Good morning, everyone. Welcome to the Second Quarter 2021 Conference Call for LifeWorks Inc. 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 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.

Thank you, Laurie. Good morning and thank you for joining us. On the call with me today is Grier Colter, our Chief Financial Officer. Yesterday, after the markets closed, we released LifeWorks’ financial results for the second quarter of 2021 and year-to-date. My comments today will focus on the business highlights for the quarter and year-to-date, Grier will cover off the financials in more detail, and then we will open the call to questions. As we build on our brand change and move further into the well-being in digital health spaces, we thought this was the right time to update our reporting and we hope you appreciate the more detailed information and updated look and feel. We have added new metrics in data about our performance as a world leader in total well-being and provided more insights into our growth from our digital health businesses. We believe this helps tell our story as we execute on an exciting strategic plan with our uniquely differentiated solutions. This reporting change is timely, because it coincides with our first quarter reporting under our new LifeWorks name. Our new brand launch has been extremely well-received by our clients, prospects, investors and our employees around the world. While we are very proud of our path, we are geared up for growth as we continue to own more of the global well-being space and bring together amazing capability with digital and in-person delivery. Meeting our clients’ employees needs when and how it suits them. In the second quarter, we saw strong sales growth and continued expansion of our pipeline. Removing foreign exchange volatility, we delivered strong revenue growth. Overall, we saw revenue on a constant currency organic basis grow 7.8% in the quarter and 8.7% year-to-date. Adjusted EBITDA margins for the quarter were down to 19.2%…

Thanks, Stephen and good morning. I’d like to briefly add some context to Stephen’s comments about the changes in our reporting format and metrics. Going forward, our news releases where we will net out the highlights for any given period, we will no longer use that format to duplicate information that is more comprehensively provided in the quarterly report. In our redesigned MD&A, we have expanded our reporting to provide additional metrics that we look at as a management team to assess the performance of our business, including geographical detail and service line information at the business level. Let’s turn to the financials. It was a strong quarter. What stands out for me in the results are two trends in the business that complement one another? The first is how fast our well-being offerings are growing and providing digital health solutions. The second is the return of in-person services. The pent-up demand coming back as lockdown conditions start to recede. Taken together, the growth in digital and high demand for in-person services tell a compelling story that we really can do anything our clients want, right across a very broad and personalized continuum of care. We are not only digital or face-to-face, we do it all. And that story is showing up in the revenue growth that we are driving. In Q2, the top line was excellent. We reported $257.7 million in revenue, an increase of 4.7% over last year. But considering the strong foreign exchange headwinds, that number was 9.3% on a constant currency basis. Year-to-date, the story is just as strong on the top line with $514.9 million in revenue, a 5.2% increase and 8.7% on a constant currency basis. Tech-enabled revenues were also strong in both the quarter and year-to-date. You will note that we are providing…

Thanks, Grier, for your for your comments. Laurie, please go ahead and open the line for questions.

Thank you, Mr. Liptrap. We will now take questions from the telephone lines. [Operator Instructions] And the first question is from Stephanie Price from CIBC. Please go ahead. Your line is now open.

Hi, good morning. Thank you for the detail.

Good morning, Stephanie.

In the MD&A, we like the new branding – re-branding over here. Just curious about the year-over-year increase in the number of lives in the LifeWorks platform, can you talk a little bit about what you are seeing in terms of demand for the platform as we hopefully exit the pandemic and any changes in kind of what enterprises are looking at as we exit the pandemic?

