Duboc, Executive Chair of MindBeacon. "We exited the quarter with an annualized revenue run rate of over $22.5 million and we have bolstered our therapist network through additional hires. While onboarding new providers results in a slight headwind to gross margins in the near-term, we expect per-case efficiencies and gross margins to continue to improve as each provider reaches full caseload capacity."

"We are very excited with the addition of Dan Clark to MindBeacon rounding out our impressive senior leadership team as CEO. With Dan in place, we are focused on executing on our U.S. and international expansion strategy. Dan is a seasoned international healthcare executive with deep experience in digital therapeutics, clinical software development and healthcare services across North America and several international markets and he has an accomplished track record of leading organizations through transformation and growth initiatives."

"I'm thrilled to have joined MindBeacon at this critical juncture and help build on its successes. It is estimated that almost one billion people around the world suffer from a mental health concern and MindBeacon is ideally situated to help fill the void and make care better for all. I look forward to working with Sam and the incredibly talented team at MindBeacon to double down on the power of innovation and help people across the world lead better lives through healthier minds," said Dan Clark, CEO.

Mr. Duboc stated further, "In the second quarter, MindBeacon entered the addictions space with the launch of a new digital therapy targeting alcohol use developed in consultation with CAMH. With the launch of our new Navigation Assistant program in July, MindBeacon users get enriched, personalized guidance to help them better navigate their employer-based benefits and remove any barriers to achieving optimal mental health and wellbeing. We have a clearly laid-out multifaceted growth strategy and we are highly focused on executing on our strategy and expanding our continuum of care, which will deliver long-term value for all of our stakeholders. We are creating what we believe is the most robust mental healthcare company in Canada, one that no other company is close to matching."

FINANCIAL REVIEW

Revenue

Asynchronous Therapist-Assisted iCBT

Asynchronous revenue for the three months ended June 30, 2021 was $4.4 million, an increase of 209% compared to $1.4 million for the same period in 2020 and an increase of $0.4 million, or 10%, from the first quarter of 2021. Asynchronous revenue for the six months ended June 30, 2021 was $8.4 million, an increase of 352% compared to $1.9 million for the same period in 2020. The increase during both periods was due to the uptake of asynchronous services by per-case and subscription-based customers from increased market penetration. The growth in per-case revenues has benefitted significantly from the Ontario Government Program and does represent a revenue concentration risk and relies on the willingness of the Ontario Government to continue to fund the program. Excluding the Ontario Government Program, the growth in the asynchronous segment for the three and six months ended June 30, 2021, compared to the prior year periods, was 21% and 62%, respectively. We continue to increase sales direct-to-businesses; however, this has been offset by a decline in direct-to-consumer sales (both out-of-pocket and reimbursable through extended healthcare benefits) as more consumers choose the Ontario program. We are focused on growth outside of Ontario and internationally, as we progress through the second half of 2021. Sales cycles in the direct-to-business segment have elongated, however we expect this to improve as we emerge from the pandemic in the second half of the year and new additions to our sales team gain traction. Average revenue per case in the asynchronous segment in the second quarter of 2021 was $467 and year-to-date was $469. We experience variations in revenue per case quarter-to-quarter with the launch of new clients, changes in volumes from subscription clients and patient progression through the program. MindBeacon has historically experienced some seasonality in the business surrounding major holidays and key dates in the school calendar. For example, we see slightly lower volumes in the last week of the year and during July and August. We expect this seasonality to have an impact on our third quarter revenues.       

Synchronous Therapy

Synchronous revenue for the three months ended June 30, 2021 increased by $0.4 million, or 55%, to $1.2 million compared to $0.8 million for the same period in 2020 and an increase of $0.2 million, or 21%, from the first quarter of 2021. Synchronous revenue for the six months ended June 30, 2021 increased by $0.6 million, or 39%, to $2.3 million compared to $1.6 million for the same period in 2020.  The increase in revenue during the periods was due to a continued adoption of virtual therapy and the launch of the Company's revamped platform which offers synchronous care to a broader population across Canada. The second quarter of 2020 was impacted by COVID-19 when substantially all in-clinic operations were migrated to virtual delivery. The Company has seen a steady increase in synchronous therapy sessions since then. Average revenue per session in the synchronous segment in the second quarter of 2021 was marginally lower than the same period in 2020 due to the mix of sessions completed by registered social workers versus psychologists. The price point for a therapy session with a registered social worker is lower than one with a psychologist. 

