Q2 2022 Progyny Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to today's progeny, Inc. Second quarter 2022 earnings call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. If you would like to enter the queue at any time.
Today, you May press Star one on your telephone keypad to enter the queue. It is now my pleasure to turn the floor over to your host.
Vice President of Investor Relations, James Hart, Sir the floor is yours.
Thank you Tom and good afternoon, everyone welcome to our second quarter Conference call with me today are <unk> CEO of progeny, Michael <unk>, our president and Mark Livingston CFO .
We'll begin 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 both the third quarter and full year 2022, including our expected utilization rates and mix the impact of COVID-19, including variance on.
Our business clients member activity and industry operations, our ability to acquire new clients and retain and upsell existing clients our market opportunity size and expectation of long term growth our plans for the expansion of our business, including expansion into other markets and our services offered our business performance industry outlook strategy future investments.
Plans and objectives and other non historical statements as further described in our press release that was issued this afternoon. The forward looking statements are subject to certain risks uncertainties assumptions and other important factors, including those related to projections growth market opportunity general economic and business conditions, and the impact of laws and regulations and laws and regulations restricting.
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.
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 risks and other important factors 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 entitle.
The risk factors in our most recent 10-K and 10-Q.
During the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA adjusted EBITDA margin gross margin, excluding stock based compensation and operating expenses, excluding stock based compensation reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors that project <unk> Dot com and now I'd like to turn the call over to Pete.
Thanks, Jamie and thanks, everyone for joining US today, we're pleased to report that project and had a very solid second quarter with record quarterly revenue of $195 million, reflecting 52% growth over the second quarter of 2021 over that same period. We also grew adjusted EBITDA by 78% to $32 nine.
While expanding our adjusted EBITDA margin to its highest level highest ever level of 16, 9%.
Strengthened this quarter results reflect that member activity continues to be healthy and at the levels. We would expect to see further affirming both the essential needs of fertility treatment as well as the strong desire or members have in pursuing the care necessary to realize your family building goals I'll pause for a moment to underscore why we believe the essential.
Nature of utility is a critical point, there's historical data demonstrating that the utilization of utility services indoors, even during periods of economic uncertainty a significant reason is that treatment is time sensitive for many patients where even a short do I can become a factor in whether or not they have a successful outcome.
The other reason is that people looking to add a child for their family had a very strong sense as to when it's the right time for them to do so which often overcomes any financial concerns. They may have over the short term.
We've seen this durability take place over the past two years when the vast majority of people who have needed fertility treatment continued to pursue care even against the backdrop of a global pandemic. This trend was also consistent with what happened during the great recession, a decade ago. When overall volumes remained healthy even though the significant majority of the market at that time.
<unk> was cash pay and presumably much more economically sensitive than a covered patient would be.
Although we've seen although the all seeing how inflation and a potential softening in the economy has become a major focus for companies and investors. This year, we arent seeing any related impact on our business thus far.
Engagement with the benefit continues to be strong we continue to have positive and productive renewal discussions with providers and we arent seeing employers change the way they think about the benefit either in terms of adding it if they don't already provide coverage today on keeping it if they do in fact consistent with prior years, a healthy portion of our employer customers.
We are planning to expand their coverage for next year.
This enthusiasm among employers of all sizes fertility and family building solutions isn't surprising given two factors.
First despite the presence of inflationary headwinds and tighter monetary policy unemployment remains at historic lows and the labor market remains extremely tight with more than two job listings for everyone employ unemployed person insertion. Recent survey data continues to reveal that facility is one of the most sought after <unk>.
<unk> amongst the millennial population and their workforce that generation now range ranging in age from their late twenties to their early forty's, which happens to be the most common age cohort perpetuity patient. So it isn't surprising for these employees, who expect fertility as an essential component of their health benefits. A recent survey from Mercer highlights that.
Compensation alone doesn't build engagement as much as it well design benefits program does and goes on to site women's reproductive health and fertility in particular as the top areas employers are focused on to meet the needs and expectations of employees.
