LifeWorks reports Q2 2022 results, court approval and key regulatory approvals for transaction with TELUS and a conditional agreement to acquire Benestar

TORONTO–()–LifeWorks Inc. (the “Company” or “LifeWorks”) (TSX: LWRK) today reported its financial results for the three and six-month period ended June 30, 2022 (all amounts are in Canadian dollars, unless noted otherwise).

LifeWorks acquisition by TELUS

Binding agreement for C$2.9 billion acquisition (the “Arrangement”) announced on June 16

LifeWorks’ Board of Directors unanimously determined that the Arrangement is in the best interests of the Company and is fair to LifeWorks’ shareholders

Shareholders overwhelmingly approved the Arrangement at Special Meeting of Shareholders on August 4

The Company has received the required regulatory approvals under the Canadian Competition Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended

On August 11, the Company obtained a final order from the Ontario Superior Court of Justice (Commercial List) approving the Arrangement

Expected closing of transaction on or about Q4 2022

Delivered solid Adjusted EBITDA margins and revenues in Q2

Adjusted EBITDA margins of 18.7% for the quarter were consistent with prior quarter

Second quarter reported revenue growth of 1.6%, an improvement over Q1 2022

Tech-enabled revenues grew 6.0% over the comparable period

Second quarter profit of $5 million

Continued growth as trusted leader in employee mental health

With the agreement to acquire Benestar, LifeWorks will have the opportunity to provide certain EAP services for Zurich’s global clients on a non-exclusive basis

8.4 million lives on LifeWorks platform at quarter end, up 42.5% compared to Q2 2021

Organizations paying for extra LifeWorks modules is up 47% year over year

Microsoft Teams users accessing LifeWorks platform grew 39% from the previous quarter

18 win backs from digital-only competitors in the quarter

LifeWorks Total Mental Health continues to be on track, the next generation of the Company’s offering

Introduced industry-leading new products including LifeWorks Community Peer Support program, Canada’s first LifeWorks Indigenous iCBT program, and LifeWorks iCBT for healthcare workers dealing with burnout

Won three industry awards including Microsoft Canada’s 2022 Impact Award, Corporate Advisor’s 2022 Health and Wellbeing Innovator Award, and HR Reporter’s 2022 Readers Choice Awards for EAPs, health, and wellness; and consultants, benefits, and pension industry

Comments from president and chief executive officer, Stephen Liptrap

“The acquisition of LifeWorks by TELUS that opens up an exciting new chapter for both companies. It is a positive outcome for all LifeWorks stakeholders – our shareholders, employees, clients and partners. As we work toward completing the transaction, in the second quarter we continued to strengthen all our core businesses with an increased focus on leveraging our competencies as the trusted leader in employee mental health. We saw growth accelerate in the back half of the quarter as fee for service revenue started to return. We continue to make good progress with increasing staff counsellors, now at 65 per cent, and we expect the pricing actions to kick in as we move to Q3 and Q4. In the past quarter, we were able to offset the annual merit increases and inflationary pressures with operational improvements.

“Under the LifeWorks Total Mental Health banner, we are moving confidently forward with market-leading solutions built on machine learning and AI, combined with unmatched in-person support through our global counselor network, all toward delivering the right mental health service to the right person at the right time in the right way: in-person, digital, chat, video, on any device at any time. And, by joining up with TELUS, we have a compelling growth opportunity to be the global leader in employee health care and wellness.”

Benestar acquisition

LifeWorks also announced an agreement with Cover-More Group to acquire Benestar, a leading employee assistance program (EAP) and workplace wellbeing provider in Australia and New Zealand. Benestar is wholly owned by Cover-More, a company of Zurich Insurance Group. The acquisition is subject to review by the Australian Competition and Consumer Commission (ACCC).

Final Order

On August 11, 2022, the Company obtained a final order (the “Final Order”) from the Ontario Superior Court of Justice (Commercial List) approving the Arrangement.

The granting of the Final Order follows the approval of the Arrangement by LifeWorks’ shareholders on August 4, 2022.

