Q3 2021 LifeWorks Inc Earnings Call
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This conference is being recorded so it goes to the homes that don't have as you see.
All participants please standby your conference is now ready to begin good morning, everyone and welcome to the third quarter 2021 conference call for Lifeworks incorporated.
Please note that this conference call will contain forward looking statements, which reflect management's current beliefs and expectations regarding the corporation's future growth and results of operations.
Actual results could differ materially from those from visa anticipated.
Now I would like to turn the meeting over to Mr. Steven lip Trump President and Chief Executive Officer of Lifeworks incorporated. Please go ahead, Mr lift truck.
Thank you Paul Good morning, and thank you for joining us on the call with me today as Grier Colter, our Chief Financial Officer yesterday. After the markets close we released Lifeworks financial results for the third quarter and year to date.
Today, I'll review, our business performance for the quarter and our opportunities going forward and Grier will cover the financials in more detail and finally, we'll open the call to questions.
To begin I'd like to share some context on the market and our business. What we're seeing as you are to our workplaces going through significant transformations, we probably have to go back to the late 19 forties. The postwar recovery period for a sea change equals scope in the labor environment.
Remote work hybrid work return to office, all words and phrases were learning to live with.
What we're learning from working with our 25000 clients worldwide is that the workplace is experiencing more than just temporary changes that will revert to whatever normal was.
Something deeper more fundamental is underway, where the concept of employee well being is a secular growth trend of growing significance today and longer term.
And our global monthly index it tracks mental health in the workplace, we know COVID-19 and everything around it has created a new form of climate change or worsening of the psychological climate in the workplace that we believe will take years to fully recover and changed much of how come.
Operator.
Already we are seeing much more focus today by leaders on talent and retention, we're supporting employee wellbeing is increasingly recognized as crucial to that on some level. It's simple.
People will engage and give their best to companies, who care about their wellbeing and companies realize that was out there are people out there best their performance and productivity will suffer.
As we assess it the outlook in the global well being market is very positive.
For life works client interest in our multimodal approach to employee wellbeing is at an all time high reflected in our record sales for the second year in a row and a continually growing pipeline along with the many millions of people now with access to our total wellbeing platform.
How is this changing situation plays into our growth strategy has many aspects, but there are three that I'd like to point out.
John.
We were on the right track well prior to Covid with our wellbeing strategy, but coming out of Covid that track for growth has gotten a lot wider and we see an opportunity to position for that.
Two is the wellbeing sector evolves and new competitors entered the market with point solutions here and there we believe our broader multimodal platform approach to employee wellbeing is highly differentiated and we're committed to building on that.
What's really resonating with our clients and their employees, it's a full spectrum of our capabilities in the personalized continuum that we offer to improve the lives of people, it's not just digital or face to face solutions, we offer everything our clients want for the care of their people need in there.
The way that they want it digital chat video telephonic or face to face everything is within easy reach and within the daily flow of their lives and work.
Our clients almost universally want access to a platform that's easy impractical to use for everyone on it including the HR buyers and our clients who are focused on improving the lives and productivity of their people retaining key resources and attracting the talent they need to.
Exceed.
Third no question going forward, we need to drive the top line, but also the bottom line.
As the workplace keeps transforming and the needs of our clients evolve and grow we remain focused on owning the global mental health and well being markets.
That brings me to our results at the end of Q3 Grier.
Greer will speak to the numbers, but the fact is we have seen very strong sales performance very strong year to date revenue performance, including tech enabled revenue growth.
We did see a revenue slowdown in the quarter as many clients and prospects took a break for the summer due to a long time dealing with COVID-19 implications.
And a year ago period, where we're asked to do more work as people were not taking those vacations, particularly in our time and material consulting business retirement solutions.
Adjusted EBITDA margins for the quarter and year to date decreased and obviously, we're not happy with that.
But there are positive messages and our results.
One we continue to see demand for our services increase counselor costs impacted margins in the short term as they did last quarter, but also represent a real indication of the importance of what we do for our clients and their employees.
Our services are in heavy demand and we have started to take pricing.