Sure. We believe the macro trends continue to be very supportive for fertility benefits and we're seeing that reflected in the positive momentum of our current selling season.
We begin each season was focused priorities for growth one to expand our market share through the acquisition of new clients two to retain clients, whose agreements are up for renewal and three to grow with our existing clients through expansion and ourselves with respect to the first priority new client acquisitions. We are now in the heart of our selling season and at this point overall pipeline.
Size and commitments received to date continue to be favorable relative to the record level of activity that we experienced a year ago at this time.
We've built a strong pipeline of active opportunities that we're continuing to pursue over the remainder of this year selling season as with prior selling seasons in the majority of opportunities. We pursued this year, we are competing against the incumbent carrier who is often participating solely on the basis of being the manager of our prospects overall health plan.
As you would expect to see in a growing market buyers are becoming more sophisticated with some choosing to use an RFP process. Although the majority of opportunities arent using an RFP. We believe a more in depth review of fertility benefits provides project with an advantage is it reveals our leadership scale depth of expertise and the superiority of our solution.
While we typically receive a certain number of early commitments, which reflect not only the client's readiness to make a decision but also their eagerness to begin preparation for the launch. This year. We've received a record number of commitments as at this point in the season.
We believe this is a strong indication that the demand for fertility and family there'll be benefits is robust and continuing to grow reinforcing the macro trends I referred to earlier.
And as usual, we expect that the majority of client decisions will come in the late summer early fall, which is what most companies finalize decisions in time for their open enrollment.
Some themes have emerged so far this season that are worth noting first we continue to break new ground by adding clients and new verticals. Some of our early wins are leading brands, who are first time logos for us in that industry, including our first auto automobile manufacturing clients, our first hotel and hospitality client and even our first major state University.
Program.
While the systems I'm, sorry, while the clients we already serve today represent a broad cross section of more than 30 different industries. We are extremely pleased to be diversifying even further for 2023.
We're pleased to see continued momentum this year from industries that we brought on in previous years. For example, we're seeing some early momentum this year in health care and hospital systems, which is particularly exciting for us as these are amongst the most sophisticated buyers of a medical benefit getting their awareness of what's important in assessing the quality of that benefit there.
So continue to see companies benchmark themselves against the specific industry leader. These companies don't aspire to be the first adopter of a new benefit like agility, but once the leader separates yourself by adding it these companies respond by adding the benefit in order to reestablish parity and maintain their competitiveness as an employer in that industry space.
While this demand while this dynamic provides opportunities within those industries. We already serve we believe that lends further importance with respect to the new verticals, we are bringing on as well in that it lays the groundwork for more opportunities to pursue in future seasons.
Third theme is that our early wins are establishing benefit coverage levels that are comparable to what we've historically seen this reveals that companies aren't pursuing some light version of the benefit in response to the economy.
We're also pleased to see the takeaway I'm projecting Rx continues to be high.
And any and any selling season, our goal is to grow the absolute number of new clients and covered lives over what we achieved in the prior season and with the results. We've seen thus far we believe we are on pace to meet this objective once again.
Turning now to the second priority in our selling season at this point in the year, we've seen that renewals have once again been consistent with our typical rate of near 100% retention.
This is a testament to both the quality of our solution as well as the integrity of our sales and account management process clients know what to expect when they sign with projecting and once they've launched our frequent communication and detailed reporting around our program ensures that they clearly understand how we're improving the efficiency of their health care spend while also helping their workforce really.
Is there family building goals.
The strong renewal rates are a positive sign and it's noteworthy that we arent seeing existing clients look to reduce their benefit for next year, which is yet another validation point to the resilience of facilities a benefit even when adverse economic conditions are present or on the horizon.
Turning now to up sales and expansions and any sales year, we pursue multiple pathways to grow our relationships with existing clients. These include adding services like processing, the Rx expanding coverage with additional smart cycles or adding newer populations within the client.
This year again, we're seeing clients expanding their relationship with progeny by adding new services.
