Q4 2020 Progyny Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the project the fourth quarter 2020 earnings call. At this time, all participants have been placed on a listen only mode in the form of them for your questions and comments. Following the presentation. It is now my pleasure to turn the floor over to your host James Hart, Sir the floor is yours.
Thank you Catherine and good afternoon, everyone welcome to our fourth quarter Conference call with me today are David Schlanger, CEO of progeny, Peter NAV, President and COO and Mark Livingston CFO.
Then with some prepared remarks before we open the call for your questions.
Before we begin I'd like to remind you that today's call contains forward looking statements, including but not limited to statements about our financial outlook for the first quarter and full year 2021, the impact of COVID-19 on our business clients member activity and industry operations, our ability to acquire new clients and retain existing clients our market opportunity.
<unk>, an expectation of long term growth, our corporate governance planned business performance industry outlook financial outlook strategy future investment plans and objectives and other non historical statements. As further described in our press release that was issued this afternoon. These forward looking statements are subject to certain risks uncertainties and assumptions, including those related.
The project is growth market opportunities and general economic and business conditions. We have based these forward looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business financial condition and results of operations. Although we believe these expectations are reasonable we undertake.
No obligation to revise any statements to reflect changes that occur. After this call descriptions of these and other risks that could cause actual results to differ materially from these forward looking statements are discussed in our periodic and current reports filed with the SEC, including in the section entitled Risk factors in our most recent 10-Q.
During the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA Adjusted EBITDA margin net income as adjusted net income per share as adjusted reconciliations with the most comparable GAAP measures are also available on the press release, which is available at investors. The progeny Dot com I would now like to turn the call over to David.
Thank you Jamie and thank you everyone for joining us. This afternoon. We're pleased to report that we had a strong fourth quarter, including another year of record performance, where we achieved our highest levels of revenue profitability and operating cash flow Mark will take you through the financials in greater detail on a few moments, but I'd like to begin with just a few of the highlight.
In the fourth quarter revenue grew 54% over the year ago period, and we also surpassed the $100 million in quarterly revenue for the first time in our history.
For the full year revenue grew 50% we achieved this strong result, despite the severe impact of our volumes in Q2 because of the pandemic. Our gross margin in 2020 increased to 23% demonstrating the significant efficiencies we realized as we continue to scale our operations adjusted EBITDA in 2020 income.
Leased 77% to $32 4 million and we also generated a record $36 million on operating cash flow in 2020, and finally during the fourth quarter. Our average member base increased sequentially from the third quarter by nearly 100000 covered lives confirming that the significant majority of our clients are successfully.
Managing the impacts of Covid or in a number of cases are flourishing and continuing to add head count.
The strength of these results achieved against the backdrop of an unprecedented global health crisis are due to a combination of factors, including the essential and time sensitive nature of fertility treatments along with the resilience of our members and their pursuit of care the <unk>.
Quality and diversity of our customer base and the support that we on our provider network delivered to members, we're facing new challenges created by the pandemic as a result of that support one of our most significant accomplishments last year relates to the continued improvement in our member satisfaction rates of progeny, we've consistently enjoyed.
The leading net promoter scores for both of our fertility and pharmacy solutions, reflecting the significant investments, we've made and providing our members with the education guidance and emotional support they need successfully navigate their fertility journeys throughout the pandemic. We've recognized that our members have had an even greater need for resources gives.
The heightened stresses and uncertainties due to COVID-19.
In response, we took a number of measures to support our members, including training of our PCA is on how to address member of specific COVID-19 related questions and concerns. We also produced a series of Webinars, where health care leaders provided information on timely subjects for our members, including the use of telehealth during their fertility journey the importance of mental health.
And wellbeing during fertility treatment and the unique issues pertaining to the two maternal health in the black community.
By becoming an even more present resource for our members in 2020, our NPS score for fertility services increased to 79, its highest level ever and we believe this result is as important to understanding our success is as any of our financial metrics.
We've previously discussed our high rates of client satisfaction and retention as well in support of that objective. We are always looking at ways to deepen our relationships with clients, including by understanding the issues that are most relevant to them to enhance these insights. We recently launched the project partner Advisory Council. The response from our clients has been.
Very enthusiastic with virtue of virtually all of the more than two dozen clients that we invited to join accepting our offer these clients represent 14 different industries as well as a diverse cross section of geographies and work force size.
