LifeSpeak Inc

TSX:LSPK

Earnings Call Transcript

[Operator]

Good morning, and welcome to the LifeSpeak Third Quarter 2020 Results Conference Call. [Operator Instructions] At this time I would like to turn the call over to Michael McKenna, Chief Financial Officer of LifeSpeak. Please go ahead, sir.

[Michael McKenna, executive]

Thank you, operator. Welcome to the LifeSpeak Third Quarter 2022 Results Conference Call. Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated.

Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding LifeSpeak and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management. These may indicate management's expectations of future growth, results of operations, business performance and business prospects and opportunities.

Such statements are made as of the date hereof, and LifeSpeak assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings, which include, without limitation, our MD&A and our earnings press release issued today for additional information.

I would now like to turn the call over to Nolan Bederman, LifeSpeak's Executive Chairman for opening remarks. Nolan?

[Nolan Bederman, executive]

Thanks, Mike, and good morning, everyone. We very much appreciate you attending our third quarter update call. I'm pleased to report that as demonstrated by our Q3 results, the LifeSpeak team continued to diversify our business, advanced product integration, cross-sell products, signed new clients and pushed forward with our core strategy of becoming the world's leading SaaS-based whole-person engagement platform.

Despite the overall challenges in the global economy, we've managed to build a company that's stronger than ever. We now have almost 1,000 corporate clients, the majority of which are outside of Canada with an extremely diversified revenue base. We are also demonstrating the power of our platform by leveraging a number of new paths to winning new customers and by leveraging our multiple components to sell more to existing customers. And importantly, as our ARR grows, we're demonstrating our efficiency and scalability with increasing EBITDA margins.

For years, we've worked extremely hard to build the leading SaaS-based total well-being education and tools platform with a goal of servicing the world's leading employers and health plans and with the unique power to engage employees in sensitive matters. In other words, we've invested in building the accessible, engaging front door, which can address a huge hole in the health and wellness ecosystem. Preventative actions that ultimately lead to less [ sigma, ] better results and more employee loyalty and productivity.

Over the past year, since becoming public, we've taken our core digital mental health engagement education platform and very strategically added leading physical well-being, caregiving and substance abuse tools. As we've consistently said, these core capabilities which are directly responsive to client needs and industry evolution have allowed us to round out our engagement platform to be able to address a more fulsome suite of employee needs. We're very pleased that we were able to decisively identify, acquire and retain these leading capabilities, their talented teams and their deep roster of corporate clients.

With the successful acquisition of Wellbeats in Q1 and our other acquisitions in the quarters prior to that, we are a much higher quality business. Not only is our core business fundamentally strong, but our management bench is dramatically deeper and more international.

Perhaps most importantly, in the face of broader economic pressures and the corresponding impact on individuals, our services can address very important and delicate issues facing companies in all industries, demand for which is only increasing. A corporate focus on employee well-being, and the resulting improvements in retention, culture and productivity is only becoming more critical. This market need continues to help us materially increase our scale and diversification, both in terms of our geographic presence and our client base.

The first stage of the integration of our 4 acquired businesses, LIFT session, ALAViDA, Torchlight and Wellbeats, is effectively complete, and we have now begun to function as one unified business. We've taken great care to build a low-risk integration plan and are on track to meet our goals. Over time, at a pace driven by prudence and customer satisfaction, we will continue to evolve into a single, completely integrated platform and brand.

With certain aspects of the integration completed, and all others successfully underway, we can focus our energy on accelerating growth by leveraging our expanded SaaS-based offering, combined complementary client and partner bases, enhanced cross-selling opportunities and expanded geographic presence. LifeSpeak's integrated B2B, SaaS-based whole-person and well-being platform for employers, health plans and insurance companies continues to generate engagement and interest with enterprise clients, partners and embedded solutions clients, and we are highly confident that we are positioned for growth in the near and in the long term.

Once again, we'd like to thank you for joining the call today, and we look forward to sharing more of our successes. Now I'd like to turn the call over to Michael Held, LifeSpeak's Founder and CEO. Mike?