Client Care Costs

Client care costs for asynchronous therapy for the three months ended June 30, 2021 increased by $1.6 million, or 217%, to $2.3 million compared to $0.7 million for the same period in 2020. Client care costs for asynchronous therapy for the six months ended June 30, 2021 increased by $3.2 million, or 332%, to $4.2 million compared to $1.0 million for the same period in 2020. The increase during both periods was due to higher asynchronous therapist-assisted iCBT volumes. Year-over-year cost of delivery per case has decreased as we are becoming more efficient in our delivery. While we expect per-case efficiencies and gross margins to continue to improve, its important to note there may be a cyclical "lag factor" as it relates to gross margins. Specifically, as our business grows rapidly, we must make prospective hires to maintain service standards. As we onboard new providers, there is a lag in time before each provider reaches full caseload capacity, which can be reflected in slightly lower gross margins during any such hiring periods. As a result, cost of delivery in the second quarter was higher than the first quarter of 2021, and is expected to be higher again in the third quarter of 2021. As a result of our significant revenue growth, we have significantly scaled-up our clinical network. Over time and with the advent of more automation, operational refinement and technology improvements, we believe all clinicians become more efficient. Clinical efficiency can also be impacted by the severity of clinical presentation of the patient populations we serve. Simply put, the more complex the case, the greater the amount of clinical time that is required to successfully treat such patients. The prevalence rate and severity levels of cases have been impacted worldwide as the COVID-19 pandemic has prolonged. While this increase in severity rates has occurred, we believe the "risk mix" will improve to more normal levels once the pandemic starts to abate. Moreover, to mitigate any downside risk associated with increases in severity, MindBeacon is tailoring its marketing approach to encourage those in need of care to seek it earlier (thereby decreasing acuity levels), has established supervisory protocols related to severity outliers to ensure effective treatment response and is also leveraging its external provider network, with whom it has capitated risk arrangements to minimize any cost of delivery variation associated with short-term risk mix variation. The clinical insights and data learned from the current "risk mix" and scaling will be crucial in developing future products and services such as our Beacon in a Box offering and managing costs as we enter other markets both domestically and internationally.   

Client care costs for synchronous therapy for the three months ended June 30, 2021 were $0.8 million, an increase of $0.3 million, or 61%, from $0.5 million in the same period in 2020, mostly in-line with revenue growth which was 56% from the same period in 2020. Client care costs for synchronous therapy for the six months ended June 30, 2021 were $1.5 million, an increase of $0.5 million, or 42%, from $1.0 million in the same period in 2020, mostly in-line with revenue growth which was 39% from the same period in 2020. The cost of delivery per session of synchronous therapy was higher than the comparative period due to the mix of sessions completed by registered social workers versus psychologists.

Gross Profit and Gross Profit Margin

Gross profit for the three months ended June 30, 2021 was $2.5 million compared to $1.0 million in 2020. This represents an increase of $1.5 million or 156%. Gross profit for the six months ended June 30, 2021 was $5.0 million compared to $1.5 million in 2020. This represents an increase of $3.5 million or 242%. Gross profit margin for the three months ended June 30, 2021 was 45%, compared to 44% for the same period in 2020. Gross profit margin for the six months ended June 30, 2021 was 47%, compared to 42% for the same period in 2020. Gross profit has increased over the last four quarters driven by top-line growth, the benefit of operational leverage, and an increasing percentage of asynchronous revenue.

Gross profit margin in the asynchronous segment was 48% in the second quarter of 2021, compared to 49% in the comparative period in 2020. Gross profit margin in the asynchronous segment was 50% in the six months ended June 30, 2021, compared to 48% in the comparative period in 2020. Refer to the discussions under the headings Revenue and Client Care Costs above for additional detail with respect to factors affecting our revenue and cost per case.

Gross profit margin in the synchronous segment in the three and six months ended 2021 was marginally lower at 33% compared with 35% for the same periods in 2020. This reduction is attributable to the expansion of our live therapy offering across Canada through the MindBeacon platform. We have required some additional clinical overhead as part of our expansion efforts. As we continue to grow, this overhead will be spread across a higher volume of cases. In addition, the Company is focused on discipline in contracting and operational delivery to ensure that we achieve healthy margins that can be invested in growing the business.