Yes, thanks for the comment on the MD&A and everything. Stephanie, it was obviously really important to us to do that and it was good timing with the branding. In terms of the platform we are seeing, as you have seen continued interest over time. When we think back to when we started this shortly after the LifeWorks acquisition, we had this concept in this theory that rather than just phoning in for support, it was way better if we could get a platform in front of the employees of our clients and on that platform, they could have personalized feeds around what they were mostly interested in rather than what others thought they would be interested that they could have immediate access to counselors that they could get all the support and everything. And we have been having the conversation with clients over time. And as you know, the number of people that we cover within our EAP has increased significantly up to just under 15 million direct lives we have covered. And then every single quarter, we have been talking to our clients about getting their employees on them. And we are quite excited that we are just under 6 million lives that we have moved on to our enhanced platform. We are getting really, really good feedback. And then as you would have seen the rate of clients saying we would like some additional modules, we would like to do more with the platform and we are willing to pay that, has increased, where we are now over 1 million lives and our up-sell as we kind of track it is over 20%. So, we continue to get great traction and we continue to be ahead of where I thought we were. But I think there is lots and lots of potential for growth as we go forward.

Okay, great. And then just on the Microsoft relationship and the Teams integration, just curious can you give us a little more color on that? So is Microsoft reselling the LifeWorks solution and how should we kind of think about that, that relationship?

Yes, we are really excited about this. We have spent a fair bit of time getting everything working from a technological standpoint. And we are really excited to announce that recently. As most folks know, there is over 250 people moving Teams alone, which is incredible when you think about it. And imagine if you are working in the Teams ecosystem and with a click, you can get help and the support you want, you don’t need to leave the system, you don’t have to think about something else. Also with us being in there, right up beside calendar and right up beside chat and everything, it’s a constant reminder to people that there is support at their fingertips. We have rolled it out to our employees about a quarter ago as a test. And the feedback has been absolutely incredible. We have been starting to take it into prospect presentations which is really, really positive. We know that we have a lot of overlap between our clients and Microsoft clients. And as we are in there doing those presentations, clients are very, very excited about having something that integrates to the thing that their employees are on every single day. So, when I think about it, I think there is an opportunity around winning more and increasing our win rate, because of having a more integrated opportunity as we think about prospects. Then when I think about our current clients, it’s really about an opportunity to get more of them on the platform, because the platform becomes more powerful. And then frankly, a lot of those cases, we will be delivering more digital solution. So, it will also help us with margins over time as well. Yes, there are agreements in place with Microsoft and we will have opportunities to expand on that a little bit. But I think there is a lot of things that will come to fruition over the next many, many quarters that will make this a great deal for us.

Okay, great. Thanks. And then just last one for me, maybe for Grier, just on EBITDA margins in the quarter. It seems like there were some puts and takes here. Maybe some of it was non-recurring could you kind of walk us through those three, list of three things that you mentioned? And maybe also a follow-up to talk a little bit about the margin differential between the in-person work in the virtual care?

Yes. And Stephanie and I’ll slip it to Grier in a second, I just wanted to make one quick comment, because in an odd way, I think the margins being down was actually some really good news. Because, one of the key drivers in there was a huge demand for what we do that is so different than anyone – what anyone else does. And it’s a fact that we do both digital and in-person. And sure, our cases in the quarter were up 18% and the cost associated with that. But from there, we saw 10 wins come over from digital-only competitors. And if you think about in the middle of COVID, we were able to compete with digital-only competitors. And now post-COVID, we are able to easily compete as we have before with folks who deliver in-person services, but we are really the only ones who do both of those. So I will take the short-term cost increase any day, because it does remind me of what we do. And I do think it’s going to play out on the long run. And frankly, I think those short-term increases in cases will normalize. And if they don’t, then we have an easy conversation with our clients around taking more pricing, because they are just paying for the services they get. And then on top of that, you take a look at the software implementation costs that I know Grier will talk about, which is now expense and it used to be capital and then a one-time thing around brand. So I just want to give you a little bit of my color before I turn it over to Grier.

That’s good color. Thanks.

