Newtopia Inc.

Good evening, everyone, and welcome to Newtopia's combined fourth quarter 2023 and first quarter 2024 earnings conference call. I'm Rikki Benny, Senior Vice President with Newtopia. Joining me today are Jeff Ruby, Founder and Chief Executive Officer, Colin Swenson, Chief Financial Officer, and Lara Dodo, Chief Growth and Operating Officer. Please note that today's call is being broadcast live over the internet and will also be archived for both telephone and online listening upon completion of the call. Details on how to access the replays are available in the company's press release issued this afternoon and can be found on the investor section of Newtopia's website at www.newtopia.com. Before we begin, let me remind you that certain matters discussed during today's call could constitute forward-looking statements, which are subject to certain risks and uncertainties relating to Newtopia's future financial and business performance. Actual results could therefore differ materially from those anticipated in such forward-looking statements. Nutopia is under no obligation to update any forward-looking statements discussed today, and investors are cautioned not to place undue reliance upon these statements. The risk factors that may affect results are detailed in Nutopia's periodical results and registration statements, which you can access via the CDAR Plus database at www.cdarplus.ca. Also, please note that all figures stated on today's call are in Canadian dollars, unless otherwise noted. I would like to turn the call over to Jeff Ruby, founder and CEO of Newtopia. Please go ahead, Jeff.