We believe this strong response reflects not only the value of our clients see and they're projecting relationship but also their willingness to partner with us and finding solutions to some of the other problems of benefits teams are confronting we.
We believe the advisory accounts will be extremely helpful. As we explore ways of evolving and expanding our services in the future, which Pete will address shortly one of the themes. We've been hearing from customers is the heightened importance for them to address diversity equity and inclusion or dei in the workplace. This was particularly impactful from project <unk>.
That our solution provides tangible ways for companies to demonstrate their commitment to dei first every project remember has equal access to care, regardless of their individual reasons for needing fertility treatment, whether it's because of the medical issue or because they are a member of the LGBTQ plus community where single mother of by choice.
Every project remember receive per proceeds personalized culturally competent care from a highly trained PCA, who was sensitive to and knowledgeable about the unique needs of a diverse population, including members of the bypass of our LGBTQ plus communities.
And finally, our plan design eliminates the discriminatory impact of traditional plan designs. We accomplish this by giving doctors full access to all of the treatments and procedures. They may need as well as the flexibility to treat patients based on each one's unique situations such as by covering genetic screening from monogenetic disorders like sickle cell.
The maybe specific to certain populations in fact of leading Doctor on our network said recently the progeny is proprietary smart cycle has all but eliminated class and race bias because it ensures that all patients have equal access to the treatments they need as.
As companies increasingly look for ways to distinguish themselves as leaders in both ESG and dei. We believe this will become a further tailwind to our growth given both the relevance and importance of our solution as well as our proven ability to help companies better manage their costs, while also providing a clear return on their investment through our superior outcomes higher.
Satisfaction and improved employee retention, let me now turn the call over to Mark to walk you through the quarter Mark. Thank you David and good afternoon, everyone.
I'll begin by walking you through our fourth quarter and full year 2020 results and then provide our expectations for 2021.
In the fourth quarter revenue grew 54% to of $103 million as David mentioned this was the first quarter, where we exceeded $100 million in revenue and to put that into perspective, our first $50 million.
There was only a year and a half ago for.
For the full year revenue of $344 9 million increased 50%.
Turning to the components of the top line medical revenue increased 40% in the fourth quarter to $74 7 million and increased 34% over the full year to $253 6 million of.
Our growth in medical revenue in both the quarter and the year were driven by our higher number of clients in covered lives, though as previously reported our full year revenue was partially offset by lower utilization most significantly for the second quarter when fertility clinics temporary closed at the onset of the pandemic.
Pharmacy revenue increased 121% in the fourth quarter from $25 $6 million.
Over the full year pharmacy revenue increased 128% the $91 3 million.
The growth in pharmacy revenue was primarily driven by the increase in the number of clients, who have the rx benefit as compared to a year ago.
We continue to see more clients, taking the progeny Rx benefit each year in the 2018 selling season, 68% of our newest clients took the integrated benefit that increased to 75% in 2019, and then to 84% of the new clients that are launching this year.
Of all of the clients today, 73% now have the progeny of Rx.
While we are very pleased with the progression of pharmacy adoption over the past few years, the remains future upsell opportunity to more than a quarter of the client base.
As of the end of the quarter, we had 135 clients representing an average of $2 3 million covered lives during the quarter.
This compared to 87 clients and an average of a $1 5 million covered lives in the fourth quarter last year, reflecting more than 50% growth in covered lives over the past year.
<unk> our growth in covered lives came both through client additions as well as organic growth within our existing client base, many of whom continue to expand their workforce in 2020.
Turning now to our utilization metrics.
During the quarter of 5719 art cycles were performed reflecting of 51% increase as compared to the fourth quarter of 2019 for the full year art cycles grew 40%, though again the growth rate for the year reflects that period of time when clinics temporarily stopped initiating new cycles.
Female utilization, which really drives our financial results.
Given that the female partner undergoes the most significant aspects of fertility treatment was four 5% this quarter as compared to 44% of year ago.
For the full year 2020 female utilization was 97%, which compared to $1 one 9% in 2019, and one point of <unk>, 2% in 2018.
The temporary disruption to our members access to care at the start of the pandemic impacted the full year utilization rates. However.
However, as I mentioned, a moment ago by Q4 of our female utilization rate has returned to comparable levels versus the prior year.
This recovery reinforces both the essential nature of fertility treatments as well as its time sensitivity for most patients.
As a reminder, utilization rates can vary due to a number of factors, including the timing of when new clients go live.
Time of the year and the demographic mix of the newest clients.