To the slowdown in retirement and financial solutions business for the quarter as clients had more of a normal summer than the last years inflated margins returned to normal.
Well digital health care will keep growing at an accelerated rate in person services will continue to be an essential component of the help that people need.
There are other indicators that we're moving in the right direction at the quarter end, some $6 2 million lives recovered on the Lifeworks platform, a 63% increase over Q3 last year.
In terms of up selling organizations paying for extra wellbeing modules and the platform is up 29, 2% year over year.
Our I C. B T solution revenue growth is also up 32.5% in Q3, and 165, 3% year to date.
As we announced in August our Lifeworks platform is now available in the Microsoft teams marketplace. This integration enables us to increase the reach of our wellbeing platform to many millions of people.
The potential for much more utilization of our well being services is very real and it allows people to use the life first platform from within a digital ecosystem, they're working within already.
Another accomplishment in the quarter was winning certification for Knox Keene license.
This allows us to provide counseling services to people directly in California.
Certification involves a rigorous multi year process not easily accomplished by anyone least of all digital only counseling providers new to the game.
Certification came into effect, we've already won 11, new client mandates extending at some 26000 covered lives.
Finally, we are pleased our workday implementation has come to a very positive conclusion.
Getting this important work done really puts our global business on a powerful operational platform to help us grow and scale.
So, let's turn to our lines of business and their results.
Integrated health solutions, we had a solid quarter in our integrated health solutions business that contributed to strong year to date performance organic constant currency revenues were up three 8% in the quarter and eight 1% year to date.
Without a loss that we knew about two years ago and in Australia, Covid shut down growth would've been approximately 6% in the quarter.
We were pleased that we won multiple wellbeing and telemedicine contracts over the past quarter much like we have been doing all through the year. This includes new wins with one of the world's largest home retailers for telemedicine upsell and new students support solution at a large American University.
Our health and productivity business has been strong all year with quarterly organic revenues in constant currency up four 8% and year to date, 15.2%.
As we expected we keep leveraging growth in our I C. B T solution with multiple contract wins in Canada and the U S.
We continue to work with Ontario health to support has meant a whole strategy related to the pandemic.
We're also very pleased to be extending a disability management contract to one of the world's largest professional services organizations.
And administrative solutions, which includes our health and welfare business, we had a good quarter with constant currency organic growth of five 5% and six 3% year to date.
We landed a large new public sector contract in Quebec to implement a software solution for managing a new Prudential, social security programs, including maintenance and technical assistance services.
Ontario, we had up sells with a well known university for defined benefit administrative services.
In the private sector, we won a sizable defined benefit upsell with a major Canadian energy company.
In our retirement and financial solutions business, we're holding our own having started the year strong, but underperforming over the last two quarters and as I mentioned earlier. This summer activity returned to traditionally normal levels compared to 2000, Twenty's unusually increase activity in the summer.
In the quarter two large contracts stand out one is a major cross sell to a large Canadian bank to support as defined contributions and capital accumulation plans.
The other large contractors with the Port authority on the West Coast, where we combined for sales into one solution covering pension investment and administration.
As I mentioned, we're very pleased with our record sales and the strength of our pipeline growth in the quarter.
From a corporate perspective were also very successful in renewing our partnership as the official mental health partner and provider to the Canadian Olympic Committee, a partnership that supports our commitment to community engagement and to creatively building our brand.
Before handing off to Greg I want to emphasize a few points about where lifeworks is going and how we're getting there.
We believe we have some amazing strength relative to our competitors. Our view is and our clients often tell us is that during the pandemic. It became even more clear that we are the number one most trusted natural health and wellbeing provider for organizations and their people we offer bar none the most comprehensive.
A range of mental health and well being services available to our clients and their people.
And we make a substantial positive impact on our clients and there are people every day and that's something we've seen and keep seeing during these times.
In previous quarters, I've talked about the three levers for growth that gives us confidence in our business model. One is a solid core of recurring revenues across our businesses and those are increasingly tech enabled.
The second is are accelerating global expansion from a strong North American base.
