Q4 2023 Progyny Inc Earnings Call

Okay.

Operator: Good day, ladies and gentlemen, and welcome to the Progyny, Inc. fourth quarter 2023 earnings. This time, all participants have been placed in a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James.

Good day, ladies and gentlemen, and welcome to the <unk>, Inc. Fourth quarter 2023 earnings call at this time all participants.

Have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation.

It's now my pleasure to turn the floor over to your host James Hart the floor is yours.

James: Thank you, John, and good afternoon, everyone. Welcome to our fourth quarter conference call. With me today are Peter Nevsky, CEO of Progyny, Michael Stermer, President, and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call to your questions. Before we begin, I'll remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the first quarter and full year 2024, and the assumptions and drivers underlying such guidance, including the impact of our sales season and client launches, and our expected utilization rates and mix, our anticipated number of clients and covered lives for 2024, the potential benefits of our solution, our ability to acquire new Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, as well as other important factors.

James Hart: Thank you John and good afternoon, everyone welcome to our fourth quarter Conference call with me today are <unk> CEO progeny, Michael <unk>, our president and Mark Livingston CFO, we will begin with some prepared remarks before we open the call for your questions before we begin I'll remind you that our comments and responses to your questions today reflect.

James Hart: Management's views as of today only and will include statements related to our financial outlook for about the first quarter and full year 2024, and the assumptions and drivers underlying such guidance, including the impact of our sales season, and client launches and our expected utilization rates and mix are anticipated number of clients in covered lives for 2024.

James Hart: The potential benefits of our solution, our ability to acquire new clients and retain and upsell existing clients, our market opportunity and our business strategy plans goals and expectations concerning our market position future operations and other financial and operating information, which are forward looking statements under the federal Securities law actual results may differ materially.

James Hart: From those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business as well as other important factors for a discussion of the material risks uncertainties assumptions and other important factors that could impact our actual results. Please refer to our SEC filings and today's press release, both of which can be found on our investor relations.

James: For a discussion of the material risks, uncertainties, assumptions, and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our investor relations website. Any forward-looking information statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non-GAAP financial measures, such as adjusted EBITDA margin, adjusted EBITDA margin on incremental revenue, and non-GAAP earnings per diluted share. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, is available in the press, which is available at investors.progyny.com. I would now like to turn the call over to you.

James Hart: Site any forward looking information statements excuse me that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA adjusted EBITDA margin adjusted EBITA.

James Hart: <unk> margin on incremental revenue and non-GAAP earnings per diluted share more information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures are available in the press release, which is available at investors <unk> Dot Com I would now like to turn the call over to Pete.

Peter Nevsky: Thank you, Jamie. Thanks, everyone, for joining us this afternoon. 2023 was another exceptional year for Progyny, a year in which we achieved record levels of revenue, which grew 38%, profitability with a 17.2% adjusted EBITDA margin, and operating cash flow generating nearly $190 million, or more than twice what we delivered in 2022. As important as those financial measures of success are, we're equally pleased with what we achieved operationally. I'll touch on just a few of these highlights.

Pete: Thank you Jamie and thanks, everyone for joining us this afternoon.

Pete: 23 was another exceptional year for <unk>, a year in which we achieved record levels of revenue, which grew 38% profitability with a 17, 2% adjusted EBITDA margin and operating cash flow generating nearly $190 million or more than twice, what we delivered in 2022.

Pete: As important as those financial measures of success are we're equally pleased with what we've achieved operationally.

Pete: And just a few of these highlights.

Peter Nevsky: Driven by our remarkable levels of member and client satisfaction, we once again maintained our near 100% retention across our client base, while also concluding a selling season that yielded the largest number of new covered lives in our history. We deepened our already highly collaborative relationships with clinical providers, while also extending the reach of our vast network through the addition of reproductive urologists, with the Progyny network now reaching more than 1,000 of the highest quality REIs Aided by the quality and reach of that network and the ways in which we collaborate with them, we continue to achieve, for the eighth straight year, industry-leading clinical outcomes in fertility care.

Pete: Driven by our remarkable levels of member and client satisfaction. We once again maintained our near 100% retention across our client base. While also concluding a selling season that yielded the largest number of new covered lives in our history. We.

Pete: We deepened our already highly collaborative relationships with critical providers, while also extending the reach of our vast network through the addition of reproductive urologists with the property the network now reaching more than 1000 of the highest quality <unk> and our use in the country and.

Pete: And we expanded our solution to address both menopause and the treatment of male infertility.

Pete: Aided by the quality and reach of that network and the ways in which we collaborate with them. We continue to achieve for the eighth straight year, the industry, leading clinical outcomes and fertility care and in 2023, we help the largest number of members in our history realize their family building dreams through healthier.

Peter Nevsky: And in 2023, we helped the largest number of members in our history realize their family building dreams through healthier and faster journeys while controlling costs. In fact, since launching our solution in 2016, we've cumulatively helped hundreds of thousands of people successfully navigate what would otherwise have been a complex, stressful, and overwhelming course of treatment. And we've done so while routinely achieving NPS scores in the 80s, an exceptional achievement for any industry, let alone a helpline.

Pete: Faster journeys, while controlling costs.

Pete: Back since launching our solution in 2016, we've cumulatively helped hundreds of thousands of people successfully navigate what would otherwise have been a complex stressful and overwhelming course of treatment.

Pete: And we've done so while routinely achieving NPS scores in the eighties, an exceptional achievement for any industry, let alone in health care.

Peter Nevsky: As a mission-driven company where everything we do is about empowering people to successfully meet the milestones in their lives through evidence-based solutions, we're perhaps proudest of our sustained clinical success because we understand how those outcomes aren't just numbers on a page but tangible, life-changing results for people every day. To put it simply, there are tens of thousands of babies in the world today who were born after their parents turned to their progeny for support, typically after having been unable to conceive on their own or unable to carry a child to term.

Pete: As a mission driven company, where everything we do is about empowering people to successfully meet the milestones in their lives to evidence based solutions, where perhaps proudest of our sustained clinical success, because we understand how those outcomes aren't just numbers on a page the tangible late changing.

Pete: Results for people every day.

Pete: To put it simply there are tens of thousands of babies in the world today, who were born after their parents Jeremy <unk> four support typically after having been unable to conceive on their own or unable to carry a child to term.

Peter Nevsky: It's helpful to remind ourselves of these successes, particularly when the news cycles over the past week have focused on a potential barrier in the state of Alabama with respect to access to care. We're fully committed to ensuring that access to IVF will continue for all those in need, including our members, regardless of where they live. Just as we saw two years ago following the Dobbs decision, a number of state legislatures and governors, including Alabama's, have indicated their intent to take action to ensure the continued availability of these services. And while this is encouraging, it isn't surprising to us, given how life-affirming these services are to the millions of individuals who have already used them successfully, and the reality that an even greater number of people will need to turn to them Likely, many of these legislators know someone personally who has needed access to fertility care in order for some people to realize their family building dream.

Pete: It's helpful to remind ourselves of these successes, particularly when the new cycles over the past week have focused on a potential barrier and the state of Alabama with respect to access to care.

Pete: And we're fully committed to ensuring that access to IVF will continue for all of those in need including our members regardless of where they live justice.

Pete: Just as we saw two years ago. Following the Dobbs decision a number of state legislators and governors, including Alabama's have indicated their intent to take action to ensure the continued availability of these services.

Pete: And while this is encouraging it isn't surprising to us given how life affirming. These services are to the millions of individuals who have already used it successfully and the reality that an even greater number of people will need to turn to it in the future.

Pete: It's likely many of these legislators no someone personally who is needed access to protiviti care in order for some people to realize their family building dreams.

Peter Nevsky: As we said previously, one of the macro trends driving the demand for care is the increasing prevalence of infertility, which has gone from one in eight just a handful of years ago to one in five today, according to the CDC. We've seen that reflected in the strong member engagement metrics that we've reported to you in 2023. Continuing the pattern that we've seen all year, utilization in the fourth quarter was up versus the comparable period in 2020. However, although our Q4 guidance reflected the typical decline in member activity due to the holidays and clinic closures for routine cleaning and maintenance, the actual decline in December was slightly more than what we had anticipated, which is why revenue ended up closer to the midpoint of our Q4 range.

Pete: As we've said previously one of the macro trends driving demand for care is the increasing prevalence of infertility, which has gone from one any just a handful of years ago.

Pete: One in five today according to the CDC.

Pete: You've seen that reflected in our strong member engagement metrics that we've reported to you in 2023.

Continuing the pattern that we've seen all year utilization in the fourth quarter was up versus the comparable period in 2022.

Pete: Although our Q4 guidance reflected the typical decline in member activity due to the holidays and clinic closures for routine cleaning and maintenance. The actual decline in December was slightly more than what we had anticipated which is why revenue ended up closer to the midpoint of our Q4 range.

Peter Nevsky: As 2024 began, utilization returned to levels that are more consistent with what we would expect to see early in the year, demonstrating that the benefit is being used by both new and existing members. And while overall utilization levels are in line with last year, as at this point in the quarter, there was a brief shift in treatment mix at the start of the year, which we estimate resulted in approximately $15 million headwind on revenue in the quarter from what we normally would expect and which we've reflected in our guidance for the first quarter. While this phenomenon doesn't happen often and has only occurred once since we were a public company back in the summer of 2021, when it has happened, it's always been short-lasting and has reverted thereafter to the more typical distribution of treatment.

Pete: As 2024 began utilization returned to levels that are more consistent with what we would expect to see early in the year demonstrating that the benefit is being used by both new and existing members.

