LifeSpeak Inc

TSX:LSPK

Earnings Call Transcript

[Operator]

Good morning, and welcome to the LifeSpeak Third Quarter 2023 Results Conference Call.

[Operator Instructions]

Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding LifeSpeak and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance and business prospects and opportunities.

Such statements are made as of this 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 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 the company's public filings, which include, without limitation, LifeSpeak's MD&A and its earnings press release issued today for further information.

At this time, I would like to turn the call over to Michael Held, Chief Executive Officer of Life Speed. Please go ahead, sir.

[Michael Held, executive]

Thank you, operator, and welcome, everyone, to the LifeSpeak Third Quarter 2023 Results Conference Call. I am pleased to report that our leading physical well-being caregiving and substance use tools, combined with our digital mental health education platform, continue to successfully address the well-being needs of employers health plans and other organizations, both internationally and domestically.

The depth and breadth of our product suite has helped us mature into a comprehensive service provider for organizations that need preventative digital education and human expertise to support their employees and end users. With this effective and comprehensive approach, we were able to add a number of new customers in our Third Quarter, diversify our revenue base and deliver significant value for our existing clients.

Notable enterprise client additions for the Third Quarter included the Law Society of British Columbia, CAA Club and the University of Minnesota. Subsequent to quarter end, the company added Canada Goose, Pirkx, 1-800-Flowers and Prolink Staffing as enterprise clients.

Cross-selling initiatives progressed through the Third Quarter of 2023, highlighted by the successful closing of a significant cross-sale, multiproduct opportunity with Signet Jewelers.

These client wins helped drive Third Quarter adjusted EBITDA margin of 25%, which increased versus the 2022 comparable period of 24%, demonstrating that we have established a consistent revenue base for our business and a well-managed cost structure. Overall, we are very excited about the opportunity that lies ahead of us and believe that we are making marked progress.

I will now pass the call to our Executive Chairman, Nolan Bederman, who will provide more color on the quarter. Nolan?

[Nolan Bederman, executive]

Thanks, Mike. We remain bullish about our growth prospects. Our core business remains strong and stable and while we are in a business environment in which corporate spending has resulted in protracted sales cycles, we believe a definitive need continues to exist and grow for the crucial services we provide.

We've remained focused on strengthening our operations, our leadership team and our go-to-market teams. And over the third quarter, we continued to leverage the repositioning of upgraded internal resources for our sales and marketing groups. The sales and marketing function is in very good hands, and our teams now have a much better and far more diverse suite of products to offer new prospective customers. These potential customers in turn, have reciprocated with greater openness to commercial opportunities with LifeSpeak across the portfolio of solutions.

Ultimately, we believe we are well positioned for growth as the market for our services shifts back to firmer ground, and we are seeing early encouraging signals that this is already happening. The frequency and intensity of our sales discussions has been escalating, and that has resulted in tangible progress as evidenced by the fact that for the second consecutive quarter, our sales teams are seeing larger customer contract wins in the enterprise segment.

In addition, the ability to offer customers greater depth and breadth by way of multiproduct sales has created a number of opportunities that the company would not have been capable of closing prior to the completion and integration of our targeted M&A.

In other words, we believe strongly that our integrated approach to well-being is proving to be the right strategy. Overall, our enterprise pipeline in a number of deals and size of partnerships remains flush and continues to expand, and we are seeing more strategic potential in our adjacent embedded solutions pipeline. We're looking forward to updating you on the progress in the coming weeks and months.

I will now turn the call over to Mike McKenna, who will walk us through our detailed financials. Mike?

[Michael McKenna, executive]

Thank you, Nolan. We believe our third quarter financial results demonstrate the consistency and stability of our business and put us on solid footing to execute on our strategy going forward. Of note for the quarter, revenue for Q3 of 2023 increased slightly to $12.9 million when comparing to the same quarter in 2022.