Key regulatory approvals received

The Company also announced earlier today that the Competition Bureau of Canada has issued a no action letter in respect of the Arrangement. Accordingly, Competition Act Approval, as defined and as required by the Arrangement Agreement previously entered into between the Company and TELUS, has been obtained.

In addition, the applicable waiting period in relation to the Arrangement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired.

Completion of the Arrangement remains subject to the satisfaction of the remaining regulatory approvals, FIRB Approval and the UK NSI Act Approval, as defined in the Arrangement Agreement, and customary conditions to closing of the Arrangement.

Availability of financial statements and MD&A

Our complete financial results, including a discussion of factors affecting those results, can be found in our financial statements as at and for the three months ended June 30, 2022, along with the Management’s Discussion and Analysis in respect of those financial statements which are available under our profile on SEDAR at sedar.com.

About LifeWorks

LifeWorks is a world leader in providing digital and in-person solutions that support the total wellbeing of individuals. We deliver a personalized continuum of care that helps our clients improve the lives of their people and by doing so, improve their business.

Financial measures

To assist investors in assessing the Company’s financial performance, this news release may also make reference to certain key performance indicators and non-IFRS financial metrics such as Adjusted EBITDA margin, Constant currency organic revenue growth, and Tech-enabled recurring revenue. The Company believes that these are useful supplemental measures to assist our investors in assessing our financial performance. See the Company’s MD&A for more details. These financial measures do not have any standard meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other issuers.

“Adjusted EBITDA margin” is defined as Adjusted EBITDA (profit before finance costs, income tax expenses, depreciation, amortization, impairment losses, and certain unusual expenditures) as a percentage of revenue.

“Constant currency organic growth” is defined as organic growth (revenue growth adjusted for the impact of acquisitions, divestitures, and other non-recurring changes) before foreign currency translation impacts, which is calculated by translating current period results in local currency using the conversion rates from the comparative period.

“Tech-enabled recurring revenue” consists of our Integrated Health Solutions retainer and platform business, internet-based cognitive behavioural therapy (“iCBT”), and ongoing system-based Health and Welfare offerings within Administrative Solutions.

Forward-looking information

This news release contains “forward-looking information” within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Specific statements used in this news release that may contain “forward-looking information” include but are not limited to statements with respect to: statements with respect to whether the Arrangement will be consummated; statements with respect to whether the acquisition of Benestar will be consummated; the anticipated benefits of the potential acquisition of Benestar; the discussion of our business and operating segments, focuses and strategies, our expectations of future performance for our various operating segment units and our consolidated financial results. They are based on certain factors and assumptions, including expected growth, results of operations, business prospects and opportunities Use of words such as “may,” “will,” “expect,” “believe,” “could,” “would,” “intend,” or other words of similar effect may indicate “forward-looking information.” Forward-looking information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in the Company’s publicly filed documents (available on SEDAR at sedar.com) and in the Company’s MD&A under the heading “Risks and Uncertainties.”

Those risks and uncertainties include, among other things, risks related to the required regulatory and other consents and approvals to effect the Arrangement and the possibility the arrangement agreement governing the Arrangement could be terminated under certain circumstances; risks related to the required consents and approvals to effect the acquisition of Benestar and the possibility the purchase agreement governing the acquisition of Benestar could be terminated under certain circumstances; the ability to maintain profitability and manage growth, competition, reliance on information systems and technology, reputational risk, satisfactory performance of client obligations, general economic conditions, pandemics, natural disasters or other unanticipated events (including the novel coronavirus and variants thereof (“COVID-19”) pandemic), dependence on key clients and key channel partners, risk of future legal proceedings, protection of intellectual property, foreign exchange risk, insurance, indebtedness and interest rates, credit risk, dividends, and market price. Many of these risks and uncertainties can affect the Company’s actual results and could cause the Company’s actual results to differ materially from those expressed or implied in any forward-looking information or statement made by the Company or on the Company’s behalf. Given these risks and uncertainties, investors should not place undue reliance on forward-looking information as a prediction of actual results.

All forward-looking information in this news release is qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on analyses, expectations, or statements made by third parties in respect of the Company, its financial or operating results, or its securities.

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Contacts

LifeWorks

media@lifeworks.com

1-855-622-3327