Q4 2022 Phreesia Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fiscal fourth quarter 2022 earnings call.
At this time all lines.
Participants are in a listen only mode.
We will provide instructions for the question and answer session to follow.
First I would like to introduce <unk> Gandhi Senior Vice President of Investor Relations.
For free jazz Mr. Gandhi you may begin.
Thank you operator.
Morning, and welcome to Fridges earnings Conference call for the fiscal fourth quarter of 2022, which ended on January 31st 2022.
Joining me on today's call are Jaime <unk>, our Chief Executive Officer, and co founder and Randy Rasmussen, Our Chief Financial Officer.
The complete discussion of our results can be found in our earnings press release and in our related form 8-K submission to the SEC, including our quarterly stakeholder letter both issued after the market closed today. These documents are available on the Investor Relations section of our website at IR <unk> Dot com.
As a reminder, today's call is being recorded and a replay will be available on our Investor Relations website at IR Dot <unk> Dot com following the conclusion of the call.
During today's call, we may make forward looking statements including statements.
Our anticipated growth our strategies predictions about our industry and anticipated performance of our business, including our outlook regarding future financial results.
Forward looking statements are subject to various risks uncertainties and other factors that may cause our actual results performance or achievements to differ materially from those described in our forward looking statements.
Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including our annual report on Form 10-K that will be filed with the SEC tomorrow.
The forward looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made.
Undertakes no obligation to update and expressly disclaim any obligation to update these forward looking statements to reflect events or circumstances. After the date of this call or to reflect new information or the occurrence of unanticipated events.
They also refer to certain financial measures not in accordance with generally accepted accounting principles.
Order to provide additional information to investors.
non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results a.
A reconciliation of GAAP to non-GAAP results may be found in our earnings release, and stakeholder letter, which were furnished with our form 8-K. After the markets closed on March 30th with the SEC and May also be found on our Investor Relations website at IR I appreciate that Tom.
I will now turn the call over to our CEO <unk>.
Hi, Thanks, everyone.
Hum.
Uh huh.
Notice that a lot of you didn't say red three separate locations.
They came over.
All together really good.
I hope everyone had a chance to read our stakeholder letter which was.
So I guess I'll take the first question.
At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. We ask that you. Please limit yourself to one question.
Your first question comes from the line of Anne Samuel with Jpmorgan. Your line is open.
Hey, guys congrats on a great quarter and thanks for putting out a long term target I appreciate it.
You know as we look at at the growth over the next three years I was hoping maybe you could provide a little bit of color on how we should think about the split between provider client growth and revenue per provider client because you know historically you'd said.
No new clients, who brought about a 5% rate with revenue per provider client up mid teens to get to that 20%, but the split has been a little bit different recently, so should we think about it maybe as a bump in clients early on and then later on the revenue per provider client will catch up as those clients expand.
Yeah.
And I think when you think about it.
We have a table in the.
Quarterly letter that show over time, how the average revenue per client is.
Continually gone up I think when we look at it.
Selling motion is land and expand.
Sometimes there is timing between quarters, where we land a client.
It goes up and then followed up as we expand into that.
Health care client.
Revenue.
Just curious where we've done a lot of investment I think there is.
Higher client growth that we have seen in <unk>.
Prior periods and so I think on a quarterly basis Youll see that average revenue per provider.
Client.
You know very little bit, but over the long run.
Why is up year over year.
Okay. That's helpful. And then I guess just on the spending for this year, how should we think about the cadence should we think about it as you know perhaps higher you know initially.
No.
As you are continuing to spend and as you move towards profitability, you know kind of coming down or do we should we think about it as kind of evenly spread throughout this year.
I think when you when you look at it.
You know when we when we look at.
<unk> history, we were profitable historically they were three years. After we went public where we were putting up a positive adjusted EBITDA every year.
In 'twenty, one is really where we decided there is this great market opportunity and we shouldn't really impact people and most of that investment was.
In the last fiscal year that we had in 'twenty two so most of the hiring and expense as has already been done and we feel like we're in a really strong position to reach the half a billion dollar target that we have.
For 2025, so when you look at the Euro fiscal 'twenty three what you're really seeing is a full year expense. So we're not.
