Good morning, everyone, and welcome to the Third Quarter 2021 Conference Call for LifeWorks Inc. Please note that this conference call will contain forward-looking statements, which reflects management's current beliefs and expectations regarding the corporation's future growth and results of operations. Actual results can differ materially from those -- 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, Paul. 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 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 too, our workplace is going through significant transformations. We probably have to go back to the late 1940s, the post-war recovery period for a sea change of equal scope in the labor environment. Remote work, hybrid work, return to office, all words and phrases we're learning to live with. What we are learning from working with our 25,000 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. In our Global Monthly Index, that tracks mental health in the workplace, we know COVID and everything around it has created a new form of climate change, a worsening of the psychological climate in the workplace that, we believe, will take years to fully recover and change much of how companies operate. Already, we are seeing much more focus today by leaders on talent and retention, where supporting employee well-being is increasingly recognized as crucial to that. On some level, it's simple. People will engage and give their best to companies that care about their well-being and companies realize that without their people at their best, their performance and productivity will suffer. As we assess it, the outlook in the global well-being market is very positive. For LifeWorks, client interest in our multimodal approach to employee well-being is at an all-time high, reflected in the 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 well-being platform. How this changing situation plays into our growth strategy has many aspects, but there are 3 that I'd like to point out. One, we were on the right track, well prior to COVID with our well-being 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, as the well-being sector evolves and new competitors enter the market with point solutions here and there, we believe our broader multimodal platform approach to employee well-being 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 that their people need in 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 and practical 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 succeed. 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 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 implications. And a year ago period where we were 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 in our results. One, we continue to see demand for our services. Increased 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. Two, the slowdown in Retirement and Financial Solutions business for the quarter as clients had more of a normal summer meant that last year's inflated margins returned to normal. While 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 are moving in the right direction. At the quarter end, some 6.2 million lives were covered on the LifeWorks platform, a 63% increase over Q3 last year. In terms of upselling, organizations paying for extra well-being modules on the platform is up 29.2% year-over-year. Our iCBT 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 at Marketplace. This integration enables us to increase the reach of our well-being 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 LifeWorks platform from within a digital ecosystem they are working within already. Another accomplishment in the quarter was winning certification for our Knox-Keene license. This allows us to provide counseling services to people directly in California. Certification involves a rigorous multiyear process, not easily accomplished by anyone, least of all digital-only counseling providers new to the game. Since our certification came into effect, we've already won 11 new client mandates, extending to some 26,000 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 the 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 3.8% in the quarter and 8.1% year-to-date. Without a loss that we knew about 2 years ago and an Australia COVID shutdown, growth would have been approximately 6% in the quarter. We are pleased that we won multiple well-being 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 a telemedicine upsell and a new student 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 4.8% and year-to-date 15.2%. As we expected, we keep leveraging growth in our iCBT solution with multiple contract wins in Canada and the U.S. We continue to work with Ontario Health to support its mental health 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. In Administrative Solutions, which includes our Health and Welfare business, we had a good quarter with constant currency organic growth of 5.5% and 6.3% year-to-date. We landed a large new public sector contract in Quebec to implement a software solution for managing a new provincial social security program, including maintenance and technical assistance services. In Ontario, we had upsells with a well-known university for defined benefit administrative services. In the private sector, we want 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 2 quarters. And as I mentioned earlier, the summer activity returned to traditionally normal levels compared to 2020's unusual increased activity in the summer. In the quarter, 2 large contracts stand out. One is a major cross-sell to a large Canadian bank to support its defined contributions and capital accumulation plans. The other large contract is with a port authority on the West Coast, where we combined 4 sales into 1 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, we're also very successful in renewing our partnership as the official mental health partner and provider to the Canadian Olympics Committee, a partnership that supports our commitment to community engagement and to creatively building our brand. Before handing off to Grier, 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 #1 most trusted mental health and well-being provider for organizations and their people. We offer, bar none, the most comprehensive range of mental health and well-being services available to our clients and their people. And we made a substantial positive impact on our clients and their people every day. And that's something we have seen and keep seeing during these times. In previous quarters, I've talked about the 3 levers for growth that give 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. 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 well-being 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 ESG and the S in particular. On that note, Grier will review the financials in more detail.