[Michael Held, executive]

Thanks so much, Nolan, and good morning, everyone. We are pleased to report that demand for LifeSpeak affordable and effective whole-person wellbeing platform for employers, health plans and insurance companies remains strong. Employers and organizations, regardless of macroeconomic pressures remain focused on the mental and physical well-being of their employees and customers.

Moreover, we believe that LifeSpeak's SaaS-based platform continues to be supported by consistent long-term factors, including increasing corporate spending on mental health and total well-being, digitalization of health solutions, growth in micro learning content as a means of well-being education and increasing corporate spend on remote access tools.

Our high-value holistic mental health and total well-being solution, which is increasingly relevant and diverse, continues to drive the growth of our business. We believe our solution is increasingly relevant because, among other reasons, we are in a work cycle where companies are finding retention and hiring very difficult. Feedback from our clients indicate that our services provide a level of value that can incentivize current employees to stay and new employees to join.

Some highlights from the quarter include: our third quarter 2022 revenue increased to $12.8 million, an increase of 116% over the third quarter of 2021. We reported annual recurring revenue of $52.2 million as of September 30, 2022, an increase of 117% over the same period in 2021 and our number of clients increased by 266% to 987 clients as of September 30, 2022, compared to 207 as of September 30, 2021.

Within our core enterprise client base, select client wins in Q3 included CommonSpirit Health, Stanley Black & Decker, the Workers' Compensation Board of Nova Scotia and H&M Canada. Partnerships and embedded solutions client additions continued through the third quarter with the launch of new embedded partnerships with MetLife Gulf, our first Gulf region client, highlighting the global nature of the platform, as well as the launch of our partnership with WebMD.

After the quarter end, LifeSpeak launched several additional significant enterprise clients, including with BJ's Wholesale and Best Western Hotels & Resorts in the U.S. and signed additional embedded partnerships, including with Manitoba Blue Cross in Canada.

During our third quarter, we experienced growth in all of our acquired businesses and gained momentum with potential cross-sell opportunities across the board. On this note, I'm pleased to report that our overall cross-selling initiatives progressed well through the third quarter of 2022. With the successful closing of several cross-sell multiproduct opportunities, including with Maximus Inc., PricewaterhouseCoopers and Grant Thornton.

The company anticipates accelerated cross-sell growth in the fourth quarter of 2022 as net new clients are added with multiproduct solutions and as the current portfolio of client cross-sell opportunities continue to be realized. Overall, we are very excited about the opportunity that lies ahead of us and believe that we are making significant progress on all fronts.

I will now transfer the call back to Mike McKenna, who will walk us through our detailed financials, following which I will provide some closing remarks before we turn it over for questions. Mike McKenna?

[Michael McKenna, executive]

Thank you, Michael. We believe our third quarter financial results demonstrate the underlying strength and diversity of our business, and we are excited to share these results with you today. As mentioned, revenue for Q3 2022 increased by 116% to $12.8 million. That's up from $5.9 million in the third quarter of 2021.

Annual recurring revenue, or ARR, now sits at $52.2 million, which is a 117% increase compared to the third quarter of 2021. ARR for the third quarter was positively impacted by the addition of a multitude of new enterprise clients and new clients in our embedded solutions area as well as expansion within the existing customer base. Of our $52.2 million in ARR, approximately $43.1 million came from our 968 enterprise clients, while the remaining $9.1 million came from embedded and other verticals.

Q3 is traditionally impacted by seasonality with lower activity within the quarter. However, on a net new basis in Q3, we added 65 new enterprise customers. This is higher than the 44 customers added in Q1 and the 56 added in Q2, all measured on a pro forma basis and indicates the strong underlying momentum of the business for Q4, which is traditionally the busiest quarter for new enterprise customer additions.

With respect to geographic diversification, approximately 64% of our ARR now originates from markets outside of Canada. Of note, we report our ARR on a constant currency basis and use a CAD 1.3 to U.S. dollar exchange rate to calculate and compare ARR. Given our exposure to the U.S. dollar and the movement in currency exchange rates over the quarter, we do think it is helpful to also note that if we were to adjust for the strength of the U.S. dollar, our ARR would be approximately $54 million as at September 30, 2022.