And third is our proven ability to grow by innovating with new digital technologies to create market, leading solutions, such as our integrated well being platform.
And today I want to add a fourth.
The growth that we expect coming out of Covid in global wellbeing markets and the significant opportunities. It presents to drive both the top and bottom line as organizations deal with mental health engagement and significant retention issues plus a growing focus on E. S.
S G and the S in particular.
On that note Grier will review the financials in more detail.
Thanks, Steven and good morning.
Building on Stephen's comments, we are pleased with our year to date results and I will get into the numbers in a minute.
In the quarter sales were solid but as you can see we are working through some of the cost implications of the return to in person counseling service.
And the overall pressure on labor markets.
On balance we've done a good job adapting to the pandemic from the early days of moving to remote work driving our workday implementation, which is now alive chain.
Changing head office locations, divesting businesses, and acquiring others and focusing each of our lines of business on delivering results.
As Stephen mentioned, there's clearly room for getting our margins back to where they should be.
In Q3 of the top line was solid we reported $246 1 million in revenue an increase of two 4% over last year and four 5% on a constant currency basis.
To get a little more specific on revenue while the sales funnel is strong there were some impacts in the quarter. In addition to what Steven mentioned.
There's generally some seasonality to the third quarter, but we expect low to mid single digit growth from the RFS business and we didn't get that in Q3 and this was largely a result of our consultants taking time off the summer that was more challenging for them to do during the pandemic and that has shown up in the results.
Secondly, there was an impact to our Australian business as this region went back into locked down in the third quarter and then lastly, we have seen a couple of large but less profitable clients leave the IHS portfolio.
Year to date the story is much stronger on the topline with 761 million in revenue.
Four 3% reported increase and seven 3% on a constant currency basis.
Chuck enabled the recurring revenues were also strong in both the quarter and year to date at five 4% and nine 3% respectively.
Adjusted EBITDA was $44 7 million in the quarter and 147 million year to date.
Adjusted EBITDA margins year to date were 19, 3% compared to 24% in 2020.
As Steven touched on we were disappointed with the margin in the quarter, which came in at 18, 2% relative to what we would normally expect which is closer to 20%.
At a macro level and many companies in other sectors are seeing this there is wage inflation relating to labor environment.
Specifically, given the increasing focus on mental health, we are seeing higher demand for workers, who specialize in this area in the short term I mean, some of our compensation costs are going up.
But the general growth trend in the mental health area, ultimately bodes well for our business long term is there will be opportunities to consider these longer term impacts on contract pricing.
The impact drove about 100 basis points of variance in our margin in the third quarter and this was similar to what we saw in Q2.
And then secondly, as mentioned there were lower revenues from our retirement and financial solutions business, which has a higher margin business for us and that drove about 50 basis points of this variance.
Profit for the quarter increased by $10 1 million compared to Q3 2020, mainly due to a $10 3 million dollar provision recorded in the comparative period associated with the planned relocation.
Of our three Toronto area offices to a single headquarter location at the end of this year.
Basic earnings per share for the quarter increased by 14 versus the comparative period.
During the quarter the company generated normalized free cash flow of $26 2 million compared to $21 2 million in the same period in 2020, an increase of $5 million, which was driven primarily by lower finance costs and income taxes paid.
Although working capital was negatively impacted by an increase in accounts receivable, which was temporarily impacted by the name change that caused a small delay in collections, which will reverse and we were pleased with our management of working capital overall.
And lastly, the company will continue its policy of paying a monthly dividend of $6.05 per share.
And with that I'll turn it back to you Steven.
Thanks, Gary I appreciate your comments Paul. Please go ahead and open up the line for questions.
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Thank you for your patience.
The first question is from Stephanie price from CIBC. Please go ahead. Your line is open.
Hi, good morning.
Hi, I was hoping you could talk a little bit more about the competitive environment that you're seeing obviously the digital providers have been very aggressive in the new startups keep popping up.
The win rates that you're seeing in the market versus historical and whether that increased competition impacted organic growth at all in the quarter.