Yes, thanks, Stephen. So Steph, what I would say is it was really three main factors. The first one is pretty simple. So, we spent about $1 million in the quarter on re-branding. The work is done. So that’s not something that will reappear in Q3 and beyond. So, that would have impacted the margin by 30 basis points, or 40 basis points. So, that was clearly non-recurring. The second item that I will talk to you is an counting change. And so what this is, is basically, if you think of integration costs associated with cloud based software. So in our case, Amazon Connect, Zscaler, these type of names, that we were doing work to configure and integrate into our ecosystem here. Previously, the accounting rules gave latitude to either expense or capitalize. We felt that because these had future benefit that our policy was to capitalize, which was clearly within the guidelines of the rules. They have clarified the guidance in April, narrowed it and said, if it’s integration costs associated with cloud based, really, the rationale is that you don’t own the code. And so that distinction, now, you are no longer able to capitalize those costs. So in the quarter, those would have been about $2 million give or take. So, brought the margin up by call it 80 basis points. And these types of items are going to continue for us. I mean, these were good investments with good IRRs. And when we started the year with we thought there would be capital now there are OpEx. But in terms of how we run this business and trying to create returns and do smart things, it really has no impact whatsoever in terms of where and accordingly obviously, the CapEx on the other side would…

Yes, no, that’s great color. Thanks.

Thank you. The next question is from Etienne Ricard from BMO Capital Markets. Please go ahead. Your line is now open.

Thank you, and good morning.

Good morning Etinne.

It’s great to see the new disclosure on iCBT. With about $4 million in revenues, and in Q2, how much of that would be related to your initial government wins, government contract wins in Ontario and Manitoba. And how have you been able to scale this product over the past – over the past year?

Yes. Etienne, it’s Stephen here, obviously a large piece of that is both the Ontario contract and the Manitoba contract. However, we are seeing every week and every month and throughout the quarter wins with kind of two groups. So, we are seeing wins with other organizations wanting to add iCBT on to an EAP offering. Again, selling it as a one-off thing, just confuses employees. So, if you are able to do it as an add-on, as we talk about the continuum of care that’s very valuable. So, we do see that coming into play. We also see that we are starting to get some wins down in the U.S. as we rolled into the U.S. And the other exciting thing for me and this is very early on, is we are starting a lot of traction with us health plans, as they think of that this as delivering solutions for folks coming into those health plans. But again, at this point in time, because a lot of those are ramping up and getting going, the majority of it would be the government contracts that we have in place.

Okay, great. And in terms – and congrats on the partnership with Microsoft. What utilization rate improvement have you seen from clients, or I guess I should say, what utilization rate improvements are you expecting from this initiative, integrating LifeWorks platform onto teams?

Yes. The shift that I think we are on it is a little bit of a longer term journey is, rather than people looking at, hey, how many employees went to see a counselor. The question that we should be answering is how many employees got the help they needed. And that helped could be I read an article about anxiety. So, I don’t need to go see a counselor, or I am on the recognition platform. And I now feel part of an organization. So, I don’t need that help and support. So, we really need to start thinking far more about how many people are we helping, how many people are we reaching, so we are starting to track all of that. We are starting to provide that to our clients. And I think Microsoft, the partnership will just ramp that up. If you think about, I can tell you personally, when I am on teams, and every month, I get a report telling me how many quite days I had, or how many – how much I was on email after hours or things like that. Imagine if I also got some solutions and some ideas, and we are going to be able to provide that as part of this. So, I think the utilization, the help, and the support will ramp up substantially. But it’s going to be our digital delivery, it’s not going to be as much as the in-person thing. So, it should help us both on utilization and emergence.

Okay. And with increased demand for mental health resources, how are you thinking about scaling up your internal counselor base relative to extending the number of partnerships with third-parties?

Yes, it’s a great question. The first thing I would say is, we are one of the few organizations that have really taken the approach of having a large basis of our own staff counselors. And we have done that because we just have a firm belief that allows us to deliver better quality for our clients. And frankly, we are also able to do it at a cheaper rate, as a result of doing that. With the demand for services going up, we – back in the last quarter, we substantially updated our recruiting efforts. And we are tracking on a regular basis, how many recruits we are bringing in every week. We are making a lot of progress against that. And as we ramp that up, we will also have an improvement on margins, because, again, we are able to deliver those services way more efficiently through staff. But in the past quarter, it does take time for those folks to ramp up and everything. So, we see that improvement will take place over the next couple quarters. But it’s a key area of focus and I believe the key differentiator of ours.

