5/3/2022

speaker
Operator
Conference Operator

All participants, please continue to stand by. The conference will begin momentarily. Once again, please continue to... This conference is being recorded. This conference is being recorded.

speaker
Paul
Conference Moderator

All participants, please stand by. Your conference is now ready to begin. Good morning, everyone. Welcome to the first quarter 2022 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 corporations' future growth and results of operations. Actual results can differ materially from these anticipated. I would now like to turn the meeting over to Mr. Stephen Liptrap, President and Chief Executive Officer of LifeWorks, Inc. Please go ahead, Mr. Liptrap.

speaker
Stephen Liptrap
President and Chief Executive Officer

Thank you, Paul. Good morning, and thank you for joining us. On the call with me today is Greer Coulter, our Chief Financial Officer, and I've invited our new Board Chair, Bob Courteau, to sit in with us since he's in the office for AGM later today. Welcome, Bob. And Bob will be available later in the call if anyone has a question for him. Early this morning, we released LifeWorks financial results for the first quarter of 2022. Later this morning, at 10.30, we will be holding our virtual annual general meeting. Today, I'll kick things off by reviewing our results and highlights in the first quarter and talk about those in the context of lockdowns, followed by a few brief comments on our strategic plan. I'll then turn it over to Greer to cover Q1 financials in more detail. As we have seen in earlier quarters of this pandemic, hard lockdowns have an impact on our fee-for-service businesses, as most of these are delivered in person at a client site. Good examples are our training business, where clients want us to talk to their employees on site, or our trauma business, where we help employees who may have been part of a robbery or other significant event. The shutdown of these businesses impacted our growth temporarily in the quarter as they did in Q1 and Q2 of 2020. However, these will come back as we start to open up in Q2 and we see being back to normal for Q3 and Q4. On the other side, our core mental health, well-being, EFAP, and absence management businesses continued to perform well, and we continue to grow our market share. Our mental health and well-being businesses, traditional EFAP plus, grew at over 5% in the quarter, and our absence management business grew over 6%. We also saw some significant wins and win-backs from digital-only providers in the quarter, which I will talk to later. We continue to make progress against our margin target of 19% to 20% by the end of the year. We ended Q1 with 18.7% EBITDA margins, up from 18.5% in Q4 and 18.2% in Q3. Our two key drivers of counselor mix and pricing are making a difference. We increased our staff counselors to 59% from 56% compared to the previous quarter, and up from 43% a year ago, a very strong result. And we wrapped up our pricing pilot with excellent results and moved well into full implementation. Gur will talk more about the expectations of pricing, but we see a clear path to significant margin impact as we move into Q3 and Q4. We also saw progress in our retirement and financial solutions business, or RFS, where the lockdown has resulted in revenues showing actual declines in prior quarters. In Q1, we returned to growth and we expect this trend to ramp up as we move through the year. At this point in the year, our key metrics show us winning market share, getting back to mid to high single digit growth in revenues for the full year. The biggest drivers are all positive and include a strong pipeline and sales wins, a higher than historical win rate, as well as win backs and strong retention rates, which are all tracking well. Regarding the LifeWorks platform, we are pleased with our continuing growth that strengthens our position as a technology leader in our markets. At quarter end, there were 7.1 million lives on the LifeWorks platform, up 32.7% from 5.4 million lives a year ago. Organizations paying for extra LifeWorks modules is up 56% year over year. Microsoft team users accessing the LifeWorks platform grew to 140,000, a 40% increase over just last quarter. Keep in mind there are over 270 million people using Microsoft Teams every month, and we offer a fully integrated wellness experience to those users or clients who integrate LifeWorks into Teams. And this is resonating with current clients and in sales presentations. These metrics are critical, as they are the leading indicators of our overall future growth, our platform growth, our ability to add services to our clients' 36 million employees, increased retention, and owning the well-being and mental health spaces globally. And finally, since acquiring the breaking free substance use management platform in January, we've won nine very good contracts right out of the gate and have seen tremendous interest from clients about adding a SaaS substance use module to their platform. Let me offer a few comments on client highlights in the quarter and their significance. In our IHF business, we won back six accounts from clients and digital-only competitors who were clearly looking for a richer model for mental health support, one that offered in-person services in real time, not just digital-only interaction. The biggest of these contracts was with the Quebec Crown Corporation Society to Alcoholic Quebec, or SAQ, which is the main distributor of liquor products in the province. SAQ left us a year ago and tried a digital competitor. And seven months later, they let us know they'd be going to tender again, which they did in February. SAQ chose to return to us in order to provide a full offering of support for their employees, including in-person among other client service attributes that they were missing from what they had in their previous experience with us. In fact, we are seeing a trend for those clients coming back to us. Overwhelmingly, the two main reasons are because their employees demanded face-to-face for