Thank you, Rikki, and thank you to everyone for joining us today. Due to the fact that the company's auditors required additional time to complete their audit and quality procedures, we felt it was best to speak to both the year-end's 2023 and first quarter 2024 results together. I want to thank our auditors, Newtopia's finance team, council, and our audit committee for your efforts. I would like to speak about some key growth areas for Newtopia, which Laura will also discuss, and we'll then turn over the call to Colin to discuss the financial results. Throughout 2023 and in early 2024, we've made great strides in reducing our cost to serve and increasing our operational efficiencies, all while impressively maintaining and improving our industry-leading engagement in whole health outcomes. Importantly, in the first quarter of 2024, our operational gains and industry-leading engagement continue to improve. Of great significance, Utopia was chosen in Q4 2023 to launch an innovative health coaching project in partnership with the Heartland Whole Health Institute. Founded in 2019 by philanthropist Alice Walton, the Heartland Whole Health Institute puts a whole health approach at the center of the broader healthcare system to address the current healthcare crisis. The vision is to advocate, educate, and guide the implementation of an innovative system rooted in whole health and the realignment of financial incentives. The initial phase of the health coaching project includes a federally qualified health center, community clinic, and a regional employer, Harvest Bank, who offered Nootopia's habit change platform in two separate outreach cohorts as a no-cost health benefit to eligible participants identified through biometric and diagnostic data as suffering from type 2 diabetes, hypertension, or obesity. The first outreach cohort from Community Clinic was launched during Q4 2023, and the second cohort from Arvest Bank was launched during Q1 2024. We are confident that both cohorts, which are showing initial positive results, will again prove Newtopia's industry-leading participation metrics and that this project will ultimately serve as a blueprint for the deployment of scalable, value-based primary prevention efforts with other employers, payers, and providers across the United States. Revenues for the full year 2023 totaled $9.8 million and were $1.8 million for the first quarter of 2024. our top line was impacted by a change made by a client with a long-standing incentive program. From 2020 through 2023, we participated in a behavioral economic trial to evaluate the impact of novel monthly incentives with regards to program adoption, IE enrollment, and utilization, IE engagement. This client decided to ultimately shift the program's incentives, which unfortunately resulted in a larger-than-expected participation decrease. This behavioral economic trial provided a valuable lesson on the power of extrinsic financial incentives. Fortunately, our relationship with the client remains very strong and commencing in Q2, we're working with them on strengthening new registrations through market expansion and the reintroduction of Nutopia to existing markets where we hope to overcome the declined experience as a result of the change to the incentive program. Looking forward to the remainder of 2024 and beyond, we see three distinct strategic areas of opportunity for growth for Neutopia. The first are innovation partnerships, such as Heartland Whole Health Institute. The second are GLP-1 drugs for obesity and type 2 diabetes. And the third are opportunities with health AI and clinical discovery innovators. First, beginning with the continued development and growth of our novel innovation partnerships with key clients, as discussed earlier, Our collaboration with Ms. Walton's Heartland Toll Health Institute offers an exciting opportunity to expand not only within Northwest Arkansas, where the program first launched, but also statewide and nationally. Our second growth driver will be in the combination of Newtopia's proven value-based habit change platform alongside GLP-1 drugs for obesity and type 2 diabetes. The GLP-1 market is experiencing massive growth. largely due to the increasing prevalence of type 2 diabetes and obesity worldwide, alongside substantial marketing spend from pharmaceutical companies, celebrity endorsements, and a groundswell of influencer activity on social platforms. Healthcare industry analysts say that GLP-1s represent one of the largest and fastest growing classes of blockbuster drugs of all time, anticipated to eclipse $100 billion in value in the next five years. While medications like GLP-1s can be effective alone, they were clinically tried and are most beneficial when used in conjunction with lifestyle modifications such as improved diet, increased physical activity, and management of mental and emotional health. Lifestyle changes can help improve insulin sensitivity, reduce blood sugar levels, and promote weight loss, all of which are crucial in achieving sustainable clinical and economic outcomes. The current market challenge is that once the marketing juggernaut for Ozempic, Wigovi, Moonjaro, and ZetBounds began, gaining serious steam from celebrities and social media influencers, the need for a lifestyle change companion was largely set aside. Many payers are placing restrictions on the use of GLP-1s, including outright bans, annual spending caps, or requirements to pair the drug with lifestyle change. cost-effective lifestyle change programming such as Neutopia could be a potential solution to these challenges. The third and final growth driver is partnership opportunities with health AI and clinical discovery innovators that leverage Neutopia's unique genetic and phenotypic data to target at-risk cohorts and identify new drug candidates. With the rise of generative AI, there's an arms race for data to train and improve the quality and accuracy of large language models. AI has the potential to transform every aspect of healthcare, from diagnosis and treatment to administration and patient engagement, leading to more efficient, effective, and personalized care. AI is being used to accelerate the drug discovery process by analyzing large datasets to identify potential drug candidates and predict their efficacy and safety. this can significantly reduce the time and cost associated with bringing new drugs to market. Neutopia's habit change platform collects anonymized, de-identified data useful for research and drug development, including whole genome and phenotypic data for each participant. What makes this data set particularly novel and valuable is the fact that it is collected longitudinally over three-plus years outside of and between doctor visits, and falls outside of a traditional clinical electronic health record. Additionally, Neutopia data applies to a targeted cohort of individuals who are at risk of metabolic disease throughout the United States. Furthermore, behavior change plays a significant role in clinical trials for new drugs, particularly in areas where patient adherence to treatment regimens or lifestyle modifications is essential for the success of a therapy. Newtopia has the opportunity to leverage its industry-leading habit change approach alongside its rich data set as a partner to health AI, clinical discovery, and clinical trial work. The most relevant example would be in the identification, clinical discovery, and clinical trials for next-generation GLP-1 drugs or other similar medications for metabolic disease. As evident from each of the three growth areas described, Newtopia could not be better positioned to participate in these important market inflections taking place. With that, I'll turn the call over to Colin Swenson to discuss our financial results in further detail.

Thanks, Jeff. It's great to speak with everyone again today. As we are well into 2024, I will focus my commentary today on the first quarter. Our full year and fourth quarter 2023 results can be found in our most recent filings and in today's press release. As Jeff laid out, we're more bullish than ever on our strategic fit within the broader changes occurring in the healthcare space and look forward to the opportunities ahead. Starting with revenue, Q1 2024 revenue totaled $1.8 million compared to $2.6 million in the prior year period. This decline was driven by the structural incentive change, which we're actively working to offset. Gross profit was 0.9 million, or 50% of revenue, for Q1 2024. As I've stated in prior quarters, it's worth noting that our margins typically experience some level of seasonality, depending on the timing of participant onboarding. Although strong gross margins are important from a financial perspective, we will never lose sight of continuing to deliver exceptional health outcomes for our clients. From an expense standpoint, selling general and administrative expenses totaled approximately $1.1 million for Q1 2024, an improvement of 18% year-over-year. This improvement is the result of reduced marketing activities, reduced office lease expenses, tightening our belt on non-critical vendor spend, and headcount reductions. Technology and development expenses totaled $0.4 million compared to $0.9 million in the prior year period. Adjusted operating expenses, which exclude share-based compensation, improved by 32% to $1.6 million versus $2.3 million for Q1 2023. EBITDA totaled a loss of $667,000. driven by the previously discussed structural incentive change impacting our revenue, compared to a loss of $727,000 in the prior year. Turning to our balance sheet, cash as of March 31, 2024, was $0.34 million. In addition, we continue to have access to our revolving line of credit with the Canadian Schedule I Bank. Financing highlights over the past two quarters include finalizing the refinancing of $2.5 million of debt in Q4 2023 and raising a small bridge equity round of $0.7 million in Q1 2024. Thank you all for your time today. I'll now turn the call over to Laura.