Necessarily adding.
Large numbers of additional resources are our.
Increasing expenses, it's more of a theory right.
From a relative year over year, because there is 12 months of expenses included in the 23 numbers.
Your next question comes from the line of Sean Dodge with RBC capital markets. Your line is open.
Hey, Good afternoon. This is Thomas Keller on for Sean Thanks for taking the questions.
I had a question on subscription pricing.
As existing contracts of any sort of pricing mechanisms built in is related to inflationary pressures or otherwise or is that something.
Exclusively negotiated during contract renewals or just new.
New clients.
I mean, it's critical for US to include language in there that gives us.
The ability to raise prices as contracts renew a year over year. So generally yes that you have.
<unk> will allow us to increase price over time.
Okay, Good and then on.
In life Sciences.
Or are you allocating those investment dollars there in that business and I guess, where do you see the most opportunity going forward within that segment.
So.
Maybe I didn't totally understand the question. So can you can you reframe it so I understand this is Glenn.
Yeah, just I assumed life sciences, receiving some of the same investments.
I guess, where is the focus there are there you know more newer products and services or capabilities a bigger.
Sales force or just anything to kind of help.
Alright, I'm Gonna I'm gonna wax on for a little bit here about our life Sciences team they are.
It is.
Just doing the team is just amazing okay. So David.
Done an amazing job, we have leaders that have been called out in the industry, where we're not just excited about product, which I'm going to talk about in a minute I'll talk about our insights product, which is just one best product of the year from P. M 360 is that right yeah yeah.
The best New product.
It's just you know I was with her our life Sciences team last week at their at their Offsite and just.
The energy and.
The organization is just amazing.
And what we are going to keep investing there as we invest all throughout the organization, but really just the performance.
And the collaboration that they have is it's just been wonderful to just be part of and I'm pretty excited.
Cited about the leadership there.
And we are we're going to keep investing.
We're proud of what they do.
Okay, Alright, I appreciate the color.
Your next question comes from the line of Jessica <unk> with Piper Sandler Your line is open.
Hi, Thank you so much for taking the question.
So interested if you could maybe talk about the Tam opportunity across subscription payments and life Sciences revenue lines in the payer market.
I think you guys reaffirmed that the roughly $9 billion Tam in the deck today. So just how do we think about the incremental opportunity that can be has he brought in your market to a payer.
So I think we're still in the <unk>.
Early days.
That's that are the payer market, we have air clients now.
Some of our provider clients frankly.
Frankly turned into payers over the last couple of years I think we've all seen the market evolve and some of the change in language is also a representation that you know a lot of our clients have started to take on risk and ensure members.
At the same time that we've also increased our.
Our offerings in the payer market. So you could expect us as we have seen.
The investments start to point in the direction of where were you know what the market looks like you could expect us to come back to market and articulate sort of that what we think the opportunity is in <unk> and what are what our go to market will be a problem.
That's where he is pretty good at making us do that overtime.
Alright. Thanks.
Yeah.
Hi.
Well I.
I guess just a quick follow up would be do you need any incremental products or are you just selling essentially the same stack or suite.
And to that market.
At least as you think about it today.
So we so why don't I take a step back which is work continuously and we have for 17 years as an organization and investing in both our existing products and new products I think all good technology companies are investing in new products or their existing and new users at all time and we're committed to doing.
That we're not investing in new products, we might as well just.
You know call. It a day right. So expect us to continue as we have.
For pre public and post public investing in new products. Some other ones pretty excited about that we've come out there like we've entered new markets roads cute.
So come out with our connect offering.
Super pumped about our insights offerings, so we expect to sell.
All existing products into that market and new products.
Awesome. Thank you.
Thank you.
Okay.
Your next question comes from the line of Richard close with Canaccord. Your line is open.
Yes, I had a couple of questions first of all congratulations on a strong year, but questions with respect to the new client growth. Obviously, you pointed out the 200 plus clients in the fourth quarter was almost as much as physical I think 19 and 20.
Alright.
Two year period yeah.
So I'm curious about looking forward, though.
Do you think the pipeline is strong enough to support a similar type of growth that you guys just.