Pete: And while overall utilization levels are in line with last year as at this point in the quarter. There was a brief shifting treatment mix at the start of the year, which we estimate resulted in an approximately $15 million headwind on revenue in the quarter from what we normally would expect and which we have reflected in our guidance for the first quarter.

Pete: While this phenomenon doesn't happen often and has only occurred once since we've been a public company back in the summer of 2021. When it has happened it's always been short lasting and has reverted thereafter to the more typical distribution of treatment.

Peter Nevsky: To that end, we've already seen treatment mix return to more customary levels over the second half of the quarter, with February activity closer to normal than in January, and the visibility we have into March that indicates it's trending to the typical expected distribution, giving us confidence that this aberration was, like all previous ones, short-lived and now behind us. While Mark will walk you through our guidance for the first quarter, given what we are seeing now, we're expecting that the activity in Q2 and over the balance of the year will be much more consistent with the historical trajectory, which is reflected in our full year guidance. Please see the complete disclaimer at https://sites.google.com & www.sites.google.com). These trends, namely the need for fertility benefits is higher than ever, with an increasing number of people affected by infertility as a medical condition. People are continuing to wait until later in life to start their families. And in doing so, they are more likely to need fertility care.

Pete: To that end, we've already seen treatment mix returned to more customary levels over the second half of the quarter with February activity closer to normal than in January and the visibility we have into March that indicates it's trending to typical expected distribution, giving us confidence that this aberration was like.

Pete: Previous ones short lived and now behind us.

Pete: While Mark will walk you through our guidance for the first quarter given what we're seeing now we're expecting that the activity in Q2 and over the balance of the year will be much more consistent with the historical trajectory, which is reflected in our full year guidance.

Pete: That tradition.

Pete: Reflect a continuation of the macro trends that have been fueling our growth, namely the need for fertility benefits is higher than ever with an increasing number of people affected by our utility as a medical condition people are continuing to wait until later in life to start their families and in doing so are likely to need fertility care.

Peter Nevsky: And family building is still a priority. In fact, these macro factors continue to create a number of tailwinds that we expect will contribute to our longer-term success. First, demand for fertility benefits is stronger than ever, particularly among millennials who are in the prime of their family building years. Second, family building and women's health benefits have never been more relevant or more timely with employers, particularly as they look to modernize the coverage they're providing in order to better support their employees' needs. Employers increasingly realize that in doing so, they're not only enhancing the efficiency of their recruitment and retention efforts, but they're Third, employers are continuing to demonstrate their commitment to family building and women's health services, and they do this by adding coverage when they don't already have it, or by expanding their coverage to provide even greater access to care, by broadening the scope to include other pathways, such as adoption and surrogacy, and by including other services in their programs, such as preconception, parenting, and menopause.

Pete: And family building is still a priority.

Pete: In fact, these macro factors continue to create a number of tailwind that we expect will contribute to our longer term success.

Pete: First demand for fertility benefits are stronger than ever, particularly among the millennials or the prime of their family building years.

Pete: Second family building in women's health benefits have never been more relevant or more timely with employers, particularly as they look to modernize the coverage. They are providing in order to better support their employees needs employers increasingly realize that in doing so they are not only enhancing the efficiency of their recruitment and retention.

Pete: Efforts, there also meaningfully improving workforce productivity.

Pete: Third employers are continuing to demonstrate their commitment to family building in women's health services and they are doing this by adding coverage when they don't already have it whereby expanding their coverage to provide even greater access to care by broadening our scope to include other pathways, such as adoption and surrogacy and by including other services into that.

Pete: Programs, such as preconception parenting and menopause.

Peter Nevsky: And lastly, by leveraging our proven strengths in patient education and support, evidence-based care pathways, network management, and outcomes measurement, Progyny continues to successfully differentiate itself in the market by raising the bar for what employers should expect from their benefit providers. This experience ideally positions us for success as we enter 2024 with a more comprehensive set of services. The 2024 selling season is in its very early stage, and while it's too soon to offer any quantitative commentary, the early activity that we're seeing thus far is very positive. Our active pipeline, which at this early point in the season consists primarily of the opportunities that were carried over from last year, is the largest it has ever been at this time of year, and the pipeline will expand as additional opportunities are created through our channel partner relationships, our own demand generation activities Thank you.

Pete: And lastly by leveraging our proven strengths and patient education and support.

Pete: Evidence based care pathways network management and outcomes measurement projects continues successfully differentiate itself in the market by raising the bar for what employers should expect from their benefit providers to see experience ideally positions us for success as we enter 2024 with a more calm.

Pete: Hence a set of services.

Pete: 2020 for selling season is in its very early stage and while it's too soon to offer any quantitative commentary. The early activity that we're seeing thus far is very positive.

Pete: Our active pipeline, which at this early point in the season consists primarily of the opportunities that were carried over from last year is the largest it has ever been at this time of year.

Pete: And the pipeline will expand as additional opportunities are created through our channel partner relationships, our own demand generation activities participation at key conferences introductions facilitated by the benefit consultants Rfps and all other activity.

Pete: We've also had a number of early wins, including well known brands in apparel health care and media just to highlight it too.

Peter Nevsky: We've also had a number of early wins, including well-known brands in apparel, healthcare, and media, just to highlight a few. In short, we've entered 2024 with considerable momentum, which comes on the heels of our last retail sales, which were the most productive in our history. Despite that rapid growth over such a short period of time, we continue to be at a very early stage of penetrating our market opportunity, just amidst single-digit percent of either our targeted clients or covered lives. Though we've expanded our addressable market in recent years by first adding labor and then adding federal government populations. We have opportunities to expand our TAM even further with other types of employers. Because of our proven history of delivering real and sustained value in family building services, we enjoy a sizable advantage as our clients will often proactively share with us the gaps they are looking to address across other areas of healthcare, particularly with respect to patient access, member experience, and cost efficiency. In fact, because the Progyny member experience is so unique and what we deliver is so special, we've had clients tell us about the letdown once a member has concluded their Progyny journey and has to return to the health plan or some other solution for further support.

Pete: In short we've entered 2024 with considerable momentum which comes on the heels of our lastly, selling seasons, which are the most productive in our history.

Pete: And despite that rapid growth over such a short period of time, we continue to be at a very early stage of penetrating our market opportunities just the mid single digit percent of either our targeted clients or covered lives.

Pete: So we've expanded our addressable market in recent years by first adding labor and then adding federal government populations, we have opportunities to expand our Tam even further with other types of employers.

Pete: Because of our proven history of delivering real and sustained value and family building services, we enjoy a sizable advantage as our clients will often proactively share with us the gaps they are working to address across other areas of healthcare.

Pete: Typically with respect to patient access member experience and cost efficiency.

Pete: In fact, because the project team member experiences so unique and what we deliver so special we've had clients tell us about the let down once a member has concluded their progeny journey and has returned to the health plan or some other solution for further support.

Pete: That's why <unk> is so uniquely positioned to expand our already industry, leading platform and to other areas of further support other key milestones.

Pete: We've made investments in our product organization will continue to expand that team in 2024 to enable us to quickly add new features to existing services or expand into new areas in ways that makes sense for us and our clients.

Peter Nevsky: That's why Progyny is so uniquely positioned to expand our already industry-leading platform into other areas that further support life's other key milestones. We've made investments in our product organization and will continue to expand that team in 2024 to enable us to quickly add new features to existing services or expand into new areas in ways that make sense for us and our clients. These include areas like preconception support, where we can help address conditions that often negatively impact the ability to conceive, such as PCOS or endometriosis, or Maternity, where we can help expectant mothers navigate the pregnancy journey.

Pete: These include areas like preconception support where we can help address conditions that often negatively impact the ability to conceive such as pcos of endometriosis or maturity, where we can help expected mothers navigate the pregnancy journey.

Pete: Post partum as the new parents look for support as they adjust to the New addition to their family and think about their eventual return to the workforce.

Pete: These services are being included in our 2020 for selling season for both new clients as well as upsell activity amongst existing clients for contribution beginning in 2025.

Mark Livingston: Postpartum as new parents look for support as they adjust to the new addition to their family and think about their eventual return to the workplace. These services are being included in our 2024... for both new clients as well as upsell activity amongst existing clients for contribution beginning in 2025. In conclusion, the early selling season activity gives us confidence that the macro trends driving the high demand for family building benefits, combined with our position as the leader in the space, position us well to sustain our growth trajectory. And given the caliber of the companies that we're both partnering with and seeing in our active pipeline, it's become even more evident that Progyny is the provider of choice for fertility solutions amongst the best known and most successful companies in the Let me now turn the call over to Mark to walk you through the results in more detail. Thanks, Pete, and good afternoon, everyone.

Pete: In conclusion, the early selling season activity gives us confidence that the macro trends driving the high demand for family building benefits combined with our position as the leader in this space position us well to sustain our growth trajectory.

Pete: And given the caliber of the companies that were both partnering with and seeing in our active pipeline. It's become even more evident that progeny is the provider of choice for fertility solutions amongst the best known and most successful companies in the world.

Pete: Let me now turn the call over to Marc walk to walk you through the results in more detail Mark.

Marc: Thanks, Pete and good afternoon, everyone I'll start with an overview of our results for the fourth quarter and the full year and then provide our expectations for 2024.

Marc: Revenue in the fourth quarter was $269 $9 million, reflecting 26% growth for the full year revenue grew 38% to 1.09 billion.

Marc: With this strong result, we've more than doubled our revenue over the past two years and achieved a 10 fold increase over the past five years, which further attests to the substantial size of our market opportunity as well as our success in executing against our go to market strategies.