As usual, we'll provide you with a recap of the complete selling season on our next call in November but at this point in the season, we're pleased with where we are.
As the leader in value based care in the utility industry, we understand that measuring and comparing clinical outcomes is one of the best means of objectively demonstrating value to our clients and members by now most of you know that our clinical outcomes outperformed national averages across every critical measure of utility success that needs of our members get pregnant meaningfully faster.
Experienced significantly fewer miscarriages have healthier pregnancies and deliver healthier babies.
And while we've been publishing our outcomes since we began offering the benefit in 2016.
We've not seen either the traditional carriers or newer point solutions demonstrate their value by improving the outcomes or in some cases, having a meaningful enough level of activity to report on.
This quarter.
We sought to set the standard for water utility program should provide to their clients regarding outcomes by engaging moment, a global leader in actuarial services to conduct an evaluation of the methodologies that we use to calculate our outcomes and compare them to the national averages.
This means probably is the only facility solution that is not only publicly publishing these outcomes. We're the only one to have taken the additional step of having an independent validation of those results.
We believe this study raises the bar with respect to what companies should expect from their benefits provider and further advances properties position as industry leader in fertility solutions.
Now turn the call over to Mark to talk about the results for the quarter Mark. Thank.
Thank you Pete and good afternoon, everyone I'll start by taking you through our second quarter results before providing you with our expectations for the third quarter and the full year.
Revenue in the second quarter grew 52% over the prior year to $195 million.
Our growth in the quarter was primarily due to an increase in the number of clients in covered lives as compared to a year ago, including the launch of a number of new clients in the quarter.
Looking at the components of the topline medical revenue increased 37% over the second quarter last year to $126 $8 million, which again was due to the growth in our clients and covered lives while pharmacy revenue increased 87% in the quarter to $68 2 million.
The growth in our pharmacy revenue was primarily driven by an increase in the number of clients with the integrated solution.
Approximately 84% of our clients now have project <unk>, which is approximately 11 percentage points higher than it was at this time last year.
As of June 30th we had 273 clients, representing an average of $4 3 million covered lives during the quarter. This compared to a 182 clients in an average of $2 8 million covered lives in the second quarter last year, reflecting growth of approximately 53% and lives over the past year.
As we discussed with you last quarter, our client count for June 30th reflects the final group of companies that we won in the 2021 selling season with scheduled the launch of the benefit in the second quarter.
It also includes a handful of accounts that were won in the current selling season.
While we always expect that the vast majority of our new clients will go live with their benefit on January one as that's the start of the health plan year for most companies there are employers whose plan year starts on other dates.
We also encountered a handful of clients each year, who have a January 1st plan here, but want to launch their fertility benefit to their workforce sooner than that.
And while that's also the case this year I'll remind you that these tend to be smaller clients, who have the flexibility to manage an off cycle change and their benefits. Accordingly, we wouldn't expect there to be significant incremental contribution to our 2022 results from these early launches.
Turning now to our utilization metrics there were nearly 10400 art cycles performed in the second quarter, reflecting a 42% increase in cycles as compared to the second quarter of last year.
The strong 16% sequential growth in art cycles versus the first quarter of 2022 is a function of the higher average lives and treatments from the clients that launched in Q2, along with the impact of those members who began their journey slightly later in the first quarter given the prevalence of the omicron variant at the start of the year.
In the second quarter, both the level and pacing of utilization as it relates to treatment journeys was healthy and consistent with what we typically would expect to see.
Our female utilization rate this quarter, which which is what corresponds most closely to our financial results was <unk> four 4% this compared to <unk> four 7% a year ago.
I'll remind you that utilization rates will vary from quarter to quarter due to a number of factors, including the timing of our launches with new clients and the time of the year.
Turning now to our margins gross profit increased 48% from the second quarter last year to $43 9 million, yielding a 22, 5% gross margin. This reflects a 50 basis point decrease from our gross margin in the year ago period, due primarily to the impact of noncash stock based compensation, partially offset.
