Desjardins Capital Markets analyst David Newman has a new lease on LifeSpeak Inc (LifeSpeak Stock Quote, Charts, News, Analysts, Financials TSX:LSPK), maintaining a “Buy” rating and $13/share target price for a projected return of 64.6 per cent in an update to clients on Monday.
Toronto-based LifeSpeak provides software-as-a-service solutions for mental health and total well-being education for mid- and enterprise-sized organizations. The company also creates content, including videos, podcasts, tip sheets, quizzes, tailored articles and expert-led educational resources for mental health, as well as training and development for employees and managers.
Newman’s newest analysis comes after LifeSpeak announced its intent to acquire Wellbeats, a Minnesota-based B2B provider of an on-demand, SaaS-based physical wellbeing platform. Newman called the deal a positive for the company and stock.
“The acquisition cements LPSK’s leadership position in total employee health and wellbeing, as Wellbeats’ physical health content complements LSPK’s core mental health and wellbeing platform,” Newman said.
The deal, which is expected to close in March, includes a payout of US$80 million in cash upon closing, with an additional US$12.5 million payable in cash as an earnout pending the achievement of select milestones in 2022. The funding breakdown includes between $30 million and $35 million in cash on hand, a $22 million private placement of common shares, and a new $97.5 million revolving credit facility, of which $16 million will be used to repay LifeSpeak’s current credit facility.
Wellbeats is expected to generate $17.4 million in revenue and an annual run rate of $19.2 million by the end of its 2021 fiscal year
“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,” said Michael Held, CEO of LifeSpeak in the company’s February 14 press release. “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.”
From a strategic standpoint, the deal doubles Lifespeak’s client base to more than 800 enterprise and embedded partners, with plenty of cross-selling opportunities when paired with the Wellbeats, LIFT, ALAVIDA and Torchlight standalone platforms.
Wellbeats also comes with a US-based direct sales team, while Wellbeats President and CEO Jason Von Bank will become LifeSpeak’s chief operating officer.
LifeSpeak management projects 2021 revenue to come in at $23.4 million, in line with the Desjardins estimate of $23.8 million. However, with Wellbeats now on board, the company is projecting top-line growth between 180 and 200 per cent, with an EBITDA margin between 30 and 40 per cent, though Newman is currently maintaining his 2022 projections of $50.3 million in revenue and $22 million in EBITDA.
LifeSpeak’s stock price has sagged to a 7.1 per cent loss since it started trading on the Toronto Stock Exchange on July 6 of last year but the stock has shown signs of life with a 24.4 per cent return since the start of 2022. The stock’s highest point to date was $8.81/share on July 8, only to experience a downward interval in falling to a low of $5.93/share on December 15.