Importantly, no client accounted for more than 3% of this ARR as of September 30, 2022. Adjusting for the large embedded solutions client that we have discussed on previous calls, on a pro forma basis, our ARR has grown by approximately 22% year-over-year. And enterprise ARR has grown by approximately 31%, again, all of which is measured on a pro forma basis for acquisitions. Both our Q3 financial results press release and the Q3 MD&A provide further detail on this enterprise to embedded breakdown for the quarter and on a historical pro forma basis for comparative purposes.

Moving on to adjusted EBITDA. Our commitment to operational efficiencies provided the company with a very strong adjusted EBITDA of $3.1 million in the quarter, an increase of approximately $1.5 million over the second quarter of 2022. The 24% adjusted EBITDA margin for the quarter is particularly strong when considering the macroeconomic operating environment. We believe this margin will continue to increase through the balance of 2022, given the stable underlying cost base of the business and the operating leverage the business is now achieving.

As part of our first quarter 2022 financial results, we identified annualized cost rationalization of approximately $3.3 million. Subsequently, in Q2, we revised this amount to be approximately $6.8 million of annualized cost savings. And following further implementation of the program through Q3, we are pleased to announce that we have achieved a total annualized cost savings of approximately $7.8 million.

These synergies have originated primarily from a refinement of processes, creating efficiencies and managing overlapping resources. However, operational excellence has not been sacrificed and we continue to believe the company is better positioned than ever to execute on our growth plan.

Turning to net income or net loss. The net loss for the quarter amounted to $1.4 million. This has significantly decreased when compared to Q3 2021, where the net loss was $20.1 million but was largely due to the company undertaking the IPO in Q3 of 2021. In addition, 2 of the previously mentioned metrics, we closely track other KPIs to help us evaluate the strength of our business. These include gross profit margin. Our gross profit margin for Q3 increased to $11.6 million, resulting in a gross margin of 91%. This is consistent with Q2 2022, and both of which were higher than Q1 of 2022.

Moving on to net dollar retention rate. NDR provides a consolidated measure by which we can monitor the percentage of ARR retained from our existing clients. As it was in Q1 and Q2 of 2022, our consolidated NDR remains significantly affected by the reduction in ARR from 1 large embedded solutions client and higher than normal churn in Q1 following the Wellbeats acquisition. Consolidated NDR will reflect that significant impact until Q2 of 2023.

With that in mind, our NDR was 78% at September 30, 2022, on a consolidated basis. This is higher than the Q2 2022 consolidated NDR of 76% due to increased growth within the both enterprise and embedded segments. To provide better insight into the underlying performance of our portfolio, we would like to also note the NDR for our enterprise clients was 97% as at September 30, 2022.

We believe this demonstrates the overall strength of the underlying enterprise customer portfolio that we have built and continue to maintain. In addition, on a consolidated basis, our annualized NDR for Q3 was 99%, which we believe further demonstrates the return to a typical NDR that we would expect for the business overall.

On to logo retention. Logo retention, which is measured on an LTM basis was 87% at the end of the quarter. This is slightly lower than the 89% reported by Q2. Of note, in Q3, our average enterprise client ARR added were higher than the ARR for customers that churned off the platform. This is consistent from a trend in Q2 and shows the continued strength and growth opportunities within the enterprise segment.

Moving on to pipeline. With respect to an update on the pipeline, we continue to add widely recognizable names to our client portfolio. And as Michael noted earlier, our momentum in customer wins continues to accelerate in both North America and globally. An important trend we are seeing in the enterprise segment is the opportunity to continue to focus on increased size of customer contract wins.

This is both in general terms and on specific partnership opportunities where new multiproduct sales are creating several opportunities that the company would not have been capable of attaining historically. We are now able to pursue much larger enterprise deals due to the strength of the platform and the multiproduct approach. The enterprise pipeline, both in number of deals and size of partnerships remains very strong.

Capital structure. With respect to our capital structure, this is an element of the business that we continually monitor to ensure it can support the growth-oriented nature of our business. For the reporting period, we have, as we did in Q2, well exceeded the financial tests for compliance on all terms of the credit facility. Along with our commitment to compliance on the terms of the facility, our lenders remain supportive of the business.