Mark Livingston: I'll start with an overview of our results for the fourth quarter and the full year and then provide our expectations for 2024. Revenue in the fourth quarter was $269.9 million, reflecting 26% growth; for the full year, revenue grew 38% to $1.09 billion. With this strong result, we've more than doubled our revenue over the past two years and achieved a tenfold increase over the past five years, which further attests to the substantial size of our market opportunity as well as our success in executing against our go-to-market strategy. Our growth in both the quarter and the year was primarily due to an increase in the number of clients and covered lives as compared to the year-ago period. As of December 31st, we had 392 clients with at least 1,000 lives, representing an average of 5.4 million covered lives in the fourth quarter.

Marc: Our growth in both the quarter and the year was primarily due to an increase in the number of clients in covered lives as compared to the year ago period.

Marc: As of December 31, we had 392 clients with at least 1000 lives representing an average of $5 4 million covered lives in the fourth quarter.

Marc: This compared to 288 clients in an average of $4 6 million covered lives in the fourth quarter, a year ago, reflecting approximately 19% growth in lives.

Marc: For the full year average life increased to approximately 24%.

Marc: I'll remind you that the fourth quarter of 2022 includes the impact of early launches, which had the effect of muting our growth rate this quarter as compared to what you will see.

Marc: In our full year growth rates.

Marc: As we told you in November our recent selling season was more typical with substantially all of our newest clients launching in 2024.

Mark Livingston: This compared to 288 clients and an average of 4.6 million covered lives in the fourth quarter a year ago, reflecting approximately 19% growth in lives. For the full year, average lives increased by approximately 24%. I'll remind you that the fourth quarter of 2022 includes the impact of early launch, which had the effect of muting our growth rate this quarter as compared to what you will see in our full-year growth. As we told you in November, our recent selling season was more typical, with substantially all of our newest clients launching in 2024, which is what we would ordinarily expect to see. Although the majority of our new clients have gone live in the first quarter, we have new clients going live in Q2 and Q3, representing, in aggregate, approximately 200,000 additional lives.

Marc: Which is what we would ordinarily expect to see.

Marc: Although the majority of our new clients have gone live in the first quarter, we have new clients going live in Q2, and Q3, representing in aggregate approximately 200000 additional lives and we've reflected that in the progression of our quarterly expectations for 2024.

Turning to the components of the topline medical revenue increased 20% in the fourth quarter to $171 million and grew 33% in the year to $676 million or.

Marc: Our growth in both the quarter and the year was driven by a higher number of clients in covered lives.

Marc: Pharmacy revenue increased 39% in the fourth quarter to $98 6 million and grew 49% over the full year to $412 million.

Marc: The growth in both periods was primarily driven by an increase in the number of clients with progeny Rx.

Marc: We continue to see the progression in the adoption of our pharmacy solution in 2022, 85% of our clients had pharmacy that increased to approximately 90% in 2023 and with nearly every one of our newest clients choosing Rx in the most recent selling season, along with our upsell activity from the existing base.

Mark Livingston: And we have reflected that in the progression of our quarterly expectations for 2024. Turning to the components of the top line, medical revenue increased 20% in the fourth quarter to $171 million and grew 33% in the year to $676 million. Our growth in both the quarter and the year was driven by a higher number of clients and covered losses. Pharmacy revenue increased 39% in the fourth quarter to $98.6 million and grew 49% over the full year to $412 million.

Marc: We anticipate that approximately 93% of our clients will have the integrated solution in 2024.

Marc: Well that still leaves approximately 7% of the base for future Upsells.

Marc: Penetration continues to decline, we would expect to see the difference in growth rates between medical and pharmacy continue to narrow.

Marc: Turning now to our member engagement metrics more than 15000 art cycles performed in during the fourth quarter. This was our highest quarterly total ever and a 24% increase from the fourth quarter of 2022.

Mark Livingston: The growth in both periods was primarily driven by an increase in the number of clients with Progyny Rx. We continue to see progression in the adoption of our pharmacy solutions. In 2022, 85% of our clients had pharma. That increased to approximately 90% in 2023, and with nearly every one of our newest clients choosing Rx in the most recent selling, along with our upsell activity from the existing... We anticipate that approximately 93% of our clients will have the integrated solution in 2024, while that still leaves approximately 7% of the base for future upsells. As penetration continues to climb, we would expect to see the difference in growth rates between medical and pharmacy continue to narrow. Turning now to our member engagement. More than 15,000 art cycles were performed during the fourth quarter.

Marc: For the full year art cycles grew more than 36%, reflecting the continued high rate of demand that we see for fertility care.

Marc: The female utilization rate, which most closely corresponds to our financial results as it captures the more extensive treatments in the fertility journey was four 8% in the quarter. This is an increase from the four 6% that we reported in the fourth quarter a year ago.

For the full year, the female utilization rate was 1.09%, which was higher than the 1.03% we reported a year ago as utilization in every quarter of 2023 exceeded the comparable period in 2022.

Marc: Although utilization can vary from quarter to quarter for many reasons, including the timing of new client launches and the time of the year. We believe the overall upward trajectory for the year reflects both the increasing prevalence of in fertility as a medical condition as well as our members continued desired pursue family building.

Marc: Turning now to our margins and operating expenses gross profit increased 28% in the fourth quarter to $56 9 million. This yielded a 21, 1% gross margin, which was a 30 basis point increase from the fourth quarter of 2022.

Mark Livingston: This is our highest quarterly total ever and a 24% increase from the fourth quarter of 2022. For the full year, ART cycles grew more than 36%, reflecting the continued high rate of demand that we see for fertility care. The female utilization rate, which most closely corresponds to our financial results as it captures the more extensive treatments in the fertility journey, was 0.48% in the quarter. This was an increase from the 0.46% that we reported in the fourth quarter a year ago. For the full year, the female utilization rate was 1.09%, which was higher than the 1.03% we reported a year ago, as utilization in every quarter of 2023 exceeded the comparable period in 2020. Although utilization can vary from quarter to quarter for many reasons, including the timing of new client launches and the time of the year, we believe the overall upward trajectory for the year reflects both the increasing prevalence of infertility as a medical condition, as well as our Turning now to our margins and operating income. Gross profit increased 28% in the fourth quarter to $56.9 million. This yielded a 21.1% gross margin, which was a 30 basis point increase from the fourth quarter of 2022. For the full year, gross profit increased 43% to $239 million.

Marc: For the full year gross profit increased 43% to $239 million. The 21, 9% gross margin in 2023 was a 60 basis point increase over the prior year, reflecting the ongoing efficiencies that we've realized in the delivery of our care management services, which were only partially offset by the impact.

Marc: Our previously disclosed cost containment efforts that were shared with our clients.

Sales and marketing expense was five 5% of revenue in both the quarter and the full year, reflecting a modest improvement from the corresponding periods in 2020 to the.

Marc: The investments we've made to meaningfully expand our channel partner relationships and go to market resources, including the build out of newer areas like labor continue to be offset by the leverage we gain through our client acquisition and retention success.

Marc: G&A was 10, 4% of revenue this quarter as compared to 13, 2% in the fourth quarter a year ago.

Marc: For the full year G&A was 10, 8% of revenue, which compared to 12, 5% in 2022.

Marc: The improvement in both the quarter and the year is primarily due to the efficiencies that we continue to realize in our back office operations, even as we rapidly expand the business.

Marc: With our strong top line growth and the operating efficiencies that we realized adjusted EBITDA both in dollars as well as in margin increased significantly in both the quarter and the year.

Marc: In the fourth quarter, adjusted EBITDA increased 31% to $43 2 million, yielding a margin of 16% for the full year adjusted EBITDA increased 49% to 187 million, yielding a margin of 17, 2%, which is a 120 basis point expansion from 2022.

Mark Livingston: 21.9% gross margin in 2023 was a 60 basis point increase over the prior year, reflecting the ongoing efficiencies that we've realized in the delivery of our care management service, which were only partially offset by the impact of our previously disclosed cost containment efforts that were shared with our clients. Sales and marketing expense was 5.5% of revenue in both the quarter and the full year, reflecting a modest improvement from the corresponding periods in 2022. The investments we've made to meaningfully expand our channel partner relationships and go-to-market resources, including the build-out of newer areas like labor, continue to be offset by the leverage we gain through our client acquisition and retention success. GNA had 10.4% in revenue this quarter as compared to 13.2% in the fourth quarter a year ago. The full year GNA was 10.8% of revenues, which compared to 12.5% in 2022.

Marc: No.

Marc: Adjusted EBITDA margin on incremental revenue, which most clearly highlights our rate of margin capture as we grow and has proven to be useful as a forward indicator of where the overall business is moving was 23% in 2023 further demonstrating the leverage that we continue to achieve on the most reach.

Marc: <unk> cohort of revenue.

Marc: Net income in the fourth quarter was $13 5 million or <unk> 13 per diluted share this compared to net income of $3 4 million or <unk> <unk> per share in the fourth quarter of 2022.

Marc: On a full year basis, net income was $62 million or <unk> 62 per diluted share, which compared to $30 4 million or <unk> 30 per share in 2022.

Marc: The increase in both the quarter and the year was due primarily to higher profitability and higher investment income, which more than offset a higher provision for income taxes in the current periods.

Mark Livingston: The improvement in both the quarter and the year is primarily due to efficiencies that we continue to realize in our back office operations, even as we rapidly expand the business. With our strong top line growth and the operating efficiencies that we've realized, adjusted EBITDA, both in dollars as well as in margin, increased significantly in both the quarter and the year. In the fourth quarter, Adjusted EBITDA increased 31 percent to $43.2 million, yielding a 16 percent margin.