Yeah, It's a really good question Stephanie it's Stephen here, what I would say is we are not seeing more losses to competitors at all we're not seeing or when rates come down at all they're staying very consistent.
And we are seeing our pipeline continued to be strong. The one thing that we did see over the quarter. It was a slowdown in decision, making so it wasn't.
That we didn't win the mandates it's sad people. It seemed like people were taking longer to make decisions and that got stretched out a little bit. So our average time to close deals increased over the quarter. So we're not seeing it come from.
<unk> per se, we're really seeing it come from and frankly, I think a lot of organizations just being tired and are actually taking a bit of a break over the summer.
Okay that makes sense and then in terms of kind of that longer win rate or the longer sales cycle.
Is there any impact of the pricing have you seen any pricing pressure just given competitors that are out there right now.
We've actually started taking pricing as you know coming out of the last quarter as we saw the impact on margins related to the change in counselor mix more complexity more severity of cases, we started obviously talking to our clients as they came up for renewal and we started to take pricing. So it's.
Then a positive obviously that will take time to kind of work through the system, but we're not seeing it on bids in general in terms of pushing pricing down.
Okay, Great and then maybe one for you just curious a little bit more color on the margins in the quarter, you mentioned 100 basis point impact from labor costs.
How should we think about that going forward is this I assume it something that might happen.
For the next several quarters.
Yeah, what I would say is.
It's pretty consistent with what we saw in Q2 I think it was 130 basis points impact in Q2, and this quarter, it's 100 basis points and yeah. I think what we said last quarter was that we werent totally convinced whether these were kind of here to stay or whether it was a one time thing from in person in coming back and I think what we can say now is we're more confident that these are.
A more permanent pressures as Stephen said I think we have an ability over time to reflect this in pricing to to get the margin back and that's probably the most significant lever we have to pull but that will take time, Stephanie that's not going to return immediately in the fourth quarter.
Great. Thanks, so much I'll pass the line.
Thank you.
Next question is from Graham Ryding from TD Securities. Please go ahead. Your line is open.
Hi, good morning.
Yeah, maybe I'll just follow up on that last comment. So it will take time, you obviously have cost pressures, perhaps are not going away over the near term like.
Over the course of the next year or do you have the ability to reprice contracts you can offset that margin pressure or is this a six months to year dynamic like what what should we be thinking about in terms of margin pressure, maybe I'll start and then I'll pass to Stephen to give further color, but you know the contracts we have are our gen.
And really kind of three to five years and so just based on that you know 20 or 30% will come up every year. There's also a general opportunity I think to have discussions with our clients in terms of how we deliver our service and making sure that they are getting what they need and the reality is that you know to do this effectively.
There's a bit of a sea change in terms of the like.
The cost environment, but so I'd say at a minimum these are going to turn it over at a 20% to 30% rate, but there may be an opportunity to get out a little bit faster with just general discussions with our clients, but maybe to Stephen's got more color there.
The one thing I would say Graham as you know it is a little frustrating on the short term, obviously, because we expect better results, but I think it really as Grier mentioned bodes well for the organization and the business long term when you think about the demand and mental health the demand and the service is how we are positioned to come out those yeah very.
Multimodal way and really get out them and the ability of us to really drive more value to our clients. So some of that will come back and pricing. Some of it will come back into new products that we've already started talking to our clients are bad. So I think long term, there's many ways to get at it and then also on the margin side not only pricing.
But we've done a very nice job as we've been leveraging our resources in India and getting more work done there that'll continue to play out and I think we've got some real estate opportunities over the longer term as well.
Okay.
I appreciate that color.
And you can see.
Follow up on that Stephen just on the on the top line. So obviously it was lower this quarter. It sounds like there was some.
Seasonality and also some.
Some client departures.
So maybe some color on the client departures and then just your visibility going into a into Q4. It because it does sound like that was pretty constructive in terms of new wins in the pipeline.
Yeah, the way I kind of think about the quarter Gram, obviously, we're not happy with it but it is a quarter.
