LifeSpeak Inc. (LSPK) Earnings Call Transcript & Summary

Thank you, operator, and good morning, everyone. Welcome to the LifeSpeak third quarter results conference call, our second quarterly results call as a public company and our first discussion, including the accounting for our IPO. Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding LifeSpeak and its business, and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance, business prospects and opportunities. Such statements are made as the date hereof, and LifeSpeak assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings, without limitation, our MD&A and our earnings press release issued today for additional information. With that, I'd now turn the call over to Nolan Bederman, LifeSpeak's Executive Chairman for opening remarks. Over to you, Nolan.

Thanks, Mike, and welcome, everyone. This truly is an exciting time for us here at LifeSpeak. As Michael Held and Mike McKenna will share with you shortly, Q3 was a pivotal quarter for LifeSpeak in many respects, not to mention taking the company public. We continue to experience an explosive period of expansion driven by both strong organic growth and targeted disciplined M&A. Our customer base is expanding. New clients are being added in diverse industries around the globe. We're augmenting and enhancing our product offering. We completed 2 opportunistic strategic acquisitions, which have allowed us to begin to extend our front door positioning, expand our client base and ultimately cross-sell our suite of products. And we're adding incredible talent to our already world-class team of employees. We continue to experience extremely low attrition and are adding highly accomplished and talented people around the world on what seems like a daily basis. Each day, we only grow more excited about what the future holds for our business. The foundation of our growth, of course, is our world-class SaaS mental health and total well-being B2B platform. We continue to provide industry-leading digital education, expert advice and support to individuals and we're generating real tangible value for our clients, their employees and their customers. We believe that our highly differentiated core product anchors us and uniquely positions us to continue our strong growth both in the immediate term and well into the future. On behalf of the company and our management team, I'd like to thank you all for joining today, and we welcome the opportunity to share more about our business. Now I'd like to turn the call over to our Founder and CEO, Michael Held. Mike?

Thanks so much, Nolan, and good morning, everyone. We are very pleased to be with you today to review our 3 and 9 month financial and operational results as well as recent developments at LifeSpeak. At our core, LifeSpeak is a SaaS-based mental health and total well-being education and engagement platform, experiencing significant growth, supported by durable long-term market trends, including increasing corporate spending on mental health, digitalization of health solutions, a growth in micro learning and increasing corporate spend on remote access tools. We continue to add world-class clients to our platform, who are very pleased with our overall business development efforts through Q3 of 2021. Examples of client wins in the third quarter include, within our enterprise customer segment, R.R. Donnelley in the U.S., McKesson Corporation in Canada, and Canaccord Genuity with an international employee base. These wins built upon the previously announced Cornerstone clients, LEGO in the U.S., Majorel in Europe, and Celestica International. Within our embedded customer segment, we had a very successful Q3 ending the quarter with 12 signed embedded deals. Our most recent signed deals include Humana in the U.S. and ICAS Digital Health in the U.K., both of which serve as a global footprint and open significant future global opportunities for LifeSpeak. During the quarter, we completed one of the most exciting developments in our company's history, the close of our $125 million IPO on the Toronto Stock Exchange. This took place very early in the quarter, closing on July 6. And Mike will take you through some of the important financial considerations that impacted our Q3 results shortly. We have not slowed down. And subsequent to quarter end, we further bolstered our industry-leading platform by completing our first and second acquisition, in line with our strategy of executing on disciplined acquisition growth. Specifically, on October 12, we announced the acquisition of LIFT Digital, a B2B SaaS physical wellbeing tool; and on October 14, acquired ALAViDA Health, a B2B substance use disorder education and support platform with a focus on effectively addressing alcohol and drug use. Both LIFT and ALAViDA are excellent examples of the business we sought to acquire using the proceeds of our IPO and both complement our existing business well, while being additive to the underlying LifeSpeak offering. The key element of these acquisitions is the cross-sell opportunities enabled by the differentiated service offering they provided, and these cross-sell efforts are already well underway. We are pleased that Raffi, the CEO of LIFT, will be taking on the newly created Growth Officer role at LifeSpeak. In addition to the LIFT and ALAViDA teams, the LifeSpeak employee base grew during the quarter with the addition of individuals throughout the sales, marketing, customer support, and technology divisions. Most notably, we added Mark Chodash as VP Sales to lead our U.S. enterprise growth. Mark is a senior sales leader in the online learning in SaaS arena, most recently with Wolters Kluwer; and Nancy Mourad in the UAE as Managing Director of the Gulf Region; U.A.E., Oman, Kuwait, Bahrain, Qatar. Nancy comes to us following 6 years at MetLife for her most recent role as Head of Disease Prevention and Wellbeing. Our ability to attract such high-quality talent enforces how well we are positioned for global growth. Overall, our effective SaaS-based platform is becoming increasingly well-known and accepted as a means to help individuals cope with the longer-term pressures that we all faced coming out of the pandemic, and our quarterly results continue to demonstrate that. I'll now pass the call back to Mike McKenna, who will walk us through our detailed financial results, following which I will provide some closing remarks before we turn it over for questions. Mike McKenna, over to you.