Annual recurring revenue or our ARR came in at $51.5 million. This number is slightly down when compared to the same quarter in 2022 on a constant currency basis. However, as a reminder, we report ARR on a constant currency basis. using a 1.3 CAD to U.S. dollar exchange rate. Given our overall exposure to the U.S. dollar, the movement in rates through the quarter. We think it's helpful to note that our ARR would have been approximately $52.9 million as at September 30, 2023, when using a 1.35 CAD to U.S. dollar exchange rate. The $52.9 million of ARR represents a slight increase in overall ARR when compared to Q2 of 2023.

To provide a further breakdown on the base of $51.5 million of ARR, approximately $44 million came from our 973 enterprise clients, while the remaining $7.9 million came from the embedded and other verticals. With respect to the geographic diversification, we remain consistent with approximately 66% of this quarter's ARR originating from markets outside of Canada.

Importantly, no clients accounted for more than 5% of ARR as of September 30, 2023. Both our Q3 financial results, press release and the Q3 MD&A provide further detail on our enterprise embedded ARR 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 adjusted EBITDA of $3.3 million for the quarter. This is an increase of approximately 6% over the third quarter of 2022. The increase is largely attributable to operational efficiencies implemented across the organization and a strong continued focus on maintaining a consistent operating cost base. Adjusted EBITDA margin for the quarter was 25%, which is very strong considering the macroeconomic operating environment.

The 25% Q3 2023 adjusted EBITDA margin is a slight increase over the Q3 2022 adjusted EBITDA margin of 24%. This again highlights the focus on operating the business with a high level of efficiency following our period of acquisitions.

Net income and net loss. For the third quarter, the net loss was $1.9 million, which compares to a net loss of $1 million in the same period of 2022. However, this is largely due to a decrease in noncash foreign exchange rate this quarter, slightly offset by a decrease in share-based compensation expense and the lack of acquisition-related costs in the quarter.

In addition to the previously mentioned metrics, we also track other KPIs to continue to help us evaluate the strength of our business. These include gross profit and gross margin. Our gross profit for the third quarter of 2023 increased to $11.6 million. This results in a gross margin of 90%, which continues to be consistent quarter-over-quarter and equates to a similar gross margin in Q3 of 2022.

Consolidated net dollar retention rate, NDR provides a consolidated measure by which we can monitor percentage of ARR retained from our existing clients. NDR for Q3 of 2023 was 88%. This compares favorably to 78% in Q3 of 2022. Consolidated net dollar retention increased primarily due to the comparable reference period no longer being affected by the loss of a large embedded solutions client, as first disclosed in the MD&A for the first quarter of 2022. This is also slightly offset by a slight increase in overall enterprise client customer churn.

Logo retention rate. Logo retention rate which is measured on an LTM basis was 81% for the quarter. This is approximately 5% lower than reported at Q3 of 2022. However, this is largely due to the loss of a smaller subset of clients following our period of acquisitions.

Capital structure. With respect to our capital structure, as of September 30 of 2023, the company had approximately $4.9 million of cash on hand at the end of the quarter and is in compliance with all debt covenants. The company continues to be in compliance with all covenants as of today.

During the quarter, the company and its lenders did enter an agreement to remove the requirement to test ARR and a T3 annualized EBITDA test for the month of September and October of 2023. In doing so, there was never an event of default as defined in our loan agreements. The company remains in compliance throughout the period and continues to work with its lenders to ensure compliance on all terms and loan agreements moving forward.

On to our outlook for Q4 of 2023. Based on the company's current sales pipeline visibility that both Michael and Nolan touched on as strong and robust and the continued execution of our business strategy, we were able to anticipate consistent revenue and adjusted EBITDA margins and an increase in ARR for the fourth quarter of 2023 when compared to the third quarter of 2023.