While we do not currently have a requirement for additional financing, it is important to ensure we monitor the market for opportunities that may benefit all stakeholders as our business continues to evolve and grow. This is a process we will continue to undertake with regularity.

Overall, we remain optimistic about the outlook of our business. LifeSpeak has grown very rapidly and we are more diversified than ever. We are very profitable on an adjusted basis and we believe that our platform is extremely compelling to our clients.

With that, I'll turn the call back to Michael Held, who can provide some closing remarks. Michael?

[Michael Held, executive]

Thanks so much, Mike. We remain very upbeat about our progress to date and the opportunities ahead. As we look forward to the remainder of 2022, we believe our growth will continue as we expand in an industry where organizations highly value the mental health and total well-being of employees.

We believe that our deep and diverse customer base improves the relevancy of our business, and that the scale we have reached today with nearly 1,000 clients and the retention rates we achieved, validate our convictions that our solutions are essential to our clients and their employees. We are looking forward to demonstrating that as we update you on our progress in the coming weeks and months.

And we will now open the call to questions. Operator?

[Operator]

Thank you. [Operator Instructions] Our first question comes from David [indiscernible] from TD Securities.

[Unknown Analyst]

This is [ Salman ] on behalf of David. Congrats on the quarter. So a few questions from my end. First, again, the outlook looks very positive. But despite that, just to get your thoughts if you're seeing any material headwind from the increasingly challenging macro environment. Like are you seeing any longer sales cycle? You already spoke of churn. Are your customers taking longer to pay? Any thoughts on those.

[Michael McKenna, executive]

Yes. So why don't I work back to front and then I'll turn it over to Michael and Nolan for some just general commentary on the overall environment. One of your questions there was just in relation to payment cycles. Are customers taking any longer to pay? I'd say no, not at all. In fact, during Q3, we were probably more effective on our receivable turnover basis than we had been in Q1 and Q2. That's also with some increased resources in the area on our part.

So we're focused on that and ensuring that we're managing that payment cycle efficiently and to ensure we're on top of things. We certainly do, from time to time, see some customers looking to have discussions on pricing. But I think overall trends in the area, we still remain confident in.

So one of the things that we pointed out, just as an example, as we compare churn to new customers coming on to the platform, right? The new customers coming on, the ACV typically tends to be -- in Q2, it was about 10% higher. This quarter it's about 12% higher on an ACV basis. And that's really important, right? Part of that is because the platform, right, can now go after and is more -- we're more prepared to go after larger enterprise customers, okay? But I think it also shows the trend in just in terms of the growth where opportunities are that larger enterprise typically tends to be wanting to spend more now, whereas in certain areas, small business-wise, that's where we're probably seeing some more budgetary constraints, okay? But again, I think positive trends.

So all this stuff, we're paying a tremendous amount of attention to, both from just a general environment perspective and also to when monitoring our KPIs. So I think we're happy with where we are, but obviously, continue to be very closely monitoring this. So Michael, Nolan, I don't know if you have any more general thoughts outside of some of that stuff on the KPIs?

[Nolan Bederman, executive]

Yes. I mean I'll just add one quick thing. Thanks, Mike, that was the right answer. While we aren't seeing any impact yet on sales cycle, of course, we're being cautious and anticipating that, that can happen any moment. And we think a couple of the factors that probably underscore it is, there's still a very high anxiety level in the marketplace of employees, whether it's higher interest rates are now dealing with their own personal financial situations, uncertainty around the economy.

And we still have a very low unemployment level in companies struggling to make sure that they retain and motivate and engage their employees, which are trends that are in our favor. So not seeing it, but certainly eyes are wide open, and we do understand the macro environment for corporate spending.

[Unknown Analyst]

Okay. That was very helpful. And for the multiproduct integration that you guys also spoke of and which we also see in the presentation, so how are the product permutations being driven? Are those coming up as a result of the feedback you're getting from customers? Or is that based off of what you deem could be a good combined solution for your customers? We saw a few product permutations in the presentation as well, so curious to get your thoughts on that.

[Nolan Bederman, executive]

Sure. It's Nolan, I add quickly.

[Michael McKenna, executive]

Okay, go ahead, Nolan.

