Limeade an employee well-being company has announced today that they have received a takeover offer from webMD Health Service for $0.425 per. share valuing the company at $A111.5mil. Significant increase from yesterdays closing price but well down from all time highs. i never owned this as the financials were always a bit unfavourable for my liking and i did think this would be the first area of cuts to companies in a difficult environment but it did peak my interest during COVID when maintaining staff was essential and I heard a lot of companies who were flushed with cash at this time were spending big on staff well-being and attempting to make the workplace a more enjoyable experience.

Good for shareholders but my takeaway is that some of these beaten down stocks that are every chance of not turning profitable will be taken out in coming months. Obviously never invest for a takeover but there would be a few on market that must be getting a look at currently given the circumstances. Limeade did a massive cut of costs some months ago including staff and it was questionable whether they would be able to turn a profit without going to the market for a CR so seems like a good deal for shareholders.

Limeade is a company I do not own but as a functional medicine practioner I have a key interest in health and well-being so I do like to monitor them.

They re-confirmed guidance of

• proforma revenue of 55-58 mil
• proforma adjusted EBITDA loss of 6-8mil
• proforma net loss after tax of 8-11 mil.
• cash balance sheet at 2.5mil (down from 8.7mil), no debt and 15 mil debt facility with comericia bank.
• expecting to be cashflow postivie 2H 2022

based on information management are expecting to avoid a Capital Raise but it is touch and go, they recorded operating cash outflows of $4.8mil for the qtr versus 2 mil in perating cash outflows in Q2 2021.. They report a 99% retention rate for the year but the contracts seem to be multi year contracts and therefore it is unknown whether any were due for renewal for this period or not. The top 20 enterprise customers on avg have 16 months remaining on their contrats, so retention should remain but it would be important to monitor this statistic to identify whether this product has ongoing purpose or a one off use and then get rid of within a company.

sales pipeline appears relatively strong. Pipeline at Q2 2022 was $43.4 mil including $18 mil in finalist and verbal stages they signed 47 new customer agreements for $0.6mil of CARR (on top of the 60 for $0.7mil in Q1).

DISC - Not held.

Limeade provided a quarterly report this morning.

Limeade is  an employee well-being company that creates healthy employee experiences through its software with the goal of increasing well-being and egagement and ultimately elevating business performance.

The share price has been recently hammered after reporting a loss of a top 10 customer (American Airlines) during the current quarter. Overall given the recent share price performance I thought the announcement looked pretty good and the marker so far seems to like.

Highlights:

• Cash Receipts of 16.1mil down 32% PCP however this was due mainly to a large annual subscription payment from a significant enterprise coming in late and expected to be in Q321. Had this been collected LME would have recorded positive operating cash flows in the qtr.
• NRR at 84% overall year to date (a bit lower than I would like to see) however given cost cutting due to Covid perhaps not too bad a result. Further impacted by the loss of the American Airlines contract. Churn in the mid-market comanies continues to be high.
• Signed 3 new enterprise contracts
• Company's total sales and marketing ppleline at Q321 recorded a decline of 4% to $151mil, whilst the company's finalist and verbal pipeline was up 78% to $16.1mil which reflects strong progression down the pipeline for core Limeade well-being solutions.

Outlook

maintained financial FY21 guidance as follows

• revenue of $50-53 million
• EBITDA: loss of $5-8 mil
• Net loss after tax of $7-10mil

Currently the cash balance sheet is $15.1mil with no debt. They also hold a %15mil debt facility. Given the challenges with losing a large client the result looked reasonble as they were able to maintain guidance. The share price was absolutely smashed after this loss and being able to maintain the guidance I thought we should see an improvement. The company essentially ran a profitable quarter and have a decent balance sheet that should see them able to work through a few years without a Capital Raise. I like this area, I think well-being in the workplace is really significant given the difficulties to maitnain and attain staff. Management contineu to focus and prioritise this. My biggest concern is that the business will continue to lose customers and churn will remain high.

Macquarie are the only company that follows Limade with a Target Price of $1.12 and outperform on it so plenty of upside if they can deliver. 

DISC: I do not hold but will continue to monitor progress.