Thank you, Michael. We truly believe our third quarter financial results continue to demonstrate the strength of our business. And we are excited to share more insight into these results with you today, including further detail on the contribution of our 2 recent acquisitions. On a stand-alone basis, our core fundamentals remain strong. Annual recurring revenue, or ARR, has grown by 128% on an LTM basis to over $24 million. Revenue exceeded $5.9 million for the quarter, an increase of 135% over Q3 2020. Adjusted EBITDA grew to $1.6 million for the quarter, an increase of 76% when compared to Q3 2020. The net loss for Q3 did amount to $20.1 million, but this was largely due to costs incurred in relation to our IPO completed on July 6, 2021. However, to help provide a normalized picture of our financial results, we prepared -- adjusted net income for the quarter, which was $1.3 million, an increase of $454,000 over the same period in 2020. Adjusted net income accounts for the nonrecurring transaction-related costs that were incurred in the period and we believe provides a clearer picture of LifeSpeak's financial performance. Lastly, in the quarter, our total client base grew to 270 clients. This was an increase of 42% over the same period in 2020. To provide some further clarity on the contributions of our recent acquisitions and the strength of our growth profile, on a pro forma basis, including LIFT and ALAViDA in the quarterly results, the quarterly revenue equated to $6.8 million. ARR increased to $27.3 million and our unique overall client count rose to 295. As you remember from our first quarterly call, we also closely track other key performance indicators to help us evaluate the health of our business and to better understand our corporate development and progress. These include gross margin. Our gross margin for the third quarter of 2021 was 90% on an adjusted basis compared to 94% in the third quarter of 2020. The slight decrease in gross profit was primarily due to increases in costs associated with production and content development in the period, including our first content shoot in the U.K., as well as some additional employee compensated related costs. Adjusted EBITDA margin. The adjusted margin for the third quarter was 26% compared to 35% in the third quarter of 2020. The decrease in adjusted EBITDA margin was primarily related to the timing of recognized revenues related to certain of our embedded contract wins and some additional costs associated with being a public company, such as D&O insurance. The adjusted EBITDA margin for the full LTM period remained strong at 35%. Net dollar retention rate. Net dollar retention rate, or NDR, provides a consolidated measure by which we can monitor the percentage of ARR retained from existing clients. The NDR for the 12-month period ending September 30, 2021, was 102%. This is up from 99% for the comparative period in 2020. We expect NDR to increase in the coming quarters as we further integrate the LIFT and ALAViDA products and provide further value-added services to our current enterprise base. Logo retention rate. Our logo retention for the 12 months ended September 30, 2021, was again above 95% and continues to demonstrate the importance of our platform to our customers and their employees. Pipeline. Moving on to an update of the pipeline versus what we have previously disclosed in our IPO process, I'll start with an update on the Embedded Solutions segment, where we have identified 40 potential client opportunities representing up to $260 million of ARR. As Michael mentioned, we are pleased with our ability to continue to convert embedded deals, including well-established global platforms such as Humana and ICAS. In the third quarter of 2021, our embedded deal count totaled 12 and subsequent to the quarter, we have signed additional partnerships including one with Safe Harbor Health in the U.S., which again highlights the momentum and opportunity within this segment. We are very pleased with the number of embedded deals we are signing. I would like to reiterate that the financial impact of embedded deals is subject to factors such as partner, time to market and a ramp in partner production implementation. While we are identifying new and exciting opportunities consistently, our core focus remains on the scale and impact of the opportunities we identified in the pipeline at the time of the IPO. Moving on to Enterprise. On the Enterprise side, the pipeline identified consisted of more than 250 potential client opportunities representing an aggregate of up to $20 million in ARR. Due to our global reach and TAM, the size of the pipeline will grow into 2022 as we continue to build our global sales footprint as evidenced by the key hires Michael referenced. During the 12-month period, we have signed the highest number of clients in an annual period through our company's history. We continue to convert high-quality logos from our pipeline and develop the business outside of Canada. With that, I'll now turn it back to Michael Held to provide some closing remarks. Michael?

Thanks so much, Mike. We are very excited about our progress to date and the opportunities that lie ahead. We continue to focus on initiatives that we believe will build value for shareholders including driving growth in our Embedded Solutions segment, acquiring new enterprise clients, expanding geographically, as well as continuing our proven ability to grow in our native Canadian market, adding adjacent services and expanding our offerings through additional M&A. None of this is possible without the hard work and dedication of our employees, a team that has grown significantly since our IPO, and are aligned and ready to facilitate our global growth plan. We are looking forward to updating you on our progress in the coming weeks and months, and we'll now open up the call to questions. Operator?