[Nolan Bederman, executive]

We are absolutely -- what we've done because there are a very, very, very large number of possible permutations and combinations, what we've done, and we've maintained that this in prior calls that our integration strategy is designed to be low risk, high impact, customer-driven.

So the solutions that we are starting with are the ones that we know we can offer a seamless experience and then we know that are most salable in the marketplace. So in the early days, we -- and are a simple enough set of solutions, that we can actually have a sales force sell them and not be distracted.

So your direction is correct. We absolutely are looking at what are the things in the marketplace that will get sold. The simplest and the easiest 2 clients that we can train our salespeople to do that we can deliver in an excellent way. And as we build that road map out, the number of those combinations will grow. But we want to make sure that we don't have solutions in the market that aren't seamless for our customer, and we are being -- we're making sure that we get pulled by our customers in the right direction.

[Unknown Analyst]

That was very helpful again. And my last question here. So you already spoke of the higher ACV that you saw this quarter. So of course, a part of that is because of the larger size of the clients that you're getting, but with the new clients, are you seeing that they're starting off with only 1 offering? Or are they becoming more and more open to starting off with the multiproduct offering?

[Michael McKenna, executive]

It's Mike again. I think it's a combination of both. We are certainly able to go to larger enterprise with multiproduct solutions. So we did mention as an example of a customer win BJ's Wholesale, that's a 2-product deal, LifeSpeak, and Torchlight, as an example. We also mentioned Maximus, which is a Wellbeats and LifeSpeak customer now, okay? And those are very sizable ACV deals for our enterprise business. So very good wins. And so that is really validating the multiproduct approach.

That said, we still, in most cases, start customers with 1 product, okay? Ultimately, to hopefully cross-sell down the road. But the sales strategy is still leading typically with 1 product. But again, opportunities now exist on the multiproduct strategy. With those higher ACVs, that 6 to 12 months ago we certainly would not have been anywhere close to getting. So that's been a great evolution for the business and a very significant focal point for us as we roll into 2023.

[Operator]

Our next question comes from Jeff Martin from ROTH Capital Partners.

[Jeff Martin, analyst]

Wondering if I can get a sense of your high-level outlook as we head into 2023. There wasn't any update to guidance for 2022. I think people have a pretty good handle on where 4Q is going to shake out. But just curious what your high-level thoughts are for 2023.

[Michael McKenna, executive]

Jeff, it's Mike. I think as you mentioned, we got a pretty good -- you've got a pretty good handle on sort of where we'll get to through the balance of the year. Q4, obviously, it's traditionally the best quarter of the year for enterprise, right? If you think back to last year, that was about $4 million of net new ARR in enterprise, right? So we've got a pretty good look through there. Obviously, the momentum of Q3 with the 66 net new customer adds, right? That provides a pretty good look through, good visibility into Q4, right?

We obviously want to maintain that into next year. I talked on the last -- with the last question a little bit about the multiproduct strategy and sort of how that is helping to expand opportunities within large enterprise. So certainly feel good about where we're going overall. But I think the key will really be good fundamental execution to continue through Q4, right, and continue to build on this logo momentum and the adds, and that should set us up well for 2023.

I think Nolan and Michael probably would like to give a bit of commentary just about the overall -- just general outlook of what we're seeing, okay? But I think the other thing that probably I should touch on, Jeff, just before we get there, is just about the margin, right, and the EBITDA margin and how the general -- the work that we've done this year just as it relates to the cost rationalization and the efficiencies within the business has set the margin up to be fundamentally very strong, right?

So we were at 20% on an adjusted basis in Q2, 24% here in Q3. And you'll note, if you go -- if you get into the sales and marketing and G&A costs in the income statement, it's down considerably Q3 versus Q2. I think we've got a very good, strong and stable cost base now, okay? We do need to make -- we'll make some timely investments in the business. But that cost base is going to remain very consistent, right? And that's going to provide good opportunity for operating leverage as it relates to margins. So we had talked about a sort of 30-plus percent EBITDA margin in Q4 and then continuing that into 2023. And we're pretty comfortable with that outlook.