<unk> reported in the fourth quarter or any perspective, there would be helpful.
Yes, I mean, I think if you look at our target.
Half a day in 2025.
It implies 27% to 29% annual growth and as I said.
We made a decision in 'twenty, one to put significant investment in the business.
And we're seeing results from that and Thats really what drove that.
Some level of comfort to put out a target like that because we do continue to see client adds and successful sales organizations and hey, Richard.
Just on your comment about client growth I think one of the other things. We just said in the letters, we think we've got multiple paths to get there.
Randy Your question just talked about sort of the cadence and then.
The growth you see with land and expand so I wouldn't I wouldn't look at any quarter end.
A reflection of how it might go in the future.
Okay. That's fair I appreciate that so on the life Sciences I think it's great. You guys had I think you had called out like a million patient surveys or.
Hum.
Surveyed more than a million patients in calendar.
'twenty one so you know as we think about fiscal 'twenty three obviously I think the new budgets for.
Marketing by pharma.
That as you enter the new calendar year I'm, just curious your thoughts obviously with a significantly higher number.
Provider clients Youre going to have that many more patient interactions. So the demand I suspect for your life Sciences business would be significantly higher as well any comment that you can provide in terms of the.
The budgets that you've seen for your life Sciences clients, how we should think about that in terms of maybe year over year growth here for fiscal 'twenty three.
Sure Richard.
You are asking about the budgets.
Life, sciences' customers impact or like outlook growth outlook.
Not as much as the growth outlook is just the <unk>.
Pharma budgets are marketing budgets are set for like the calendar year right. So when it begins in January I think the timing typically isn't it.
So you've grown the client base significantly and youre going to have that many more patient interactions.
Spect that life science companies would be increasing potentially their budgets. They are allocating to someone like freesia are you seeing that.
I think I can say comfortably that we expect to do better this year than we did last year.
Okay.
Okay.
Thanks, Adam.
Alright.
We're going to work really hard on.
Alright, so I don't know.
Good idea okay.
Yes, you are fine.
Awesome.
Yes.
Thanks.
Your next question comes from the line of Daniel <unk> with Citigroup. Your line is open.
Hi, guys. Thanks for taking the question.
I was hoping you could put a little bit of a finer point on expense growth in fiscal 'twenty, three and beyond so if I look at the noncash expenses for full time employee. We've obviously had a pretty dramatic increase this quarter and thats carrying over to fiscal 'twenty three.
Instead of just head count adds and salary are you seeing any structural shift in how you're managing that expense side of the ledger are you having to invest more in product development as you enter into some of these newer markets like the payer market or as you get bigger into the health system market curious why we're seeing such a dramatic shift not just in head count.
But in noncash expense per FTE.
I think when you're looking at that noncash expense, you're talking about like stock compensation.
Oh, sorry expenses, excluding noncash expense.
Okay.
I know.
Yes.
Sorry go ahead.
Estimate right I think CNA is a good example, where.
As we've looked out and said what is the growth opportunity and what size of company or are we going to be and making sure that we have scale and reach that we made a significant investment over the past couple of years and I think as we articulated in the quarterly letter.
We feel like we can achieve DNA is a good example of that where we have achieved the level of staffing and systems and.
Investment that we've made to support a company that reaches the.
500 million.
Run rate business, so from the perspective of more growth.
It would be it's minimal.
From this perspective, because much of the investment is there and I think what we're really looking for.
And the years beyond fiscal 'twenty three is operational leverage on that investment.
Which.
Improves our efficiency across the board.
Okay, but there is nothing I guess structural and how youre thinking about investing in new verticals and product development, that's causing this pretty dramatic increase in expenses per FTE right.
No.
Okay, and then Mike.
Sorry go ahead.
Notable we like being profitable.
We expect to get back to profitable.
Yes makes sense and then on the the payment processing expense that came in.
Yeah, a little bit higher than historically around 61 ish percent of of of.
Payment processing revenue.
Versus historically, it's been around 58% is there anything that's causing this.
Increase in payment processing expense specifically.
I mean, I think there's always a little bit.
The mix you know how cartilage process card present cargo was present.