If you recall, during our fiscal 2022 reporting cycle, on -- the Q4 2022 results were impacted by some specific onetime revenue opportunities in Q4 of 2022, which impacted positively our financial results for the quarter. The company does not expect the same quantum of onetime revenue to be driven in Q4 of 2023. And we expect our results for Q4 to be largely in line with the third quarter of 2023, while seeing an increase in ARR and demonstrating the consistency and resiliency of the underlying business.

Thank you, everyone, for your participation in the call this morning. We'll now open the call up to questions. Operator?

[Operator]

[Operator Instructions]

Our first question today comes from Jerome Dubreuil from Desjardins.

[Jerome Dubreuil, analyst]

First question is on the utilization of service. I wonder how this has trended recently as people have come back to work. I wonder if you're seeing any trends there in terms of utilization.

[Michael McKenna, executive]

It's Mike and I think Michael and Nolan can provide some thoughts on this one as well. But it is certainly something that we're tracking actively and regularly. We have discussions with our stakeholders on this and it's actually been very consistent. And in a lot of cases, we're seeing actually good growth across the various platforms.

And so we're looking at reports on this daily, weekly, monthly to ensure that the trends are going in the right direction. And so I think we're feeling good about where things are -- and so Jerome part of that then reverts back to the sales piece, like because ultimately, questions around utilization come up obviously through the sales piece to our renewal discussions, et cetera, right? So as much as we're tracking it, obviously, internally, we're communicating with our customers about that regularly as well.

And I think as we talk about the pipeline and where we're going with opportunities for 2024. Certainly, the strong utilization of the platform is leading a lot of those discussions.

Michael and Nolan, I'm sure if you want to add anything to that, but I think, Jerome, we're -- we feel like we're on the right path there.

[Michael Held, executive]

Mike, the only -- this is Michael. The only thing I would add is the underlying need for mental health and physical well-being services just continues to increase. And we just -- all you have to do is look at the news every day to understand why. So we're seeing that in utilization, as Mike has suggested. And I believe we're a leading indicator, I think, as the world started to slow, we saw that in advance.

And I think now we're starting to see the world from the corporate spending open up a bit. And the size and number of opportunities is just a testament to the ongoing needs, which is always at the end of the day relates to the fact that people use it because they need it.

[Nolan Bederman, executive]

Jerome, I'll only add one other piece as it relates to the evolution of the product, engagement and utilization are at the forefront of what we do. But we also -- now that we have a broader platform that's substantially integrated and are starting to think best about how we leverage things like AI, all of that is driven towards enhancing utilization even from here. So there are a ton of different ways and opportunities to continue to drive that upward over time.

[Jerome Dubreuil, analyst]

And just based on that, you've been in business for longer than maybe people realize. So you've gone through several economic cycles there. And what has been the impact of macro and past economic hardship maybe in terms of utilization and in terms of how clients were ready to adopt a service in terms of actually paying for it?

[Michael McKenna, executive]

Michael, you hold a best position to talk through this.

[Michael Held, executive]

Sure. This is Michael. And Jerome, in terms of -- utilization is so different because that's when it's available to a human and their given access, will they use it. And so whether or not the macroeconomic environment is good or not, or people are buying it. If they have it available, they're using it because it's greatly needed. And as anyone could attest when the macro environment from a financial perspective layers on financial stress on to their other daily stress, stress just goes up in anxiety.

So from a usage standpoint, that remains -- through this environment has remained consistent, strong as Mike attested to has also seen growth. The year was -- if you look back at the past 12 months, it's been relatively flat, which in our environment compared to competitors is actually sadly quite strong because with uncertainty, corporate spending does go on hold, but the underlying need doesn't end.

So it just pushes to a later date, and we have been around 20 years. And we've seen the bump that follows these cycles. And what we're seeing now, which will translate into our results in the coming years, people get back to business. And so if you were to step into our corporate environment, it's very buoyed feeling because the activity is very strong with very large opportunities. But also when they've been there had we not added the various product suites.

