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Good morning, everyone. Thank you for standing by and welcome to Dialogue Health Technologies web conference to discuss results for the third quarter of 2022. At this time all participants are in a listen-only mode. Following the presentation, we conduct the question-and-answer session for research analog. The instructions will be provided for you at that time. Listeners are reminded that portions of today's call may contain forward-looking statements that reflect term views to the respect of future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For more information or valid risks and uncertainties related to these forward-looking statements, please refer to the company's MD&A dated November 14, 2022, and the annual information form dated March 23, 2022, both of which are posted on [Indiscernible]. [Foreign Language] Our operating and financial results will be presented this morning by Cherif Habib, Chief Executive Officer; and by Navaid Mansuri, Chief Financial Officer. And with that, let's begin. Cherif, please go ahead.
[Foreign Language] Thank you for joining us today. Dialogue achieved a strong performance in the third quarter that exceeded our expectations, and this was driven by solid execution across the board. Revenue grew 37% year-over-year to $23.6 million, better than the end of our guidance range. We improved our gross margin significantly and demonstrated strong cost discipline, resulting in another sequential improvement in our adjusted EBITDA. We continue to deliver on our long-term plan during the third quarter. We added nearly $6 million in ARR more than offsetting the loss of the customer in legacy Optima business as previously announced. Despite this setback, our ARR increased a bus 30% year-over-year to $97.8 million. Our core business in Canada, the Dialogue Integrated Health Platform or IHP performed even better. In this segment, ARR and revenue are higher 51% and 52%, respectively, on a year-over-year basis. Notably, these growth rates were entirely organic, underscoring our ability to build new services and to successfully integrate them in our IHP. Providing quality in care and exceptional member experience our top priorities of Dialogue. I'm very pleased to see a number of key metrics running in the right direction. A solid retention rate, low member churn and our all-important mid-market and enterprise segments, an increasing [Indiscernible] and a higher percentage of members with two or more services. All of these are clear indicators of our customers really like what we're doing. Last week, we ended the quarter with $59 million in cash. We will continue reducing our burn rate in the coming quarters, and we believe that it's extremely important to have a strong balance sheet during a period of turbulence. Despite the evolving economic environment, employment remains healthy in Canada and organizations continue to invest in their employee benefits and support. At different time, we're maintaining our focus on improving member experience, delivering better health and wellness outcomes and raising the bar for quality of care. During the third quarter, we made meaningful progress towards our strategy, including four key areas that I want to highlight in today's discussion. First, we continue to grow rapidly and see strong demand for all our services. As a reminder, Dialogue launched innovative IHP in January 2021. During the first year, we invested heavily to build customer awareness and promote our approach to drive better outcomes. We're seeing solid gain in 2022 as years paid revenues from our core IHP business in Canada grew 55% year-over-year. We also entered the fourth quarter with our highest-ever pipeline for the IHP. Dialogue is now widely recognized as more than a primary care provider. We addressed is mental health challenges through a broad range of services and can develop preventative solutions to our wellness program. Second, we remain committed to profitability. We have reached new step function to a gross margin over the last two quarters, and we're working hard to further enhance our profile with technology and focus improvements. I'd like to highlight the change in mindset that we've all been undergoing at Dialogue. From a growth at all cost mentality, we're now looking to be more efficient and sustainable in every asset of our business. We've also been disciplined on costs, keeping our operating expenses in check without sacrificing our growth. This will continue throughout 2023. Third, we're developing our partnerships. Sun Life and Canada Life now carry our three main services on their respective past months. We also recently signed distribution agreements with Sterling Capital Brokers Canada’s largest independent meter consultants and with my HSA at the largest independent platform. Looking forward, we're building a solid pipeline of partnership opportunities and expect to have more announcements in 2023. First, we’re extracting our IHP. We continue to look for new services to most of [Indiscernible]. We’re currently valuing several opportunities to launch commercially in the second half of 2023. Without giving in too much, I'll briefly mentioned charities. But first, re-imagined approach to mental health training in the improving engagement and fostering mentally healthy workplace. Second, at the [Indiscernible] solutions to support a full return to work built around rehab services. We are partnering with customers to influence the design of our next generation of services and expect to begin building any new service in the first quarter of 2023. On November 1, Dialogue became the first virtual care company to receive the equalization Canada Primary award, which recognizing us for our high level of quality and safety of care. [Indiscernible] vision to process benchmark company practices against the highest standards of excellence through multiple evaluations and onsite visits at creation can examine a log governance leadership, lead management, medication management measures in quality