I think there is out there.
Fluctuations, sometimes and visit volumes that can impact that quarter over quarter.
As that business grows.
Where visa and Mastercard.
The price increase though.
We see some fluctuation in that over time, but then we also have the ability in our contracts.
Raised price.
If those financier reward card the killing of man.
Eric.
Rewards card.
Okay.
Yes.
Yep Yep, Okay understood alright, thanks, guys Thats it for me.
Sure.
Your next question comes from the line of John Ransom with Raymond James Your line is open.
Hey, a couple for me can you help us tease out the effective and saying yeah on both revenue and members.
How much that helped in the quarter.
Yes, I mean, I think when we announced this last.
Last quarter.
Not material.
The results from a revenue perspective, I mean, you can see that.
The purchase price it is a small tuck in acquisitions, so it doesn't really impact our outlook significantly.
Okay.
Second question I mean, if we just do the simplistic analysis.
Str's two next 12 month revenue I mean, you've more than doubled your SCR force from.
From July of 'twenty through July of 'twenty, one and you're calling for a nice uptick in revenue, but it looks like the revenue per SCR would have to drop.
Pretty meaningfully to just grow top.
Top line acceleration by 500 bps.
When you are more than doubling the SCR. So can you kind of help me understand the relationship between revenue and SCR count in there. So is there something structural where that that correlation which is pretty tight for a couple of years is kind of broken down.
Yeah.
I mean, I think from that perspective, right is that the STR is our R&D generations.
It is really at the beginning of the revenue cycle.
I think one thing to keep in mind is that we've made significant investments in the last year and we are seeing.
12 months of that expense there I think.
See a dip in productivity when youre looking at revenue per head count statistics, our revenue per cost, but I think that is temporarily temporary.
Efficiency.
Those resources are in place they have been working for 12 months and they become more productive in that period of time, where you onboard.
Training.
I think it's kind of normal to see a temporary dip.
Okay.
Okay, and I know you've never got out there.
And then lastly, I mean, we've learned that you know you've on boarded tenet healthcare hospital client.
I guess I would've thought that might have engendered, a press release and a little bit of a marketing opportunity for you. So what's your.
What's your philosophy was that something they ask you not to do or is it. Just you guys are quite modest and want to keep your want to keep your light under a bushel.
I know I think.
I think what's important is not putting out press releases its doing good work for our clients job.
The work generally over 17 years has paid off immensely.
Right.
When we put out press releases, because we get asked.
Great.
I generally believe in a philosophy that.
We should just do wonderful things for all of our stakeholders and overtime. It always works out positive.
Right.
Frankly.
All of that our clients are positively talking about us.
Publicly and privately.
But okay.
Let me speak to the merits of St. Louis and sets us free self promotion I think I think we need to talk more about that.
Alright.
Youre not the only apparel marketing.
You know drives you crazy.
Right.
It's we've definitely increased our our.
<unk>.
Lot of what we're doing with our clients.
A lot of the social media outlets, which I personally am not really on there'll be it.
I'll look forward to your Instagram page.
<unk>.
Thanks, John .
Your next question comes from the line of Stephanie Davis with SBB Leerink. Your line is open.
Hey, guys. This is joy Zhang on for Stephanie. Thank you for taking my question.
Wanted to circle back to the payer market question again, sorry.
I was hoping if you can give some more color on what exactly some of the new solutions can look like and what product lines you're tackling.
Also how much are those products leveraging the capabilities you acquired from the same warehouse.
So Julien just to be clear are you asking about.
On the acquisition.
Oh, No I think you mentioned earlier I said there'll be new products. In addition to the senior health acquisition.
Extend into the payer market.
Yes.
There will be and there are and I think we are.
I think we're in the early days of it.
Philosophically our thesis is as we.
No.
As we have a better understanding of what those products, how we're going to take them to market and we're ready to talk about our early adopters.
Some of our later stage adopters.
We usually are more public about what those products do and.
Obviously, you've largely unlike press release <unk> talked.
Talking about this so it's just a little early right now for us to be talking about it but we're really excited about what the team is doing there.
But I think it's a little too early for us to.