Marc: In response to feedback we've received from investors. We're also now reporting adjusted earnings per diluted share, which is earnings excluding the impact of stock based compensation taking into account any associated tax impacts.

Marc: We believe this measure enhances the comparability of our results to other companies who report non-GAAP earnings.

Marc: We will continue to report an issue guidance just as we did previously and we'll add this measure going forward.

Marc: Adjusted earnings per diluted share was 32 <unk> in the quarter, which compares to <unk> 22 in the year ago period for the year adjusted EPS was $1 40 for the full year as compared to 89 in 2022.

Mark Livingston: For the full year, Adjusted EBITDA increased 49 percent to $187 million, yielding a margin of 17.2 percent, which is a 120 basis point expansion from 2022. Adjusted EBITDA margin on incremental revenue, which most clearly highlights our rate of margin capture as we grow and has proven to be useful as a forward indicator of where the overall business is moving, was 20.3% in 2023, further demonstrating the leverage that we've continued to achieve on the most recent cohort of rabbits. Net income in the fourth quarter was $13.5 million, or $0.13 per diluted share.

Marc: Press release, we issued today includes a reconciliation for adjusted EPS over the last eight quarters.

Marc: Turning now to our cash flow and balance sheet operating cash flow in the fourth quarter was $37 7 million, which compared to $51 5 million generated in the year ago period. The decrease was primarily due to timing on certain working capital items.

Marc: Our full year operating cash flow was our highest ever at $189 million more than double the $80 million that was generated in 2022 and reflects our higher profitability as well as the previously disclosed impact from an amended agreement with with a pharmacy partner, which took effect midway through the year.

Mark Livingston: This compared to net income of $3.4 million, or $0.03 per share, in the fourth quarter of 2022. On a full year basis, net income was $62 million, or $0.62 per diluted share, which compared to $30.4 million, or $0.30 per share, in 2022. The increase in both the quarter and the year was due primarily to higher profitability and higher investment, which more than offset a higher provision for income taxes in the current budget. In response to feedback we've received from investors, we're also now reporting adjusted earnings per diluted share, which is earnings including the impact of stock-based compensation, taking into account any associated tax impact. We believe this measure enhances the comparability of our results to other companies who report non-gap earnings. We'll continue to report and issue guidance just as we did previously, and we'll add this measure going forward. Adjusted earnings per diluted share was $0.32 in the quarter, which compares to $0.22 in the year-ago period.

Marc: As a result, our days of sales outstanding improved at year end by approximately 20 days from where we concluded 2022.

Marc: Looking forward, we expect a mid 70% conversion of full year adjusted EBITDA to operating cash flow, excluding the impact of any cash taxes.

Marc: As of December 31, we had total working capital of approximately $454 million, reflecting $371 million of cash cash equivalents in marketable securities and no debt.

Marc: Yeah.

Marc: Finally, turning now to our expectations for the first quarter and the full year 2024 for revenue we are projecting between 285 million to $292 million in the first quarter, which contemplates the $15 million headwind in treatment mix shift that Pete described to you a little bit earlier.

Marc: With the visibility that we had into a more recent activity. We can see that mix is trending more consistent to what wed expect and we've reflected that in our guidance over the balance of the year.

Marc: For 2024, we project revenue of between one and $2 85 billion to $1 315 billion, reflecting growth of between 18 and 21%.

Mark Livingston: For the year, Adjusted EPS was $1.40 for the full year as compared to $0.89 in 2022. Turning now to our Cash Flow and Balance Sheet, operating cash flow in the fourth quarter was $37.7 million, which compared to $51.5 million generated in the year-ago period. The decrease was primarily due to timing on certain working capital items.

Marc: Turning to profitability, we expect between $49 million to $51 million and adjusted EBITDA in the first quarter, along with net income of between 12 four to $13 7 million.

Marc: This equates to 12 and 13 earnings per diluted share or <unk> 33, and 35 of adjusted EPS.

Mark Livingston: As a result, our days of sales outstanding improved at year-end by approximately 20 days from where we concluded 2022. With the visibility that we have into more recent activity, we can see that mix is trending more consistent with what we'd expect, and we've reflected that in our guidance over the balance of the year. For 2024, we project revenue of between $1.285 billion and $1.315 billion, reflecting growth of between $18 and $21 billion. For the full year, we expect adjusted EBITDA of between $224 million and $232 million and net income of between $68.1 million and $73.6 million.

Marc: On the basis of approximately 102 million fully diluted shares.

Marc: I'll remind you our guidance does not contemplate any discrete income tax items, including the income tax benefit related to equity compensation activity to the extent that related activity occurs we will continue to benefit from those discrete items throughout 2024.

Marc: For the full year, we expect adjusted EBITDA between $224 million to $232 million and for net income of between 68, 1% to $73 6 million.

Marc: This equates to 66% and 71.

Marc: Earnings per diluted share and $1 54, and $1 59 of adjusted earnings per diluted share on the basis of approximately 103 million fully diluted shares for the full year 2024.

Marc: At the midpoint of this guidance, we are expecting to see the continued expansion of our margins in 2024 with adjusted EBITDA margin on incremental revenue 19, 4%.

Operator: These ranges reflect how 2024 will be another year of both strong top-line growth and continued margin expansion. With the momentum we continue to see for family building services generally and the energy behind our more comprehensive end-to-end solution, we are excited for the year ahead. Operator, can you please provide the instructions?

Marc: These ranges reflect how 2024 will be another year of both strong top line growth and continued margin expansion with the momentum we continue to see for family building services generally and the energy behind our more more comprehensive end to end solution. We're excited for the year ahead with that we'd now like to open the call for questions.

Speaker Change: Operator can you please provide the instructions.

Operator: Absolutely. Thank you, ladies and gentlemen. The floor is now open to questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while you are posing your questions, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, please press star 1 if you have a question or a comment.

Speaker Change: Absolutely. Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your questions and please pick up your handset if listening on speaker phone to provide optimal sound quality. Please hold while we poll for questions. Once again. Please press star one if you have a question.

Speaker Change: Or comments.

Peter Nevsky: The first question comes from Anne Samuel with J.P. Morgan. Hey guys, thanks for taking the question. I was hoping you could just provide a little bit more color about what's happening in the first quarter around the treatment mix, you know, why the headwinds, and then you touched on it, you know, that you've seen the rebound in February, but why do you expect to be able to recover that through the remainder of the year? And how should we think about that recovery looking, you know, is it going to be kind of even throughout the year? Do you expect it to even kind of step up in the queue? Thanks. Yeah, hi Annie.

Speaker Change: Question comes from Anne Samuel with Jpmorgan. Please proceed.

Anne Samuel: Hey, guys. Thanks for taking the question.

Anne Samuel: I was hoping you could just provide a little bit more color about what's happening in the first quarter around the treatment next why the headwind and then you touched a little bit on it.

Anne Samuel: You've seen the rebound in February but why do you expect to be able to recover that through the remainder of the year.

Anne Samuel: How should we think about that recovery looking is it going to be kind of even throughout the year do you expect it kind of.

Speaker Change: I've been CTO.

Speaker Change: Yes, Hi, Annie.

Michael Stermer: Thanks for the question. So, let me give you some history, and that history is what our expectations are based on. Throughout all our years, if you look at a full year, utilization mix is pretty constant year over year. The reason for that is that incidents and prevalence of treatment types, especially when the population is as large as it is under management as it is under ours, are going to be relatively consistent over a period of time. That said, there have been periods, and again, the most pronounced one was the summer of 21, right, where we had blips or anomalies or aberrations or whatever you want to call them where treatment mix was a little off for a short period of time, but then it reverted back to normal.

Annie: Thanks for the question. So let me give you some history and that history is is what our expectations are based on <unk>.

CTO: Throughout our years, if you look at our full year.

CTO: Utilization mix is pretty constant year over year.

CTO: The reason for that is that incidence and prevalence of treatment types, especially when the population is as large as it is under management that we have is going to be relatively consistent over a period of time that said there have been.

CTO: <unk> and again, the most pronounced one was summer of 'twenty, one right, where we had blips are anomalies or aberrations or whatever you want to call them, where treatment mix was a little off for a short period of time, but then reverted back to normal.

Michael Stermer: This is acting similarly to that where we had, you know, treatments both done and scheduled for Q1, where we haven't received all the claims yet, but we materially are receiving a lot of them, where that aberration started and continued into the middle of February in terms of, you know, again, scheduled and where we received adjudicated claims on. But scheduled for the balance of February and through March, it's already returned to normal.

CTO: This is acting similarly to that where we had from treatments both Don and scheduled for Q1, where we haven't received all the claims yet but materially are receiving a lot of them were that aberration started continued into the middle of February in terms of.

CTO: Again scheduled in and where we receive adjudicated claims on and but scheduled for the balance of February and through March it's already returned to normal and our expectations because past history says that the years and again, when I say the years or sort of pretty consistent.

Peter Nevsky: And our expectations, because past history says that the years, and again, when I say, you know, the years are sort of pretty consistent, I'm literally referring to almost every year since we've been in the market, right? That the longer periods of time revert back to normal because again, what people are going to need for treatment based on the different treatment pathways and journeys that they're going to do are going to be relatively consistent when the population gets large enough. And that's our expectation too. And that's why we expect what we are now seeing as a normal distribution of mix to continue beyond the visibility that we have for March. That's really helpful. Thanks. And then maybe just one more.

CTO: I am literally referring to almost every year since we've been in the market right that the longer periods of time revert back to normal because again that what people are going to need for treatment based on the different treatment pathways in journeys that theyre going to do are going to be relatively consistent when the population gets large enough and thats, our expectation and that.