Set by efficiencies that we continue to realize in the delivery of our care management services.
Sales and marketing expense was five 9% of revenue in the second quarter as compared to three 1% in the year ago period. The increase of 280 basis points reflects a higher noncash stock based comp as well as investments we have made in our go to market resources.
G&A costs were 12, 1% of revenue this quarter as compared to 10, 8% in the year ago period that.
That increase of 130 basis points is primarily due to an increase in noncash stock based comp partially offset by operating leverage in G&A as we rapidly grow revenue.
The press release that we issued today reconciles the impact of noncash stock compensation on our gross margin and operating expenses.
Because of our strong topline performance as well as the operating efficiencies we realized adjusted EBITDA grew 78% this quarter from $18 5 million a year ago to $32 9 million.
Our adjusted EBITDA margin of 16, 9%. This quarter is the highest ever quarterly results, reflecting a 250 basis point expansion from the 14, 4% margin in the second quarter of 2021.
This quarter, our adjusted EBITDA margin on incremental revenue was 21, 7%. We continue to believe that margin on incremental revenue is useful as a forward indicator for where the business is capable of moving as it.
Highlights our high rate of margin capture as we expand the business.
Net income was $8 $8 million in the second quarter or <unk> <unk> per share.
This compared to net income of $18 7 million or.
419 per share in the year ago period.
The lower income in EPS as compared to a year ago, primarily reflect the higher stock comp expense in the current period as well as the seven cents per share tax benefit that we recorded in the prior year period as compared to the de Minimis tax provision booked for the current quarter.
Turning now to our cash flow and balance sheet operating cash flow during the quarter was $19 2 million. This compares to a cash use of $7 5 million in the year ago period.
Each period was impacted by timing items, including the short term use of working capital at the outset of each year in the current period those impacts are beginning to reverse following the completion of those integrations for the newest clients who have launched the benefit.
Also as a reminder, last year, we signed new pharmacy partner agreements, including new rebate agreements, which represented a significant improvement in the economics on the Rx business and extended payment terms, an additional 90 days.
As a result, our progeny Rx as our progeny Rx business grows we'll expect that we'll experience negative timing on cash flows which is the effect of the combination of our actual growth plus the extended payment terms, particularly for the first two quarters of the year.
The payments owed to us under our rebate agreements are reflected on the balance sheet is accounts receivable.
As of June 30, we had total working capital of $211 million, including $122 million in cash cash equivalents in marketable securities and no debt.
Turning now to our expectations for the third quarter and full year 2022.
With the front with the strong first half results. We are pleased to be in a position to revise our guidance upward for 2022 for the second quarter in a row for the.
The full year, we are raising the low end of the range and now expect for revenue to be between $750 to $775 million, reflecting growth of between 50% and 55% or approximately 52% at the midpoint.
We are also raising our guidance on profitability, we now expect adjusted EBITDA of between $114 million to $122 million.
For net income, we now expect between $13 8 million to $19 5 million or between <unk> and.
<unk> 19 earnings per share on the basis of approximately 102 million fully diluted shares.
I'll remind you that our net income production projections do not contemplate any discrete income tax items, including any income tax benefit related to equity compensation activity.
To the extent that that activity occurs we will continue to benefit from those discrete tax items throughout 2022.
For the third quarter, we are projecting revenue between $190 million and $197 million, reflecting growth of between 55% and 61%.
Third quarter adjusted EBITDA, we expect between $29 $6 million and $31 $6 million, along with net income of between $1 9 million to $3 $3 million or between $2 <unk> earnings per share on the basis of approximately 102 million fully diluted shares.
Let me now turn the call back over to Pete for some closing remarks, thanks, Marc before I close I wanted to touch on <unk>.
We had heard in the past around whether or not fertility treatment would become an unintended consequence of the overturning of Ravi weight, we've not seen or heard of any clinics across the U S changing their practices or have seen any legal analysis would suggest access to IVF will be negatively impacted.