[Jeff Martin, analyst]

Curious if you could give us an update on cash and debt outstanding. Didn't see a balance sheet in the press release. I know it will come out later today in the filings, but just curious where you are on that. And what annualized interest expense is going forward?

[Michael McKenna, executive]

Jeff, it's Mike again. So just in terms of interest costs for the quarter, it was about $1.87 million. If you look at the cash flow statement, you'll notice that the interest cost paid during the quarter, we're actually a little bit higher. We actually pre-paid 1 month of Q4 interest cost because we've been doing a little bit of work just in terms of our -- trying to manage the underlying funding cost between the prime rate in Canada versus BAs, which is just another funding mechanism here that's available. And so we've been able to manage some interest cost that way.

So if you think about that $1.87 million in the quarter, that will be sort of moving into Q4. But again, we pre-paid 1 month of Q4. Overall, we did not make any further repayments on the facility. During the quarter we were not required to. So the outstanding balance on the facility remains $87.5 million. We have a $5 million undrawn revolver, and we had about $7.8 million of cash on the balance sheet at the end of the quarter.

So generally speaking, feeling okay, with the liquidity going forward. And as I mentioned in the prepared remarks, we are consistently sort of monitoring opportunities in the market should we require any financing. But at this point, comfortable with the outlook. And again, I think you can see from the sort of fundamentals of the business in terms of where revenue is going, especially as we think about ARR on that FX adjusted basis, and we'll get some positive impact out of that into Q4, right, at $54 million moving forward. And then the cost base being steady. I think we certainly see good momentum in the outlook. So overall, pretty comfortable with where we're at.

[Jeff Martin, analyst]

Great. And then last question for me is relating to sales and sales efficiency. How do you feel the performance with sales given the current environment? And what is the lead pipeline development look like?

[Michael McKenna, executive]

Yes. I'll touch briefly on that, Jeff, and just maybe give you a bit of insight into some of the work we're doing systematically within the business, and then I'll turn it over to Michael and Nolan for a bit more general commentary. We've really made a real effort and focus on this. A lot of this, frankly, came as we've built the team through some of the acquisitions, certainly, with the processes that we're undertaking, for example, at Wellbeats we're very strong. A great sales team there, really very efficient in terms of work they did on tracking conversion. We worked hard with our Chief Growth Officer to take some of those best practices, emanate them through the organization.

So we're very focused on this daily, weekly, however you want to phrase it, but it's really sort of top priority for the business, right? And so it's been one of the great outcomes of the broader strategy as it relates to building out the platform with a couple of the acquisitions because some of the work around sales and some of the efficiencies and just the knowledge we've been able to gain there has really been an excellent sort of outcome. And so we are focused on this. I think we understand the macro environment. And so that's another part of the reason why we're focused there.

But again, if you think about logo adds, right, if we go back and go all the way back to Q1, on a net basis, 45 logo adds in Q1, 59 logo adds in Q2, 66 logo adds in Q3. If you compare that on a pro forma basis back to Q3 of last year, and again, we mentioned that traditionally, Q3 would have some seasonality. Q3 of last year was 52 logo adds. So I'm not trying to just spit numbers at you, but I think you can follow the trend there, right? We actually were much more efficient in Q3 of this year, now that we're bringing everything together and integrating.

So that's really important. And I think that sort of bodes well for the trends, but part of it really is also too driven by just the increased focus, the really great -- the team that we've built and the fact that this is like priority #1 for the business, right? So Michael, Nolan, any thoughts just on the overall environment as we finish up with Jeff?

[Nolan Bederman, executive]

Yes. I'll just add one thing. I think, Mike, you covered really all the key points. Jeff, the only thing I'd like to add is when we purchased these other businesses, it was designed very specifically to fill product needs that we think are super complementary from a client-facing standpoint.

And as we integrate them properly, and to the prior question that was asked, we released more and more combinations and ways we can satisfy client needs. That builds both more efficiency because sales folks can actually find multiple ways to secure revenue dollars, but also in situations where historically, we might spend a whole bunch of time talking to a client who might like what we have, but doesn't have the budget for it, we now have many ways to satisfy that budget.