of care. A very positive achievement and the securitization speaks to the dedication of our teams for to relentlessly to ensure the highest possible of care every single day. Thanks to IHP, we continue to offer multiple solutions to our customers. Whether they're looking to improve benefits for primary care to offer better mental health support or to modernize their EAP, Dialogue can help them achieve their health analysis objectives. In the third quarter, we added more than 320 new customers and 65% of these signed up for two or more services. This performance also marked a sixth consecutive quarter with a metric above 50%. Our key strategic decision at first in Canada to develop a fully integrated platform and to add more services and value over time is clearly paying off. We continue to grow our relationship with for secondary schools, including several of the country's large largest universities, signing 31 new deals and adding more than 200,000 members in that segment. In addition to mental health support, many schools have started adding primary care, demonstrating once again the benefits of our integrated services. On the expansion front, a leading distributor of motor parts with our primary care service, added mental health plus is from our competitors' EPS for our fourth oven employees. In another example, a national retailer virtual E&P customer added our new wellness program for their 1,000 employees to incur in as to healthy lifestyle habits. From a competitive standpoint, we continue to farewell in head to the situations and a lot to treat our mid-market success for the enterprise segment, where we see a growing number of opportunities. We’ll continue to emphasize our service integration and [Indiscernible] platform, and this remains one of the top phases where our customers love in [Indiscernible]. We entered the fourth quarter with a record pipeline of 53% year-over-year and 10% since the end of the second quarter. Looking at our key opportunities, two of these related organizations with more than 40,000 members, while another six lift organizations that range between 10,000 and 40,000 members.Our attach rate continues to improve, rising to 1.53% at the end of the third quarter compared to 1.52% last quarter and 1.11 in the third quarter last year. Excluding Fit track, we members only have access to wellness service, the attach rate or increase of 1.59. 30% of our direct members are now described two or more services compared to 24% last quarter and 17% in the third quarter of last year. At the end of December, we completed the full commercial launch of Wellness in Canada. With four services on the IHP, we see a longer runway to cross-sell more services over time to customers and to further enhance our partnerships with insurers.I'll now provide an overview of what's left to migrate at Optima. At the original ARR at the time of acquisition two years ago, 45% has either migrated to IHP or churn. 16% relates to approximately 80 ESP customers that have a likelihood of migration. This means is either begun to transfer or have indicated they plan to do so. A further 18% relates to a single ESP customer that is under contract until the end of 2023. This customer is buying an RFP next year to go evaluate all available options, including Dialogue Virtual EAP. The remaining 21% relates to rehabilitation and visibility Management Services. We view the segments having got potential. As mentioned, we are currently working on digitizing the services to strengthen our IHP.Going forward we will reemphasize is part of the business in our discussions. We'll invest focus on our IHP, which not only represents more than 80% of the overall ARR, but it is also growing at a much faster rate than the rest of our business. I also want to provide an update on our well interest. The acquisition of Tictrac is a bill of two cities. Early attraction with Wellness in Canada has been very encouraging. We delivered on target a full commercial launch at the end of the quarter. We signed an additional six new agreements and have and are having positive discussions with many [Indiscernible] customers. We also presented the program to our insurance partners and look forward to exploring the addition of wellness to our customers. Our [Indiscernible] Sterling Capital Brokers and our largest independent betas consultant partnered Dialogue to offer our wellness program to its customers. As for the existing wellness pipeline in our international markets, it has performed below our initial expectations and has been slowed to invert. Where we finally agreed to try back in April. We saw a pipeline that was heavily weighted to a large goal that heavily weighted towards large lower insurers, and we're aware of the complexity of dealing with such agreements.This is a way we structured the deal accordingly. We're still confident in our ability to drive solid value from this acquisition. We are working through the existing challenges in focusing the business towards a B2B model that's more aligned with our strategy in Canada. We see significant potential for wellness and Tictrac existing markets and we are investing in our go-to-market team to better address the opportunity while reducing the use of cash in the remaining operations. While this ARR increased slightly in the third quarter, offset in part by foreign currency headwinds, we're in the process of reevaluating our international pipeline and partnerships and will likely need to reset expectations. We'll provide more details on wellness in the New Year. As for the product, we rolled out several improvements. We introduced new challenges, new contents and insights and [Indiscernible] decisions to encourage engagement and more importantly, a new healthy habits feature. This feature recommend activity to support specific well goals, and it is integrated with Dialogue clinical services. That means [Indiscernible] content and preventative habits to members as they move to their health and well journey. I’ll now let Navaid discuss our financial results in more detail.