[Operator Instructions] And the first question comes from Paul Treiber from RBC Capital Markets.

I was just hoping, can you bridge between the growth in ARR this quarter and then also new client wins in the quarter? It seems like some of the customer wins are quite large and the embedded momentum is strong. So if you could bridge it back to the growth in ARR on a sequential basis just being up 5% quarter-over-quarter.

It's Nolan. Thanks, Paul. Mike McKenna, do you want to explain?

Yes. Paul, it's really just largely due to the ramp, right? So certainly, the deals we're signing on the embedded side are going to start to have far more impact for us in 2022. Some of them do start out small and we only are able to include the initial sort of uptake announced in the ARR. So I think as we look out to 2022, in fact, we already know that we've got additional contracted revenue, just as it relates to the exact ARR calculation, right? We only calculate what we've actually invoiced for at the end of the quarter. So there's a bit of a lag on some of them in terms of the ramp. That timing is impacting the overall numbers. But as you can see from the numbers and the quality of the companies that we're signing, right, that is pointing very much towards a very strong 2022.

And in regards to the ramp and the timing, is there anything systemic that you're seeing across customers that is common. So like whatever factors? Or is it just how the timing may occur on a company-by-company basis?

I think the answer is it's really idiosyncratic to the companies. From our standpoint, we deploy and integrate efficiently and quickly. So we are never in the bottleneck. Typically, it's a company's marketing launch of whatever product they're doing. Held, is there anything you want to add to Paul's question there in terms of, have you seen anything that's systematic in delays? Or is it really just idiosyncratic as these companies launch the programs in which we're embedded?

No. I would agree with that, Nolan, and we're seeing, as some of them might take a little bit longer, they're all happening. There's a lot of momentum and all of the ones that are significant to us are backed by very senior management and C-suite within those organizations. So I do think at this stage, as we add more and more, we'll get a bit more of a blend. But at this point, it's just a bit idiosyncratic.

And in terms of -- I mean, I've focused on the new wins. When you look at the embedded wins or even existing clients, but more focused on Embedded. Has the ramp of those contracts gone as you've expected or ultimately got to where you originally projected the AR would be over, say, a year or 2 after launch.

I think, Paul, you have to look at it really on a case-by-case basis, and that's sort of why we've suggested this to be very much a portfolio approach. There are certain deals within that portfolio that are ahead on both ramp-up and timing, and there are certain deals that are behind. And so again, as this portfolio grows, the impact of individual deals will be less and less, right, because it would just be a longer list and it will even itself out, so to speak. So we're not too concerned because I think we see a pretty good horizon for 2022, as we look at the deals that we already have signed and we know what they're going to impact 2022 like. And then the other activity is very strong, right? So I think the key thing is just getting the portfolio a little bit bigger and then the impact of the individual deals on a one-off basis will be smaller. But again, if you went through the whole list, you could pick some that are ahead and some that are slightly behind. And again, that's just kind of how we have to manage this going forward.

Okay. And then lastly for me. How do we think about Q4 seasonality in terms of new customer wins and ARR related to that? I mean do you typically see a flurry of new customer wins in Q4? Or there's no real seasonality?

Yes, I'll speak generally to that. Typically, Q3 is our seasonally slowest quarter to add new logo, which is typically the way it's gone. What we've seen with Embedded is it has its own set of seasonality. So I'm really speaking about the enterprise direct business from a historical standpoint. Q4 is definitely where the most activity is. The technical answer to your question will be so many of the Q4 wins will launch in January of Q1, but that's really the Q4 activity. So when we think of how our business goes to market, Q4 is a pretty big period from a seasonally adjusted basis. And it's not super skewed like a retail business with Christmas, but definitely of the quarters, Q3 ends up being least and Q4 would be the most. Held, anything you want to add to that, just given the long term.

Yes, I would say it's the largest -- Q4 is the best quarter for getting approval. When they launch -- I know we've just had a few sign on that will launch before year-end. And one of the best contracts we've ever had has been approved. I know it's launching in January. So to your point, Nolan, when they launch and when we get to start recording from a financial perspective is literally at a whim or it's let's get this done -- launch before Christmas, before people go away or when they come back, but it's definitely the most activity for certain. Because we're not like the largest ticket item out there, we are very well spread across the year, but there's still a lot of budgeting towards year-end, open enrollment and things that spark a decision for companies to get more approvals, and we are seeing that.

Just one follow-up one for me. Since you mentioned it. Can you elaborate on the contract that you mentioned, the best contract that you've ever had.

Again, I don't want to get in trouble. If you want to answer that. Also, I don't think there's anything I'm not allowed to say.

I think, we have good 3 weeks. I think, Paul, the way [indiscernible]. That was very fair call by the way. Mike do you want to answer that one?

