Q3 2023 Phreesia Inc Earnings Call
Good evening, ladies and gentlemen, and welcome to the freezer fiscal third quarter 'twenty 'twenty three earnings conference call at.
At this time all 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 Blotchy Gandhi Senior Vice President Investor Relations, a free shot Mr. Gandhi you may begin.
Thank you operator, good evening and welcome to Freezers earnings Conference call for the fiscal third quarter of 2023, which ended on October 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.
<unk> 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's close today.
Documents are available on the Investor Relations section of our website at IR Dot 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 regarding trends.
Our anticipated growth strategies <unk>.
<unk> about our industry and the 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 in our quarterly report on Form 10-Q 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 we undertake 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.
We may also refer to certain financial measures not in accordance with generally accepted accounting principles in order to provide additional information to investors.
These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
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 filed after the market's close today with the SEC and May also be found on our Investor Relations website at IR Dot Fregeau Dot com.
On final note as discussed in our stakeholder letter we are updating the nomenclature of one of our revenue categories in our consolidated statement of operations beginning with this reporting period. The revenue line previously named life Sciences will be named network solutions going forward.
Change in nomenclature had no effect on prior revenue amounts we.
We have provided background on why we chose to make this change in our stakeholder letter.
I will now turn the call over to our CEO Hi, Mindy.
Thank you Bill.
Good evening everyone.
We're participating in our third quarter earnings call.
Stakeholder letter and earnings release hit the wires just after four P. M. Eastern So let me share some key highlights for those of you haven't had a chance to go through all the materials yet.
Revenue in the third quarter with $73 million up 31% year over year, that's our seventh consecutive quarter of over 30% revenue growth.
I want to congratulate and thank the entire <unk> team for making this happen.
In the quarter.
Our average number of health care services clients was 2982.
We added 206 average healthcare services clients in the second quarter to the third quarter.
Healthcare services revenue, which is a combination of subscription and related services and payment processing revenue was up 30% year over year in the third quarter.
On a per average health care services client basis subscription and related services revenue remained near 11000 dollar range in the third quarter, reflecting both our land and expand go to market motion and another quarter of growth in average health care services clients.
Payment processing revenue grew 22% year over year in the third quarter net.
Networked solutions revenue the new name for our revenue category previously known as life Sciences was up 33% year over year.
Moving on to our outlook for the rest of the fiscal year.
We expect revenue for the fiscal year 2023.
278 million.
From a range of $273 million to 275 billion.
We expect average healthcare services clients to increase by approximately 150 in the fourth quarter.
We expect fourth quarter subscription and related services revenue on a per average healthcare services client basis to remain roughly in line with our second and third quarter results.
We continue to see solid operating leverage and we expect to return to adjusted EBITDA profitability in fiscal year 2025 base.
Based on our strong year to date performance.
Taken up adjusted EBITDA outlook for the fiscal year to approximately negative $95 million from our previous range of negative <unk> 9 million to negative $1 6 billion.
We remain comfortable with our ability to finance our fiscal year 2025 targets and expect to end fiscal 2023 was approximately $170 million in cash cash equivalents, we believe our capital allocation strategy sets us up to deliver on our financial targets for fiscal <unk>.
2025, India.
Everyone here is focused on driving value for all of our stakeholders, including our share driving shareholder value.
Operator, we think we can now open it up for Q&A.
Thank you.
He would like to ask a question press Star then the number one on your telephone keypad, if he would like to remove your question again press the star one.
We asked today that you limit yourself to one question and one follow up thank you.
We'll pause for a moment to compile the Q&A roster.
Your first question comes from the line of Anne Samuel with Jpmorgan.
Your line is now open.
Hey, guys congrats on the terrific results.
No.
In your letter you talked about an incremental $1 billion opportunity from the payer space as he ought to network solutions.
I was wondering if maybe you could just discuss a little bit how you get paid in this new area and how we should think about the pace of growth for that segment relative to your traditional life Sciences business.
Let me take that mature.
So it's similar to how we get paid for life Sciences based on digital engagement.
Based on the volume of digital engagement.
We received.
And receive cash for that.
It's very similar to that.
Her lifestyle.
And Andy on the second part of your question.
We've been in the life Sciences space for our entire history. This is brand new so.