[Foreign Language] Thank you for joining us today. Our annual recurring and reoccurring revenue or ARR continue to grow at a strong pace. During the third quarter, we added nearly $6 million in ARR in our core IHP business. This was partially offset by the loss of a customer at our legacy Optima business as well as the impact of foreign currency translation. The net effect on overall ARR was an increase of $0.7 million to $97.8 million, up 30% year-over-year. ARR in our core IHP business in Canada increased by 51% compared to the third quarter last year, all of which was organic. We continue to make solid gains with our mental health service and virtual EAP and signed several new agreements for our new wellness program. Since the start of this year, 58% of new ARR came from nonprimary care services in line with our goal of approximately 50% for the full year. We're very pleased to see all our services contributing to our games so far this year and the diversification of our revenue mix. We reached 2.7 million members at the end of the third quarter, representing 54% growth year-over-year. Excluding acquisitions, organic growth was strong at 39% year-over-year. Compared to the second quarter, we added nearly 320,000 new members, representing a 13% sequential increase. Member service units or MSUs rose 112% year-over-year to $4.2 million for approximately $2 million at the end of the third quarter last year. This significant increase is a result of Dialogue's landed and span strategy, which continues to drive multiservice sales among new customers, while crossing existing customers, complemented by the acquisition of Tiptree. We continue to see strong customer stickiness. Churn remained low during the third quarter in our mid-market and enterprise segments at less than 2,800 members and remain well below internal expectations in our small business segment. We recorded an average monthly net retention rate of 101% in the third quarter. As a reminder, the average monthly NRR does not capture the compounding effective growth over a measured period. We believe the better approach and when there will be more comparable with other publicly traded subscription models is to look at a longer time frame. On a rolling 12-month basis at the end of Q3, the net retention rate for our direct customers was 117%. We've continued to benefit from price increases and minimum contract values as well as the addition of new services as customers expand their use of dials IHP.Revenue grew 37% year-over-year to $23.6 million, driven by our land and expand strategy and by our acquisition of [Indiscernible], offset in part by the impact of foreign exchange translation. The primary Care Mental Health and Wellness segment continued to perform well in the third quarter as revenue increased 41% year-over-year to $16.3 million and 34% on an organic basis. The EAP segment generated revenues of $6.1 million in the period, up 27% year-over-year. We continued to gain market share with our virtual EAP, growing that segment by 33% on a sequential basis. Tictrac, our occupational health and safety business in Germany saw a steady progression in the third quarter as revenue increased 36% year-over-year to $1.3 million, even as the year weakened meaningfully in relation to the Canadian dollar. Looking forward to the fourth quarter, we expect to report revenue between $24.5 million and $25 million. This guidance includes a decrease in revenue at Optima due to the customer churn that we have previously spoken about. Even though the agreement officially ends on December 31, we anticipate a reduction in volume as this customer begins to transition business to its new provider. Our efforts to improve profitability started to gain traction in the second quarter and continue to drive forward into Q3. We reported a gross margin of 52.2% in the third quarter, up 960 basis points year-over-year. As we discussed last quarter, we have reached a new level for gross margin. We continue to benefit from pricing increases to eligible IHP customers and from the growing scale of our mental health service and virtual EAP. Additionally, our new wellness program contributed a 70% improvement in gross margin. We've continued to work on process efficiencies where possible and will be undergoing continuous improvement through 2023. We review most of these factors as systemic and expect a significant portion of the margin gains to continue in future periods. For the fourth quarter, we expect a gross margin between 51% and 53%. Operating expenses increased 