So you need people to be in -- you need corporations to be in the space to purchase and we're starting to see that again. So we have felt that it has been a flat year. We used that time to build and bring these companies together. And now as we see it opening up, we're just kind of bigger and stronger enough more to offer and I believe that will translate strongly. So the environment is -- does go up and down, but we've been through those cycles and now we can see that it's turning back up as we've seen before.

[Operator]

The next question on the line is from Jeff Martin of ROTH MKM.

[Jeff Martin, analyst]

Great. Wanted to get a sense of some detail around some of the changes within the sales organization, you announced one in the earnings release this morning. You don't need to directly address that. But just looking for more broadly speaking, what are some of the strategic improvements you're making in improving the sales and conversion?

[Nolan Bederman, executive]

Sure. So it's Nolan. I'll start with structurally. When you bring multiple products together, you need a sales team that can actually sell multiple products and that has that skill set, different skill set than selling one. So a big push at the end -- sort of towards the end of last year and the first half of this year was to reorient and make sure that we have the right groups and teams focused on the right sectors and spaces, who had the capability to sell multiple products.

Also, I think we talked about this before. If you think of the possibilities of, say, 5 different products immediately, there's sort of 25 combinations you can have. You can't go to market that way. So a lot of effort was spent early days figuring out what are the key most salable, most appealing combination, rank though, figure out how to actually go to market with a subset of things that are the most appealing and then learn from that to build and grow the materials so that selling multiple products can be simpler and simpler and simpler. At the same time, improving the quality and reach of the teams that do that and all the infrastructure associated with that as well as the leadership.

So that has really been the last full year project for management. That was -- as you saw in the press release, you saw Raffi departed, again, very -- we're super collaborative with him. That was his mission. We believe we've achieved a big push forward with that mission with some really great folks leading the specific sales functions of direct and then sort of on the partner side with enhanced tools, enhanced infrastructure, his teams, enhanced reporting and all the things that go with that, that's -- not to suggest that, that ever ends.

We still have way more to do, but we're a cohesive company. And I think evidence for that is we're starting to see, and we have seen a lot of folks in this industry calling us and saying, it looks like what you guys are doing is incredibly interesting, how do we join. And that's pretty good feedback for us. So building what we call 1 LifeSpeak has been the mission and that's been, as you can imagine, doing that with multiple companies in a non-great environment is even more of a challenge, but we feel really good about that push forward.

Held, anything you want to add there?

[Michael Held, executive]

The only thing I would add is we are a much larger player now with a lot more to offer. So we also have a lot more stakeholders that are important. So one of the key stakeholders in our industry are benefits consultants like the world of Aon and Mercer and WTW. And so we've actually -- to this team, we've added a consultant relations team brought in like phenomenal people, 1 from Mercer, 1 from WTW who started earlier this year, and we're already seeing the benefits, working on some very large deals.

So while the sales team and the partner team are out selling, this group is working with the advisers to employers in the background, facilitating these sales and making sure everyone is educated and everyone knows about us. And just for example, these just 2 people have had roughly 100 meetings with consultants in just the last 2 months.

So we will definitely see that, but you kind of have to be a certain size to be able to invest in that type of opportunity, but we are there and feel great about it. And it works -- this just works really well with the other part of the team that Nolan has just described.

[Jeff Martin, analyst]

Great. My other question is regarding ARR. It looks like it's at a pivot point heading into Q4, you're expecting ARR to increase over Q3. I assume that's more on the enterprise side. Maybe you could speak to the embedded solutions side as well. And is that more of a freeing up of the decision-making? Or are you looking at that as wherever you're seeing the broader macro conditions improve?

[Michael McKenna, executive]

Jeff, it's Mike. I'll start, and then we can talk into some of that other detail with Michael and Nolan as well. But just in terms of the context of just the overall pipeline and certainly where we're seeing opportunities, and we did touch upon that a little bit during the prepared remarks, but enterprise, absolutely a focal point.