Now to conclude we're pleased with our results in the quarter and first half of the year as well as the progress that we've made in our selling season for 2023 book of business.
While there are economic headwinds on the top of investors' minds and certainly this is impacting some industries, we're not experiencing the same level of impact given that the overall macro trends that have been fueling our growth continued to be strong.
Those trends include the growing need for fertility as people increasingly differ family building. The later in life and access to care is growing as employers are increasingly realizing the need to offer fertility benefits to their employees with that let's open up the call for your questions operator.
Thank you the floor is now open for your questions. If you would like to enter the queue. At this time to ask a question you May press star one on your telephone keypad to enter the queue. We do ask if listening on speakerphone today that you. Please pickup your handset while asking your question to provide optimal sound quality once again, ladies and gentlemen, that'll be star one.
On your telephone keypad at this time to enter the queue to ask a question. Please hold a moment, while we poll for questions.
And the first question today is coming from Anne Samuel from Jpmorgan. Your line is live. Please go ahead.
Thanks, Congrats on some great results today.
You said in your prepared remarks that you're starting to see some clients expanding with new services and was wondering if you could just talk about what those expansion look like and whats catalyzing those conversations.
Hi, there. Thank you by the way there.
The up sell services that we generally.
Have sold in the past, so there whether or not they're viewing their benefit and understanding do they have enough smart cycle approaches that they want to expand the number of smart cycles that they're offering each employee of reach eligible member there whether or not theyre going to add our estimate didn't have it already there whether or not they're going to.
Certain populations that that may not be today covered or maybe they acquired a company that they now want to put on the benefit those types of things in terms of expanding their benefit.
That's helpful. Thanks, and then just Youre just in gross margins expanded quite a bit in the quarter. I was just wondering what drove that and are you seeing maybe some better pricing that might flow through going forward. Thanks.
Yes so.
Certainly sequentially, we were expecting gross margins to.
To go up and I think we highlighted this last quarter. So.
The company was really built this year for the level of revenues that we have and we launched all of those new clients that we referenced last quarter here in the second quarter. So that incremental revenue was expected and so we naturally expected gross margins.
Go up in Q2, so it's really sort of our expectations.
As far as pricing goes.
Yes, there is nothing that I would call out in terms of pricing impacts going forward.
Great and maybe if I could just sneak in one more you know your commentary around the selling season has been really positive. So far and was just wondering if you might be willing to share how youre thinking about next year and how we should be modeling.
Well I can't know that.
We think it's early and wanted to go back to a normal cadence is talking about from a dollar expectation perspective for the November call overall sales activity I think the the.
The commentary.
And I'll remind you as I remind everybody the majority of commitments do still happen middle of August through through early October but the activity. So far is really strong relative to commitments to date relative to the overall remaining active pipeline et cetera.
And so that's really.
The commentary I think that that we can provide at this point before we start quantifying.
2023.
That's great. Thanks, guys.
Thank you. The next question is coming from Michael Cherny from Bank of America. Michael Your line is live. Please go ahead.
Hi, This is Sean Colman on for Mike. Thanks for taking my question I'm just looking at the results from the quarter, you reported pretty strong revenue growth, but it also looks like youre seeing some pretty significant growth in your accounts receivable and days sales outstanding could you just break down what's driving that growth.
Yes, so part of what's in there and I tried to highlight it in my prepared remarks.
In the first two quarters of the year, we will see an increase in our receivables associated with our Rebase.
Based on the payment terms that we agree and again it was a.
Strong deal from an economics perspective.
Given that we have plenty of cash on the books, we were okay with allowing that but.
But essentially we collect.
We were earning rebates.
And getting in this quarter and getting paid for the rebates that we're a couple of quarters back. So it's really referencing what we had earned were getting paid now for what we earned last year.
So and then and really it's all centered around the growth in pharmacy. So when you see from last year to this year.
Youll see that growth and that's what's really driving it.
You should start to see a correcting itself in the third quarter.