Thanks, Stephen, 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 have done a good job adapting to the pandemic from the early days of moving to remote work; driving our work to implementation, which is now live; changing head office locations; divesting businesses and acquiring others; and focusing each of our lines of business on delivering results. As Stephen mentioned, there is clearly room for getting our margins back to where they should be. In Q3, the top line was solid. We reported $246.1 million in revenue, an increase of 2.4% over last year and 4.5% on a constant currency basis. To get a little more specific on revenue, while the sales funnel was strong, there were some impacts in the quarter in addition to what Stephen mentioned. There is 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 this 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 lockdown 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 top line with $761 million in revenue, a 4.3% reported increase and 7.3% on a constant currency basis. Tech-enabled recurring revenues were also strong in both the quarter and year-to-date at 5.4% and 9.3%, 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 20.4% in 2020. As Stephen 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 and other sectors are seeing this, there is wage inflation relating to the 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, it means 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 as 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 is 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 provision recorded in the comparative period associated with the planned relocation of our 3 Toronto area offices to a single headquarter location at the end of this year. Basic earnings per share for the quarter increased by $0.14 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, we are pleased with our management of working capital overall. And lastly, the company will continue its policy of paying a monthly dividend of $0.065 per share. And with that, I'll turn it back to you, Stephen.

Thanks, Grier. Appreciate your comments. Paul, please go ahead and open up the line for questions.

[Operator Instructions]. The first question is from Stephanie Price from CIBC.

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 and the new start-ups keep popping up. Just curious about 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?

Yes. 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 are not seeing our win rates come down at all. They're staying very consistent. And we are seeing our pipeline continue to be strong. The one thing that we did see over the quarter was a slowdown in decision-making. So it wasn't that we didn't win the mandate. It's that 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 competitors per se. We're really seeing it come from, frankly, I think, a lot of organizations just being tired and 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 to the pricing? Or have you seen any pricing pressure just given competitors that are out there right now?

We've actually started taking pricing 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 actually been 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, Grier, maybe 1 for you. Just curious a little bit more color on the margins in the quarter. You mentioned 100 basis point impact from labor costs. I mean, how should we think about that going forward? Is this -- I assume it's something that might happen or might continue for the next several quarters.

Yes. 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 I think what we said last quarter was that we weren't totally convinced whether these were kind of here to stay or whether it was a onetime thing from in-person coming back. And I think what we can say now is we're more confident that these are more permanent pressures. As Stephen said, I think we have an ability over time to reflect this in pricing to get the margin back. And that's probably the most significant lever we have to pull. But that will take time, Stephanie. It's not going to return immediately in the fourth quarter.

Next question is from Graham Ryding from TD Securities.

Grier, maybe I'll just follow up on that last comment. So it will take time. Obviously, the cost pressure is perhaps not going away over the near term. Like over the course of the next year, do you have the ability to reprice contracts so you can offset that margin pressure? Or is this a 6-month, 2-year dynamic? Like 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 the contracts we have are generally kind of 3 to 5 years. And so just based on that, 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 service and making sure that they are getting what they need. And the reality is that, to do this effectively, it's -- there is a bit of a sea change in terms of the cost environment. But -- so I'd say, at a minimum, they're going to turn 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 Stephen's got more color.

Yes. The one thing I would say, Graham, is it is a little frustrating on the short term, obviously, because we expect better results. But I think really, as Grier mentioned, bodes well for the organization and the business long term when you think about the demand in mental health, the demand in the services, how we are positioned to come at those in a very multimodal way and really get at them, and the ability of us to really drive more value to our clients. So some of that will come back in pricing. Some of it will come back into new products that we've already started talking to our clients about. 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 will 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. Maybe you can follow up on that, Stephen, just on the top line. So obviously, it was lower this quarter. It sounds like there was some seasonality and also some client departures. So maybe some color on the client departures. And then just your visibility going into Q4 because it does sound like it was pretty constructive in terms of new wins in the pipeline.