And when we think about the underlying challenges we saw in the quarter. When we look at the numbers when we take a look at the metrics that we track on a regular basis I think many of those point to an exciting future for us so here's how I kind of think about the quarter. Our admin business was relatively good at five 5%.
Instant currency growth.
Our IHS business would've been around 6% if it wasn't for in Australia, Covid shutdown that took place and low margin client loss and that client loss was actually from two years ago and it just took the client while to kind of exit.
Our health and productivity business, you know, we saw excellent growth in ICB T at over 32% and the absence business is just kind of an up and down it's hard to predict cases, but you know.
Around.
Covid and when people come back and go out so that will normalize as we go forward and then obviously we were disappointed that our retirement and financial solutions business, but last summer really wasn't anomaly. So when I normalize all of that I kind of get us to our normal range of mid single digits, and then when I layer on top.
That industry trend demand, what we're seeing in our pipeline. There is no reason that our mid and long term growth would not be mid to high single digits as we've done before organically and we will continue to do acquisitions and in fact, the two tuck in acquisitions that we did earlier this year are performing well.
Okay, Great. My last question, if I could just on the I C Bluetooth side.
You mentioned a few wins are those.
Corporate wins, a government or a combination and maybe just some context on the size as you know in terms of importance.
So your base or how material it easily.
Yeah, we continue to do more on the government side and the pipeline is actually very very strong on that both in Canada and the U S. Obviously governments are a little bit slower.
But we did have some wins in the quarter, which was great. We did also have some corporate wins in the quarter, they're much smaller than the government wins, but yeah. We continue to add to it and we continue to learn more about I see BT in the U S market and deliver it into clients there as well.
Great and when you say government whenever you talk in Canada, and the U S or just government wins in Canada.
Yeah, mostly it was in Canada, but we have our pipeline is very very strong in terms of the public sector within the U S.
That's it for me thank you.
Thanks Scott.
Thank you.
The next question is from James going from National Bank Financial. Please go ahead. Your line is open.
Yeah. Thanks good.
Good morning first a first question on the on the client attrition.
IHS Canadian market.
Down 8% quarter over quarter, which is bit of a surprising number you.
But it all to just that one client from two years ago that just exited today or is there anything else that would explain.
That sequential decline.
Yeah, Jim It's Stephen let me start and then you might want to make a couple of comments I, we always see in the IHS business that the third quarter is slower than the second quarter. So we tend to look at year over year, rather than quarter over quarter and what you see.
Happened in the IHS business in the third quarter is all of the AD hoc stuff, we do so training and trauma cases, and things like that all slow down in the summer.
Which is a very normal thing organizations just have us do obviously less training their staff and theres less robberies and things like that to take place. So it's hard to look quarter over quarter, but Q3 is always slower than that and aside from that one client that we lost a couple of years ago, we see our retention rates kind of.
In our normal range in that normal range is retention around you know depending on the year at 90 490, 596%.
Okay.
I'm not one client can you give us a bit more color as to.
Why.
Why they chose to leave and why did it take two years for them to I guess.
Cute that.
Yeah really good question. So it was a large insurance company. So it was tended to be very low margins and it would have been we would sell to or we would be their provider and then they would sell into their clients and things like that.
So again that business tends to be low margin, it's indirect and as you can imagine for them too.
To make that decision and then go out to all of their very very small clients and then you do all the changes and all that.
Insurance companies tend to move slowly so that just takes some time, but it it really was a case around pricing and as I mentioned it was already low margin and we really didn't want to lower the margin more.
Okay, and just last one.
I get the sense that you are pretty confident that this is.
A one off occurrence with this large insurance company and not something that could.
Karl with other insurance companies or large partners.
Similar nature.
Yeah, the thing that I keep tend to track on a very regular basis game is just our overall retention rate across all of our businesses and you know we continue to be north of 95% and I would expect that to continue.
Okay great.
Shifting to the margin front end and the pressures.
And wage inflation.
I get the sense that there's perhaps a structural shift.
And how the businesses has stopped and how.
EAP services are I guess effectively serviced by a buy stop in house and third party networks.