their serious mental health issues. And because of our being the largest employer of counselors and having the largest network, we can get people the help they need much faster than any competitor. We're having these conversations with other clients as employees come out of lockdowns and want a broad range of support for their employers, not to be forced to a single solution that might not work. In administrative solutions, we also had a major win back with the state of Nevada's public employees benefit program. We won back a major health and benefits admin contract involving 45,000 members given their poor experience with a competitor that, as we understand it from their public meetings, wasn't up to the task. These are win-backs that support our view that in the markets which have increasingly complex requirements in bringing together human talent and digital support, we are well-positioned to lead the pack against competitors that don't have the depth of our capabilities and are decades of experience in meeting complex client needs. In addition to the win-backs, Q1 saw a number of sizable wins or upsells in each line of business. In IHS, we won a significant EFAP RFP upsell for CAG, Centered Acquisition Government, a non-profit government acquisition center for the province of Quebec. We also won an ICBT contract for Canadian employees of a leading global shipping company. Signet Jewelers, the world's largest retailer of diamond jewelry, selected us for a telemedicine and telephone health coaching solution in the U.S. and Canada. An existing client, a large home improvement retailer in North America, selected us for a telemedicine solution. And in our retirement and financial solutions business, a long-standing client, a large multinational food manufacturer, selected us for their defined contribution and capped plan design and implementation. In our admin business, we won a multimillion-dollar contract with the state of Oregon Health Authority for benefits management, aerial, and health and welfare. We also won a multi-million dollar benefits admin SAS contract with a national faith-based benefits provider in the US. Overall, we are pleased with the market reaction to our platform and the fact that we offer the full continuum of care and support. Whether someone needs to get support in person or digitally, we take care of them. We believe in that model and it is reinforced by our clients and prospects every day. However, that does not stop us from continuing to invest in and build our digital capabilities. We've been investing in digital capabilities for more than 15 years, where we launched the first app in this space, to today, where we have the first substance use SaaS solution on a well-being platform. We see an amazing opportunity in the mental health space where one in three are at high risk in their mental health. And high-risk drinking in the workforce has increased fourfold. Beyond that, more people are aware of the need to actively invest in their mental health and appreciate employers who also invest in their mental health. We have a product roadmap that is being tested with clients every day with features that help clients build stronger relationships with their employees, improve retention, and productivity. We're the only organization that can combine EFAP, mental health, depression care, psychological services, and well-being all in an integrated way. We will continue to evolve our roadmap with our clients' input to create what we call continuous coordinated care or LifeWorks Total Mental Health, which leverages machine learning and artificial intelligence combined with our unmatched capacity to provide in-person support through our global counselor network. all toward delivering the right service to the right person at the right time in any way, in person, digital, chat, video, on any device at any time. As we pulled together IHS and HPS last quarter, we are now building the elements of continuous coordinated care, which will be an integrated solution that provides access to personalized therapy Helping people with self-guided exercises, check-ins, and feedback loops, and having a dedicated therapist to call on will be an important part of our differentiation that makes our LifeWorks Total Mental Health an exciting evolution of our solution. In closing, we continue to execute against our strategic plan and are excited by the future. Total wellbeing will remain the core of our strategic plan. The ability to differentiate by providing and integrating services across four pillars of wellbeing, mental, physical, financial, and social. To continue doing that at a market leadership level, we have a strong portfolio of businesses, each with a solid core of recurring revenues, each primed for growth, and each playing a vital role in taking us forward for the next five years. Our growth strategy to win continues to have three pillars. One, consolidate and rapidly expand our leadership in mental health and well-being markets, but emphasizing mental health even more so. Accelerating growth through U.S. and global expansion and driving world-class delivery through people and technology. Going forward, we have some amazing strengths to build on. We're the world's leading mental health and well-being provider, trusted by some 25,000 organizations and their 36 million people. We offer the most comprehensive 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 their people every day. In previous quarters, I've talked about the four 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 our accelerating global expansion from a strong North American base. Third is our proven ability to grow by innovating with new digital technologies to create market-leading solutions. And fourth is much stronger growth opportunities we expect in the global mental health market. LifeWorks Total Mental Health, the evolution of our offering, fits into this perfectly. On that note, Greer will review the financials.

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Q1T 2022

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