Turning now to our margins gross profit increased 76% from the fourth quarter of 2019 to $20 7 million.
As a result, our gross margin of 26%. This quarter reflects an increase of 250 basis points from the fourth quarter last year and.
In addition to normal operating leverage in our care management services part of the approved part of the improvement in Q4 2020.
Related to favorable IBM or true ups normally done at year end.
For the full year gross profit increased 54% to $70 1 million for the same reasons that drove our revenue growth in the fourth quarter of.
Our gross margin of 23% in 2020 reflected an increase of 50 basis points from the $19, 8% margin in 2019.
Turning now to our operating expenses I'll begin by noting that we adopted ASU topic 326 during the fourth quarter, which pertains to the accounting for credit losses, and the allowance for doubtful accounts. We've provided a table in today's press release to give you a reconciliation by quarter of each line item that was affected as a result of.
The ASC 326, which will allow you to confirm your models to our historical results.
Sales and marketing expense was four 8% of revenue in the fourth quarter as compared to 5% in the fourth quarter of year ago for the full year sales and marketing was four four percentage of revenue, reflecting an 80 basis point improvement from 2019.
As a reminder, we realize the certain amount of savings this year by shifting our sales activity and open enrollment of events from in person to virtual.
In addition, we continue to see significant operating leverage in our sales and marketing functions.
With our near 100% client retention rate and the persistent utilization that we see year to year within each client we benefit from what is effectively of recurring revenue stream.
With the majority of acquisition costs being incurred in the first year of client launches of the project and minor variable expense thereafter associated with this revenue stream our long term margin should continue to expand.
G&A costs were 14, 7% of revenue this quarter as compared to 11, 3% in the fourth quarter of year ago. This increase was primarily due to the resolution during the quarter of a longstanding arbitration with the particular vendor, which resulted in $6 1 million in settlement costs and legal fees.
As a reminder of G&A in 2020.
Has been reflecting the onetime step up in costs that we incurred in connection with our first year as a public company. However, effective with the fourth quarter. We are now comparing quarters on a like for like basis, given net public company expenses are in both periods.
As a result with public company costs incurred in both periods, but excluding the costs related to this arbitration G&A as a percentage of revenue in the fourth quarter of 2020 was eight 6%, reflecting the inherent nature of expanding margins on G&A as we grow our revenues.
For the full year G&A was 13, 5% of revenue as compared to 10, 4% in 2019.
Excluding the arbitration costs from both periods G&A was 10 eight percentage of revenue in 2020, or an increase of 100 basis points from 2019.
Selecting the public company expenses that were incurred throughout 2020, but only for a portion of 2019.
Given our margin improvements across the business adjusted EBITDA increased significantly in both the quarter and the year.
In the fourth quarter adjusted EBITDA more than tripled from $3 9 million a year ago to $11 9 million of.
Adjusted EBITDA margin of 11, 8% in the fourth quarter reflected of 580 basis point expansion from the year ago period.
For the full year adjusted EBITDA grew 77% of $32 4 million, primarily reflecting our higher revenue and improved operating leverage across the business.
Adjusted EBITDA margin of nine 4% in 2020 reflected an increase of 150 basis points from 2019, despite the impact from the pandemic on our results adjust.
Adjusted EBITDA margin on incremental revenue in 2020 was 16, 7% after giving effect to the $5 2 million step up and incremental expenses related to our first full years of public company.
We believe margin on incremental revenue as useful as the board indicator for where the business is capable of moving and its expansion. This year highlights are expanding rate of margin capture on new revenue.
Net income was $39 1 million in the fourth quarter of 39 per share this compared to a net loss of $4 4 million of <unk> <unk> per share in the fourth quarter of 2019 the.
The improvement in net income was primarily due to two factors first given that given net debt. We now have sufficient evidence that our deferred tax assets of realizable, we recorded a $38 million tax benefit in the fourth quarter of 2020 in connection with the release of our valuation allowance on deferred tax assets.
Second our 2019 results reflect the warrant valuation adjustment expense related to the convertible preferred stock warrants that existed prior to the IPO.
To ease compare the ability of the results between the periods net income as adjusted to reflect the exclusion of.
Of the tax benefit in 2020, as well as the warrant valuation adjustment of 2019, and the settlement and legal costs in all periods was $7 2 million or seven of share in the fourth quarter of 2020, this compared to $1 7 million of <unk> <unk> per share in the year ago period.