We've got pretty good visibility on some good opportunities on the Enterprise side for 2022. And I don't think it's just sort of one contract, frankly. I think if you look at where we're going with Enterprise and especially with some of the unique opportunities that present themselves with the new acquisitions that we've made, the enterprise segment is going to be very strong in 2022. And I think it's -- yes, there's a nice contract out there, but there's a lot of opportunity across the board. I think that's the best way to think about it.

Our next question comes from Doug Taylor from Canaccord Genuity.

Good morning, everyone. You mentioned you've got some revenue contracted with some of these embedded contracts. It's not yet reflected in your ARR. I wonder if maybe generally you could help us by quantifying some of that contracted growth in the coming years that isn't in the ARR base yet. And just more generally, what we're trying to do is get a little comfort on the expectations for next year, which right now for about 100% revenue growth. I know there's a lot of contributing factors. But I guess I just want to remain on a more broad level set here and determine whether that's achievable.

McKenna, you want to speak? I mean, I think...

Yes, Doug, one of the things we've thought about is, again, this goes to the backlog concept. But Mike, why don't you address that specifically, and we can always follow up.

Yes. Look, I think, Doug, our view for 2022 is that those assessments are in line and remain in line. I think sort of giving specific numbers as to the contracted revenue, I'd say it's a very good base, right? And we see really good contribution. In terms of giving you the actual numbers, I'm not certain I'm sort of able to start throwing that out there. But I think our view is that for 2022, our estimates remain in line and we're tracking well towards a good 2022. Now we've got some increased steam with us now behind a couple of these acquisitions that we've made, created some additional opportunity. But I think overall, we're on track.

Okay. I want to speak about those acquisitions in a minute. But just to put a finer point on this. There is revenue that's contractual part of these embedded agreements that is not in your ARR, but you know you will be receiving next year. And so you got a pretty conservative view of what your current ARR run rate is. Is my understanding of that is correct, just to be clear?

Yes, that is correct. That is correct. So for example, if we know what program is launching on January 1, right, the program itself hasn't started, right? But we have visibility to know that it is going to start. And then at the end of the next quarter, that can be part of our ARR calculation.

Well, I mean I do appreciate the conservatism in your interpretation of ARR, which is good. Humana sticks out as a particularly notable name. I wonder if I could get you to just talk a little bit about that agreement and how that works and the rollout there and any more detail qualitatively or quantitatively.

McKenna, do you want to explain what we're allowed to disclose on that one?

I mean from a from a financial perspective, we've got good visibility to it having sort of about a 4x impact as to what it will have this year into next year. And the quantum of that overall will still be below $1 million, but sort of gather where we're going with it from what we've done this year and to where it can go. But I think overall, the program itself is one that has started and is now nicely expanding in different parts of the organization. And I think Mike would probably give a bit of a view on that.

Yes. And make Mike just flatten it, sorry. Whatever I'm not allowed to say. No, it's very exciting. I mean Humana is obviously one of the biggest insurers in the U.S. and the part that I'm most excited about is we were running a 6-month program and they had such incredible usage within 2 months that they actually came in and said -- and this is in one division called the Neighborhood that's helping more elderly folks. It's one part of their business, but still a fairly significant contract. And after 2 months, they had such high utilization that they immediately put us into procurement. They said we want an MSA and we want to bring you across the other divisions. So where this one division might be under $1 million, they have lots of divisions and the take-up is great, and they are pushing the expansion within their customer base. And what I love about it is, it's such a blue chip name that once you start having that success, high utilization, showing the growth, it's just a hop, skip, and a jump to many of the other payers. Humana has often looked at us and others look too to see what we're doing. So the program is working great, but I'm more excited about their approach to expansion and what it means for us in the market.

Yes, great reference customer, no doubt. Let's talk a little bit more about these 2 tuck-in acquisitions. You were good enough to give us the pro forma contributions inclusive of the two. I wonder if you could go a step further and perhaps talk about the growth rates that came with those operations we're operating on and whether these are going to be contributing positively to the profitability kind of run rate of the organization as well?

So why don't we, Doug, just again recap that what we bought were, directional information, small companies that have been through the first phase of growth, have reached a point where -- again, McKenna will speak more specifically -- actually, on their own power are past or very, very, very close to, in one case, breakeven, and that's on a stand-alone basis. I think we've articulated a little bit about how we plan to very carefully integrate these, which is in a very moderate way, the businesses will continue to sell on a stand-alone basis. But what we are going to do is obviously consolidate the back office, which will provide some cost savings, but these are not big companies. So those dollars are not huge. What we are also doing, and which is already underway, and we can talk a little bit about it is, we have already, it is a very organized, formalized cross-selling approach that we're leading with those companies. So that will add a revenue dimension that they couldn't have on their own. And in certain areas, both of these companies have, as part of what they build, a technology piece and a content piece. We're able to add some pretty significant, let's call it, leverage to the content side, probably on the technology side as well, but generally, we're going to leave the crushing alone. So we think they both came into the system with growth rates that looked, certainly on their projection, similar to ours on a go-forward basis. We sort of see no reason that these 2 premises under our auspices wouldn't continue to provide growth rates, certainly at this stage of their size, similar to the business we have, cross-selling for next year. We'll share more forecasting as part of our bigger plan in the future. I think with respect to the contribution of those businesses, that will be accretive over time. It should be accretive from a bottom line perspective in the near term. I mean, McKenna, do you want to put any more color around sort of how we see the growth pace and then how we see the contribution?

