TIDMKOO
RNS Number : 8308E
Kooth PLC
04 July 2023
4 July 2023
Kooth plc
("Kooth" or the "Group")
$188m four year contract in California
Material upgrade to 2023 revenue guidance
Four-year contract to serve all 6 million 13-25 year olds in
California
Proposed fundraise of approximately GBP10m to accelerate
expansion strategy
Trading update
Further to the announcement on 16 March 2023 of the selection of
Kooth (AIM: KOO), a global leader in youth digital mental
well-being, as primary vendor partner to California for digital
mental health to 13-25 year olds, the Group is pleased to confirm
that definitive contract documentation in relation to this has now
been signed (the "Contract"). The Contract confirms Kooth's
momentum in the US market and follows a pilot contract signed with
Pennsylvania State in 2022.
Kooth intends to raise GBP10m to fund its expansion strategy.
Further details will be included in a separate announcement,
following this announcement, today.
Highlights
-- The Contract has a minimum total contract value of $188m
through to June 2027. Kooth's service is expected to launch in
January 2024, with platform development underway in readiness for
this.
-- As a result of this contract win, the Group now expects a
material upgrade to 2023 revenue guidance, to not less than GBP34m
(FY2022: GBP20.1m).(1)
-- The Contract is also expected to have a highly material
impact on revenues and ARR from 2024 with the timing of revenue
linked to usage, promotional activity and product development.
There is potential revenue upside from increased usage, and a
minimum expectation of service levels and product milestones.
-- To support this Contract, Kooth intends to hire over 200
staff during the next twelve months to support and build its
Californian and broader US infrastructure. These additional staff
will primarily be practitioners, marketing and promotion staff,
clinicians, and product and engineering professionals.
-- The Company intends to raise GBP10m to fund its expansion strategy.
Contract overview
Kooth has been selected as primary vendor partner to deliver its
digital mental health platform to all 13-25 year olds in
California. Kooth is responsible for digital platform, workforce
and service delivery as well as marketing and promotion across the
State of California (the "State"). This is part of California
Governor Newsom's $4.7 billion investment in youth behavioural
health, the Master Plan for Kids' Mental Health , and the Children
and Youth Behavioral Health Initiative ("CYBHI").
Kooth will provide services integral to the Behavioral Health
Virtual Services Platform (the "Platform"), a new
technology-enabled services solution, for all children and youth in
California. The platform is one of 15 workstreams within the CYBHI.
Kooth was selected as a primary vendor in competition with more
than 450 diffe rent providers with existing digital behavioural
health platforms and content.
As part of the Contract, Kooth will be working with the
Department of Health Care Services and the youth of California to
extend Kooth's existing platform with a mobile app and additional
capabilities that provide a welcoming, safe, and stigma-free space
for behavioural health support, in multiple languages, with no
waiting lists, qualifying criteria, or cost to end users. In
support of this, Kooth will invest further in product development
until mid 2024 to extend its platform :
-- Providing early intervention to help at a pre-clinical level
with a focus on achieving positive life outcomes
-- Building a mobile app and content available in multiple
languages and providing culturally relevant content
-- Delivering professional support via chat, messaging, video and phone
-- Integration with high acuity / crisis services to enable
simple navigation across the care system
-- Leveraging artificial intelligence to enable personalisation, risk detection and moderation
With a population of six million 13-25 year olds, there is a
clear imperative to transform mental health support in California.
More than 284,000 youth (2) in the State cope with major
depression, while 66% of those with depression currently do not, or
are unable to, receive treatment. There is also an increasing
suicide rate in children aged 10-18 in the State, with a 20%
increase (3) between 2019 and 2021. This problem is not limited to
California, with 22% of high school students across the US
seriously considering suicide in the past year and nearly half of
US parents very or extremely worried about the mental health of
their children (4) .
This is Kooth's second significant contract in the US, following
the announcement of a pilot contract with the State of Pennsylvania
in September 2022.
Kooth has identified additional opportunities in the US, a key
market for future growth, underlining the scale of opportunity in
the world's largest health care market and the Group's ability to
localise its services internationally.