The improvement in both net income as adjusted and net income per share as adjusted is due to the improved operating efficiencies across the business that I previously discussed.
In 2020 net income as adjusted was $17 8 million or <unk> 18 per share as compared to $10 9 million of <unk> 12 per share in 2019.
Turning now to our balance sheet and cash flow as of December 31, We had 190 $109 3 million of cash and marketable securities an increase of $4 3 million from our cash balance at September 30th and.
In addition, as of December 31, we had working capital of approximately $112 4 million an increase of $2 million from September 30, and we have no debt.
The increase in our cash position reflects positive quarterly operating cash flow of $6 5 million, which compares to $5 5 million in cash used by operating activities in the fourth quarter of 2019.
For the full year cash provided by operations of $36 $2 million in 2020 reflects the significant improvement from the $1 5 million in cash used by operations in 2019.
The improvement in both the quarterly and full year cash flow was due primarily to our higher profitability as well as the timing of billing and collections on quarterly cash flows.
Turning now to our expectations for the first quarter and full year 2021.
It has been over two quarters since clinics reopen with their COVID-19 safety protocols in place and during that period, we've seen our member activity has been fairly consistent.
Accordingly, our guidance assumes that member activity stays consistent with the level of activity, we've been seeing since last summer.
For the first quarter of 2021, we are projecting revenue of between $117 million to $2 million to $122 million, reflecting growth of between 44% and 51%.
For adjusted EBITDA, We expect between 14 million to $15 5 million along with net income of between seven 5 million to $9 4 million of between seven and nine earnings per share on the base of the basis of approximately 101 million fully diluted shares.
For 2021, we project revenue to be between 520 million to the $540 million, reflecting growth of between 51% and 57%.
For adjusted EBITDA, we expect between 63 million to $68 million and for net income of between $30 1 million to $37 4 million or between <unk> 29 and 36.
Earnings per share on the basis of approximately of 103 million fully diluted shares.
At the midpoint of this guidance, we are expecting to see continued expansion of our margins in 2021 with adjusted EBITDA margin on incremental revenue of 17, 9%.
Let me now turn the call over to Pete Pete.
Thanks, Mark and good afternoon, everyone.
At the midpoint of the 2021 guidance Mark just provided you can see that we expect our top line growth rate to accelerate slightly this year as compared to the 50% growth we achieved in 2020.
This reflects how our mission to help people have healthy successful pregnancies is more relevant today today than it has ever been and have the need for employers to offer a better fatuity solution continues to grow.
As we think about 2021 and beyond we believe progeny is in its strongest ever competitive position in what continues to be largely underpenetrated market opportunity.
Starting first with the market, although it's not clear what if any lasting societal changes may result from the pandemic. We remain confident that all of the macro trends that have been contributing to our growth remain intact, including the high and increasing rates of infertility as people continue to deferred family building till later in life the need for companies, who we are.
Accrued and retain talent and to demonstrate inclusiveness and the quality in their workplace and the need for employers to use their health care dollars and the most efficient way possible and to do so while also optimizing employee health.
The utility market today is large and growing at a double digit rate as the.
We look to capitalize on our opportunities we feel extremely well positioned across every function of progeny.
Last quarter, we discussed how certain prospects on our sales pipeline. We're so focused on their COVID-19 response plans that day.
We are unable to make any benefit changes in 2020, or we're choosing the concentrate only on specific types of benefits targeted of COVID-19 related issues, such as enhanced mental health support.
<unk> of having more of these deferred accounts are not now in 2020 than we would typically expect to see we still had a very strong selling season, adding 40 45, new accounts in 2021.
The 2021 selling season is just beginning so it's premature at this stage to provide any detailed perspectives as to what we're seeing in the market. However, the initial anecdotal feedback we've heard at this point from both the benefit consultants as well as certain prospects that we're engaging with is that better the buyers of hopeful of getting back to some type of normal in 2021.
We believe this demonstrates the eagerness to shift the focus from the crisis management. They have been doing over the past year tooling of the benefits of their workforce needs post COVID-19 in 'twenty, two sorry in 2022 and beyond.
The behavioral health is likely to remain the top focus for companies in 2021. The early feedback suggests that female friendly family of family friendly benefits are also significant priority.
At this point, it's still too early to know of challenges, we'll see if any as compares to the 2020 sales season, but we are expecting a highly engaged and active pipeline of new opportunities and to address these opportunities. We're onboarding new sales executives, which we do every year at this time, we're deepening our relationships with the key benefit consultants to ensure that project is well.