Yes. The way I kind of think about the quarter, Graham, 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 5.5% constant currency growth. Our IHS business would have been around 6% if it wasn't for an Australia COVID shutdown that took place and a low-margin client loss. And that client loss was actually from 2 years ago, and it just took the client a while to kind of exit. Our Health and Productivity business, we saw excellent growth in iCBT at over 32%. And the Absence business has just kind of been up and down. It's hard to predict cases, around COVID and when people come back and go out. So that will normalize as we go forward. And then obviously, we are disappointed at our Retirement and Financial solutions business, but last summer really was an 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 of that, industry trends, 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 2 tuck-in acquisitions that we did earlier this year are performing well.

Okay. Great. My last question, if I could. Just on the iCBT side. You mentioned a few wins. Were those corporate wins on government or a combination? And maybe just some context on the size in terms of employee base or how material are these wins?

Yes. 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 yes, we continue to add to it, and we continue to learn more about iCBT in the U.S. market and deliver it to clients there as well.

Great. And when you say government wins, are you talking Canada and the U.S. or just government wins in Canada?

Yes. Mostly, it was in Canada, but we had -- our pipeline is very, very strong in terms of the public sector within the U.S.

Next question is from Jaeme Gloyn from National Bank Financial.

First question on the client attrition. IHS Canadian market was down 8% quarter-over-quarter, which is a bit of a surprising number. Do you attribute it all to just that 1 client from 2 years ago that just exited today? Or is there anything else that would explain that sequential decline?

Yes, James, it's Stephen. Let me start, and then Grier might want to make a couple of comments. We always see in the IHS business that the third quarter is lower 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 help us do, obviously, less training of their staff, and there's less robberies and things like that take place. So it's hard to look quarter-over-quarter, but Q3 is always lower in that. And aside from that 1 client that we lost a couple of years ago, we see our retention rates kind of in our normal range and not normal ranges, retention around, depending on the year, 94%, 95%, 96%.

Okay. And on that 1 client, can you give us a bit more color as to why they chose to leave? And why did it take 2 years for them to, I guess, execute that decision?

Yes, a 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 -- 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 to make that decision and then go out to all of their very, very small clients and then to do all the changes and all that, insurance companies tend to move slow. So that just takes some time. But 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 guess a sense that you're pretty confident that this is a one-off occurrence with this large insurance company and not something that could recur with other insurance companies or large partners of similar nature.

Yes. The thing that I tend to track on a very regular basis, Jaeme, is just our overall retention rate across all of our businesses. And we continue to be north of 95%, and I would expect that to continue.

Okay. Great. Shifting to the margin front and the pressures on wage inflation. I get the sense that there's perhaps a structural shift in how the business is staffed and how EAP services are, I guess, effectively serviced by staff in-house and third-party networks. Is that a fair comment? Or how would you respond?

Yes. Let me start and then Grier will jump in. I think the easiest way, and we've talked about this before, is we kind of have 3 groups that we use to deliver services. So we have staff counselors, and we really like using staff counselors because you have higher quality and you're able to be fairly efficient and you're able to really train them and deliver phenomenal services. So that's great. We have 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. 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 that's really taken place is a lot of the preferred providers that we would usually go to before and were very efficient have 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, you think about governments providing more services, you think about just people needing a lot more mental health and demand. So we have been able to leverage the 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. I don't know, Grier, do you want to add anything?

I completely agree. Like I think the -- 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 the preferred and the affiliate network Stephen was talking about. And I think as the supply has come out of that preferred part of the market, we'll need to switch that ultimate target. And I think the in-house will need to be higher than 50%, and we've made good progress going from Q2 to Q3 on that. And so yes, I think it's really a rebalancing that is probably a condition for us that's here to stay.