33% year-over-year to $16.3 million in the third quarter and were flat on a sequential basis despite a full contribution from Tictrac in Q3 compared to only two months in Q2. As a percentage of revenue, the operating expense rate was 230 basis points lower year-over-year as we continue to drive operating leverage in our business. As mentioned last quarter, we have slowed down hiring and cost the company except for revenue-generating roles and within our member-facing teams. We also realized synergies at Tictrac as we accelerated the integration of the two tech platforms and consequently reduce the size of the engineering team. While intentionally pressures persist across all our pipelines, we're executing well against these challenges, taking proactive steps to offset them. We're pleased to see that the measures taken last quarter had [Technical Difficulty] impact on current results. Moving on to adjusted EBITDA. We recorded a loss of $3.9 million in the third quarter or negative 17% of revenue compared to a loss of $4.8 million and $5.7 million in the second and the first quarter, respectively. We are very pleased with our progress and remain committed and on track to achieve breakeven EBITDA by the end of 2023. For the fourth quarter, we expect to maintain this pace of improvement with an EBITDA loss between $2.5 million and $3 million. Looking at our balance sheet, we ended the third quarter with $59 million in cash.I'd like to highlight our strong working capital management, which drove a low cash burn of $2.4 million, well below our adjusted EBITDA loss. I'd like to also reiterate Cherif’s comments on the strength of our balance sheet. Not only is our cash balance more than enough to attain our profitability goals, but it also provides us with optionality for incremental M&A to accelerate our growth, strengthen our platform and broaden our geographic coverage. Thank you again. We'll now open the floor for questions. [Foreign Language]
Thank you, Navaid. [Operator instructions] The first question comes from the line of Daniel Rosenberg and Paradigm Capital.
My first question is around binary service. I was just curious here if the trajectory, if there's some puts and takes as we look into 2023, is it going to be a fool process? Or are there certain quarters or certain timing events that we should consider as we model out what that looks like?
I think when you look at revenues, it's a steady and gross margin follows that trend. Generally, for operating expenses, it's a similar story. The one exception I would highlight is from an inflationary point of view, all of our people cost, for example, in due salary, which we do expect a bump in Q1 on our operating expenses. So that's the only anomaly that I can think of. Otherwise, it should be a pretty steady progression on all three metrics.
And then in terms of use of cash, just as a quick follow-up. Has your thinking changed at all in terms of the best uses of capital as you have a lot on the balance sheet. Just given the market dynamics we're seeing and changes in valuations that we've seen in companies out there?
We've previously said that our M&A team remains very active. We've also said that we weren't seeing interesting valuations in the marketplace. My intuition and this is, starting to change. We're starting to see expectations and evaluations kind of getting to a play that is a little bit more reasonable. So again, our M&A team, our core team is very active. There is a pipeline they're looking at, and we have to strike a balance between being opportunistic when we see good opportunity in the market, but as I mentioned in our comments, the strength of our balance sheet is something that gives us a lot of comfort in the moment in time we're in. So we need to strike a balance between being opportunistic but also having this very strong balance sheet heading into a -- what leasing might be a period of turbulence. And as you know, we have very, very minimal debt and we're going to keep it that way.
The next question comes from Douglas Taylor at Canaccord Genuity.
I'd like to ask a question about the regulatory landscape here in Canada for public pay models, we've seen changes to reimbursement rates, a couple of provinces for virtual care, understanding your private pay, and that doesn't impact you directly. But I wanted to ask what the implications are from some of these changes on the ecosystem here and the behavior by employers in Canada or if there are any other regulatory changes on the horizon that you're monitoring that may impact your outlook?