So sharing too much about it but obviously.
It's an area we're investing in it.
Yeah, no that makes a lot of sense.
And it's early days.
So first of all the way right now.
One other thing John .
Very excited about some of the the work yet.
Dr <unk> and the team had been doing around.
The patient activation and measure and we think that that is a it.
It's not just an important.
Instruments.
So the from a payer standpoint, I think it's just an important instrument generally for healthcare for folks to be able to understand how we as patients are activated and our health care and I think that that's something that there's hundreds of research studies on and we're really excited to be able to really expand the footprint and the.
Knowledge base around patient activation.
Got it very helpful.
And as a follow up your.
Half a billion dollar target for FY 'twenty five.
Obviously, it looks like the quarterly run rate.
$25 million this.
This would imply kind of a significant step up from our industry FY 'twenty, one numbers and I think it implies something like 40% plus growth. So can you maybe just reconcile that level of acceleration with your long term growth target in 2000.
95%.
Right.
We had previously.
We indicated that our long term growth rate was 20% to 25%. So when you look at the <unk>.
$1 billion run rate in 2025 that imply 27% to 29%. So we did significantly increase our growth rate into the high twenty's.
Enjoy it I think.
I think we've also said that there is a long term growth through 2025, but given the investment levels were.
We're making we've made in fiscal 'twenty, two there could be periods, where it's higher and.
The $500 million is indicative of that but.
I don't know the percentage throughout that doesn't sound, 40% doesn't seem to make sense I think randy's math is probably closer but sort of quarter.
25 years, you got 500.
Got it okay. Thank you.
Okay.
Your next question comes from the line of Glenn Sam Tangela with Jefferies. Your line is open.
Yes, thanks for taking my question.
Wanted to follow up on a couple of the questions that have already been asked because I think what we're all trying to really wrap our heads around as we're seeing expenses tick up but at a very accelerated rate here at the same time that revenue growth is decelerating pretty sharply and I think we're having trouble sort of reconciling why that's the case and then if you look at sort.
The fiscal 'twenty five guidance, you've now provided right I mean, we're looking at 27%, 29% revenue growth next year, but then you got to step up at least to the mid Thirty's.
$24 25 to get to 500 by the end of the year. So revenue growth dips then it reaccelerate and we don't really have great visibility on the expense base in 'twenty four and 'twenty five.
As we think about this this path to return to profitability is the expense base in fiscal 'twenty. Three is that is that the number or will there be continued investments in fiscal 'twenty four because the way the release reads, it's a little bit unclear that we're going to approach profitability in 2025 could you give us.
Any more color on the trends as we think of the three year view.
I know Glen and I'm very excited that you asked me the question.
But I'm going to hand, the baton over to Randy because he is probably going to do a better job of answering it.
Is that cool yeah, that's fine I'll take the answer from anybody.
Yeah Glenn.
Yes, I think if you if you look at fiscal 'twenty three as we mentioned in the quarterly leather that's really the low watermark and we have done.
Hey, Matt.
And that investment has set us up to reach the $1 billion goal in 2025.
So what that means that we're not planning a lot of expense acceleration and whats youre, saying in 'twenty three is really the investment that we've already made but we made it in the latter half of the last year.
The increase from 'twenty two to 'twenty three.
Really the impact of having a full 12 months of those expenses.
So from.
Operator.
If we don't feel like we have to make significant investments to achieve those growth rates. So that's where the approach to profitability in 2025 comes from.
So that's helpful. So basically the run rate in 'twenty three that's like a reasonable run run rate within reason to think about for fiscal 'twenty $4 25. So we can model the leverage off that.
All right is that correct.
Yes, I think from an expense perspective.
Good.
'twenty three.
That number of course, we continue to make investments but not.
At the rate that we made in this last fiscal year, where we did a lot of.
Additional head count hiring you would think that that moderate in 'twenty three.
And Randy if I could just maybe ask you one quick follow up on the balance sheet. So you've got $314 million in cash and I saw you increased your revolver up to a $100 million. So lets just say a little over $400 million in capacity right I mean, you guided.
EBITDA down let's call it $150 million help us think about not only just a return to.