There are some additional opportunities, let's call it, coming forward as maybe Nolan mentioned in some of these adjacent sort of categories. But that's like a little bit more today still in planning. And so where we're seeing opportunities in Q4 and Q1 for opportunities to really see that ARR increase or drive that ARR increase is certainly on the enterprise side.

And part of that, too, maybe I'll just add one more thing. I mean, obviously, part of that, Jeff comes with the continued efforts and focus to manage churn and really trying to focus on the retention side as well, right? So there's a lot going into that.

Obviously, with the focal point there being the large component piece of the enterprise customer.

Michael and Nolan, I don't know if you have anything else you would like to add, but...

[Michael Held, executive]

Well, it goes back to Jerome's question, we've seen this show before. So the world does return. We're seeing it returning. But on top of that, as Nolan has said, we've used the last couple of years to be far better and be able to weigh the offer way more. So when I look across our opportunities in go-to-market, each part of that, I expect growth. And so feeling very bullish because I think the combination of each tool to make money getting better, our churn getting better in an environment that gets better.

So even while there might be a consumer recession, our world starts to improve, I'm feeling very bullish on next year. So it's more than a quarter seasonal thing. The world is changing upwards for us, and it's quite evident.

[Operator]

The next question on the line is from Paul Treiber from RBC Capital Markets.

[Paul Treiber, analyst]

I just wanted to discuss further cross-selling. What proportion of the customers now are multiproduct as opposed to a single product? And where do you see that going in sort of the medium near term?

[Michael McKenna, executive]

Paul, it's Mike. I'll start and then again, Michael and Nolan can add in terms of the thought process and some trends for 2024. But when you think about the opportunity within cross-sell in the 990-ish, 1,000 enterprise customers, right, there's still only a small component piece of that, that existing base, right, that would be already, let's call it, a multiproduct customer in the sense that sometimes it would be -- the opportunity for a discussion would be like out of renewal or depending on where customers will be during their own cycle, where we continue to talk, I think, very consistently for the past couple of quarters and with opportunities to go to market with -- from new customer sales on the multiproduct side, right?

I think that's really where we're seeing the entirety of that opportunity to be able to grow. And so it would still be, frankly, less than 100 of the enterprise customers that when you stack it all up, would be considered to be true cross-sell customers today. But I think that also speaks to the breadth of the opportunity right now. Also not all customers are going to be a cross-sell type opportunity because it could be -- our offering could be a component -- could one of something else or they could be a smaller type business that may not have the ability to pay for 3 or 4 products, right? But I think just in that description, we can sort of see why we're excited about that opportunity because there's pretty significant potential goals there within, right?

[Paul Treiber, analyst]

That's helpful. How do you think about the potential ARR uplift per client with multiproduct as opposed to single product? Is it -- you double ARR per client? Is that the ballpark that you're thinking of?

[Michael McKenna, executive]

Well, again, sort of to go through that like the list of current customers. I think what you're seeing, maybe a better way to think about it, Paul, if we went through and looked at the 5 largest customers that came on to the platform this year, right? They would be multiproduct in nature, right? And so you could think about that in the contest of those customers. That deal size is probably 2x or in some cases, 3x would have been if it was just back to the LifeSpeak product that we had at the time of the IPO, right? But I wouldn't sort of necessarily translate all that thinking through the entirety of the base, right? Because again, I was -- as I tried to describe, not the entirety of that current enterprise base is going to be set up to sort of make that mathematical formula work.

[Nolan Bederman, executive]

Paul, it's Nolan, to your point, you're going in the right direction in that the products are similarly priced within a band on an individual basis. And then as they're bundled there's a discount. So if you think of having 4 capabilities because we think physical well-being is really 1 capability. Again, there's lots of variations within this because there's a million things you can add and not add. But you could see why a client could double or triple if they add multiple things.

Michael McKenna's point, it's going to be different across the scale of portfolio. But we're definitely seeing that. But they're roughly similar price. And clearly, if you can buy more of them, their discounted component...