Growth is sort of a different animal altogether.
Starting from zero.
Pretty recently.
Great I know it sounds like a very interesting opportunity.
Yeah, and maybe just my my next question is you've seen a couple of quarters here now that you know because you're growing your new logos at such a rapid pace.
The revenue per client who's just lagged a little bit and it seems like maybe that will improve a little bit in the fourth quarter, just from adding larger new clients. I was wondering if you could talk about is this a newer trend we should expect to continue or maybe just a one quarter dynamic.
I mean, I think quarter to quarter.
Some quarters.
We have big expands our well will land a larger client.
You know I think.
I don't know if I would call the trends, but I think.
It's going to stay in the range that it has been in the past couple of quarters and we're excited about some of the new larger wins and expansions that are easily sold recently right.
And frankly, we've just been doing really well like the team's been rocketing outlets.
It's been all across the board Big small expands like we're just really I can't thank everyone enough freesia for this past quarter just and.
The work Theyre doing it.
Very very pleasant.
Yes.
Yeah. It does.
2% new logo growth was impressive and looking forward to seeing those clients expand over time and really waterfall into the growth. So great great job terrific results this quarter.
They are so.
Im sure Youll see it soon.
Your next question comes from the line of Ryan Daniels with William Blair. Your line is now open.
Hey, guys congrats on the quarter. Thanks for taking the question.
Maybe another one on member connect I'm curious if you can leverage the client base of insignia health I think they had a pretty significant number of installed clients across the MA book of business. In particular, so is that something that youre leveraging to kind of launch this and drive market growth in that area.
They.
Thanks for that question.
Right.
<unk> had a it was a pretty small business and it was very I wouldn't say it was a significant client base I would say the most important client that they had that we've been able we've definitely been leveraging and working closely with us.
Yeah, Matt right.
We were working regard this KCP program, that's been rolling out very successfully and we really appreciate it.
Yes, the impact it's having on.
Kidney patients and we're really proud to be part of that work, but <unk> senior definitely had in which we are leveraging the.
Reputation of the patient activation measure not measure is the gold standard for understanding.
How patients feel about their own health care and are they participating in are they active.
That's becoming a core temple into our payer strategy, but not just how do we think about.
Our payer products, but also just how we think about engaging in understanding the patient population. We think it's long term I think we tried to articulate this over the last 12 months long term, we think it's really important activation just so critical to understanding.
Impacting health outcomes.
And that's something that's important to everyone here at for Asia, but we think that the that we are going to keep leveraging the work that Dr. Hubert did.
With the pill.
We think we are.
Frankly.
Someone asked me if we're what inning, we're in I would say we're in the top of the first.
And we feel.
Very excited about the impact we can have across the board.
Okay, I appreciate that and congrats to Mike and his team on the expanded market opportunity.
I guess a follow up there for Randy.
Initially coming into the year, the EBITDA guidance, the midpoint was above negative $150 million. So you improved it again today, but more importantly from where we started the year. It's a very dramatic improvements I'm, hoping you could walk through maybe some of the details there what's driving that.
And then certainly want to get your take on Dion Sanders at your alma mater. Thanks.
Yeah.
Yes, Prime time, and there's a lot of excitement.
So it goes to the University of Colorado, So he's a follow on with that.
As far as the.
March towards profitability. Our leadership team is very focused on our fiscal 'twenty five goal of being 500 million run rate in 'twenty five.
Returning back to profitability and I would just say that every leader.
Thinking very carefully about it.
Theyre resourcing in and what is needed to get to that.
<unk> goal and we also feel very strongly that we have enough cash in the bank to execute on our 25 plan.
<unk> is a joint effort of the leadership team just really focus on where we're going and what we need to do to get there.
The team has been incredible this year thinking.
Thinking about this and driving towards that.
Okay, perfect Congrats again to Mike Thanks.
Your next question comes from the line of Richard close with Canaccord. Your line is now open.
Yes. Thank you congratulations on the great results.
You called out winning larger deals in the payment processing and talked about price.
And in that description can you provide a little bit more context.
And in terms of that.
Yeah, what we realized is that.
A lot of large customers really when.
We started working with them and we built the trust we were very surprised at how well like just a lot of them are being.