CTO: Why we expect what we are now seeing as normal distribution of mix to continue.

CTO: And our visibility that we have for March.

Michael Stermer: You added some new benefits for the 2024 selling season. We're just hoping you could discuss, you know, what conversations with employers have been like, how receptive they are to, you know, adding more than just fertility. Thanks. Yeah, hey, this is Michael.

Speaker Change: That's really helpful. Thanks, and then maybe just one other.

Speaker Change: You added some new benefits for the 2020 for selling season, which.

Speaker Change: We're just hoping you can discuss what conversations with employers have been like how receptive are they to adding more than just fertility.

Speaker Change: Yeah, Hey, this is Michael.

Peter Nevsky: Yeah, the conversations, you know, obviously, we're early in the season, but conversations have been very good. There's a good amount of interest. And again, these are products and services that are logical extensions for us, especially given our success on the fertility side, as that naturally goes into maternity and postpartum. And so, again, conversations are early, but interest is good, and the pipeline is good from a client perspective. Thank you. The next question comes from Michael Cherny with Lyrinc Partners; please proceed, and others. Thank you, sir. Thank you, sir. Maybe if we could just follow along a little more. Park, and as always, thanks for watching. I'm your host, Richard Close, and I'll see you next time.

Michael: <unk>, obviously, we're early in the season, but conversations have been.

Michael: Very good there's a good amount of interest and again. These are these are products and services that are logical extension for us.

Michael: Especially given our the success on the fertility side as that naturally goes into.

Michael: Into maternity and postpartum and so again the conversations are early but interest is good in the.

Michael: Pipeline is good from a from a client perspective, so far.

Speaker Change: Thank you.

Speaker Change: The next question comes from Michael Cherny with Leerink Partners. Please proceed.

Michael Aaron Cherny: Good afternoon, and thanks for taking the question.

Michael Aaron Cherny: Maybe if I could just follow up on.

Michael Aaron Cherny: First question I know you've talked about this not being the first time you've had this mix dynamic can you just maybe give a little more color beyond what you already said about how you land on $15 million is the right number that is transitioning over the course of the year given that the implied guidance here over the rest of the year no matter, how you spread out is still pretty solid relative to what your long term trajectory.

Speaker Change: As Ben.

Peter Nevsky: Sure, I'll remind you that Q1 has seasonality in it versus Q2, Q3, and Q4. We compared Q1 mix to last year and previous Q1 years and calculated the impact of the mix change that caused the impact to revenue, or the short-term headwind that we described. So it's literally an effective pro forma calculation is the easiest way to think about it. And it takes into account what I'm describing, which is the short-term nature of the mixed impact in the first half of the quarter in terms of what we see versus what we have and see scheduled for the second half of the quarter. And that's how it's calculated. Does that help?

Speaker Change: Sure.

Speaker Change: The.

Speaker Change: Mind, you that Q1 has seasonality in it versus Q2, three and four.

Speaker Change: We compared Q1 mix to.

Last year in previous Q1 years.

Speaker Change: And calculated the impact of the mix change that caused the impact to revenue.

Speaker Change: Short term headwind that we described right. So it's literally a effectively a pro forma calculation is the easiest way to think about it right.

Speaker Change: And it takes into account what I'm, describing which is the short term nature of the mix impact in the first half of the quarter in terms of of what we see versus what we have in <unk> scheduled for the second half of the quarter and that's how it's calculated.

Speaker Change: That helps.

No. It certainly does and then when you think about the dynamics of the pharmacy business in particular youre getting at kind of high levels of penetration how should we think about the growth dynamics growth opportunity around that business on an intermediate term basis, given that there's so much cross penetration it's already been done.

Peter Nevsky: I know, does, about, and other areas. So as you point out, Mike, and by the way, welcome back. But as you point out, the penetration is getting close to 100%. It's 93% this year in terms of the client base that we have. There is a little bit more to go relative to upsell opportunities, but for the most part, it's getting close.

Speaker Change: Other areas other ways that you can help grow that business beyond just natural volume growth on the member adds or where should that business be going within Europe.

Speaker Change: You know.

Speaker Change: So as you point out Mike and by the way welcome back, but as you point out.

Speaker Change: Yes.

Speaker Change: The penetration is getting close to a 100% 93% this year.

Speaker Change: In terms of the client base that we have there is a little bit more to go relative to upsell opportunities, but for the most part it's getting close so it will.

Peter Nevsky: So it will reflect a normal growth rate more consistent with medical revenue. That said, the only other dynamic that does come into play for a pharmacy is what's been going on historically, which is annual increases on some of the drugs that are in the formulary. And that will continue to contribute to growth from a top-line perspective for a pharmacy. This question comes from Glen Santangelo with Jefferies.

Speaker Change: Reflect.

Speaker Change: Normal growth rate more consistent with the medical revenue.

Speaker Change: That said the only other dynamic that does come into play for a pharmacy is the whats been going on historically, which is annual increases on some of the drugs.

Speaker Change: That are in the formulary and that will continue to contribute to growth.

Speaker Change: From a topline perspective for pharmacy.

Awesome. Thanks.

Speaker Change: The next question comes from Glen Santangelo with Jefferies. Please proceed.

Peter Nevsky: Yeah, Pete, I just want to go back and touch on the regulatory climate that you talked about in your prepared remarks. After the Alabama court ruling came out, did you see any inflection or change in your business? And I know the Alabama AG office has come out and said they have no intent to prosecute any families.

Speaker Change: Yes.

Glen Santangelo: Ill go back and touch on the regulatory climate that you talked about in your prepared remarks, I mean after the Alabama Court ruling came out did you see any inflection or change in your business.

Glen Santangelo: No the Alabama AG office has come out and said they have no intend to prosecute any families and the <unk>.

Peter Nevsky: And the Texas governor came out. And is this all going to wind up just being like, you know, World vs. Wade a couple of years ago, where it didn't really amount to anything as far as your business is concerned? Or is there anything that you're watching, or we're sort of paying attention to? So the short answer is, like you're asking, and similar to when Roe v. Wade got overturned, where there was concern that fertility or IVF could inadvertently get caught up in the anti-abortion laws that were coming out, and then that didn't happen. This is the same thing.

Glen Santangelo: Texas Governor came out.

Glen Santangelo: Is this all going to wind up just being like world versus wait a couple of years ago, where it didn't really amount to anything as far as your business is concerned or is there anything that you're watching or we're short of paying attention to.

Speaker Change: So the short answer is I do believe like you're asking and similar to win.

Speaker Change: <unk> got overturned.

Speaker Change: There was concern that.

Speaker Change: Fertility or IVF can inadvertently get caught up in the anti abortion laws that were coming out and then that didn't happen. This is the same thing Alabama.

Peter Nevsky: Alabama, just for clarity, wasn't a legislative change. It was a Supreme Court ruling on a case that then had an impact and concern around clinics in the state when they do, in normal practice, create more than one embryo when they're doing IVF, right? But I think the thing we're seeing and watching, but seeing, is bipartisan comments from everybody, including even the former president, but certainly the legislature in the states that are the most extreme relative to anti-abortion, including Alabama, which just had this Supreme Court ruling in the state of Alabama, where they're talking about effectively fixing it, if you will, or protecting IVF, realizing the importance of IVF in family building for many, many millions of I don't believe any other legislature in any other state will have anything to do with moving this direction.

Speaker Change: Just for clarity wasn't a legislative change it was a Supreme Court ruling on a case that then had an impact and concern around.

Speaker Change: Clinics in the state practicing when there do you do create a normal practice more than one embryo when theyre doing ibs right.

Speaker Change: But I think the thing, we're seeing and watching but seen is bipartisan comments.

Speaker Change: From <unk>.

Speaker Change: Everybody, including even the former president, but certainly the legislature in the state that are the most extreme relative to anti abortion, including Alabama, which just had the Supreme Court ruling.

Speaker Change: In the state of Alabama.

Speaker Change: Whether it's talking about effectively fixing it if you will are protecting IVF, realizing the importance of IVF and family building for many many millions of couples and so.

So I agree that I don't believe this will have an impact to the overall industry I don't believe any other legislation in any other state will have anything relative to moving in this direction.

Mark Livingston: I also hope that in the state of Alabama, the legislature there will correct, if you will, what, in my opinion, is a bad ruling. And this is Mark, just putting a fine point on the first part of your question: is there anything that we're seeing? We don't really get into sort of the breakdowns of our business by state, but if you look at the publicly available data from SART around Alabama, it makes up less than one-half of one percent of the volume in the U.S., and they are not outsized for us. So they're a very, very small part of our overall business, so we're not seeing any impact. Okay, that's helpful. Mark, if I could just ask you a quick follow-up question on that guidance.

Speaker Change: And I also hope that for the state of Alabama. The legislature, there will will correct. If you will what.

Speaker Change: My opinion is.

Speaker Change: A bad rule and this is mark just putting a fine point on the first part of your question is there anything that we're seeing.

Speaker Change: We don't really get into sort of the breakdowns of our business by state, but if.

Speaker Change: If you look at the publicly available data from sort around Alabama, It makes up less than one half of 1% of the volume in the U S and theyre not outsized for us. So they are very very small part of our overall business. So we're not seeing any impact of that.

Speaker Change: Okay. That's helpful. If I could just ask a quick follow up question on the guidance I think you said when all your your client wins of 2023 have rolled on.

Mark Livingston: I think you said when all your client wins in 2023 are rolled on, you'll have 6.7 million covered lives. Could you give us what that number was at the end of the period, 1231? I'm just kind of curious as to how many members still have to roll on here post January 1st. And embedded within that guidance assumption, are you assuming any sort of organic growth within the existing base or any sort of deterioration within that existing base? And thanks, and I'll stop there.