Proposed fundraising
Kooth intends to raise GBP10m before expenses to fund its
expansion strategy of which approximately GBP5m will go towards
accelerating platform development and approximately GBP4.5m will go
towards investing in US growth. This includes the development of a
single platform for all US customers, rollout of new capabilities
in the UK and extending the platform for other international
markets. In the US, additionally, Kooth intends to build teams and
proof points to extend support to other States, pilot Kooth with
Medicaid managed care plan providers, and explore opportunities to
support the 0-12 year old age group. Further details are included
in a Proposed Fundraising announcement announced separately
today.
Trading update
Trading for the first half of 2023 was in line with management
expectations. The Contract, together with the proceeds of the
Placing, is expected to fully fund the development of the US
platform and enables the Company to accelerate its US expansion.
The Group expects a material upgrade to 2023 full year revenue
guidance, to not less than GBP34m (FY2022: GBP20.1m). The Contract
is also expected to have a material impact on revenues in 2024 and
beyond with the timing of revenue linked to usage, promotional
activity and product development milestones.
Whilst the Group will incur significant upfront costs in respect
of the Contract, principally relating to platform opex and
recruitment in FY23, the Group anticipates increased EBITDA margin
in FY24, and thereafter aims to deliver a sustainable Group EBITDA
margin in the mid-teens for the remaining life of the Contract with
the potential to improve after the initial investment phase.
Following the initial investment phase cash generation is expected
to increase significantly from 2025 and beyond.
Tim Barker, Chief Executive Officer of Kooth, said :
"We're incredibly proud to partner with California's Department
of Health Care Services to help tackle the growing crisis in youth
mental health. As a pioneer and innovator in digital mental health
care, being awarded this contract in a highly competitive process
is a huge testament to the world-class technology and clinical
expertise that we have developed over decades."
Further details can be found here:
https://www.dhcs.ca.gov/formsandpubs/publications/oc/Documents/2023/23-13-CYBHI-3-15-23.pdf
- Ends -
Enquiries:
Kooth plc investorrelations@kooth.com
Tim Barker, CEO
Sanjay Jawa, CFO
Panmure Gordon, Nominated Adviser and
Joint Broker
Corporate Finance:
Dominic Morley, James Sinclair-Ford,
Daphne Zhang +44 (0) 20 7886 2500
Corporate Broking:
Rupert Dearden, James Todd
Stifel, Joint Broker +44 (0) 20 7710 7600
Ben Maddison, Nick Adams, Nicholas Harland,
Richard Short
FTI Consulting kooth@fticonsulting.com
Jamie Ricketts, Alex Shaw, Usama Ali
The information contained within this announcement is considered
to constitute inside information as stipulated under Article 7 of
the Market Abuse Regulation (EU) no. 596/2014 as incorporated into
UK domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").
About Kooth plc:
Kooth (AIM:KOO) is a global leader in youth digital mental
well-being. Our mission is to provide accessible and safe spaces
for everyone to achieve better mental health. Our platform is
clinically robust and accredited to provide a range of therapeutic
support and interventions. All our services are predicated on easy
access to make early intervention and prevention a reality.
Our three services are:
-- Kooth: for children and young persons
-- Kooth: for adults
-- Kooth Work: for frontline employees
Kooth is a fully safeguarded and pre-moderated community with a
library of peer and professional created content, alongside access
to experienced online counsellors. There are no thresholds for
support and no waiting lists. Currently, Kooth sees more than 4,000
logins a day.
Kooth is the only digital mental health provider to hold a
UK-wide accreditation from the British Association of Counselling
and Psychotherapy (BACP) and according to NHS England data for
2021/22 is now the largest single access provider for mental health
support for under 18s.
In 2021, Kooth began executing on its international expansion
strategy, with an initial focus on the US market. This focus is due
to the growing recognition of the importance of improving youth
mental health in this key global healthcare market, with 1-in-6
people aged 6-17 experiencing a mental health disorder each year.
Kooth's first contract in the US was signed in October 2022 with
the State of Pennsylvania.
Notes
1. Company-compiled analyst consensus for FY23 revenues is GBP24.3m, as at 3 July 2023.
2. Governor Newsom's Master Plan for Kids' Mental Health
3. Centers for Disease Control and Prevention
4. Pew Research
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