Price averaged almost by some of the large payment processors and so just by offering.
Frankly competitive prices were able to significantly help them.
The ability for us to as we work with them to understand how we're able to offer them a fairly competitive price while at same time, allowing them to use those dollars to run their run their businesses, the health systems or hospitals.
Those dollars are instead flying from.
Two a payment processor.
Coming to us and <unk> back to the hospital and its been really advantageous to all the stakeholders.
And I've been very <unk> been really like the team has just done a great job of working with larger clients are waiting some of that business really.
It's just all around just wonderful.
That's good to hear but last year, maybe you could go in a little bit deeper on the 1 billion Payor Tam in terms of how what's the buildup there and is that just for the current products like as Youre thinking member <unk>.
Act and activation or any thoughts there.
Its current iteration is underneath.
Planned enrollment and patient activation, but remember activation lets say an and.
So Richard I mean, we're going to be a little bit close to the best in terms of pricing, but I think.
At a very high level, I think as Randy articulated very analogous to <unk>.
Our life Sciences revenue has been generated.
Engagement base, so essentially getting paid by by payers and it's all types of payers government payers right predominantly in Medicare advantage, but on some of the activation stuff that can be a commercial plan it could be a value based care plan or the provider and they are paying us.
Her engagement basis Theres a range of expectations. There in terms of what we can get it's still early days, but there's two variables in that.
There are people, who we can engage in how much we get paid for each.
Okay.
Yeah got it can I slip one more in regarding that.
Yes, yeah.
Yeah. So I mean are you essentially getting paid for lead flow and if they.
Activate or sign up for the plan is there any type of residual revenue.
Associated with that or.
No and hence again the description we renamed our revenue line.
With revenue category and.
Its engagement base.
On recurring <unk>.
There's no residual today.
Excellent. Thank you.
Your next question comes from the line of Jessica <unk> with Piper Sandler Your line is now open.
Thank you and congrats on the good quarter.
I was just curious to know so when you sign a new provider client data and network solutions that you've contracted more broadly automatically extend to that providers patients.
Assuming he is in network or or how does that work.
Yes, assuming when we set a new provider if they give us permission.
Are they going to be part of the network and we could deliver a digital engagement for either.
<unk>.
Life science or.
Remember connect.
Got it and then just.
I'm sorry.
Go ahead.
Just as you guys diversify the revenue streams is there any thought to potentially offsetting some of the subscription burden incumbent upon the provider with.
With some of these alternative sources of revenue or should we still expect that the kind of total addressable opportunity.
First subscriptions on a per provider basis is the same as it always was.
And that's it for me thanks.
We expect subscription to stay where it was.
This isn't.
An alternative this isn't in lieu of.
Got it thank you.
Thanks, Jeff.
Your next question comes from the line of Stephanie Davis with SBB. Your line is now open.
Hey, guys congrats on a great quarter.
Thank you I was hoping to prod a little on that transaction.
You said that market you were seeing a lot of price gouging from the other merchant acquirers.
At 3% you guys are solidly 50, that's above market is there anything else in your transaction yield beyond just the merchant acquiring that we should know about.
Or is there anything really that bad in the market.
I would say pricing is really that bad right. Just it is unbelievable people are taking advantage of our hospitals in America is up it is very upset and assessment.
So with that in mind.
Would you would you go do something more in line with a traditional merchant acquiring and does that mean, you're not bumping into the traditional merchant acquirers like the bank of America merchant services and Jay Diamondback for the world or are they just know, we're probably taking advantage of it and they're still doing that we're bumping 3% pricing.
Yes.
All of these hidden fees and stuff that's crazy Crazy times.
Got it so does that mean, we're going to see more of this payback.
Mix change over time as you get more traction that hospital side of the world.
I mean, absolutely I would say the reason we pointed this out is if you remember I mean, historically, we've talked about that percentage going down and in fact, it's holding in and was slightly up Randy yes. It's been it's been fairly constant at a slightly I mean, we did think it would just go down as we entered the enterprise.
Alright, I'll look for more of a hospital next going forward. Thanks, guys.
Oh wait quick comments do you have anything on the EBITDA raise by less than the beat.
The read through there or just conservatism.
I mean, one thing to think about is that our fiscal year and goes into January .