And whenever a consultant engaged within employer, we've continued to produce content demonstrating both the thought leadership and superiority of <unk> of our solution and although we expect the benefit conferences will be held virtually again. This year. We believe that our sales team is well equipped to manage these virtual interactions with the same efficacy and impact.
<unk> as they work through any in person activities.
Today, we have over 180 committed clients, reflecting just the low single digit share of our target market and despite our rapid growth since launching our fertility benefit we're still at the very early stage of penetrating our core market.
As a result, we don't anticipate any market based restraints on our growth for the foreseeable future, but given the strength of our balance sheet as well as our proven ability to generate very healthy levels of cash flow you should expect it will continue to invest in our business and seek opportunities to expand our addressable market through new services.
The new partner Advisory Council of the day to describe to you will give us insight into those potential areas, where we can be most impactful to our clients.
To that end with the broad category of women's reproductive health, we can provide additional services that enhance our fertility benefit while also making the processing relationship with clients, even more sticky than it already is.
For example, we believe the range of maternity related services from Preconception support to return to work programs. The companies are seeking provided they can adequately measure of the value of what they are getting while also improving the shortcomings of certain existing solutions.
In addition, as we look longer term there may be other episodic disease categories, we can pursue where similar to <unk> the outcomes very significantly not only by treatment, but also by the providers and where patients need more support than what the traditional managed care companies are willing or able to provide of.
Of course.
We will be highly selective with respect to any service line expansions of the strategic transactions and we will apply the same discipline that we use the managing all other aspects of the business.
Before we open up the call for your questions I'll close by noting that it's been a year since the onset of COVID-19, and despite the significant disruptions, it's cost to our society and across much of the economy. We believe project needs of stronger business today than we were a year ago.
Of the essential nature of facilities of medical service was proven to our members' ongoing pursuit of treatment the relevance of pursuing the benefits to employers is proven to our client retention as well as the success of our selling season the <unk>.
<unk> of the collaborative relationship we have with the providers in our network was proven to our members the ability to return of cash quickly as possible. The superiority of our approach of utility was proven to our increasing NPS score.
And lastly, the strength of our business model was proven through the quality of our results achieved during an unprecedented global health crisis.
That we'd like to open up the call for your questions. Operator can you please provide instructions.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now we ask that will put on your question you kept your handset if listening on speaker phone to provide.
Buddy please hold them on the call for questions.
Your first question is coming from Ralph Jacoby.
Your line of life.
Great lengths to afternoon.
Yet prior revenue guidance of at least $5 25, the lower end of the range, obviously, a little bit below that maybe if you could just help what are the factors. There that caused you maybe it could be a little bit more conservative on the on the lower end of the range.
Yes, I'll take that.
No.
The estimates that we gave more prior to seeing utilization patterns early in the year as we talked about in the past early utilization patterns of the most instructive relative to what we might expect for the year.
One thing to point out even though it may not sound like a lot is earnings.
Year on earnings are almost two weeks ahead of where they were last year, that's a little bit of loss experience that we get to see earlier in the year. So it really was the guidance that we thought was the most responsible based on the utilization that we're currently seeing that the guesstimate that we had.
Relative to the expectations that we talked about on our last earnings call were really around how many new lives the adding of new clients that we added but then there are variables that impact that a little bit right to the extent that any clients are going a little bit off cycle and adjust the expectations from those clients are part of that and again utilization.
The Asian patterns, but it's pretty much in line with what we said relative to not being able to see what all of those new clients that we added were actually going to do from a utilization perspective, even though we have some idea of relative to their the information that we get from them.
Okay, Alright fair enough and then I wanted to hit on EBITDA, because that number actually came in a little bit of the ahead of what we were modeling any details there on sort of maybe whats, providing a little bit more of that boost the profitability, whether it's business mix or other factors within the cost line item or simply leverage.
Yeah.
So the EBITDA in Q4 was slightly better than what we expected mark talked about a little bit of a little.
A little bit of of favorable true up as it related to year end.
The true ups estimates for IBM.
And that was probably the biggest factor other than that was pretty much in line with what we expected.
Okay did you quantify what was that IV and are now the.
The small.
Around $1 or something like that okay.
Okay Alright.
Was it for me thank you.
Your next question is coming from Michael Cherny.
Your line of life.
Oh, great. Thanks, so much and thanks for all of the color so far.