Speaker Change: $6 7 million covered lives could you give us what that number was and the period to $1 31, I'm just kind of curious as to how many members still have to roll on here post <unk>.

Speaker Change: January 1st and embedded within that guidance assumption are you, assuming any sort of organic growth within the existing base or any sort of deterioration within that existing base and thanks and I'll stop there.

Mark Livingston: Yeah, so we have a couple of pieces here to keep in mind, and some are part of my prepared comments. So we expect, you know, in Q1, that we'll be approximately 6.1 million lives. In addition, and then on top of that, the 300,000 or so lives that we have for GHA, so call it, you know, 6-4-ish.

Speaker Change: Yes, so we.

Speaker Change: So theres a couple of pieces here to keep in mind that in some of them are a part of my prepared comments. So we expect in Q1 that will be approximately $6 1 million lives in.

In addition, and then on top of that the 300000 or so lives that we have for for geha. So call. It six four ish.

Mark Livingston: That, together with the 200,000 or so that will be launching in Q2 and Q3, you get you closer. I think the rest is frankly in the rounding, to be honest. As far as organic growth through the year, we're not anticipating, I know in earlier years of our existence, we had more significant organic growth that we saw, but we're not planning that, and it's not baked into our guidance, you know, very, very small. So, you know, that's where our outlook as of right now is. Okay, thank you. Up next is Alan Lutz with Bank of America. Good afternoon,

Speaker Change: That together with the 200000 or so that we'll be launching in Q2 and Q3.

Speaker Change: You get you closer I think the rest is frankly in the rounding to be honest.

Speaker Change: As far as organic growth through the year.

Speaker Change: We're not anticipating I know in.

Speaker Change: In earlier years of our existence, we had more significant organic growth that we saw but we're not planning that is not baked into our guidance.

Speaker Change: Very very small so.

Speaker Change: That's where our position is for this year our outlook as of right now.

Speaker Change: Okay. Thank you.

Speaker Change: Up next is Allen Lutz with Bank of America. Please proceed.

Peter Nevsky: Thanks for taking the questions. Pete, I want to ask another one on the treatment mix shift here. Digging a little bit deeper here, was there more IUI and less IVF in the quarter? I'm trying to understand exactly where the mix shift is occurring within the business, just to give you the confidence that it's going to revert over the next few quarters. Sure. No, it wasn't more IUI versus IVF.

Allen Lutz: Good afternoon, and thanks for taking the questions Pete I want to ask another one on the treatment mix shift here is digging.

Allen Lutz: Digging a little bit deeper here is it was there more iui and let IVF in the quarter I'm trying to understand exactly where is the mix shift occurring within the business.

Speaker Change: Just to give you the confidence that it's going to revert over the next few quarters. Thanks sure no it wasn't more rui.

Speaker Change: Versus IVF it was more types of IVF and have different revenue contributions.

Peter Nevsky: It was more types of IVF that had different revenue contributions. And again, so without sort of getting into a lot of detail, if you will, there are variations of treatments, right? We literally have 20 different treatment bundles that are all different forms of IVF. A couple of them are IUI, but they're mostly IVF.

Speaker Change: And again, so so without sort of getting into a lot of.

Speaker Change: Detail. If you will there is variations of treatments right. We literally have 20 different treatment bundles right. They're all different forms of IVF couple of MRI you either most of the IVF.

Peter Nevsky: And there are nuances to all of those, and they have different revenue contribution from all of those. And so it's within the IVF bucket; it's not some shift to IUI. That's helpful.

Speaker Change: And Theres nuances on all of those and they have different revenue contribution on all of those and so it's within the IVF bucket is not are not some shift to two iui.

Mark Livingston: And then just a quick follow-up on female utilization: it was up about 6% in 2023, and that's a pretty big step up in one year. So just trying to think about what we should think about in terms of utilization in the 2024 guide. Thanks.

Speaker Change: That's helpful. And then just a quick follow up on the female utilization was up about 6% in 2023, and that's a pretty big step up in one year.

Speaker Change: So just trying to think about how we should think about what's embedded in terms of utilization into 2024 guidance. Thanks sure for for both Q1 and the full year were essentially flat utilization versus 2023.

Peter Nevsky: Sure. For both Q1 and the full year, where we have essentially flat utilization versus 2023. Thank you. Okay, the next question comes from Scott Schoenhaas with KeyBank. Please proceed. Hi team.

Speaker Change: Thank you.

Speaker Change: Okay. The next question comes from Scott <unk> with Keybanc. Please proceed.

Peter Nevsky: Thanks for taking the question. I just want to keep drilling into this treatment shift. So is it a shift in the, you know, initial consult services that were probably more pronounced in December into early January, affecting, you know, sort of the push out in egg retrieval medication and the retrieval process, which can be... Medications alone could be 10 times more than the initial consult? I just want to kind of put a fine point on the minutiae of this treatment shift on the IV.

Scott: Hi team. Thanks for taking the question. So I just wanted to keep drilling into this treatment shifts.

Scott: So is it a <unk>.

Scott: <unk>.

Scott: The.

Speaker Change: I will consult.

Speaker Change: Services that we are probably more pronounced in December and into early January.

Speaker Change: Affecting sort of the pushout in egg retrieval medication and the retrieval process, which can be.

Speaker Change: Indications alone could be 10 times more than the initial console I just wanted to kind of put a fine point new show on this treatment chips when the IBP process, yes.

Peter Nevsky: Yeah, although it is what consoles contributes to it, it was more, again, a shift within IVF treatments themselves, which do, by the way, as you're pointing out, different treatments have different levels of pharmacy contribution to them. Different parts of the cycle require different volumes and, you know, in terms of dosing as well as price points relative to the specialty drugs that are involved in IDF, so the combination of them is what's driving the bigger mixed impact, not an outsized impact relative to higher initial consults than normal versus moving on to treatment. And I'd just add to that, making the fine point Pete made in his comments a little bit earlier, we do normally expect at this time of the year to see a slightly higher proportion of initial comments and consultations because it's the beginning of the year. That's part of the real reason you see the step up from Q1 to Q2, it's a contributor there. So all of our comments here around mix are versus what we would expect to see and what we've seen historically. Again, Q1 is a little bit different than other quarters of the year normally. That's super helpful.

Speaker Change: Yes.

Speaker Change: Although it is from console contributes to it it was more again, a shift within IVF treatments themselves, which do by the way as youre pointing out different treatments have different levels of pharmacy contribution to them different parts of the cycle require different volumes in and.

Speaker Change: In terms of dosing as well as well as.

Speaker Change: Price points relative to the specialty drugs are involved in IVF. So the combination of it is what's driving the bigger mix impact not an outsized impact relative to higher initial consult than normal versus <unk>.

Speaker Change: <unk>.

Speaker Change: Moving onto treatment.

Speaker Change: And I'd, just add to that making defined point Pete made it in his comments a little bit earlier, we do normally expect at this time of the year to see a slightly higher proportion of initial comments so console because it's the beginning of the year.

Speaker Change: As part of actually why you see the step up from Q1 to Q2, it's a contributor there so.

Speaker Change: All of our comments here around mix or versus what we would expect to see what we've seen historically again Q1 is a little bit different than other quarters of the year normally.

Speaker Change: That's super helpful. So is it fair to say that we should see.

Peter Nevsky: So is it fair to say that we should see a re-ramp up in acceleration in the medications, the, you know, the blip that we saw in the first half? Corridor, should that role really give you visibility and confidence to see that role right into the second quarter? Yeah, so I'm not sure that we commented specifically on medications or not, but in general, the blip that we saw in the first half of the quarter, we're seeing in the first half of the quarter, that seems to be correcting itself in the second half, is going to, you know, however much it contributes to higher medical revenue and higher Rx revenue. Yes, that's our expectation. Again, based on past history, and when I said that before, it wasn't like a one-time past history; it's literally years and years of history around full-year utilization, mixed, from a mixed perspective, is what we are expecting for the reasons that I said in the answer to my first question. Thank you so much.

Speaker Change: The ramp up and acceleration in the medications.

Speaker Change: Yes.

Speaker Change: The blip that we saw.

Speaker Change: In the first half of the quarter should that roll really should that give you visibility and confidence to see that roll right into the second quarter.

Speaker Change: Yes, so I'm not sure that we commented specifically on medications or not but in general the blip.

Speaker Change: That we saw in the first half of the quarter. We are seeing in the first half of the quarter that seems to be correcting itself in the second half.

Speaker Change: Is going to however, it much contribute to higher medical revenue and higher Rx revenue, yes, that's our expectation again based on past history, and when I said that before it wasn't like a one time past history, it's literally years and years of history around full year utilization mix from a mixed perspective is what we are.

Speaker Change: Expecting for the reasons that I've said in the answer on my first question.

Speaker Change: Thank you so much.

Peter Nevsky: The next question comes from Sarah James with Cantor Fitzgerald. Your line is live. Thank you. So if we, you know, kind of ignore the anomaly that's going on in January and we think about just the underlying revenue per cycle trend, how do you think about that progressing in 24 versus 23? Or maybe how you think about it going forward, given, you know, the geographic and product mix that you guys have going on. Is that something that would be flat?

Speaker Change: Next question comes from Sarah James with Cantor Fitzgerald. Your line is live.

Sarah James: Thank you.

Sarah James: So if we can.

Sarah James: Kind of ignore the anomaly thats going on in in January and we think about just the underlying revenue per cycle trend.

Sarah James: How do you think about that progressing and 24 versus 23 or maybe how you think about it going forward given.