Okay. Understood. And in terms of the hiring process, it sounds like you are making decent progress. I guess like if you could mention that in terms of like how far along, either as a percentage or any basis analogy, like where are you on that process to get to a level where you would -- you may be consistent with pre-pressure periods. And with that, I guess, what kind of challenges are you facing in terms of hiring enough staff to get to that level?

Yes. So maybe I'll take the second part, Jaeme, and then I'll let Grier can talk to you about the percentage of folks that we have increased to within staff because I think that will give you a sense of numbers. But I think like everyone in the market these days, there is a lot going on at there. There is a lot of demand for people. Retention is a little bit harder. And I think that's frankly showing up across all industries. And as I am out 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 make progress week after week. We track it day by day. And I think we're bringing in new folks on a regular basis. Obviously, one of the challenges is anyone that we bring in, we spend a lot of time training getting them up and running. It's kind of a 6-week training program so that people answering the phone are 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 know, Grier, if you want to talk through the numbers a little bit.

Sure. So in Q2, Jaeme, we would have been -- staff counselors would have been roughly 46%. As I said, our old target was kind of 50%. In Q3, we are running 54%. So you can see the improvement there. In terms of where we need to get to, I'm just showing out a ballpark number. I don't know if we have a magic number, but it's probably 60% to 70%, assuming that the current conditions stay as they are. There is pressure generally on wages, and it is a tough market. That said, we can do things more efficiently with staff counselors versus the affiliates. So there is -- where you're feeling pressure and it's hard to hire staff counselors, a, we've made good progress quarter-to-quarter. But there is, on a net basis, it's 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 getting back to the kind of the old margin, as we said, I mean, I think that there is net-net of all this stuff. It is higher cost. You saw it in Q2, it was 130 basis point impact. And then this quarter, we said it was 100 basis points. 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 side of this, if that makes any sense. There's a lot of stuff in there, and hopefully, that's been somewhat helpful.

Yes. That's very helpful, Stephen and Grier, thank you. Obviously, it's a challenging and uncertain backdrop. So really appreciate the color this morning.

[Operator Instructions]. The next question is from Etienne Ricard from BMO Capital Markets.

To continue on the operating expense front, could you comment on retention rates you're seeing for your staff counselors recently and 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, Stephen here. Yes, we are seeing a couple of things. So turnover is up a little bit compared to what it would have been in the past. Obviously, turnover through COVID was close to 0. So there is some, I hate to use this word, but pent-up demand that between the 2 years probably averages out to a little bit over what historical trends would have been. I think we probably got an advantage just 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, 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 offshoring in some areas. And we've also made a lot of progress around real estate footprint. We think we can do more on that. And there's probably some other parts of our business that we'll look at over the next few months, is our way to be more efficient to offset some of that as well.

Okay. And 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 counselors was 46%. Was that correct?

Yes. Etienne, it's Grier here. So in Q2, our staff, our employees, our staff counselors delivered 46%. And then in Q3, it was 54%.

And prior to the pandemic, what would have been the mix?

Yes. So as I -- we would have run at a target of 50%. So in Q2, it's a slightly different dynamic where we saw the pressure of the market changing, and we had to go outside to deliver the cases, which drove quite a big cost differential and that was the 130 basis points. We have made progress hiring staff counselors, net-net and delivered more of the cases in Q3 through our in-house staff counselors, so that's positive. But as we said, I think the market has changed a little bit. So that 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 just to replace the preferred side of the outside network.

Okay. Understood. And I think you mentioned in your comments on California, the award of the Knox-Keene license. How does that impact your competitive positioning in that state? And what growth prospects are you seeing in -- on the West Coast?

Yes. It's a really good question. It's Stephen here, Etienne. And it's 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 3 sessions kind of thing, you have to use a Knox-Keene provider. So the fact that we are a Knox-Keene provider, when you think about what's happening around mental health and 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 there's a lot of opportunity around it. And again, as I mentioned, we had some wins in the quarter, over 11, just as a result of that alone. So we're pretty excited with the long-term growth prospects as a result of that.

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

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 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. Please disconnect your lines at this time, and we thank you for your participation.