Adjusted EBITDA profitability, but really a return to positive cash flow right. Do you think you have enough cash between what you have on hand, and 100 million revolver to make it to positive cash flow before having to raise capital from somewhere else.
Yes, I mean, I think if you look at the three 2014 that we have on the balance sheet, we feel like we have a very strong.
Our position on our balance sheet, we did raise the line of credit from $50 million to $100 million and we haven't been using that for that we have the full capacity of that line.
I think in.
For fiscal 'twenty, three we're very comfortable with the strength of our balance sheet and being able to fund the business.
But I guess the question was can you make it to 25 with the cash App.
Yeah, I mean, I think from that perspective, we're not really giving.
<unk>.
On that basis.
Phil Thanks for that.
Let's say in this year.
Glen.
The term approach profitability and I think all of rent.
Yeah.
<unk>.
Expenses expense growth decelerating and revenue growth accelerating.
From the historical I think you could probably put some estimates together and see how much cash we probably need in the business, but I don't think we can comment specifically on your question perfect. You gave me a lot to work with thanks a lot.
Okay.
Your next question comes from the line of Ryan Macdonald with Needham Your line is open.
Alright, thanks for taking my questions.
First wanted to start on the on the Med Tech and Cerner integration and validation can you just discuss the opportunity with that partnering with these additional vendors creates especially as you're going after sort of the upper end of the market with the health systems and hospitals and perhaps how that can unlock the opportunity versus what you were doing previously.
Okay.
I think it's been pretty consistent with saying eventually we gotta be everywhere right, that's sort of our goal.
We start to 17 years ago to build a small business. So look we.
As much as we compete with pretty.
Pretty much every EMR vendor. We're also partnered with almost all of them or we work with them or we integrate with them.
Collaborative way and work with their technical.
Interchange and interoperable with them and we're committed to always doing that.
I think this is a.
The view that we have been.
Success in those markets and we just want to make sure that.
The integration as you know.
Like how are clients one of them.
And we look forward to working with them, but they've been great. So far.
So and then my follow ups on the on the life Sciences business and I know, we've talked about it a little bit here, but.
As we think about the trajectory of the end market and the shift towards digital marketing spend we've obviously seen a multiyear pull forward and the investments there and so as you're thinking about expectations for fiscal 'twenty three.
What sort of moderation in spend are you expecting in the movement of that spend over to digital channels.
In the in the implied sort of assumptions for this year and what are I guess are you hearing from your clients from that perspective are we still very early innings or or is this an instance, where we saw really aggressive pull forward in that now they're satisfied with kind of the levels. We're at.
Okay.
So I think all claims are different.
What.
In working with.
Talking with our clients and our team that work with them all the time all of them are consistently looking at.
At what programs and partners drive phenomenal amount of value and during the year.
Sure Rob.
<unk> shipped during Covid there was a lot of programs that were run including ours that provided a huge amount of value and if they provide a huge amount of value you tend to do Moreover.
And I'm sure that there was a bunch of programs digital or none that didn't provide a lot of value.
They probably won't do more of those but I think sort of putting a bucket under a one size fits all right do I think like we're going back to the days of as many pharma sales reps, calling on doctors know.
Slide <unk>.
<unk>.
Correlate to that but do I think that a lot of the investments in products that have been made and new tactics, we bear crude youre going to keep doing more of it.
Hum.
I don't know if I sort of see.
I don't know if you know him from Edmonton right. So very.
The mine has escaped to where the puck is going right. So let's review.
It was putting that genie back in the fall.
I guess would you say that in those conversations like are you seeing instances, where now these vendors are starting to.
I'm talking about consolidating spend against those more effective channels that you talked about.
Thanks.
I do think that there is.
More spend continuously going towards channels that are proved to be very effective which.
The data show, we are one of those very very effective channels and and not only are we one of those channels. We're one of those channels one of the few channels with broad scale to reach.
To reach those patients and help them understand the therapies available to them.
And.
Learn more about the therapies that they are owned so we're pretty we're very excited about continued investment in this.
And.
Area.
Your next question comes from the line of Joe <unk> with Baird. Your line is open.
Yes.
This goes back.