Adjusted EBITDA^[1]

For the three months ended June 30, 2021, Adjusted EBITDA decreased by 43% to ($2.5) million compared to ($1.8) million for the same period in 2020. For the six months ended June 30, 2021, Adjusted EBITDA decreased by 21% to ($4.2) million compared to ($3.4) million for the same period in 2020. The decrease in adjusted EBITDA is within our expectations as MindBeacon continues to invest in growing the business. We do not expect to be Adjusted EBITDA positive for the next several quarters.  We continue to invest in building out our sales capabilities, developing our platform and are focussed on pursuing and implementing our growth strategy both domestically and internationally. During the three months and six months ended June 30, 2021, gross profit increased by $1.5 million or 156% and $3.5 million or 242%, respectively. This was offset by higher selling and marketing expenses due to higher marketing spend as we grow our brand and promote our offerings, higher product and development expenses as we continue to make investments in our platform and technology and higher general and administrative expenses related to the higher costs associated with operating as a public company, administrative and recruitment costs associated with the build out of our therapist network and product and development team and higher spend on employee compensation as we have added new positions over the past year, in-line with the Company's growth.   

LIQUIDITY AND CAPITAL RESOURCES

Our principal cash requirements are for working capital. Excluding deferred revenue, our working capital as of June 30, 2021 was $58.0 million. Given our existing cash balances, we believe there is sufficient liquidity to meet our current and short-term financial obligations and fund our organic growth strategy.

CASH FLOW

The following table provides an overview of the Company's cash flows for the periods indicated:

Operating Activities

Cash used in operating activities for the six months ended June 30, 2021 increased by $3.0 million to $5.1 million, compared to $2.1 million for the same period in 2020. The increase was primarily attributable to negative changes in working capital, an increase in non-cash expenses of $0.6 million and growth investment related increased net losses of $1.7 million for the six months ended June 30, 2021.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2021 increased by $0.2 million or 13%, to $1.3 million. The increase was due to additions to internally-developed software compared to the prior period of $0.1 million, due to the SR&ED claim we made in the prior year which was recorded as a reduction in additions to internally developed software, and an increase of $0.1 million related to additions to property and equipment mainly in the form of computer equipment as a result of our increased headcount.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2021 increased by $3.6 million, compared to the same period in 2020. The increase was primarily due to settlement of amounts owing to selling shareholders who sold in the over-allotment as part of the IPO of $3.1 million, and certain share issuance costs from the Company's IPO that were settled in 2021. This was offset by proceeds from the exercise of stock options of $0.2 million and receipt of $0.2 million government loans under the Contribution Agreement with the Federal Economic Development Agency of Southern Ontario.

Capital Expenditures

Our capital expenditures include internally-generated intangibles, information technology hardware, leasehold improvements and office furniture.

Capital expenditures for the three months ended June 30, 2021 increased by 10% to $1.0 million, compared to $0.9 million for the same period in 2020. The increase was due to the SR&ED claim that we made in the prior year period which was recorded as a reduction in additions to internally developed software, offset by marginally lower additions to property and equipment in the second quarter of 2021 compared to the same period in 2020. As a public company, we are no longer eligible for enhanced refundable SR&ED investment tax credits.

Capital expenditures for the six months ended June 30, 2021 increased by 34% to $1.6 million, compared to $1.2 million for the same period in 2020. The increase was due to increased additions to property and equipment related to computer equipment of approximately $0.1 million and the SR&ED claim that we made in the prior year period which was recorded as a reduction in additions to internally developed software.

OUTSTANDING SHARE INFORMATION

The Company is authorized to issue an unlimited number of common shares and preferred shares. As of June 30, 2021, there are 23,773,173 Common Shares and nil Preferred Shares outstanding.

The number of Common Shares reserved for issuance under the Company's Omnibus Incentive Plan and Legacy Incentive Plan is 3,565,976. As of June 30, 2021, the number of stock options that are outstanding, including those that remain unvested, that may be converted to common shares is 2,237,764.

SUBSEQUENT TO QUARTER END HIGHLIGHTS

On July 8, 2021, MindBeacon announced the company launched its new Navigation Assistant, a service that empowers Canadians to identify and select the right mental health support to meet their own personal needs and preferences and helps them to better understand how to get costs reimbursed through their employer benefits plans.