[Paul Treiber, analyst]

Yes. That's very helpful. And then just lastly, as you look at 2024, it sounds like you're upbeat on the pipeline and potential pickup in ARR through the year. How do you think about your approach to investing to drive growth, investing in sales and marketing and other initiatives versus retaining some of that just from a conservatism point of view, just in light of macro, who knows where to go going forward? Like how do you think about that as the -- ahead of '24 here?

[Nolan Bederman, executive]

So, it's Nolan, I can do that path of business and I mean we feel we've actually made the vast majority of investments to address the returning market. It's really in our numbers at this point, I mean, we think there's also a pace at which in this industry, and I think we talked about this over various calls.

You just wouldn't go in, for example, double your sales force in anticipation of things really if they grow this business, building relationships, getting salespeople to really have that pipeline, which takes time to build the funnel process is a pretty significant one.

So we feel like there's always more one can spend and we have some growth factored into that spend. But the bulk of the infrastructure that's needed this year, where we're upgrading and where we're investing and sort of have committed to this already are very specialized salespeople.

So again, health plans. Well, that's a very specialized subgroup of embedded or adjacent revenue. That's something that is way best done with a person who's done that for 20 years, yet to be big enough to be able to find those folks and have them want to join your business.

And those are the types of adjustments and further investments we're making, but they're at the margin in terms of dollars. They're very important in terms of unlocking capabilities, but it's targeted, thoughtful approaches. It's building better infrastructure. We do spend the money on marketing, but this isn't a business.

We're not going to see spending $10 million on social media marketing is not going to have an ROI for us. So we're very disciplined around that stuff. So I think the answer is just continuing to do -- to build on what we build with more and more specialized folks doing what we prove that there's an opportunity in a very particular space, then we can bring someone on who has that expertise.

[Operator]

[Operator Instructions]

The next question is from David Kwan from TD Securities.

[Salman Zia Rana, analyst]

This is Salman on for David. Thanks for all the color that you guys provided for this quarter and for Q4. So my first question is actually related to churn. So quarter-over-quarter, we did see some churn in both here, enterprise and embedded clients. I was wondering if you could shed some light on why those customers chose to leave? And, yes, just some color on there -- on that area would be appreciated.

[Michael McKenna, executive]

Thanks for the questions and always -- for stepping in for David. I'll touch just firstly on the embedded customers. There was 2 customer losses in the quarter there. One of them was very small, and the other one was from a geographic perspective -- or geographic opportunity that we're no longer supporting the geography. So I think that's important. There are going to be little nuances of different reasons, right?

I think on the enterprise side, again, logo -- number of logos versus total dollars, I think, is also really important as we think about how we are measuring this, right? So again, I don't want to sort of take too much emphasis off of that overall churn and retention number because it's a huge area of focus for us, right?

And we are consistently speaking about this on our quarterly calls, where we don't want to lose any -- you don't want to see any customers churn off the platform, right? But we are trying to very much be focused operationally, sales and marketing wise, on ensuring that from a dollar perspective, we're also putting the resources towards the right places the right areas because, overall, there are some larger opportunities that we want to try to go after and then ultimately want to retain.

So that's really the focus. I hope that's not detail in terms of the question, but I think that probably provides some good insight into how we're trying to manage that. I don't know, Michael and Nolan, if you wanted to add anything, would I probably covered it.

[Salman Zia Rana, analyst]

I appreciate that color. And I think Michael also alluded to using AI or maybe it was Nolan like earlier on the call, you used to Nolan like you know what you guys are thinking on that front? And if you're trying to -- if you've already embedded some AI in your existing product line or when you're planning on launching something big when it comes to AI in the coming quarters or maybe in fiscal '24?