Yes. I think you hit the growth pace very well. I think from a margin perspective, at the gross margin side, the LIFT business is a little bit of a lower gross margin business than LifeSpeak because there is some additional cost of sales there. I think on the ALAViDA side, the gross margin is very much in line with what LifeSpeak would have historically put on the board. LIFT already contributes at the EBITDA line and we would expect ALAViDA to do the same as we get into 2022.

Our next question comes from David Newman from Desjardins.

Just looking at the Embedded ARR, again, not to beat a dead horse here, but obviously not straight line realization of full value. But now you've kind of got a few -- 12 of these in the mix and more to go, you must be getting a greater sense on what that curve looks like for years 1, 2 and 3. Just trying to get the quantum. I mean, you're baking in a forward number that is maybe only 10%, 15%, 20%, I'm not sure of the realization of that full value of the contract. So what are you thinking there on what we should be sort of building into the model on that front?

McKenna, I'll let you take that one without trying to modify.

Yes. I mean, I think a couple of things. Like so right now, today, David, when you think about our Enterprise and our Embedded business, on an ARR basis, about 60% of our ARR comes from Enterprise, right, and 40% from Embedded.

And that how you think has as well helped this quarter as well, Mike?

Yes. Yes, the Embedded side is starting to become a little bit more. Why I say that because what we talked about at the time of the IPO is that by the time we get to the end of 2022. That mix probably flips, right? And that doesn't mean that Enterprise isn't going to grow. Enterprise, in fact, will do 2x in that time. But what we will see is a flip. And so that will give you some indication of where the contribution is going to come from, right, through next year, right? So is it going to be exactly 60-40 by the end of 2022? I'm not going to say exactly, but it's going to go in that direction, right?

Got it. Okay. And then just switching gears over to the 2 deals. It seems really interesting to me because we're seeing some other players in the space starting to talk about building their own libraries and things like that. And I'm not sure if there's going to be convergence in this space at all, but I'm looking at this and your moves into virtual rehab and fitness. And I'm thinking you're moving kind of into the care spectrum. Where do you want to take this? Like do you want to sort of backward integrate into care or I guess maybe forward integrate into care at some point with actual physicians and the health care practitioners? Like what are you thinking strategically.

So Dave, great question. So let me try to articulate for you where we started and where we think we see this. So our view is, and again, for those of you who've sort of listened to this many times, I'll try to do it a bit differently. So we sort of view ourselves, because of our usage and how we get positioned at the front door, we've kind of made that point, probably not to everybody. What we don't really have, or did not have on a native basis, is things one can do post learning about whatever happens to elderly, whether you're talking about elder care, whether you're talking about diabetes or obviously, metal health, which is our biggest focus. What we want to add is digital tools that can allow companies to offer further extensions of help. And so I think, to your point, are we moving into care. I think what we're moving into is self-care. And then ultimately, where we see the line stopping is, we think the telemedicine companies out there do a great job doing telemedicine and there are literally hundreds of them around the world, even EAP does EAP. And what we want to do is continue to make all of those things more utilized, but provide a SaaS-based alternative that gets you the bridge between -- or the blend, frankly, between the medical professional, who we don't see ourselves as actually ever employing or housing inside our platform, but everything else that goes with that as a complement. I mean one of the things that you see in mental health, in particular, is if all of the folks, even a very small portion of people with statistical mental disorders actually go seek help, we're going to run out of professional medical help in a nanosecond. We don't really have enough of it in the world. So what we want to do is try to provide tools that give leverage to that as opposed to try to compete in that sphere. And I think that's how we see keeping ourselves differentiated into what we thought about both LIFT and ALAViDA, different sides of the spectrum. What LIFT offers is an ability to extend into the physical realm. It's not just an exercise app at all, it is very much a physical well-being mindfulness app that is built on a B2B basis. So companies can use it to help their employees. Sometimes it's on a group basis, sometimes it's individual. What ALAViDA gives us is ultimately the ability to have some very specialized, let's call it loosely, ICBT tools, those being very digital. There's going to be a small, small, small portion of human engagement in those, just by definition, there's always going to be something. We plan on keeping that incredibly low to the point where if anybody needs a professional, that's where we partner out with the other folks who do that. And we think that market is still so massive that there's a million ways to play it. But I think for us, the core was SaaS-based tools that allow a user to make improvements in a certain area or get some help short of the actual expert. And we think that can be expanded, a, globally; and then b, we also wanted to start, as we've sort of said to you, we're sticking to our game plan. The first acquisitions were small, close to profitable, as profitable as really you can be at the size of revenue those things are, with great growth in SaaS models. And now we feel pretty confident in how we've done that. We have a pretty good road map and a very good team in terms of the right types of integration, and we'll hopefully extend that positioning as we go forward. Hopefully, that helps.