So we get that both on the efficiency side, just in terms of more people -- fewer people selling more things. We also see it on the client side. More conversations have a probability or possibility to actually result in a sale because we have more things to offer and that goes up over time as we train our sales force and introduce more variations of what we sell.

So we see that something we're working on very hard, and it does take time to release those things properly, get people trained properly and then have the market see it. But what we do, we are finding that market is understanding what we provide, and it's resonating, at a very early days, obviously. So we think that goes to efficiency.

[Operator]

Our next question comes from Adam Buckham from Scotiabank.

[Adam Buckham, analyst]

So the first one I wanted to touch on and go back to the near-term outlook. And obviously, from what you said, you're very comfortable with the number of signings that occurred in Q3 and what's transpired thus far in Q4. In terms of the ARR outlook for Q4, it kind of implies about [ $7.8 million ] of incremental ARR signing. And I guess, from what you're saying, you're still comfortable with that sort of guidance that you put out historically, right?

[Michael McKenna, executive]

Adam, it's Mike. I think we're certainly focused on this, right? And obviously, we do see a path, right, to that lower end of the guidance range, but it's not going to come without hard work. We understand that. I mean -- I think part of the reason why we also added the additional information on the FX piece, right? About 65% of the ARR that's coming on now is outside of Canada, right? So when you think about that on an adjusted basis, that's 54% through Q3, right, I think it fits us to further bridge the gap, right?

And so we always present that number consistently year-over-year just for comparative purposes, right? But I think important to think about that, FX adjusted, if you think about Q4 of last year as well, that was about, as I mentioned through Jeff's question about $4 million of net enterprise ARR adds, right? So you can start to sort of see the path, again, not without hard work, but we certainly see good momentum through the quarter here.

[Adam Buckham, analyst]

Okay. Great. Now just on NDR, I'm just wondering if you sort of back out some of the noise from the acquisition of Wellbeats and the churn that occurred in Q1, would NDR be trending above 100% in the enterprise segment? Is that the right way to be thinking about it? Or what can you add from that perspective?

[Michael McKenna, executive]

Adam, it's Mike again. I think you're absolutely on the right theme there. I'd be slightly over 100%, sort of pushing one-on-one type thing, right? So I think we'll see some of that noise sort of work itself out. And we did allude to that both in the -- I tried to allude to that in the prepared remarks, and we did a little bit in the press release as well, just in the context of how those numbers are calculated.

So overall on the consolidated piece, right, we're seeing that number move up inclusive of keeping the large customer impact in there, right? And then when we further break out the enterprise piece on a just pure LTM calculated basis, right, it was 97%. But when we think about Q3 and we were to take that and annualize it, it's actually about 98.5%. So you can sort of see where the trend is going there, right? So that's why I suggest to you that we would be sort of able to push just slightly above the 100% in the context of removing some of that initial noise.

[Adam Buckham, analyst]

Okay. Great. Just last one for me. I just wanted to touch on the agreement that you guys signed with Loblaws, obviously, starting on the enterprise side. But I'm just curious as part of that discussion, was it ever chatted about to add it sort of to the [ PC ] health app as a broader sort of -- almost like an embedded solution product over time? Or any color you could add there would be great.

[Michael McKenna, executive]

Adam, I think Michael or Nolan are probably better suited to sort of take this. But no, thanks for noting that. I mean, obviously, we set out the press release during the quarter, and I appreciate you highlighting that. Obviously, it's a great relationship for us. And I think over time, lots of room for that to grow and develop.

[Michael Held, executive]

A little [indiscernible] is what I can say, but the answer is yes, there have been conversations in that front.

[Operator]

We currently have no further questions. So I'll now hand you back to Nolan Bederman for closing remarks.

[Nolan Bederman, executive]

Guys, we just wanted to thank everybody for joining. I mean -- I think part of the purpose of this call, in addition to getting you guys up to speed on the numbers was just to try to reorient everyone to what this platform is becoming and has become. We're going to do the best job we can trying to explain that as we go forward. It's something we're doing with our clients, obviously, and they're starting to get it.

So again, you guys have a lot in demands on your time. We really appreciate you taking time to hear our story. So thank you all very much. I think we can conclude.

[Operator]

This concludes today's call. Thank you for joining.