So the way to think about regulations in Canada is that we're not doing with one regulator, right? So we are dealing with 13 jurisdictions from a payer point of view and we're dealing with 13 jurisdictions from [Indiscernible] a physician point of view, right? So we have, call it two dozen jurisdictions that we work with every day. So you can't paint a broad stroke and say regulations. You have to think about it in different markets. Our primary objective and our mission is to increase access to health care to all Canadians, and we really support and encourage any regulation that do so. I think some of the regulations that you're alluding to in Ontario and others, we feel have been negative -- will have a negative effect and will actually decrease access to Canadians. For example, we have two million Ontario directly and to their families that have access to dialogue. And if there was a regulatory change to curtail that, that is a net-net loss of access for Ontario to Canadians. So again, we're working with every regulator and every jurisdiction to make sure that doesn't happen. Now I think it depends on the political situation in every market. And there are some markets that are a little bit tougher than others for us. But the nice thing about our model that is very resilient. As you know, we have a multiciliary model, contrary to some of our competitors trying to position all the models. So this means that we're able to balance the load between the different practitioners on our -- that provide the service. And depending on the regulatory and payment changes, we're able to serve them through the most intoned team. So once again, our primary objective is to increase access to all Canadians. We believe that Dialogue brings in new capacity and new financing into the system without asking the government for a single dollar, which is great. And we're going to continue working with all the way the way is to make sure this continues happening.
You made great progress on the gross margin front. It seems like there's more to do there still. Just wondering if you'd speak to your expectations of what kind of gross margin level are required for you to hit to get to that breakeven EBITDA and cash flow level by the end of next year?
I would say, in terms of gross margin, as we've talked about over the past two quarters, we believe we've reached a new level. And for 2023, we expect to be operating in the same range. So yes, there will be marginal improvement as we continue to look for areas of efficiency. But a significant improvement in gross margin is not -- we're acting on us to drive the profitability will come from revenue maintaining our gross margin at current levels, maybe a slight improvement and then continue to drive operating leverage as we have over the past couple of quarters. Those are the three ingredients that are going to get us to breakeven. As you can see, we're well on track and getting traction quarter-after-quarter.
The next question is from Chelsea Stellick with iA Capital.
My first one is just could you just give us a little bit more color on the guidance for Q4? I read that you had some new contracts that were signed but not launched during the quarter. And therefore, their value wasn't reflected in this quarter's revenues, but do these contracts hit by Q4? And sort of is anything offsetting them?
So the guidance we provided on revenue, particularly is what your question is at the midpoint of the guidance would be reflects year-over-year growth of about 31%. And that's very much in line with ARR growth in Q3, which was around 30%. So that's how it's going to drive. And the demand for our services is she talked about, is still quite high. We've entered Q4 with a record high pipeline. There is generally as we talked over in the past, depending on the size of the customer, between a 30- and 90-day lagging new customer signing and they get onboarded. So a lot of will be signed in Q4 we've downward in Q1. The other thing to keep in mind for Q4 is that is what I talked about in my opening remarks on Optima. So even though the customer who is not renewing the contract ends on December 31. We do anticipate a little bit of a reduction there as they start the migration to the new provider through the balance of Q4.
I recognize that you can't give us too much detail, but as you're looking to strengthen your IHP, could you just give us any additional color on the rehab and disability management services that you're exploring. What are you seeing in terms of pre demand, I guess?
So as we mentioned in the prepared remarks, when we acquired Optima, there was a sizable multiple business and the [Indiscernible] management that we have space. And that demand, we've seen a lot of interface and growth. When you talk to employers and insurers today and you ask them that what are your issues, mental health is a big one. And as a result, when people have mental health issues and we take short-term or long-term visibility, then visibility management and rehab become a very important cost center for stocks. We believe that there hasn't been a lot of innovation in the field in the last decade or so. And we think there's a really interesting opportunity to digitize and innovate, we have and happen, and we think it's an extremely exciting opportunity to integrate into the IHP because again, if you think about it continuing prevention with our wellness products to treatment and diagnostics with our primary care and mental health products and then all the way to people leave work and then helping them return to work. So we think that having all of that in one place, again, on one app is something that's never been done. And we're excited to be the first people to bring inhibition to Canada.