Thanks, Colin, and good evening, everyone. I'm going to focus on three themes, operational rigor, commercial highlights, and innovation for future revenue. With the launch of Ms. Alice Walton's Heartland Whole Health Institute, Utopia has been exposed to new population types. Our experience has been deeply rooted in commercial self-insured employers, where we have consistently demonstrated engagement rates over 70% across a 12-month period, with more than 25% of enrolled participants meeting or exceeding clinically significant weight loss by the end of the 12th month. Newtopia is now navigating a population comprised of Medicare, Medicaid, and self-pay alongside commercial. We are helping participants who are dealing with mental health challenges, food and housing insecurity, risks associated with their social determinants of health, as well as multiple physical health conditions. Our care team has been upscaled with enhanced training in cultural sensitivity, social determinants of health, and how to make appropriate care escalations and referrals to other medical services and screenings, such as for cancers. In Q1, our efforts from these operational focus areas yielded approximately 30% referral rate of participants to a next best action at their health clinic. Program engagement rates across the population is at 91%, on a target of 70%. And the percentage of the population who will meet or exceed clinically significant weight loss of 5% is tracking to 25% of the enrolled population, which matches our ethno-sponsored randomized control trial. We couldn't be happier. From a commercial perspective, in Q1, Utopia surpassed new participant enrollment goals from both our existing clients who expanded into new geographies, as well as new client launches. we are continuing to work on increasing our current client footprint as well as working to convert pending opportunities to one revenue deal. As an example, we remain in active discussions to scale Neutopia's platform in a Canadian province where we have completed a highly successful pilot with outcomes that were published in 2022 by Diabetes Canada and have also been reshared at a nursing and education symposium. The overarching message of the research that was shared is how Neutopia helped patients to successfully improve healthy lifestyle choices and manage their diabetes. Future forward, we remain positive about the positioning Neutopia has to actively participate in solving the classic health issues of metabolic syndrome and new momentum that is and will continue to be driven by the demand for GLP-1s and HealthAI. Both GLP-1s and HealthAI have the potential to transform every aspect of healthcare, from diagnosis and treatment to administration and patient engagement. During Q1, New Tokyo launched our GLP-1 Sustain companion program to specifically support and extend the dramatic clinical outcomes produced by the drugs at a critical juncture in the patient journey, which could be when a user encounters a weight loss plateau or when users even cease taking the medication entirely. Newtopia currently has participants enrolled in the SUSTAIN program from across various clients. The common feedback we are hearing from these participants is that they are losing weight, they are quietening food noise, reducing their appetite and cravings, and as a result, are feeling even more motivated to work on healthy lifestyle changes. This has translated directly into increased engagement with Newtopia enhanced weight loss, as well as minimizing the loss of muscle mass, which is a serious risk when taking GLP-1s. We are all learning quickly that GLP-1s alone cannot end the obesity crisis. I will now hand over to Geoffrey B. Thanks, Lara.

Nootopia continues to pursue deeper relationships with existing clients while seeking new business partnerships and leveraging advancements in the healthcare space. I want to thank our entire team at Newtopia for your efforts this quarter as always. I also want to thank all of our shareholders for your continued support of Newtopia. We look forward to speaking on future earnings calls. Have a great evening.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line. Have a lovely day.