That.
Is that a fair comment.
Or how would you respond.
Yeah, Let's let me start and then grill jump in I think the easiest way and we've talked about this before as we kind of have three groups that we use to deliver services. So we have stopped counselors and we really like using staff counsel. He is because you have higher quality and you're able to be fairly fishing, and you're able to really train them and deliver pheno.
I'm Gonna services. So that's great. We had preferred providers, which is we go out and we essentially buy time from other folks that are out there and we're able to supplement their private practice and then we have a group of affiliates that we use on occasion on.
The the lower cost ones tend to be both staff and preferred affiliates tend to be a little bit higher and our team has done an amazing job recruiting more staff providers, we added a significant number over the past quarter and we will continue to do that.
The change has really taken place is a lot of the preferred providers that we would usually go to before and we're very efficient has seen that their private practices have just taken off with all the demand for mental health and you think about people coming out of Covid do you think of the government's providing more services you think of that just people needing a lot more.
It'll help the demand so we have been able to leverage that preferred provider market less so than what we have in the past. So we've been ramping up staff to kind of offset that but in the meantime, we've had to use more affiliates and those are at a higher cost and no girl. If you went out anything that completely agree like I think the what we used to talk about the old mix kind of being 50.
With our in House staff, and then 50 outside of course that outside would be a mix of preferred in your affiliate network. Stephen was talking about it and I think as the supply has come out of that preferred part of the market. You know, we'll need to switch our ultimate target and I think the in house will need to be higher than 50% and we've made good progress going from Q2.
Q3, we've done that.
And so yeah, I think it's a really a rebalancing that is probably a a condition for us that's here to stay.
Okay understood and that in terms of the hiring process. It sounds like you are making decent progress.
Like if you could measure that in terms of like how far along I, either as a percentage or earnings basis analogy I like where are you on that process to get to a level where you would.
Maybe be consistent with that with.
Hurry pressure periods and that.
Now with that I guess.
And what kind of challenges are you facing in terms of hiring.
Yeah, you know enough stock to get to that level.
No.
Yeah, So maybe I'll take the second part Jamie then electric grid and can talk to you about the percentage of folks that we had to increase to within stats because I think that'll give you a sense of numbers, but I think like everyone. In the market. These days there is a lot going on out there there is a lot of demand for people.
You know retention is a little bit harder and I think that's frankly, showing up across all industries and as I regularly talking to our clients. There is a lot on the go in terms of talent right now around recruiting talent retaining talent and all of that and I think the mental health industry is not immune to that at all so.
Our teams are working exceedingly hard we made progress week after week, we track it day by day and I think we're bringing in new for new folks on a regular basis. Obviously one of the challenges is anyone that we bring in we spent a lot of time training getting them up and running is kind of a six week training program. So that people answer.
And the phone or at the highest quality possible. So that we deliver that quality to our clients. So it takes a little bit of time to work through we'd love to be doing more but we are making progress kind of week after week and day after day, but I don't agree with you one talk through the numbers a little bit.
Sure. So in in Q2, Jamie maybe you would've been stopped counselors would've been roughly 46% as I said, our old target was kind of 50.
In Q3, we were running 54%. So you can see the improvement there in terms of where we need to get to I'm, just throwing out a ballpark number I don't know we have a magic number, but its probably 60% to 70% assuming that the current conditions stay as they are because there is pressure generally on on wages and it is.
Tough market.
That said, we can do things more efficiently with staff counts was versus the affiliate. So there is you know where are you feeling pressure and it's hard to hire staff counselors, Hey, we've made good progress quarter to quarter.
But there is on a net basis.
It's a more cost efficient and also these they provide better quality of service to our clients. So there is a lot of benefit there.
And then but you know getting back to the kind of the old Martinez.
We said I mean, I think that there is not an out of all this stuff. It is higher cost you saw it in Q2 is 130 basis point.
Impact and then this quarter, we settled 100 basis point I don't think through us managing.