Great start. And what about the -- not that you don't have enough on to go already, but you talked about this growth market theme in sort of nontraditional channels like universities, et cetera. Any movement on that front or any KPIs that you can point to?

Well, what we can point to is we actually did sign our first two small education clients. And that is sort of a testament to that side of the business. We think there's -- and we've talked about this a little before. We do think there's an opportunity in schools and really, that's a colleges and universities application, but it could go in a broader array, just that big enough. We have some tangible evidence that those are working, so we're going to try to figure out the right expansion path there. And then we have a whole host of discussions around other types of programs, and generically just to sort of describe it, because we're not, we can explore with that group things that otherwise historically might not be payers themselves, there are opportunities, and this exists in the world, and we're in discussions with it. We do not have any of these formally signed yet, so I'll be very careful. But sponsorship-type opportunities where an entity that provides certain services, financial or otherwise, want to sponsor our program within a community that doesn't have the wherewithal to actually pay for all of it at the beginning. And that becomes a really interesting model for us, too, and backed with what that group has expertise in building.

Excellent. And last one for me is just on more of a housekeeping, probably for Mike. Just as you look at your G&A and you had some production development and content costs there. It looks like there's a bonus. I'm not sure if that was onetime. It looks like it's onetime. And just G&A was at $2.2 million. So I'm just kind of looking at sort of fixed cost absorption here and leveraging your fixed cost. What do you think steady state might be on the G&A side on an annualized basis? And maybe just, if that bonus was just one time and we should not keep that in the mix.

Yes. It was quite a quarter, as you could tell, from the release and the numbers, obviously, with all the stuff that was related to the IPO. And so there is so much in there. I hope we've done a good job of the pro formas for everyone. We tried to spend a lot of time to make sure it was clear. No, first of all, I think, David, you're thinking about it correctly, right. Like I think that $2.2 million number is a good number. It's an important sort of for the run rate number as well, right? We've made some more hires, as you can tell, right? The cost base is increasing a little bit from a people perspective. right? But the reality is, we've got pretty good margin profile and margin protection based on where the revenue growth is going to be, right? The revenue growth is going to far outpace any of the costs. So I think the number is good. I think maybe it will be a little bit higher next quarter just again, as we're adding some more people, right? But margins themselves will continue to roll forward well. I think, if you're thinking about gross margin, right, the 90% adjusted for the quarter, I think, is a good number to be at. We're absorbing some costs from some of these acquisitions. Again, I noted that the LIFT overall gross margin is a little bit lower. If that may take a quarter or 2 to work itself out into our numbers again with our own revenue growth, right? The ALAViDA gross margin is right where LifeSpeak has traditionally been. And then we've got some more people because of the acquisitions as well, right? And so I think probably a good number, maybe just to come back to you, it would just be just a G&A number on the acquisitions. But I think overall, from an EBITDA margin perspective, that 35% LTM EBITDA margin is a pretty good sort of target for next quarter and where we're going to try to be going forward with growth obviously into 2022 as the top line ramps, right, which will, again, far outpace any of our expenses.

Excellent. That's very helpful. So keep up the great work, guys. I know it's certainly drawing a lot of interest from other players in the industry from your margin perspective. So great job.

And our next question comes from Adam Buckham from Scotiabank.

I'll try and keep it brief because it's been a long call for you guys answering stuff here. I guess, to start maybe more broadly on M&A, pretty busy October for you guys with two acquisitions. Are you able to give some high-level commentary around what the pipeline on the M&A front looks like right now and what maybe the cadence could look like on a forward basis for what's in there.

Yes, we definitely can.

Yes, it's Nolan, Adam, and... Please go ahead.

Yes, okay. We definitely can. I think Nolan is having technical difficulty, so I'll jump in here. And if Nolan gets back on, he could be supportive because he and I sort of take the lead on the efforts here in this stuff. I think, Adam, we've been pleasantly surprised in a couple of things. The overall activity in the market is very interesting. There's quite a lot of stuff happening. That said, right, we have to be very selective in terms of what we're looking at and what we're thinking about. And we've been very impressed with some of the quality that we're seeing in terms of the opportunities. So we do certainly still want to remain active as we signaled at the time of the IPO. That hasn't changed. Look, two acquisitions coming as quickly they did. While that's not necessarily going to be always the case, but again, testament to the quality, right? So when we see the quality that we saw and the opportunity there, we had to try to move to make those work. And so I think importantly, right, we're going to make sure that we're continuing to monitor opportunities for quality, for fit, for cross-sell opportunities, for platform enhancements. Will there be opportunities for deals to be even somewhat larger than the deals that we saw the first two be. Yes. We think about that too. Again, back to the IPO timing and the discussions that we had there, we talked about sort of step function and making sure that the first couple of deals were on the smaller side, they fit well, show that we can actually execute well and prove the thesis. And then we'll start to look at larger opportunities. And so that plan hasn't changed and we're continuing to execute on it. And we're very pleased with the quality, again, of some of the assets that we're seeing.