Got it that's helpful. And then just a second question can you talk a little bit about foundation trends that youre seeing on newer cohorts.
Yes so.
Utilization.
Is is as we expect.
There is a different each cohort will be different because the demographic makeup of each client group.
Is different so for example, we launched.
Some customers here in the second quarter, including a larger one that was a a retail customer now we would expect again given the demographics of that company that their utilization rate would be lower than what our overall average book of businesses.
And so again they they begin in their first quarter and then we'll typically see them rise a little bit as people begin to.
Get into their treatment journeys, but otherwise.
These cohorts in the past cohorts are effectively.
Normal acting normally.
Okay.
Great. Thank you.
Thank you. The next question is coming from Sarah James from Barclays. Savi. Your line is live. Please go ahead.
Thank you.
Follow up on on the utilization front. So if you look at your more mature book not the guys that started in two cube earlier are they back to pre COVID-19 levels at this point.
Yes, if you if you look at it by client and those clients.
Within the industry that they're in.
They are back to normal pre COVID-19 levels.
What mark was referring to was the impact of of newer clients and the demographics of the industry that they're in and it would impact the averages, but overall, our pre COVID-19 or sorry, our clients that will round pre COVID-19 are back to normal.
Right.
And then you mentioned earlier that your pharmacy sell through is now kind of low to mid Eighty's, where do you think that caps out their client base.
I Wouldnt we.
We tried to sell every one of them I'm not sure.
I would say it caps out I would say that it's a matter of time.
In terms of whether or not they'll all by upfront or whether or not there'll be upsell opportunities in the future. Our success around upsell activity, whether it's rx or anything else in terms of their original plan design when they first come on board and then what they ultimately do is an indication of that that continues so so I wouldn't sort of.
Yes.
Begin to guess at where it where it caps out we're in that we're in the high eighties already or that sorry, the low eighty's already and I think that'll continue to improve just the question is is to wear but I think it's a matter of time that they come on.
Versus versus whether or not they'll ever come on and just to be clear. The 84% is the cumulative take rate since effectively beginning of time.
It has the take rate in our 'twenty, one selling season.
Out of that group was in the low 90, so we continue to improve on that.
Great.
One more clarification on your comment when you said, it's going to start to normalize in <unk>.
Does that mean normalized going forward or where we're always going to see this seasonality.
Where it's elevated in first half and then goes down in second half because I don't think looking at past years, you guys have had that seasonality.
We had it was just one quarter not too so the payment terms got extended so every year as you have a step up in growth you're going to have that same cash flow impact that will correct itself in the back half of the year. So it's a it's a function of the growth.
And as a result of those payment terms that are on a 180 day payment term, that's going to impact two quarters versus one in terms of you know.
As you have step up in growth in.
Just to be clear on what normal means so in those first two quarters as we saw this year in the second quarter of last year, It's an investment in working capital associated with the growth. So we don't again to the extent that Rx begin continues to grow there'll be a smaller.
The increase in working capital, but you won't see that outside space, but to be clear. It doesn't mean that it comes back down or somehow reverses itself in the back half of the year. It's just we will no longer be making is sizable we wouldn't expect to be making a sizable investment in working capital.
Helpful. Thank you.
Thank you.
And the next question is coming from Stephanie Davis from SBB Securities. Stephanie. Your line is live. Please go ahead.
Hi, guys. Thanks for the question and congrats on a solid beat.
I was looking at your stock based comp.
And I was hoping to hear a little bit more.
You bet.
Got it.
Wondering if that shifted at all given the push pull of the macro backdrop with a growing number of sizable rfps in the market and this is reflective of anything to call out.
Okay.
The stock comp activity is more a function of a grant that we did late last year, that's impacting the year.
On a full year basis, including this quarter.
There is no change in philosophy.
We haven't sort of adopted a change in the level of stock comp that we award to new employees, we've been operating under a matrix and continue to do so relative to.
The portion of compensation that ties to stock comp versus the portion of compensation that's cash com.