Sarah James: The geographic and product mix that you guys have going on is that something that would.

Peter Nevsky: Is it possible for it to still trend upward? We don't normally sort of comment from a guidance perspective on revenue per smart cycle. I would point to our history, though; our history is that, in general, it's been coming down a little bit each year for a couple reasons. One is, I think you referenced one of them, and the bigger contributor, which is as we continue to grow the company, and more and more of our growth comes from across the country, and therefore contributes as a mix, you know, a higher mix versus sort of previous years where there was a higher concentration of East Coast and West Coast, which normally has higher reimbursement rates, that's going to contribute to an average lower medical and overall revenue per cycle.

Sarah James: <unk> be flat is it possible for it to still trend up.

Sarah James: Okay.

Speaker Change: We don't normally sort of comment from a guidance perspective on revenue for smart cycle I would point to our history. Our history is that in general it's been coming down a little bit each year for a couple of reasons. One is I think you referenced one of them and the bigger contributor which is as we continue to grow the company and more and more of our.

Speaker Change: Our growth comes from across the country, and therefore contribute as a mix a higher mix versus sort of previous years, where there was a higher concentration of east coast West coast, which which normally has higher reimbursement rates.

Sarah James: That's going to contribute to an average lower medical and overall revenue per cycle.

Peter Nevsky: So if history is a guide, I would continue to expect at some level that, I couldn't tell you sort of how much and what that might look like, but that would be a normal expectation based on what's been happening over the last seven, eight years. Now remember, though, that we'll have a greater proportion of clients in 24 that have the Rx benefit than the prior year. So if you look at it on a full revenue basis, there's a little bit of a step up because of the higher attach rate, but all the comments are, you know, certainly stand for medical, which is probably the best comparison. And one more, if I could, you guys have been fantastic at generating cash flow. You have a large balance now. How do you think about deploying that capital?

Sarah James: So so if history is a guide I would continue to expect at some level that I Couldnt tell you sort of how much and what that might look like but that is that would be a normal expectation based on what's been happening.

Sarah James: Over the last seven eight years now remember, though that we will have a greater proportion of clients in 24 that have the rx benefit than the prior year. So that if you look at it on a full revenue basis theres, a little bit of a step up because of the higher attach rate, but all the comments.

Sarah James: Certainly.

Sarah James: <unk> for medical which is probably the best comparison point for you.

Speaker Change: Great and one more if I could.

Speaker Change: Guys have been fantastic at generating cash flow.

Speaker Change: We have a large balance now how do you think about deploying that capital.

Mark Livingston: Um, we continue to... as we sit here now, we continue to look at that capital as an option relative to opportunities; we continue to explore opportunities out there. To that end, at some point, we will take a harder look at, you know, whether or not there's some sort of other use for that capital. And we'll share sort of those thoughts on an upcoming call. Thank you.

Sarah James: We continue to.

Sarah James: Sure.

Sarah James: As we sit here now we continue to look at that capital as Optionality relative to opportunities as we continue to explore opportunities out there.

Sarah James: To that end at some point, we will take a harder look at.

Sarah James: Whether or not there is some sort of.

Sarah James: Other use for that capital.

Sarah James: And we will share those thoughts on upcoming calls.

Speaker Change: Thank you.

Peter Nevsky: Okay, the next question comes from Jailendra Singh with Truist Security. Thank you and thanks for taking my questions and apologies for keeping going back to this shift in treatment mix in Q1. A couple of cleanup questions first.

Speaker Change: Okay. The next question comes from Jay Alondra Singh with Trust Securities. Please proceed.

Speaker Change: Thank you and thanks for taking my questions and apologies to keep going back to the shift in treatment of mix in Q1.

Speaker Change: A couple of cleanup questions. Therefore, what is the related EBITDA headwind for this 15 million revenue impact and how is this $50 million of any impact split between medical and brought genetics and the second question for that.

Peter Nevsky: What is the related EBITDA headwind for this 15 million revenue impact, and how is this 15 million revenue impact split between medical and progyny Rx? And the second question for that was, was this treatment mix shift across the board, or was there particular geography or industry you saw this concentrated in? The reason I'm asking this is because, Pete, you're trying to compare this with the summer of 2021, but back then, you attributed that to the possibility of seasonality as people taking summer vacations, but having something like this happening at the beginning of the year is a little surprising but, Well, thanks for the question, Jailendra. So let me give you again some history. When it happened before when we weren't public, it wasn't in summer, or sort of it was different. It happens in different parts of the year.

Speaker Change: Was this treatment mix shift across the board or was a particular geography or industry.

Speaker Change: You saw this concentrated the reason I'm asking this because I know you're trying to compare this with somewhat of 2021 but back then you attributed that to a possibility of seasonality as people are taking somewhat vacation, but having something like this happening at the beginning of the year.

Speaker Change: Surprising but.

Speaker Change: Yeah.

Speaker Change: Well.

Speaker Change: Thanks for the question. So let me give you again some history when it's happened before when we went public it wasn't in summer or sort of it was different if you happened to different parts of the year its more happenstance than it is causing effect when we talked about in 'twenty. One we surmise what it might be the reality is we have no idea. The reality is nobody tells.

Peter Nevsky: It's more happenstance than it is cause and effect. When we talked about it in 21, we surmised what it might be. The reality is, we have no idea. The reality is, nobody tells us sort of, you know, why they're doing what they're doing.

Speaker Change: Sort of.

Speaker Change: Why are they doing what they're doing they're on a medical journey and theyre going to do what they do and there is a point in time that are anomalous, where a concentration of types of treatment that contribute lower revenue are going to happen in a higher concentration, but there are anomalous because.

Peter Nevsky: They're on a medical journey, and they're going to do what they do. And there are points in time that are anomalous, where a concentration of types of treatment that contribute lower revenue is going to happen in a higher concentration, but they're anomalous because they usually are short in duration, right? Relative to, I forgot what your other questions were. So the EBITDA sort of contribution would be, you know, relatively normal drop through is the best way I could describe it. And you could do sort of your own, you know, calc if you want that.

Speaker Change: They usually are short in duration right.

Speaker Change: Relative to.

Speaker Change: I forgot my other questions were.

Speaker Change: Nick.

Speaker Change: EBITDA.

Speaker Change: The EBITDA contribution would be would be relatively normal drop through is the best way I could describe it.

Speaker Change: And if you do sort of your own Cal give you on that as.

Peter Nevsky: As it relates to breaking apart sort of the impact between medical and pharmacy, our guidance, we don't guide to sort of with medical and pharmacy broken out already. So I'm not sure how instructive that would be. And so we're not going to break that out. Okay, and then on gross margin, anything you can share in terms of your expectations for 2024? You guys reported a 50 basis point expansion in 2023. Should we expect similar year-over-year trends in 2024? Well, I wouldn't I wouldn't sort of exactly peg that number.

Speaker Change: As it relates to breaking apart sort of the impact between medical and pharmacy, our guidance, we don't guide disorder with medical and pharmacy broken out already so so I'm not sure how instructive that would be.

Speaker Change: And so we're not going to break that out.

Speaker Change: Okay, and then my follow up on the gross margin anything you can share in terms of your expectations for 2020 before you guys reported a 50 basis point expansion in 23 should we think similar year over year trends in 'twenty four.

Speaker Change: I wouldn't I wouldn't sort of.

Speaker Change: Exactly.

Peter Nevsky: The reality is, you know, a lot of the dollars relative to margin expansion do come from there. Right. So you certainly should take a look at that.

Speaker Change: That number the reality is a lot of the dollars relative to margin expansion do come from there right. So you can certainly take a look at that but these leverage across the business.

Peter Nevsky: But there's leverage across the business, you know, sales and marketing and G&A, as Mark talked about for 23 minutes, but since we don't guide margin either, I think it's premature to sort of start commenting on margin expectations. That's why we give sort of the adjusted EBITDA guidance for the full year to give you some framework. Great. Thanks, guys. Next is Stephanie Davis with Barclays. Hey guys, thank you for taking my question and apologies for this background noise. I am at the airport again. This is the story of my beginning.

Speaker Change: Sales and marketing and G&A as Mark talked about for 'twenty three in his comments.

Speaker Change: Since we don't guide margin either I think it's premature to sort of start commenting on on margin expectations. That's why we give sort of the <unk>.

Speaker Change: Adjusted EBITDA guidance for the full year to give you some frame of reference.

Speaker Change: Great. Thanks, guys.

Speaker Change: Up next is Stephanie Davis with Barclays. Please proceed.

Stephanie Davis: Hey, guys. Thank you for taking my question and apologies if there's background noise.

Stephanie Davis: Airport again.

Stephanie Davis: Yes.

Peter Nevsky: I want to ask a little bit about the farm, because we are hearing a lot of concerns because of the election year around what it could mean for PPM. Are there any protections or carve outs that you would call out that you think would shield your pharmacy benefit from being impacted by any regulation by this or how does that factor into your I'm not sure exactly what you're referring to, but the regulatory stuff that's being discussed, as far That said, I will point out that our model relative to our clients and the members is different as it relates to rebates. We don't cut a rebate check, if you will, and give it to the client.

Stephanie Davis: I wanted to ask a little bit about the farm.

Stephanie Davis: Because we are hearing a lot of concern because of the election year around what.

Stephanie Davis: Are there any protections or carve out that you would call out that you think like shield.

Stephanie Davis: <unk> pharmacy benefit from being impacted by any regulation by that or how does that factor into your outlook for the year.

Speaker Change: I'm not sure exactly what you're referring to of the regulation of the regulatory stuff, that's being discussed as far as I'm aware, it's mostly around transparency and not around sort of any change relative to the economics of sort of the PVM world right that said I will point out that our.