OUTLOOK

The pandemic has completely changed our world. It's time that mental health care embraces those changes and provides the support that patients need, when, where and how they need it. It's never been clearer that there simply isn't enough access to high-quality solutions to meet this global health concern. We are developing solutions to help solve this problem and we intend to bridge the gap, and stand apart, by delivering the best outcomes and consumer experience available. We are proud of our performance in the second quarter of 2021 across all aspects of our business and while we expect our revenue growth to be impacted as we enter the third quarter of 2021 due to the seasonality that we have historically observed during peak holiday seasons in July and August, we are still well positioned to keep the momentum going through 2021 and beyond.

MindBeacon ended the second quarter of 2021 with sufficient available liquidity to pursue our multifaceted growth strategies, which include growing our consumer base and enterprise membership in existing markets; expanding into new geographies; expanding use cases and our continuum of care; investing in artificial intelligence and machine learning; pursuing selective acquisitions that expand our offering, provide geographic diversification and offer strong economics; and building and implementing our BEACON in a Box product offering, which is a mid-term objective.

We are excited by the outlook for MindBeacon and are confident we have the people and the assets to succeed.

SECOND QUARTER 2021 CONFERENCE CALL

MindBeacon will hold a conference call on Wednesday July 28, 2021 at 8:30 a.m. Eastern Time to discuss its results. The call will be hosted by Mr. Sam Duboc, Executive Chair, Mr. Dan Clark, President and Chief Executive Officer and Mr. John Plunkett, Chief Financial Officer.

CONFERENCE CALL DETAILS

The taped replay will be available for 7 days.

A link to the live audio webcast of the conference call will also be available on the events page of the investors' section of MindBeacon's website at www.mindbeacon.com/ir. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to hear the webcast.

ABOUT MINDBEACON HOLDINGS INC.

MindBeacon provides a continuum of mental healthcare that includes self-guided psychoeducational and wellness content, Peer-to-Peer Support, Direct Messaging Therapy, Therapist Guided Programs and Live Therapy Sessions all offered virtually through its secure and private platform. As one of the first commercially available, digitally-native platforms to offer therapist-assisted internet-based Cognitive Behavioural Therapy in Canada, MindBeacon's professional service is designed around end users – their health, their way. Working with employers, insurance carriers and government ministries, MindBeacon offers services that are accessible, available, affordable and, most importantly, proven to be effective. MindBeacon is changing the therapy landscape by making professional care available to every Canadian, no matter when, where and how they choose to access it.

CAUTIONARY NOTE REGARDING NON-IFRS MEASURES

This press release makes reference to certain non-IFRS measures. These measures are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. MindBeacon uses the non-IFRS measures "EBITDA" and "adjusted EBITDA". EBITDA and adjusted EBITDA are intended to represent an indication of MindBeacon's capacity to generate profit from operations before taking into account management's financing decisions and costs of consuming intangible and tangible capital assets, which vary according to their vintage, technological currency, and management's estimate of their useful life. EBITDA represents net profit or loss before income tax expenses, finance costs and depreciation and amortization. Finance costs represent interest expense on lease liabilities and accretion of non-cash interest expense on government loans. Adjusted EBITDA represents EBITDA before taking into account certain unusual expenses. We also believe that securities analysts, investors, and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This press release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information can, but may not always, be identified by the use of words such as "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "would", "should", "believe", and similar references to future periods or the negatives of these words and expressions. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that MindBeacon considered appropriate and reasonable as of the date such statements are made, and is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including, but not limited to, the risk factors identified under "Risk Factors" in MindBeacon's Q2, 2021 MD&A and the AIF for the year ended December 31, 2020, particularly under the heading "Risk Factors" in the AIF, and in other filings that we have made and may make in the future with applicable securities authorities, including those available under the Company's profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking information is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents MindBeacon's expectations as of the date hereof, and is subject to change after such date. However, MindBeacon disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

Unaudited Interim Condensed Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
As at June 30, 2021 and December 31, 2020

Unaudited Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(In thousands of Canadian dollars, except per share amounts)
For the three and six ended June 30, 2021 and 2020

Unaudited Interim Condensed Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
For the six months ended June 30, 2021 and 2020

SOURCE MindBeacon Holdings Inc.