No change in our approach nor the proportions of of compensation the increase in stock comp tied back to the grant we did late last year.
Okay understood.
On the subject of some of those large rfps and pipeline activity.
Can you just tell us where you think it means.
The hard.
Maybe what are you seeing either greater traction or the pricing.
Stick with them the stickiness.
I'm not sure I mean, I don't know I'll, let Michael answer that.
Yes.
I think you know I think in general.
We continue to see first of all the contingency that health plan is sort of a constant.
From a competitive perspective.
They're there they own they own the benefits already and again in every case, we'll certainly come up against the health plan from that decision point.
While there has been.
An increase in RF and RFP activity.
We've not seen that impact.
Any of our key metrics to date.
Whether that be pipeline.
As referenced in the opening comments.
Our head on closes this year.
And we're seeing consistency and comparability in our close rates.
So.
Again, they're there.
Although there is slightly more noise in the marketplace.
We're not seeing negative impacts from our new logo sales right and then in terms of where we're seeing it there's no specific segment or industry or or or benefit to sell it or anything like that that's out weighed relative to rfps, it's sprinkled across industries and and consultants relatively equal.
Okay. Thank you guys.
Thank you and the next question is coming from that where Syria from Bahrenburg. Doug. Your line is live. Please go ahead.
Hi, there thanks for taking my question.
Pardon me, if I'm repeating something that's been asked of them kind of hop into a calls here.
I wanted to just talk around a couple of things one is just capacity for providers.
The number of art cycles.
<unk> grown at about a 10% clip.
Over the last five years or so.
From what we understand the capacity of the provider base has dramatically increased.
And you know given kind of where the fertility market is.
We're expecting that to continue to grow I guess, what do you guys have thoughts on how that capacity and volume.
We'll reconcile.
With kind of the supplier the provider base, what bridges that gap.
These way I could describe it as the conversations we have with our our provider network.
There is significant variability in what I'll call productivity per Doc across the industry.
And they all manage their businesses differently, but to manage them in a way that they they don't arent.
Aren't hitting limitations as I understand it relative to.
Being able to service all their all their patients including their product D members.
So we're not hearing when I say, we're not hearing we're not having a challenge in getting our members are scheduled with docs and getting them treatment.
We're not feeling an impact relative to the capacity limitation.
Of any kind to speak of.
And so and the docs are adding docs every year relative to the 2000 ships that they have.
<unk> the country and they are opening up to novo clinics.
As part of their group that works so so although the numbers.
That you are suggesting might indicate some limitation.
What we are experiencing are hearing in any way.
Okay great.
That's probably something I want to double click on later, but let me just move on maybe just revenue.
It's typically been back half weighted aside from last year.
And this year's guidance kind of points to that trend coming back a little bit.
With the H, two waiting re emerging albeit to a lesser extent.
Could you provide some color around what lends to that.
Historically and why that may be emerging now.
Sure.
Sure.
The biggest thing that's going to impact back half versus first half revenue is.
Number of larger usually not this many and not this size clients that have started in Q2, and some of which started within that.
During the quarter not literally unable first but that started in Q2 and their impact in Q3 Q4 is going to impact the full year were.
Where they weren't they didn't exist in Q1 right. So the step up in revenue from Q1, and Q2 is driven primarily by those new clients that have launched right. The other things that do impact it though naturally for the entire base is every year is frontloaded relative to eligible members utilizing the benefit from.
Consultation standpoint, more so as a mix more so than the back half as the mix that they were going onto treatments and so the combination of those two factors.
He is going to drive the back half of the year versus the first half of the year.
Alright, thank you so much.
Rob.
Okay.
Thank you and there are no further questions in queue. At this time and this does conclude today's Q&A session I would now like to turn the floor back to Jean Hart for closing remarks.
Thank you and thank you everyone for joining us. This afternoon, we know that there are certainly lots of companies that are now so we'll wrap this up quick and let you get back to that thank you. So much. If you have any questions. Please reach out otherwise, we'll look forward to speaking with you in the fall.
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.