Speaker Change: Model.

Speaker Change: Relative to.

Speaker Change: Our clients and the members as different as it relates to rebates. We don't we don't cut a rebate check if you will and give it to the client all of it is point of sale relative to the formulary pricing.

Peter Nevsky: All of it is point of sale relative to formulary pricing so that the members themselves individually can also benefit from it. But there's nothing out there that I'm seeing or hearing about as I talk to the attorneys that causes me concern relative to an impact economically on our model. I think the stuff that's being discussed sounds like it's just furtherance of some of the transparency laws potential. That rebate info is all I need to know.

Speaker Change: The members themselves individually can also benefit from it.

Speaker Change: But there is there is nothing out there that I'm seeing or hearing about as I talked to the attorneys.

Speaker Change: That causes me concern relative to an impact.

Speaker Change: <unk> to our model I think this topic being discussed it sounds like it's just further ins of some of the transparency laws potentially.

Speaker Change: That rebate Enzo with all I need to know and then I wanted to touch on your margins because it looks like your <unk>.

Peter Nevsky: And then I want to touch on your margins a bit because it looks like you're still expanding margins, but it's not the same pace that we've seen for the past few years. How much of that is just the penetration rate that you will reach for this pharmacy benefit versus maybe some conservatism and the outlook? Well, I would say, again, it's early in the year to see where we settle in. I think it's pretty comparable to prior years, relative to our guidance versus what we've achieved. And I wouldn't necessarily peg it all to pharmacy or not; it's the overall business, and the overall revenue growth contributes to the overall margin expansion. The larger dollars are already on the medical side.

Speaker Change: Expanding margin, but it's not the same pace that we've seen for the past few years, how much of that is just the tenancy.

Speaker Change: Penetration rate that you have reached for the pharmacy benefit versus maybe some conservatism in the outlook.

Speaker Change: Well I would say again, it's it's.

Speaker Change: <unk>.

Speaker Change: Early in the year to see where we settle in I think it's pretty comparable to prior years relative.

Speaker Change: Relative to our guidance versus what we've achieved.

Speaker Change: And I wouldn't necessarily peg it alter pharmacy or not it's the overall business and the overall revenue growth contributes to the overall margin expansion.

Speaker Change: The larger dollars are on the medical side already.

Peter Nevsky: But overall, I would say that, given all of the continued investment that we plan for the year, as I referred to in some of my prepared remarks, if you think about it right, before 2023, we were effectively a one-product company; we've been investing in 23, and a lot more again in 24, in becoming a multi-product company. That's all in the P&L. And with that, we're still achieving the margins that we have. So I think, you know, that's a pretty good financial picture given the amount of investment that we are doing to expand our product portfolio. Awesome! Thanks for the help.

Speaker Change: So, but overall I would say that that given all of the continued investment that we plan for the year.

Speaker Change: As I referred to some of my prepared remarks.

Speaker Change: Think about it right.

Speaker Change: Before 2023, we were effectively a one product company, we've been investing in 'twenty, three and a lot more again in 'twenty, four and becoming a multi product company. That's all in the P&L and with that we are still achieving the margins that we have so I think you know.

Speaker Change: That's a pretty good financial picture given the amount of investment that we are doing to expand our product portfolio.

Speaker Change: Awesome, Thanks for the help.

Peter Nevsky: Next is David Larson with BTIG. Hi, this is Jenny Shen on for David Larson, one on competition. So you mentioned that your market share right now is pretty low in the mid-single digits, so I was just wondering your views on the competitive environment, whether you run into other competitors when you're having discussions, and whether most of your wins right now are from clients who've never offered fertility benefits before, or whether they're competitive wins where you're taking business away from them. Thanks. Thanks for the question. I'll do the second part first.

Speaker Change: Up next is David Larsen with <unk>. Please proceed.

Speaker Change: Hi, This is Jenny Chen on for David Lawrence and Thanks for taking my question just one on competition. So you mentioned that your market share right now is pretty low in the mid single digits. So.

Jenny Chen: I was just wondering your views on the competitive environment.

Jenny Chen: Whether you run into other competitors, when you're having discussions with prospective clients.

Jenny Chen: And whether most of your wins right now are from clients who've never offered fertility benefits before or whether they're competitive wins, where youre taking business away from competition.

Speaker Change: Thanks for the question I'll do the second part first so and all my comments relate to prior selling season. So it's too early in the year to comment on current activity.

Michael Stermer: So, all my comments relate to the prior selling season, so it's too early in the year to comment on current activity. But if you sort of take the 23 selling season, the 22 selling season, the 21 selling season, our wins come from, you know, almost 50-50 as a percent from brownfields, i.e. clients that have had some form of fertility benefit or greenfield, i.e., clients that have never had a benefit

Speaker Change: But if you sort of take the 23 selling season, the 'twenty two selling season, the 'twenty one selling season.

Jenny Chen: Our wins come from.

Jenny Chen: Almost 50 50 as a percent from brownfield ie clients that had some form of fertility benefit or Greenfield <unk> clients, they've never had a benefit.

Michael Stermer: And that's sort of been the recent history in the past three selling seasons. Before that, it was more sort of two-thirds, one-third brownfield versus greenfield. That was the first part of your question. From, I think the second part was related to, you know, competition during sales. So, you know, we, you know, first off, you know, each, really each sale and each win, you know, we are competing first and foremost with the health plan's benefit.

Jenny Chen: And that's sort of been the recent history in the past, we selling seasons before that it was more sort of two thirds one third brown.

Jenny Chen: Brownfield versus Greenfield.

Jenny Chen: That was the first part of your question.

Jenny Chen: Okay.

Jenny Chen: From a I think the second part was related to competition during <unk>. So.

Jenny Chen: We first off each really each each sale in each win.

Jenny Chen: We are competing first and foremost with the with the health plans benefit.

Michael Stermer: So that's always something that's there, that's always something that's available, and obviously something that, you know, we've had a lot of success selling against for a variety of reasons. And then, certainly, as the market and the industry have picked up, and the interest from the employer side have picked up, we do see and compete against some of the other point solutions. Again, that's not, nothing new this year from that front; we've been competing on that front for a while now. And as Pete said, it varies depending on whether we're competing with a health plan only or whether we're competing with the health plan and point solutions on a case-by-case basis. But, again, early in the year so far, but, you know, again, we're seeing consistent, nothing new, I should say, from the competitive position versus. Okay. That makes sense.

Jenny Chen: So thats always something Thats, there thats always something thats available in and obviously something that we've had a lot of success in selling against for for a variety of reasons.

Jenny Chen: And then certainly as the market and the industry has picked up in the interest from from.

Jenny Chen: From the employer side has picked up.

Jenny Chen: Do we do see and compete against some of the other point solutions again, thats not nothing new this year from that front.

Jenny Chen: We've been competing on that front for a while now and as Pete said it.

Jenny Chen: It varies on whether we're competing with with our health plan only or whether we're competing with the health plan and point solutions on a case by case basis.

Jenny Chen: But again early in the year, so far but again, we're seeing consistent.

Jenny Chen: Nothing new I should say from the competitive.

Jenny Chen: Position versus last year.

Michael Stermer: And I think you mentioned last quarter, throughout the year, some of the nows. Do you think some of those headwinds... Yeah, I mean, so, you know, our not nows are, you know, we see not nows every year, first off. And, and again, these are, you know, these are, at times, strategic decisions that employers are making. And so, you know, sometimes they go through a process, and it's, you know, it's next year's priority or something along those lines. So we do see them every year.

Speaker Change: Got it that makes sense and I think you mentioned last quarter and throughout the year. Some of that now decision do you think some of those headwinds can become tailwind in 2024.

Speaker Change: Yes, I mean so.

Jenny Chen: Not now or.

Jenny Chen: We see not now as every year first often and again. These are these are at times. These are these are strategic decisions that employers are making and so.

Jenny Chen: Sometimes they go through a process and it's it's next year's.

Jenny Chen: Priority or something along those lines. So we do see them every year.

Michael Stermer: As Pete mentioned in his comments, not nows make up usually the majority of our pipeline early in the year like this. And, you know, currently, we're at a, you know, a strong position from a not now and an active pipeline perspective. Again, early, early in the year to make too many predictions about how that will materialize, but they certainly become not nows from last year certainly become opportunities going into the new year. And this year is not.

Jenny Chen: As Pete mentioned in his comments.

Jenny Chen: Not now make up usually the majority of our of our pipeline early in the year like this in.

Jenny Chen: Currently we're at.

Jenny Chen: Our strong position from a not now in a in an active pipeline perspective again early in the year to make too many <unk>.

Jenny Chen: Predictions around around how that will materialize, but.

Jenny Chen: They certainly become not know is from last year, certainly become opportunities going into the new year and this year is no different.

Michael Stermer: There are no further questions in queue. I would now like to turn the floor back to James Hart for a closing remark. Thank you, John, and thank you everyone for joining us this afternoon. As always, please feel free to reach out to me if you have any questions. Otherwise, we look forward to giving you our next update in just a couple of months.

Speaker Change: Great. Thank you.

Jenny Chen: There are no further questions in queue I would now like to turn the floor back to James Hart for closing remarks.

James Hart: Thank you John and thank you everyone for joining us. This afternoon as always please feel free to reach out to me. If you have any questions otherwise we look forward to giving you our next update.

James: Thanks much. Have a good afternoon. 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.

James Hart: And just a couple of months actually thanks, much have a good afternoon.

Speaker Change: 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.

Speaker Change: You for your participation.