Gallon glenn's questions, a little bit but the.
Incremental revenue.
<unk> been adding kind of per expense dollar has been really assess and for the last few years now.
And I just think about the EBITDA guide it would seem.
More growth is possible as I, just keep a kitchen key ratios the same I guess.
What are the puts and takes you talked about onboarding a lot of new hires.
Hey, if ramp and become productive that would seem to help us I should say I guess what are some of the considerations are.
Is it just more growth possible, but maybe you just need to get out a little deeper into the year touch CF.
I think I think.
We need to get further.
The euro is easy to see how this call some of these investments pay off before.
I would I would say that but I also think which is also I think we have telegraphed.
Really important to note wages have gone up right and we want to be an employer of choice at all times.
And part of that thesis is making sure that we pay.
Like our total compensation levels for our teammates is is good right and I think keep in mind, you sort of get what you pay for and we wanted to make sure we get the best.
I think we have a lot of the best.
I do think that has played into some of the efficiency levels, but I also think that now.
We understand what that looks like as an organization we have to make sure that we get back to the place where we feel the investment levels should be no take a couple of quarters, but feel pretty good about it.
Okay. Thank you very much.
Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.
Hey, guys. Thanks for taking the questions I guess a lot of the big picture ones are asked so I'll go to some nuances.
Looking to get an update on what the traction has been with connect or are you seeing more growth there and is it really focus more on the core the plus offerings and how broad is the network today that you've been able to develop.
It's <unk>.
Growing.
I think the some of the metrics that we're looking at right now so we're pretty excited about.
The operating right and.
It's.
It's growing very quickly the thing we look at which is probably harks back to the days of like how we have always thought about our business is not.
The size of the network, but how much usage in volume or we put it through it and we're seeing volume increase pretty rapidly.
I'm not just the same reason I've got excited about press releases I'm not excited about lots of product that doesn't get us they care about whether the products, we build and deploy and invest in.
Get heavily.
Right.
So I believe used by all the stakeholders, who can truly be often call. It utilization bogo, we're moving more and more towards activation is the terminology that we use and we think it's more appropriate.
But it's going in the markets and a lot of the markets. It's in it's growing fairly rapidly.
Okay. That's helpful. And then I noticed you guys are offering a free trial of your services I think through June and I'm curious, if you've done that before and if that is a big demand stimulator and if so what the conversion rates of have looked like from offering a free service to paying clients.
I think.
Yes, we do often for a lot of our products and both for new and existing clients will often test out different promotions.
And we will do them at different times of the year for different types of products in different markets and generally speaking.
We have our analytics team that looks at sort of the uptick in how it's going and what the sensitivity is on it and I would say that if the team is running a promotion and it's broadly adopted it's probably effective and it's working.
And if it doesn't work then they tend not to do the promotion.
Or offer.
Fair enough.
And I don't think it's like I will say that it's not like.
Offering until June or.
There is continuously rolling different types of things that they look at for different segments of the market.
And they tried to use.
As much as you can data.
Decide what's working what's not and it's really about making sure that people understand the things that we do and how that could drive a huge amount of value to their organizations.
And Doug to their patients.
I think Randy.
Yes, I think one thing that we look at what are the retention rates.
New clients and we included that in our quarterly letter on a revenue base.
Approximately 95%.
Client base.
Basis of 90%.
We finance as we're acquiring customers.
Staying with us.
The utilization of the activation of our product is high with these customers.
Yes, understood and then maybe final one I'll ask here is a bit of a big question Big picture question. We've discussed this in the past but.
If we think of macro drivers, obviously, there's labor shortages, which are likely to continue and you can help with that there's the kind of movement to digital front door and you can help with that there's the need to drive activation and bring patients back into the care workflow post COVID-19 .
So a lot of things moving in the market and that's probably what's driving a lot of your growth in investment, but I'm curious if there's any.
One trend that you see as most significant and sustainable when you speak to your clients, it's really pushing them towards your solution. Thank you.
So Ryan.
Ryan I think one of the things that I.
And we have talked about this over the years I think what are the benefits that it has.
Gained our growth for all these years is that.
Our acknowledgment that it's not a one size fits all and often says theres no silver bullets.