One of the thing of it.
<unk> expenses, the employer taxes that we have to pay.
A significant bump up in the quarter over quarter, just as we go into the.
One month of our fiscal year, then our new calendar basis.
So security taxes.
Yes.
Understood. Thank you.
Taxes are important.
Your next question comes from the line of Glenn <unk>.
Santana Hello with Jefferies. Your line is now open.
Okay. Thanks for taking my question, Hey, Jim I wanted to dig in on this average number of client growth if I look at the year in totality in the first quarter. You grew 33%. Then you grew 40 and now you're growing 42%. This quarter I just wanted to get a get a sense for you as to whats driving that acceleration because it seems like a.
A lot of other companies not necessarily in your sector, but just more broadly are starting to feel the effect of the difficult environment.
Your numbers are accelerating here and I'm kind of curious is there anything going on here with respect to increased promotional activity or is it productivity from the recent hires or maybe anything shifting in the competitive landscape. What do you think sort of driving that acceleration.
Well look so first and foremost it's pretty right.
We've got a great product that offers a phenomenal amount of value.
In good times and bad people are looking for value and we're and we we provided we show it like there is a phenomenal ROI when you choose free drugs.
<unk>.
And so.
When there is.
When people are looking at tightening budgets, they look for things that help them drive their business.
One second the teams executed really really well.
And I would just say, it's the CLC, which is breaking down the amazing it's been our Str's alright.
Alright, just been crushing it it's our implementation organization is our CSM organization and.
And it's our product organization I think the company is really just.
Doing really like as a team we're doing really well.
Okay say enough about it now we did pull it up.
I was wondering if people are going to ask a question because I do listen to other what other people said and I read the papers.
I asked the team in Macau.
We watch it on our end.
Because I do want you don't know a monthly basis Howard's opportunity close rates have been.
Have we seen because we actually do watch that metric.
<unk>.
Yeah from opportunity to close Glenn we looked at sort of two buckets.
Small and then in the sort of enterprise area and in the small.
We've seen the change.
Pick up by a day or two.
In terms of opportunity to close and then more in the enterprise area. It's been about 10 to 15 days pick up and this is sort of comparing.
As of October versus less so it is taking a little more thinking about a day longer to close some deals and about 10% to 15 days longer to close other deals than we traditionally see.
I guess, you can say we've seen it.
I hope that answers your question.
Yes, no that's fine.
Maybe if I can.
A bigger picture question, just sort of going back to some comments you made a quarter or two ago about the market. In total I think you said last year. There were about 1 billion physician visits if I remember correctly and you said you guys are now at the 100 million Mark So maybe 10% of the market and maybe at this point 30 or 40% are done via automated check.
So I wanted to sort of verify those numbers, but also really get a sense for maybe what percentage of the physicians today already have some type of solution at this point right because I think what investors are really trying to understand is sort of how penetrated we are into the Tam at this point.
As we all are all trying to assess the durability of this this revenue growth. Thanks.
Yes.
Well I don't know if he'll do a great job answering and I am sure.
Sure Bill as you other jumped in our World you were there.
Consequence, but we got about 10% of all of those things not just physician. It's also hospital visits right. So I think the totality is about one three when you look at ambulatory and hospital and we have seen growth in the hospital market.
So we think we're about 10% of the available market.
And I think we've got a long way to go and frankly, we think that.
We've been winning a fair number of where people have tried other solutions too.
So.
The reason we tend to win is just because of our ability to drive.
Call it.
90% self service rates and we think thats.
That's what drives the ROI when the vast majority of patients use the product. So we think we have.
Literally a lull period of growth in front of us.
While we made the investments we did over the last couple of years and while we're seeing some of the payback and we really think.
We appreciate the trust of our investors placed in us and being able to make those investments to be able to grow share some significantly.
So if I take this moment to income for that trust.
And Glenn the only thing I'd add to what I've said is just that in.
In 2019, we did disclose we did about 54 million visits so.
5%, then closer to 10% now.
We're obviously have some <unk>.
Ambition to double the business roughly.
If you look at our 45 targets, so that's sort of the trajectory but quarter to quarter. So we are doing pretty good.
Alright, Thanks, a lot appreciate the comments.