If I could just pick ever so slightly of I guess, maybe follow up on.
Ralph's question regarding the guidance you had talked about if I recall, roughly 90% utilization in terms of baseline those.
Predicated on where the initial at least $525 million was what is baked into the guidance here and along those lines in the early days of at least I know it is early but are you seeing any geographic variability based on different members of different parts of the country.
Yes.
Well I'll take the second question first we're not seeing any variability.
If I look at.
What we've been seeing what I'll call since the summer.
And throughout the end of the year on into the early weeks of this year.
Look at the existing clients, we're not seeing any change relative to variability from what were already seeing on what we might expect cash.
Calendar year turns.
So no real change there as it relates to <unk>.
The press utilization if you will in any geographic area that might be coming from from COVID-19 or anything like that.
As it relates to the utilization level at the 90% number we had talked about.
As far back as when we reported on Q2 results in sort of talking about expectations for Q3 that in step two.
More on the range of <unk> 90, 596% when we reported on Q3 results and what we've talked about since then is we is it normal utilization level now that we have insight into and unfortunately, we don't have any more insight into anybody that may still be waiting on more concerned about COVID-19 and not pursuing treatment, but the majority of people.
<unk>.
In our covered lives are and so all we can talk to any sort of current utilization levels, which is what we're seeing and what we used to.
To put out of our guidance for this year.
Thanks, Pete that's certainly helpful. And then if I may just.
Another one here.
You talked about some of the range of maternity services that you could theoretically look to introduce is there any desire to have something that's either.
The <unk>.
Between organic versus inorganic.
And you noted some of the surfaces of the currently out on the market right now I guess, where do you see the competition falling short or what could progeny do better based on the strong relationships that you already have.
Yes.
Hey, Mike This is David.
Look I think.
We talked about in the prepared remarks.
There is.
There are certainly true.
Opportunities to help our customers address issues theyre seeing across their employee base.
<unk>.
And those relate to certain issues during the maternity journey and again as I said in the prepared remarks everything from preconception.
All the way through returned to work as we as we assess those opportunities and work with our clients about the problems. They are having and due to the current or the existing solutions address those problems will always go through and maybe this gets to the organic versus inorganic growth will always go through the exercise of I'm thinking about potential new solutions.
Whether we buy build or partner.
And we will always look at kind of the most capital efficient way to get into a new opportunity and a way to kind of do it the biggest biggest best and fastest.
So and those opportunities are consistent with what we've talked about in the past.
But without getting into more detail than kind of we need to now since this is still at the assessment stage.
I would say that the within or within that entire kind of continuum of of women's reproductive health journey.
There are certainly.
The issues with all of the solutions that are in the marketplace and we see opportunities to provide it.
Certain cases a better.
A better set of services and when we have more specifics to tell you about.
We will we will provide them. So again, we're still at the assessment stage right now and we don't want to get ahead of ourselves and provide specifics until we are ready to announce something.
Okay. Thanks, David.
Your next question is coming from Stephanie Davis Your line is live.
Hey, guys. Thank you for taking my questions and congrats on the corner.
Thank you. Thank you.
To call a highest volume is quite quite conservative.
I heard the alcohol consumption are in your <unk> guidance just in light of the the year over year improvement you're seeing on female.
Utilization and all of the nine per script data coming in very strong is there any cushing or beginning of the COVID-19 or anything like that I'm, just trying to think about.
Yes.
Theres not any Christian again.
I can tell you is it's based on what we're currently seeing right now through the first let's call. It six weeks of the year.
And it's the best information that we have and then what we uses as past history of of experience you.
Utilizing that early data to project, what we expect not only for the quarter, but really for sequential quarters out into the year, we obviously the layer into that expectations around.
Timing of new client launches et cetera, and there are a couple of debt or would it be later in the year, but nonetheless, most of it is really related to utilization pattern. So I would definitely not call. It conservative I would call. It as we hope to sort of put out guidance.
Best view on most accurate view of what we expect.
And just adding on to that I mean, we normally see in the first half of the year, we see revenue build through the year. So our first quarter is typically our lowest quarter again absent last year, which was affected by COVID-19, but if you go back over time, you'll see Q1 is lower Q2, so the first half of the year tends to be.
Maybe 47, 5% of the total for the year. So Thats also what youre seeing when you when youre looking at Q1 guidance versus the rest of the year.