Or anything it's just making sure that we do continuously deliver a phenomenal amount of value for all of our stakeholders and if we think about our products and our team in and all the things we do.
Hi, it's Pete.
Becomes very fulfilling.
When you know that you might go in.
I might start using us for one reason and over time.
The value proposition will shift it will just grow.
That to me is that it's sort of a hallmark of what makes a great business and that's also why our retention, but we.
We've thought about it is we were writing their stakeholder letter.
Why was why was it important for us too.
Disclosed some of our retention metrics, because we think it's important for.
All of our stakeholders to understand that.
The investments, we're making are really for that long term value.
And for our clients.
And their patients.
Right.
I also would tell you like.
As you think about value proposition, it's not the same for everyone for some people it's labor for others its cash flow for others. They have to solve a clinical problem and where how they do it.
Alright, I appreciate all that and thanks for all the color congrats on congrats to David in the life Sciences success in particular have been really outperforming our thoughts thanks, yes.
Yes.
The team is just doing great.
Your next question comes from the line of John Ransom with Raymond James Your line is open.
I know you missed me.
So the.
The French words segue.
Beautiful segue into life science.
So you guys I'm old enough to remember that used to kind of dour Lee talk about life science being this.
Forever flat business and now it's not.
And as you price the team, but is there kind of for the I'll say look outside there is there a simple correlation we can draw between your labels. Among your product group in your lifetime revenue or is that is what's driving the growth is something different than that but I would think that more providers that you add the more eyeballs with Cvs and the more money you can.
But can you kind of help us out with sort of some stuff a little correlation there.
Well so.
Your your correlation that you are making is wildly important.
Network has grown significantly and I think we've.
I did want to paint that picture for a reason so.
That has without question given us.
Scale right. So we have a well.
Rod reach we're able to segment appropriately we invested significantly in data science and be able to understand and segment population better reinvesting.
Hello team, but we've also invested in new products like our <unk> product.
Right right that allows gives us.
And our clients March better visibility and understanding about what consumers are saying and why why things what matters to them why they matter and thats been a.
<unk> powerful.
Tool in our arsenal to be able to.
Demonstrates significant value to our clients.
Sure.
Yes, I think we linked to it in our.
John I don't know if you ever did you see the entire project.
The example, we put out they'll migrate into that.
That stuff is.
Easily accessible to a lot of people and we've made it accessible to our clients.
We're pretty excited because what that also does is demonstrates the depth of understanding we have about.
Felicia.
You know again that gets segue, where like our bread and gender.
<unk>.
You know there are a number of companies who are trying to capture this digital move.
By Big pharma from running.
Midnight ads on TV channels open to catch one fish.
Much more targeted ads.
Do you have a perspective of what.
What freesia brings to the table when you were talking to a manufacturer versus some of your April competitors, who kind of come at it may be a little different way.
Look I think.
So I think that there is different parts of our marketing funnel and theres. Some tactics that are used to sort of.
Get people into an office right. There's some tactics that are used to.
Get you Didnt do switch messaging and what we really talked about is.
We know who the when we engage a patient is a patient you don't have to guess.
Right, we don't talk about as consumer marketing, we talk because the only people, we really reach our patience and they've opted in.
For us to deliver a very targeted message.
Because the information we have relevant to their health care and when you deliver something thats opted in and relevant and it's at the right time.
Wildly effective.
Being able to engage those patients in.
Their care.
And what we've been able to demonstrate is that that engagement.
As.
Very strong ROI, and we're able to do it at scale and reach patients that would otherwise be pretty hard with these organizations to be able to reach right before they are about to see a care provider.
Thank you Sir.
Alright.
Perfect.
Oh, Hi, I'm you know that's that's as excited as I've ever heard you. So.
I'll give you an a.
I think maybe a good one.
All right.
Right.
So I will say much night youre, having Randy realizing here doing it altogether. So thank you everyone for participating and I think I do like the evening call more than first thing in the morning. So maybe it will make this we rolled moving forward. Thanks, everyone.
And I'll talk to you all soon.
This concludes today's conference call. Thank you for joining you may now disconnect.
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