The next question is from Scott Fletcher at CIBC.
I wanted to ask a question on the investments in sort of in the new IHP initiatives. Will those investments sort of see R&D as a percentage of revenue pick up in Q1 of next year when they start? Or do you expect to sort of keep that impact flat even as you invest in more developing the products further.
Yes, I can say that. So no, we don't expect an uptick because just at a high level, you can imagine that some of the teams, for example, that have integrated wellness and developed all the new wellness features that are now potentially done and will be in a more regular maintenance cadence will now be transferred to some of these new products. So we have a actually pretty amazing product innovation team, and that team has always been working on the next steps. So we don't foresee any material increases in our R&D spend in the next couple of quarters.
And then the second one for me, just on the construction of the pipeline, you mentioned that it's at record levels. Could you maybe break down where you're seeing some of that strong growth? Is it at the enterprise level? You've seen some good university adds. Just a little more color on the construction there would be helpful.
I would say that the contraction of the pipeline really reflects the growth we've had over the last couple of quarters. So there's a really nice mix and diversity in size of company, industry product, and that is something that we're also -- we're actually very happy with because I think it makes us very resilient and anti-fragile pipeline that really reflects our growth ambitions. So there's no pattern that I would point to other than the fact that it really reflects where we want to be.
The next question is from Endri Leno of National Bank Financial.
I have a question on the ARR and then a follow up on that. But I if you can talk a little bit about that 18% Optima higher. In terms of is it -- what kind of options are they evaluating? Is it all virtual or in person as well? And you can charter of what type of customer is it?
So what I heard is the 18% customer, what kind of options they're evaluating for their IHP? If that's the right question, the answer is -- this is a pretty traditional employer, and they've indicated that in-person will be a very important characteristic that we're looking for, as you know, optimizing in-person service. Dialogue does not have an in-person service. So this will be part of the discussion. Hopefully, we succeed in convincing them that in the virtual EAP is the way to go. As a reminder, the reason we say that virtual is so much superior is that we're able to promise and actually guarantee at 24-hour SLA mental health services. And this is in contrast to 10 to 15 days within person. And the data and the evidence clearly shows that faster time to care leads to much better help out company. This is kind of like logical, but the scientific evidence also demonstrates that. So this is why we're -- we've been investing in pushing so much the moderate virtual EAP, and we hope that more customers follow us on the journey.
Are you able to put any dollar amount on that 18%?
I mean part of our EAP segment, we haven't disclosed that number separately. So it's not something we've disclosed.
And then my follow-up on this one is that if you can talk a little bit in terms of information, the RFP and then that you're going to work in there, what are you seeing in there in terms of when you're bidding for RFPs? In terms of the competition, in terms of what your potential funds are looking for, any kind of changes, let's say, that you can point to that have happened in the last 12 months?
No. I mean, I think it's been pretty steady in the RFP world. There's a lot of coffee pace, right? So what often happens is these are existing RFPs that companies that used it five years ago for their current provider, they'll use the fine part maybe change a couple of things. But there's a lot of -- I mean, we see the same RFPs over and over in. So there's really no new trend that I would point to. The only thing that I would say is that there is more and more emphasis on one and return to us. Otherwise, one of the business justice discussions are kind of like the only two things that I could point to. But otherwise, RFPs are very similar from [Indiscernible].
The next question is from Adam Buckham from Scotiabank.
So the first one I have is on the enterprise segment. Now over the last year, you guys made sort of two concerted efforts to, one, increase the size of customer you're looking at, and then two, you've added additional services. I'm just wondering on a contract size basis, if you can provide some color on how that's trended throughout this year. So comparing like contracts signed last year, for instance, versus this year, like how much higher would they be, for instance. So it does not to be exact, but maybe some color would be great.
I would say in terms of overall volume, as we focus over the past few quarters, under that segment more and more overall volume and the proportion of those customers that take up our pipeline has significantly serious provided some stats in his opening remarks in terms of the number of customers with over 10,000 members. We obviously announced a couple of big ones, including Scotia earlier this year. And as Cherif mentioned, we have a number of those in the pipeline and more than we've had historically, just because we've been focused on that segment a little bit more over the past several quarters.