It's Nolan. And I somehow got dumped off the call, but I'm back now. One other thing to say in case Mike didn't say it is one of the things that's unique about our positioning is we're substantial enough in this space to be credible, but we're also not so big as to be perceived as being a giant corporate to EMS. And so what we're finding in a lot of conversations that we're seeing is we're a really attractive home for businesses that have reached a certain scale because we can actually -- they can see how the cross-selling works and they can see that we've got some pretty serious steps on the content and to a lesser degree, obviously, on the technology side, but as we've said, each company will have a bit more uniqueness inside their technology, but the content knowledge that we have really exacerbates or can increase the quality of anything in the acquisitions we're looking at. And so what's been really interesting is -- I don't know, again, how much we can say, -- we don't believe we are the highest payer for either of the things we've acquired so far. Not that you don't have to be competitive in this world, but I think our future growth potential as a combined entity seems to be a real attraction and it's helping us find really high-quality deals around the world. I think the other thing we've sort of said we'd stick to, and we are, which is very limiting in digital health, as you guys know, is we like profitable businesses, because we like recurring revenue SaaS businesses. And we think that, when we look at our pipeline, the vast majority, it's not 100%, but the vast majority of things we're seeing, we know we can make -- if they aren't profitable, we know we can actually make them profitable, and that gives us a really interesting leg up, too. I mean we are a high-growth company, but we like actually making money and we don't want to give that up in any way. So we feel that everything we're seeing fits nicely in that. And the global depth of our pipeline is, I think, I'd say, way better than we had anticipated it would be, not that we thought it would be bad, but it's really coming together. So again, there's a far cry from saying that we see that in the pipeline and turning it into action, but we're finding some really unique talent in some really interesting real cross-sell opportunity components that sort of help bolster the mental health side.

It's great color as always. So just one last one for me here. It's one for Michael. Maybe just thinking about more broadly, on building the brand that is LifeSpeak. When you think about inbound interest today versus where you guys were maybe at the IPO or even in the end of 2020. Like how has that evolved over the last year? Like are seeing a lot more inbounds since you guys have gone public? Like there are people more aware of the brand and coming to you because they want to launch a product. Maybe just some high-level commentary around that would be...

I mean it's really the best. There are a lot of extra knicks and knacks in going public. It may be a challenge, but the upside is most certainly the increased exposure and credibility. So including M&A pipeline, talent, but also just clients, both Embedded and Enterprise, we're definitely getting more inbound and we're seeing that with the increased pipeline. I think what I find most exciting is that it's global. I think the IPO was very significant in terms of getting in the bound. The biggest increase is from the U.S. and overseas, where maybe perhaps before then we used more Canadian, even though our growth was global. So yes, it's also the fact that when we reach out. And so we have a very active and tenacious workforce, including myself. And so I reached out to, just as an example, the largest life insurers in the U.S., and I literally... Again, I don't know what I'm allowed to say or not say, but I reached out to the 4 largest life insurers and had meetings with them within literally 2 weeks and they're all, I feel, very good about where they're heading. And I don't think that would have happened pre-IPO. So I think saying, people are hearing about us more, just being able to say we are public, which means that we've gone through that setting process, we're credible, we'll be a good, reliable partner. We're in a world where almost everyone in our space loses money and goes out of business, we are profitable and funded. And so just that reliability makes -- we're working with the world's largest insurers. They don't want to plug us in to millions of people and have us disappear. And so I feel like, as of now, that is the bigger thing in terms of when we reach out, we get far more response and our pipeline is being reflected in that way globally, but also we are getting more inbound and certainly investing more in marketing in that regard. It's quite a kind of vague or broad answer, and I don't know if that gets what you are...

There's another place we see it and it actually goes a little bit to David's question before of G&A. So one of the reasons our G&A is sort of on a temporary basis up and you sort of say how do we leverage into it. What we're seeing, because I think partly the IPO is also partly we're growing enough that, that feeds on itself, is our opportunity to hire really accomplished people that we would never have had the opportunity to hire before, is also coming on an inbound basis. And so we're taking advantage of that. And so when you think of it from a cost structure standpoint, those are people who we are investing in for future growth. It's not a cost pressure within our business because it costs more to make our product. It's not that. It's an opportunistic view of, hey, we have people calling us who are unbelievable. We should bring them on and see what we can add to our growth. So it's funny because it sort of covers both of those questions. It's a large part because people know who we are now, and it goes really back to David's question -- we're being a bit opportunistic in bringing people on that if you can find some of these people, you take them even if it's an extra body in a growth area.