And could you remind us what is the difference in terms of the margin, whether the service is performed in-house relative to leveraging your third-party relationships?

Yes. I will give you a cost perspective. Our cost is about a third less. So, we are a third cheaper by delivering through our own staff counselors than we would be through using what we call an affiliate network.

Great. Alright. Well, thank you for your comments.

Thanks, Etienne.

Thank you. The next question is from Graham Ryding from TD Securities. Please go ahead. Your line is now open.

Hi, good morning. I just like to reiterate that improved disclosure is definitely well received on our end, much better. My first question, just be on the iCBT side. It was definitely a strong growth when we look at it on a year-over-year basis, both for the quarter and year-to-date. It did – I think it dropped quarter-over-quarter. I am just wondering what drove that?

Yes. And the easy answer on that Graham is the quarters last year, just become a little bit more of a difficult comparison. We went a lot of government contracts a year ago. So, in the first quarter, you are not really comparing year-over-year versus this quarter where we are starting to.

Okay, understood. And then did I catch your comments correctly? Like I understand that that Ontario contract was recently put up for RFP. Did I hear you correctly that you successfully renewed that contract?

That’s right, Graham. So, it’s an extension of seven months.

Okay, great. And is it still a shared program or any details on – although you were sharing it before, have you got – is it exclusive or is it shared program going forward?

Yes. It’s still shared. So, it’s 50-50 shared with the same party that we have been sharing today. So, we have no change in that regard.

Okay. And that the terms of new wins, you made some comments, I think last quarter, you want a iCBT mandate and you have provided some comments, I think about targeting U.S. health plans. Are you referring to the pipeline there or are you actually successfully winning further mandates in the U.S. like in the quarter?

Yes, we had some wins in the quarter Graham. And we have got some health plan announcements that should be coming out a little bit later. But we are just kind of putting the final touches on them. But we were quite pleased with some progress we have made in the quarter.

Okay, great. And then just my last question, just the Australian acquisition, SMG? How much was that – how much did that have, like in terms of a revenue impact? And does that get backed out when you sort of break out your organic growth rate?

Yes, it’s – just looking at it here, Graham. So, in the quarter it would have been, give or take about $4 million in revenue.

Is that higher than expected, or is it that in line?

It’s a little bit better than expected, but largely in line. But it’s performing really well. We are super happy with it.

Perfect. That’s it for me. Thank you.

Thanks Graham.

[Operator Instructions] Your next question is from Jaeme Gloyn from National Bank Financial. Please go ahead. Your line is now open.

Thanks. Really exciting stuff with the Microsoft partnership, I think in terms of a new channel, obviously, early days here on that front, but thinking longer term about this channel, are there discussions or opportunities with other providers of teams, like Universes and also other providers of App Source, cloud based software distribution?

Yes, Jaeme, it’s Stephen here, I think yes on all fronts. I think obviously, we will spend a lot of time and really double down on how do we fully leverage this partnership. And I think it’s an opportunity, as I said to win more and continue to improve our win rate. It’s an opportunity to move more clients onto our platform as an opportunity to add on modules for clients as well when their people are all in that system. And I think it’s also an opportunity, continue to improve margins with more digital delivery. So, we will go down that route for sure. We are also excited around App Source and the fact that we have got our ability solutions in Arielle on that platform. So, small and medium sized organizations can pick up some of our solutions there. So, I think it gives us a nice channel there. And we are in – we will continue to look for other partnerships that are similar to this. But I do think we should spend a fair bit of time making sure we fully realize all the benefits from this just with the fact of 250 million people being on teams and growing at a substantial rate.

Appreciate it. Thank you.

Thanks Jaeme.

Thank you. There are no further questions registered at this time, I will turn the meeting back over to Mr. Liptrap.

Thank you, Laurie. In summary, we had a good quarter that has contributed to strong year-to-date growth. I would like to end by expressing my thanks to everybody on the call. We continue to appreciate your interest 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 are doing to drive our growth and success as a business. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.