And good morning, if you're beyond what Navaid just shared, if you're interested in a more detailed number, we can look it up and get back to you.
My second question is kind of along the same lines, but you guys provided some good color on trailing NRRs on a 12-month basis. Now some of that is sort of skewed to some of your larger customers. When you look at the sort of enterprise segment, I'm just wondering if NRR on a trailing 12-month basis has sort of looked very similar to that number? Or is it skewed higher or lower.
In the enterprise segment, I would say the NRR is higher. And the reason for that, like we’ve had very small churn but [Indiscernible] nonetheless, when we've implemented some price increases and minimum contract values in the SMB and the end market segments, and we saw some very limited churn. But in the enterprise segments, we've seen pretty amazing stability and customers have been with us now for some of that's almost the entirety of the life of the company. So we've been very encouraged with us.
The next question is from David Kwan, TD Securities.
Just obviously see some good improvements in the gross margins over the last couple of quarters here. And I was just wondering, though, could we see the gross margin move beyond, I guess, the guided range you have for Q4, the 51% to 53% next year. Just given the price increases you guys are implementing right now, it will take some time to make their way to the system. And maybe also given -- I assume there's going to be a bit of an uplift after the legacy talked about customer loss? Or maybe are those tailwinds are mostly reflected in that Q4 guidance.
So what we're targeting for 2023 is in line -- is it a similar rate to where we're at today. And all of the points you mentioned are very valid. The other thing that's offsetting that is, I mean, these are practitioner less costs. So there will be inflationary increases in salary increases in Q1 of 2020. That will be an offsetting pressure. The other thing that we want to emphasize is that, yes, profitability is a priority. Revenue growth is our first priority. And we also want to maintain competitive service levels and deliver the level of service. So we're looking to balance maximum revenue growth or optimum revenue growth by delivering a service level of appropriate service also will make the necessary investments that we need to make there. And then the third driver is going to be continued cost discipline. So in short, to answer your question, we're targeting to be in a similar range to where we are right now.
On Tictrac, could you provide an update on the key insurance partner and kind of how they're really rolling out the solution there? And then maybe bigger picture, just help us relate to modeling because between the international business and the rollout kind of commencing here in Canada, how should we look to model Tictrac revenue?
So on the first point, the customer we talked about who is transition to an API product. So they relaunched the second territory in just a few weeks ago in Q4. So we'll have a small impact on ARR and recognized revenue. And we do expect two more territories to launch in Q1. So as you recall, it was a total of six territory. So one has been witnessed have now been relaunched, and we expect another purpose to launch in Q1. On top of that in Tictrac, we signed an agreement with the insurance partner in the low six figures in Q3. And obviously, the foreign exchange has beards on ARR as well as recognized revenue. As Cherif mentioned in his notes, we do need to read their expectations on Tictrac, and we're reviewing our strategy currently and we'll update and provide a proper update when we report the Q4 results. I mean, we structured the deal in a way that's yielded us from the slower conversion of the pipeline, and we've taken actions on cost to offset that. And we are pivoting to a B2B focused approach aligned with our IHP strategy in Canada. So more information to come on that when we report Q4. But we are looking at resetting expectations on Tictrac.
And one last question, maybe for if you want to take this one. Just on the competitive nature of the market right now. Curious to get your thoughts on what you're seeing, particularly, I guess, maybe will TELUS from what acquisition. And they had, I guess, the announcement earlier, I think this week with Walmart. Just curious to get your thoughts from that standpoint.
So I think this is kind of the theme we've addressed the last couple of quarters. The market in Canada is really shaping up as almost a duopoly with TELUS and in the lead. We're obviously a little bit ahead on primary care. I've been a little bit ahead on EAP with the acquisition of LifeWorks, big acquisition. TELUS is formidable competitor to us, but our win rates are still holding up very strong this quarter as in previous quarters. And we haven't seen any major shifts in the competitive landscape yet. On Walmart, specifically, I think it's important to look a little bit further than the PR, right? So LifeWorks was already Walmart E&P provider. TELUS was already well Walmart's primary care provider, and TELUS was also powering Walmart's pharmacies. So, this press release was really a repackaging of an existing situation in an effort to show that there is now some kind of integration between services. As this is something we've had for two years now. It has been the pioneer and we're way ahead on that. So again, the Walmart the repackaging of something that was already there, it's really nothing new when you will be on the PR.