Your next question comes from the line of Danielle <unk> with Citi. Your line is now open.
Hey, guys. Thanks for taking the question.
Back on some of the questions around adding larger clients for <unk>.
Are these clients and your what I would call your core ambulatory channel or are you seeing.
Strength in.
In the acute care.
Health system setting.
Okay.
We're seeing I think a lot of expansion activity everywhere. So.
We're in hospitals, where in large system.
The opportunity to expand is there and we are doing well.
We're selling them.
And getting them to use it.
Phenomenal amount of argue from a lot of our new products.
I think it is expand the footprint, but its also upsell and cross sell but I like to think about it as providing more value.
Yes, so youre not waited to the acute care setting for <unk>.
No.
Okay.
It did not look that way.
Understood.
Got it okay.
One of your competitors in the life Sciences advertising space.
I noted last quarter that there was some weakness.
Recently around.
Company is potentially cutting back on digital AD spend amid a pending recession, obviously you didn't see that in this quarter, but I'm curious what your conversations with the pharma companies have been like and if you expect to see them.
Cut backs.
Our next fiscal quarter and the advertising spend given a pending recession.
I can't comment about other companies I can comment about our <unk>.
Amazing team and the work they've been doing with our life Sciences clients. The feedback Im getting is that things are good. They are working really hard we're in the selling season, but I.
I frankly think we have a bunch of areas, where there is significant competition for the inventory and I think that the.
The life Sciences team has just been doing a phenomenal job of working with our clients and demonstrating phenomenal rois, which has allowed us to continue to grow.
It's not a question of like just the macroeconomics. It's a question of are we providing phenomenal value to all of our clients and our life Sciences organization has.
Just done.
Great job.
Working with clients and.
Demonstrating the.
The lift in value of our platform.
So I got it congrats.
Congrats on the quarter doing well thank you.
Yep.
Your next.
Comes from the line of John Ransom with Raymond James Your line is now open.
Hey, there.
Just stepping back when you guys decided to step on the accelerator last year on year.
Spend money to make money if you will.
Now that we're at.
A year or so and of this one.
It has surprised you both good and bad.
And what is not surprising.
Uh huh.
I don't think we have enough time on this call to Mr. <unk>.
Yes.
You've got to do better than that.
You really have to do better than that that's all I got so far.
I think I have been.
I think what's been very interesting to watch from our vantage point is.
That.
Our execution has been generally to plan, but.
I think I've been very pleasantly surprised on as we've executed the.
The number and the <unk>.
The amount of feedback and trust, we've gotten from our investors and our employees.
As we continue to execute the like sigh of relief, we often get and I think the thing thats.
Been very.
Nice as we've gone through it is the support we've gotten from the Investor community and I really do appreciate that.
From all of you on this call I think that Thats been I don't know, if I caught surprise or not but it's been.
This has been it was a very significant investment that we made and obviously, we're still in the middle of the journey and we are starting to show.
Material improvements and success in that journey, but I've been very pleasantly surprised.
Yeah.
Crosswords, where we got.
Alright.
Just to kind of go one more level under that.
Do you think the R&D step up or the sales step up has been more and then what did you learn from you know.
We're really accelerating your pace of that adding new salespeople that you end up having to get more churn on the back end of that or you have you've proven that you can add more salespeople at scale and not have a diminishing return from the additional people that you added.
I think that with all rules, sometimes you have you hire lots of people whether it doesn't matter. The fairways, sometimes they are just not the right fit for the organization and realizing that as soon as you can for them. They're taking yours is the right thing I don't think we differentiate from any other company that way other than <unk>.
Internally the acknowledgment that not everyone has the right fit for freesia and it's three <unk> is a special place, but I would say that the sales organization has just done a phenomenal job, but going back to your earlier part of the question around R&D.
I think we keep investing in R&D because at the end of the day it's.
The product is what we don't we're a product company the product has to provide a phenomenal amount of value and continuously get.
Provide more and more value every day to our clients.
We can treat patients. They can all we can do is try to make it easier and better for them and their patients.
And experiencing the health care system.
Helping those patients become more activated improving their journey those are all things that we.
Very blessed and lucky to be able to be part of.
Okay and did you have everybody over for dinner again Tonight that you'd make dinner.