The staff part of this up to 62 or whatever that magical number ends up being it's not going to be able to drive all that out and that's I think where we start to look at the pricing sided us if that makes any sense. There's a lot of stuff in there and hopefully that's been somewhat helpful.
Yeah.
That's very helpful. Stephen and Grier. Thank you, obviously, its a challenging and uncertain backdrop. So really appreciate the color. This morning. Thank you.
No problem.
Thank you.
Please press star one on the devices keypad. If you have a question. The next question.
He is from its energy golf from BMO capital markets. Please go ahead. Your line is open.
Thank you and good morning millennials.
To continue on the.
On the operating expense fronts.
Could you comment on retention rates you've seen.
So your staff Council recently.
How that compares relative to history.
And are you seeing more inflationary pressures on.
Your existing workforce or is it more weighted towards new hires.
I'll start off Stephen here.
Yeah, we are seeing a couple of things so turnover is up a little bit too compared to what it would have been in the past obviously turnover through COVID-19 was close to zero.
So there is some I hate to use this word but pent up demand that between the two years, probably averages out to a little bit over what historical trends would have been I think we've probably got into advantages in the business. We're in and the size, we're in and the amount of training and development. We do for our people. So I think we offer an environment. That's obviously.
Very positive as a result of that but yes, we do we have seen wage inflation as grier mentioned and that would be current workforce as well as new hires coming in.
And again, we will work over the next few quarters to offset that with pricing and we'll also look at other parts of our operation and how can we be more efficient. We've had again good luck with using off shoring in some areas and we've also made a lot of progress around real estate footprint. We think we can do more on that in there.
There's probably some other parts of our business that we'll look at over the next few months is there a way to be more efficient to offset some of that as well.
Okay, and then just to make sure I had the numbers right I think you mentioned before.
In Q3 the mix.
Of cases that were performed by staff count stress was 46% was that was that correct.
Yeah, it's attendants career here. So in Q2 are the that our staff our employees. Our staff counsel has delivered 46% and then in Q3 was 54.
And prior to the pandemic what would have been.
The mix yeah, so as I I, we would've run out a target of 50%.
So in Q2 is a slightly different dynamic where we saw the pressure the market changing and you know we had to.
No go outside to deliver their cases, which drove quite a big cost differential and I was the 130 basis points.
We have made progress hiring stopped counselors, not not and deliver more of the cases in Q3 through our in house staff counts are so that's positive but.
As we said I think that the market has changed a little bit so that's optimal.
50% that we used to drive towards has changed now and so that number is now north of that and so we'll continue to hire staff counselors and really is to replace the preferred side of the outside network.
Okay understood.
Hum.
Mentioned in your comments on you know in California, The award if that Knox Keene license.
How does that impact your competitive positioning in that state and what growth prospects are you seeing and Oh.
On the West Coast.
Yes, it's a really good question is Stephen here at Tia and its fairly significant very very few organizations get granted the Knox Keene license, it's a multiyear.
Process to get awarded it.
And generally speaking if you want to help people with issues and it's more than something very short term less than three sessions kind of thing you have to use the Knox Keene providers. So the fact that we were at Knox Keene provider. When you think about what's happening around mental health in complexity of cases in the world We.
Now can help people with those mid and long term cases, which is amazing rather than having to outsource it to others. In addition, we're now one of those providers that other folks can outsource to we can help that way as well. So we think theres a lot of opportunity around it and again as I mentioned, we had some wins in the quarter over <unk>.
11, I just as a result of that alone. So we're pretty excited with the long term growth prospects as a result of that.
Great. Thank you for your comments thank search yet.
Thank you.
There are no further questions registered at this time I will turn the call back to Mr lip trap.
Thank you Paul in summary, we had a challenging quarter, but the underlying business and the underlying metrics are very positive as we think about what's happening in the world and we think about the implications on the future I'd like to end by expressing my thanks to everyone on the call. We continue to appreciate your interest.
First in our company and we look forward to other opportunities in the future, including these calls to keep you up to date on what we're doing to drive our growth and success as a business. Thank you.
Thank you the conference has now ended.
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And we thank you for your participation.
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