The next question is from Jerome Dubreuil with Desjardins Securities.
The first one is it will be an interesting market, you seem to have great success there. We're often talking about how well penetrated in the enterprise market on the EAP front. On the other side of service, how penetrated is the general university or school market?
It is actually not penetrated very well at all. We are working with a key partner in the educational market as we before. [Indiscernible] has been really successful in the postsecondary market. They have good relationships with the two associations. Sometimes it's the student association that is a customer and sometimes the diversity itself but as a customer, and they've been really successful with both of these call points. I would say that primary care is still in its intensity in that segment. Mental health and each EAP services are well penetrated by primary care. There's a lot of runway. So in mental health and EAP. It's mostly and replaced from other vendors, whereas primary care is mostly empty markets that were [Indiscernible].
Hopefully you can to hear me now. And also congrats for the cost control here, we're confused to have a bit of a comfort result on how sustainable that is and obviously Q4 guidance helps on that front. But how was the utilization in the quarter versus other seasonally low Q3? And then second, when Tictrac is maybe a bit more ready for full commercialization. Do you think possibly sales and marketing could go up? Or do you feel your structure is ready to with [Indiscernible]?
Just a quick comment on utilization. With not the scale that we have and the number of members that we have utilization levels across all our services are relatively stable. As we've talked about, I mean, it varies based on service. But now as we're heading into Q4, which is seasonally high utilization on primary care, mental health is an area that's seeing continued utilization and stable utilization the demand for mental health is quite high, but our utilization levels with the field that we have now is relatively stable has been for the past few quarters.
And on the Tictrac side, I think you asked whether we're going to have to scale our sales and marketing spend. So nothing significant, nothing material. I mean, we believe that we're a current team we can do pretty well in wellness. We've recently hired three or four folks in the London office to help with that with GPM efforts. But on the total cost basis, you're not really going to add nothing.
[Technical Difficulty]
The question I have is that you talked about the ABC goods and the strong pipeline and the M&A [Indiscernible] talk a little bit in terms of what would you consider something that would fit with your strategy, right? Like in terms of what you can sure you're seeing more development. But is that something you want to continue investing in given the situation of Tictrac? Or kind of any color on what that M&A pipeline of light? And what are you more interested in?
So first of all, I'll say that all the opportunities are currently looking at our Canadian. This is an important point. And I think we've been asked in previous quarters about our international strategy. And we said that the #1 priority is Canada and that remains a fact today. The second thing I'll say is that we've we talked about mental health training, rehab and DM as future priority areas. So obviously, as the team look at opportunities, these will be something on their mind. And then thirdly, wherever we can increase scale, even in existing services, I mean this could be of interest to us. What's abiding in the market is a consolidation and a market really developing towards a 2-player market or a duopoly. And I think that many subscale businesses will look to be consolidated between TELUS and us. So we're looking at some of these opportunities that could be interested. But again, there are sometimes a quite significant gap between what we think an asset is worth and what the owners of that asset I think it's worth. And we also want to be very prudent with our shareholders money, and we want to make sure that any deal we make is accretive to our shareholders. I mean, they'll have to be accretive on day one and sometimes you have to take synergies into consideration, but it has to make sense.
So these are all the questions we have for today. For anyone that would like to meet our team, we'll be hosting meetings at the National Bank Financial Technology Conference in Toronto on December 7th. You can also reach us today's time by e-mail at investors@dialogue.co and it will be our pleasure to answer any questions that you have. Cherif, the floor here again to conclude today's call.
Thank you, and thank you all for your participation on today's call. We look forward to speaking with you again as we release our Q4 results at the end of March. Have a great day, everyone. Thank you.