We're having dinner, how neither visual reorder rate.
But we are sitting around the table.
Literally gateways is it this time because we got feedback on the audio now like the Mic is on a pillow in the middle of the table, so hopefully certain group.
And your kids or somewhere where theyre, not making a lot of noise.
Thank you to the left the building.
Alright, thank you.
Great.
Your next question comes from the line from Scott Schonhaus with Keybanc. Your line is now open.
Hey, Hi, and team congrats on the results of this are battling a flu here, but most of my questions have been asked I just wanted to kind of drive on this last point that you just kind of mentioned high end about your team, but really your sales and marketing expenses as a percent of revenue reached kind of the lowest levels. We've seen since 2020 and you just posted.
Record, new client wins with healthy adds in <unk>.
<unk> and <unk>, how are you getting so much efficiency with your sales and marketing team now.
Well I think it's.
I think it's.
The fact that our whole organization understands what we have to do and Randy mentioned, the leadership organization, but I would say, it's the whole organization.
Winning opportunities, making phone calls the str's, creating the demand of our product, but also being able to then make sure that we can demonstrate that value and keep that client live in.
And work cohesively and a lot of that also frankly depends on our product organization building, great product, which we do we our product is great.
And it's great because we have a great product organization and when you have a great product.
You are able to demonstrate value quickly and it does the things that you say youre going to do and it does them quickly.
The reason we were able to do what we do is the investments we made.
Over years and over the last couple of years, we made a lot of investments and we're now starting to see the fruit of those investments pay off and I think we still and we will continue to see that for some period of time.
And we're going to keep investing in this amazing thing that we get to do which was called <unk>.
But the reason, we're seeing improvement as the team and the team just executing on their targets and beating them in doing and waking up the next aimed Julian again and I can't thank them enough.
Thanks, Thats all from me great results.
Your next question comes from the line of Joe <unk> with Baird. Your line is now open.
Great Hi, everyone.
This may be overly simplistic, but over the last four quarters now you've invested 30 of the 34 million, let's say.
At quarter end sales and marketing and over that time, you've also added clients at a clip typically over 200 a quarter. So just leaving the composition of our client add aside is the productivity associated with the current team in this current expense base something that.
Do you think kind of supports the same level of client growth going forward.
I mean generally yes.
I think we feel like.
We've said this before.
The level of head count that we have.
Is adequate.
To get to the plan as we talk about this march towards the $500 million in 2020 filings sound like we have a team in place.
And bring US there. So I think we are confident in their productivity and their ability to deliver on it.
Okay. Thank you and then.
Just so I understand that.
Comment that's the fourth quarter, you expect to see a greater mix of larger clients added in expansion activity.
How does that.
Flow into the average subscription per client metric.
One one quarter relative to our big installed base I can appreciate it doesn't move the needle immediately but is this sort of a function of time, where eventually the activity Youre seeing alright, I should say recent many many quarters now of activity eventually that'll be more reflective of just.
What's happening in the broader installed base and that's where you start to get per client growth.
Yes, I mean youre correct one.
<unk> isn't going to move the needle.
A lot I mean, I think we see that number even if you look at the past six quarters.
It's been around somewhere between the 11 two in the 11 six.
I think.
It can go up slightly but I think in a quarter to quarter. It also depends on the mix.
<unk> added a lot of new clients and then there is a cycle there.
When you start to expand and cross sell and some of the new clients that you added in the prior quarter or so.
I think.
Generally I don't like we thought it would be it would moderate but.
I think.
It just it kind of fluctuates quarter to quarter, depending on what this mix in that vein.
Okay I'll leave it there thank you.
Your next question comes from the line of Ryan Macdonald with Needham. Your line is now open.
Hi, Thanks for taking my questions and congrats on a great quarter, you already mentioned in the shareholder letter that you're working with some health plans during the Medicare open enrollment period.
I'm just curious one what.
With those clients how are you measuring ROI and two to.
To the extent that you've sort of seen it thus far what sort of ROI or delivering for those clients relative to sort of the benchmark.
So.
I don't know if were going to disclose some of it right now just because we're in the middle of a lot of these things but the.
The early indications and the anecdotal feedback has been very very positive I'm sure Michael and the payer Jim will start releasing some of that information over the next 12 to 18 months.