And if I could add, we're also buying through these acquisitions' brands. So for us, we have to remain very selective in who we bring on. I think like because of good glow around it, we've worked hard, we're all about quality. And while LIFT and ALAViDA might be smaller, quite a bit smaller than we are, they have great brands. And so we've received the inbound from saying, "Oh, we know them well, what a great fit, and we've seen not just the cross-selling, but further inbound interest in terms of both Embedded and Enterprise since the acquisition. So far, it's very exciting.

That's great to hear.

And the last question comes from Justin Keywood from Stifel.

I just had a few broader questions. One is just if the selling environment has changed recently with employees returning to the office or in a hybrid environment versus primarily work from home over the past 18 months. And then also, we're hearing the staffing shortages in the mental health space in general. And is that attributing to any of the pipeline or growth expectations, assuming that some of the other EAP providers are seeing some difficulties in being able to service some mental health needs.

Great question, Justin. I mean, Mike Held, do you want to talk a little bit more sort of in the first part of, are we seeing any impact of the sort of, let's call it, a mixed-use return to work, because I think you're seeing exactly that. Some places have people, some places don't. Why don't you answer that and we can get into the second question.

Yes, I can actually answer the second one as well. But I don't want this to sound -- and first of all, hi, Justin. I don't want to say I'm opportunistic, because, obviously, the world is going through a lot of challenge. But whenever there's more turmoil and activity and discomfort, it just creates more anxiety and more people leave and people need more support. So all I can say is, I've never seen that remotely as busy as this. The amount of -- like one of our top sales folks said they did 30 client presentations over the last 7 days. If anything, [indiscernible] dealing with the opportunity. So again, I don't want to sound opportunistic by it, but as everyone's trying to return, they're trying to figure out how to like provide support all over the place, and we are just one of those things that can address everything because it's not just mental health, it's -- as people are trying to figure out their work arrangements and where they work, they're having more issues with their relationships, with their kids, their elder care, and everything that goes around and the fact that we have thousands of micro learnings addressing these specific things makes us very, very valuable, or some of other players trying to address that are very specific or pointed and not necessarily as helpful as we are. So we are seeing an increase in business, people are very aware of the great resignation, like people are leaving like crazy. So anything companies can do to support it is really important. As we know ourselves and one of the things I'm most proud of that we haven't talked about yet is, in this great resignation in all of 2021, we haven't lost a single person. So we walk the walk as well as talking the talk. I don't want to speak -- we're partners with a number of wonderful mental health providers, but we are hearing in the market, there are service issues, there are shortages. And so I don't want to -- again, I don't want to be opportunistic, but the fact that we're SaaS and don't rely on those things, we're getting great rave reviews of our ability to implement and service our clients where others are having issues. I don't know how long that's going to last, but we are hearing it from clients, and we've seen places where they're looking to maybe get rid of some offerings and put us in. So I don't want to be negative on that.

Yes, Next thing, Mike, to add to that, it bolsters our thesis of we want to do everything we can to leverage, call it, employee infrastructure of the EAPs and telemedicine. We can help. We're not taking away really dollars in any of these folks because, to your point, one of the biggest limitations is there are all of those folks' ability to get professionals they need to provide the service. So there's just a big gap in the behavioral mental health world of health available. So we're hoping to fill as much of that gap as we can, and we don't see that as being necessarily competitive with professionals because there's just not enough of those, so.

And when you look at where we see this massive growth with our Embedded clients such as insurers, where we're being used as a value-add and differentiator to show customers that they care, in between sending bills, it becomes very shaky, I guess, for some of these players to put in mental health services that may or may not receive the service. So you don't want to put in a value-add that might cause harm to a customer relationship. So again, the primary is, our education is wonderful, but the fact that they don't have the risk associated with delivery only strengthens our case. And we've seen that.

That's helpful context.

Thanks, Justin.

Thank you. We currently have no further questions. I will now hand over to Nolan Bederman for any final remarks.

Great. Guys, I just wanted to really thank everybody for taking the time to dig in, understand our story, listen to this. It's early innings, we understand that, but we really do see things coming together really according to the plan we articulated. It's kind of important to us to try to stick to that. It took us a long time to craft it and we believe in it. as Mike said, I think we didn't spend enough time on it. We're really proud that not only are we sticking to what we're doing. And in a world of huge resignations everywhere, we literally haven't lost one unplanned person in the face of what really amounts to a lot of change for our company. So that's just a testament, I think, to how our employees feel about where we're headed. So again, thanks for the support of everyone. We appreciate the questions, and we look forward to talking to you all again soon. Thanks for joining.

Thank you, everyone.

Thanks a lot.

This concludes today's call. Thank you for joining. You may now disconnect your lines, and enjoy the rest of your day.