Yes, because of the upper end the upper end of the Q1 guidance range is in excess of 50% growth. So yes.
Alright understood how do I take my shot like everyone else.
Thank you.
Yeah.
In your prepared remarks, you did talk about broadening the scope of the privacy offering a little bit just given how facility.
Really different during the pandemic that day.
And then are you.
Are there any spend tech startups or adjacencies that caught your eye or is there any potential to expand your behavioral health offering as it becomes that much more scrap flow process.
But the bed.
David sort of alluded to before the best thing I can tell you is.
22020 was definitely a year of managing through the pandemic 2021. In addition, the sort of taken advantage of the opportunities that we have with what we have.
In the space that we're in now.
As of year of real focus around those adjacencies and opportunities, including looking at some of the fab Tech that's out there looking at.
Any strategic acquisitions, we could do but also looking at things who can grow organically right and so for US. The best thing. We can tell you is as the year progresses and as we make progress in assessing those areas.
And when we're in a position of share more about what we think makes sense for us we'll share it but really no more color to add in that area.
It's a bit premature for us to talk anything beyond that.
Considering where we are on that assessment.
Okay, I understand alright, well I'll see you tomorrow.
Thank you Daphne.
Your last question is coming from Glen Santangelo your.
Your line is live.
Hi, yes. Thanks for taking my question, Hey, I just wanted to go back to some some comments you made regarding the selling season, but if I look back to the <unk> comments, you made last last quarter.
You were suggesting at the time the client retention was near 100%, but you were starting to see clients find more smart cycles more clients sort of upgrades of the progeny of Rx offering could you maybe give us some stats or anything looking back to last year's selling season in terms of what the legacy clients were doing.
Given I understand the limitations around adding new clients related to COVID-19, but what we were existing clients doing the last selling season.
Well I would say this in general the one thing we saw from our existing clients last selling season was no reduction in benefits. So they were not looking to skinny down their benefit and some effort to control costs and the changes that we saw were if there were changes where to make the benefit more robust and that could be.
<unk> taken a number of forms they may add smart cycles, because they are starting to realize that.
If they had to smart cycles, the number of their members were.
Tapping out on the smart cycles and have not gotten the successful pregnancy, it could be adding probably in the Rx. They didn't have it in the past because they really wanted the integrated program and understood the benefits of it.
It could be adding ex reason that they didn't have that so on those are the types of changes. We saw we don't quantify how much of our growth comes from.
<unk>, which would be those upsells and the addition of new lives by our existing customers through hiring from our acquisition.
How much comes from new sales, but in the past.
Sure.
Certainly a non insignificant amount of our growth has come from organic growth to existing customers and that's the combination again of both of their internal growth, but also upsells.
And maybe when you look at the year end 2020, any any sort of updated statistics about what percentage of the employers you think of offering fertility benefits at this point maybe on the large side on on the small side, maybe how the.
How that's trended.
Trended through 2020 on what you think it could be of catalyst to really ramp the penetration there.
Yes.
There's not great data on this and we've talked about this of the vast number of certain studies that have been done by the benefit consulting community. The most recent of those studies were done at the beginning of 2020 were released at the beginning of 2020, but the trend has been fairly clear that over the last several years the percentage of large employers of provide <unk>.
<unk> benefits on net.
The level of benefits varies greatly but the percentage of employers that provide facility balance has grown pretty steadily a few years ago was around 25%, it's approaching probably 50% now and most of the studies that had survey of large employers.
Two continued growth in the number of employers that are going to have the benefit of one study even said that by 2022.
Amazingly is only a year from now that two thirds of large employers will have fertility coverage looking a few years past that it should be 75%. So on the trend is in the right direction and you see that even in our own sales. We have typically had somewhere around two thirds of our customers.
Come to us having had some legacy coverage the carrier <unk> never had any coverage at all last year was similar trends, but it was about 40% had no coverage before so that's very indicative of that 40% of our customers that have never had covered before consistent with that trend, where every year more and more employers of realizing that.
Until the benefits coverage isn't a nice to have but really a half to half of central piece of their fertility of the other benefits package for lots of reasons.
Fairness of their to their female workforce.
The desire to have more positive <unk> initiatives as we've talked about in the in the.
Prepared remarks, but again this is a trend that we think has been well established over the past handful of years and will continue for the next handful of years.
Okay. Thanks for the comments.
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Okay. Thank you operator.
Thank you so much everyone for joining us today, we'll look forward to speaking to you next quarter.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.