Sure we will make it easily digestible for the investment community, but we are very excited and we do think that we will have broad based value impacts for the payer and provider communities and the early indications have been very very positive.
That's super helpful. I appreciate.
Yeah go ahead sorry.
How to think about it and member retention.
Got it got it Okay. That's helpful. And then in terms of as you look to continue to build out. These these new businesses are these new offerings.
What sort of increment incremental investments need to be made if any on sort of go to market motion. There and then as you contemplate sort of the $500 million target what.
Essential do you believe there is for.
These new offerings to accelerate your path to that $500 million.
Ooh.
Sure.
Our commitment we feel really good about that.
Sure.
One slide in front of the other for now.
Look I think one of the reasons why we also wanted to be very clear and talk about this opportunity.
To our investors is we have been making a lot of investments in it and we think it's our responsibility to articulate where some of those investments have gone.
I think thats the compact we have with our shareholders and so once it got to a certain.
Size and we started talking about it we thought it was just the right thing to do.
It is too.
Pretty excited about it and we're in market talking to a lot of early clients and Theyre pretty happy. So we thought this was the right platform for them to properly articulate this and we'll be talking about it more over the coming years as it grows.
And we do think it.
It is going to make it's going to be a big part of us.
<unk>.
Getting to where we need where we have committed to being in the coming years.
Understood. Thanks for the color and congrats again.
Thanks, Ed.
Your next question comes from the line of Jack Wallace with Guggenheim. Your line is now open.
Hi, Good afternoon. This is actually sandy on for Jack.
Honestly one of the questions have been asked and answered, but maybe just one and I think maybe now the answer because you ask you across all the business lines, but when I look at the the lift in revenue guidance and how you've been bringing that up to the year against my model at least for JAKKS model The network solutions and the only name has been the one that's really outperformed this.
Quarter, but is there any certain era you'd call out or do you just generally more positive across all three of the segments.
We're pretty positive about all three of the segments look payments was a little bit lighter than we thought it would be when we started the year.
And I think we've been articulating that it could go up and it could go down throughout the year depending on.
Blue season, and if people are going to the visits or not but I think the team is just look there is there is a bunch of variability.
When you start the year you plan for the worst and you hope for the best I think Thats one of the things in.
Continuously we try to figure out how if something good happens or we do more of.
It happens that we prevent it from happening over and over again and for 18 years, we would run the business.
It's a lot of work and you just pay attention to the details and drew you surround yourself with as many amazing people as possible.
You empower them to just make a difference at every stage of the way and if you keep if we keep doing that and as we have for the last 17 years for the next 18 years, we're going to build a very significant company in health care and we feel pretty good about that.
Great. That's really helpful. And then just a quick housekeeping.
Housekeeping does the number of Str's and in the quarter or at the end of the quarter.
So the number is the 175, including SDR has an impact here.
Great. Okay. Thanks, so much.
Thank you Ed give Jack our best if you talk to the.
The baby was delivered last night, so everybody is healthy and happy and <unk> expanded.
Mazeltov Thats all.
Your next question comes from the line of Robert Simmons with D. A Davidson your line is now open.
Hey, thanks for taking our questions.
First.
I was wondering didn't remember connect contribute revenue in <unk> or is that starting this quarter here.
If you remember COVID-19 contributing.
Yes.
Yes, we just reported Q3. So this is a member connect revenue in that number yes.
Okay, Great and then.
So your head count.
Net come down each of the last three quarters, where is that primarily coming from Ms had been pretty much across the board or is it more than say in G&A or any kind of color would be helpful.
And it's across the board.
With our leadership team is focusing on what's needed to drive our fiscal 'twenty five targets.
It's not in one particular area or another.
Got it great. Thank you very much.
Thank you.
Your next question comes from the line of Richard close with Canaccord Genuity. Your line is open.
Yes. Thanks.
I'm good.
I am good.
Good morning again.
Have a good night.
Yeah.
No and I'd like to thank everyone for joining us for the call and we hope to see everyone virtually and in person soon enough.
Have a great holiday season.
<unk> talked to all of you and thanks, everyone on Freesia FERC great quarter.
This concludes today's conference call. Thank you for attending you may now disconnect.
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