[Nolan Bederman, executive]

Yes. It's Nolan, again, thanks for that question. So we think of it this way, at the simplest, I mean, we have a, I mean, very, very, very large comprehensive super high quality and broad content -- proprietary content libraries. That's one of the things that we've created -- we continue to create. And so one of the thoughts we have as you think of all of the possible applications of AI is better serving up and learning from those types of libraries or content repository.

So our first efforts are in how do we make the user experience even better, even more robust and even more focused, leveraging that content. So that's sort of where we're focused at the beginning as well as leveraging AI within the operations of the business, but that's -- I think most companies are thinking about how to do that as well. So that's really where we're starting. It's definitely a 2024 initiative. And I think for us, you'll see it in 2 ways.

One is, I think, just in a native sense that the utilization in the customer journey within our product, we get better and better. Whether we market it as a separate product or not, to be honest, we don't know. It just may make our product significantly better and that will just be a core part as opposed to having sort of a "AI feature."

So I think at this stage, we're trying to assess how best to use it. There's certainly lots of ways that they can enhance the base parts of our product. There may be actual new features that it unlocks. But I think at this stage, we're really in the discovery phase of that, I think we're going to take it in sort of a very stepwise fashion to packing.

[Salman Zia Rana, analyst]

I appreciate the color. I think there's a lot of potential there. So Mike, again, back to you for a few other questions. So are you guys anticipating any further cost base rationalization or any more cost synergies like your margins have held up pretty strongly. So curious to know your thoughts on those maybe on cost rationalization?

[Michael McKenna, executive]

Sure, and thanks for this question as well. I think the real focus is on efficiency, right, and consistency in the cost base. We can't, also not invest in sales and marketing for the product, right? So we have to balance that, right?

So I think where we are now, I think we've -- as you noted, rightfully and thankfully, in terms of where we are with the margins, they have held in strong. At the same time, we're still trying to continue to invest and continuing to try to grow. And so obviously, that's where the balance is right now. But again, I think if you look back at even in the past 3, 4 quarters, just even at the sales and marketing and G&A breakdown for the quarter, right, you can certainly see that every quarter, we're getting a little bit more efficient, but we're still investing dollars, right? And I think that's really important.

So that's really the focus in terms of balance. Can you always be a little bit more efficient. We can always be looking at cost rationalization. I touched on that a little bit in the prepared remarks, right? But we don't want to be sort of overemphasizing that at this point because -- and this also would relate to a couple of questions that we had earlier -- just about the excitement levels for 2024 and where some -- where opportunities are, we have to be mindful to ensure that we're investing in the right thoughts to continue to supplement the growth.

[Salman Zia Rana, analyst]

Got it. And 1 last quick question. So I also noticed that you guys made an amendment to your credit agreements this quarter and the subsequent months as well. So could you talk a little bit about that? And as you're expecting your ARR to increase through Q4, should we expect those amendments to go away later on?

[Michael McKenna, executive]

Yes. We're just -- what we're trying to do is get the agreements to the right spot so that we can avoid any further challenge with, for example, an ARR testing covenant, right? So we've got good support from the lenders and the like to work through that. So that's -- it's a bit of an ongoing process. But I think, again, we're -- I tried to be as clear from this quarter's perspective, as possible in the prepared remarks that everything is on side.

We've worked well with the lenders on a couple of these minor amendments that were related to very specific tests versus the overall health of the agreement, right? So I think that's most important as it relates to the focus. Yes, we're continuing to try to make sure that, obviously, we remain consistently in compliance, and that process is ongoing as it would be for anybody, right?

[Operator]

We have no further questions on the question queue. So I'd now like to hand back to Nolan Bederman to conclude.

[Nolan Bederman, executive]

Great. Thank you, operator. Thanks, everybody, for listening for the thoughtful questions, and we look forward to updating you again soon. Thanks very much.

[Operator]

Thank you, everyone, for joining the LifeSpeak's Third Quarter 2023 Results Conference Call. You may now disconnect your lines, and enjoy the rest of your day.