Q2 2024 Progyny Inc Earnings Call
Operator: and Patience. Please stay on the line, and we'll be back in just a moment.
Stay on the line and we'll be back in just a moment.
[music].
Speaker Change: Good afternoon, everyone.
Operator: Good afternoon, everyone, and welcome to the Progyny, Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.
Speaker Change: That's neat Inc. Second quarter 2024 earnings conference call.
Speaker Change: At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
Speaker Change: It is now my pleasure to turn the floor over to your host James Hart, Sir the floor is yours.
James Hart: Thank you, Matt, and good afternoon, everyone. Welcome to our second quarter conference call. With me today are Peter Anevski, CEO of Progyny, Michael Sturmer, President, and Mark Livingston, CFO.
James Hart: Thank you Matt.
James Hart: Good afternoon, everyone welcome to our second quarter Conference call with me today are Peter <unk> CEO of progeny, Michael Stern, 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'd like to remind you that our comments and responses to your questions today reflect management's views as of today.
James Hart: We will begin with some prepared remarks before we open the call for your questions. Before we begin, I'd like to 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 third quarter and full year 2024, and the assumptions and drivers underlying such guidance, the demand for our solutions, our expectations for our selling season for 2025 launches, the timing of client decisions, our expected utilization rates and mix, the expected benefits of our pharmacy program partner agreements, including future conversion of adjusted EBITDA to operating cash flow, 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.
James Hart: 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. 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 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.
Speaker Change: Certain 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.
Speaker Change: During the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin on incremental revenue 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 that progeny dot com I would now like to turn the call over to Pete.
Pete: Thanks, Jamie and thanks, everyone for joining us afternoon.
Pete: During the second quarter, we continued to make significant progress in many of the areas that are most impactful to building the long term value of our business and in laying the foundation for our future growth in women's health.
Pete: This includes our early success in the most recent selling season the enthusiasm we're seeing for our newest services amongst existing clients the advancement of new channel partner relationships and the investments, we're making to further enhance our already leading solutions in women's health and address even more of our clients and members needs.
Speaker Change: As it relates to our second quarter results, while the rate of utilization ticked up modestly from the first quarter consistent with our prior assumptions and our second quarter revenue and adjusted EBITDA within our guidance based on our current visibility to the remainder of the year. We now believe the second half will unfold differently than expected.
Pete: Accordingly, we are adjusting our revenue guidance lower by approximately 5% at the midpoint with corresponding reduction to adjusted EBITDA as well.
Speaker Change: Given the year has continued to unfold differently than we had originally expected we recognize there is frustration and disappointment and we share in those sediments.
Pete: And while utilization as a percentage is thus far level with Q2, you can see from the table that we would ordinarily expect for average sizes per utilized to increase to something like <unk> in Q3.
Pete: And then tick up a bit higher in Q4 as well.
Pete: It has increased over the first half of the year, we're anticipating a lower rate of increase than what we ordinarily would expect or none at all over the second half of the year and this is driving approximately 7% lower revenue per utilizing member.
Speaker Change: The obvious question then is why aren't we seeing the customary pattern in 'twenty four.
Speaker Change: There are a number of factors that could be causing this such as higher clinical success rates, which should result in fewer treatments for utilizing different treatment paths based on the member's medical need or different timing of the treatment journey based on the members preference.
Speaker Change: Payroll highlights, we arent seeing or expecting a decrease in Cyprus brutalizer and because the rate of utilization is also expected to remain consistent with past patterns. We arent viewing this as an indicator of a lesser demand.
Speaker Change: But we also can't predict how long this lower average will last to a quarterly we believe an outlook on the high end showing we've consistently seen throughout the year and Hello, and showing a decline in both utilization rate in our cycles for female utilizing member.
Speaker Change: Industry position.
Speaker Change: Our goals are clear each season first we want to expand our market share through new client acquisition second we seek not only to maintain our high rate of retention, but also to grow our relationships with existing clients through expansions and Upsells and lastly, we look to develop new partnerships to enhance our market presence and create efficiencies in our sales efforts.
Speaker Change: At this point in the season, and we're pleased with our progress across all these areas with respect to the first priority, adding new clients. We're now in the heart and selling season employer demand remained strong with a consistent pipeline of opportunities compared to last year's selling season. We're also continuing to add to our new sales pipeline as companies are a valued.
Speaker Change: And their benefit offering throughout the year.
Speaker Change: As usual, we anticipate that the majority of client decisions were delayed this summer and early fall as most companies look to finalize your benefits ahead of their open enrollment activities in Q4.
Speaker Change: Pleased to report that at this point in the season commitments received to date are pacing ahead of where we were at this time last year.
Speaker Change: Although this is just one indicator of demand. We believe these early commitments demonstrate that the appetite for family building in women's health solutions remained robust.
Speaker Change: As usual, we'll provide you with a recap of the complete selling season on our next call in November but at this point in the season, we're pleased with where we are.
Speaker Change: And any selling season, our goal is to meet or exceed the number of covered lives from the prior season.
Speaker Change: We recently became the preferred partner to Maritain L. A subsidiary of Aetna in the second largest tpa in the country with one 5 million members, adding to our existing agreements with Cvs health over north in this year.
Speaker Change: In addition, we are progressing other channel partner opportunities and hope to be able to provide additional detail on future calls.
Speaker Change: We believe continuing to add these channel partnerships are an important part of the go to market strategy. Since they act both as validation for our market leading solution as well as provide an alternative way to reach and contract with new prospects.
Speaker Change: This quarter, we also enhanced.
Speaker Change: Our global offering through the acquisition of April a Berlin based fertility benefits platform expand the scope of services, we can provide to multinational employers and their employee populations in over 100 countries.
Speaker Change: April has created a platform customizable by country to provide members with personalized culturally sensitive education support care navigation and we're excited about the opportunities to broaden our support on a global scale.
Speaker Change: Let me now turn the call over to Mark to review the quarterly results before I come back with some closing remarks, Mark. Thank you Pete and good afternoon, everyone I'll begin with the second quarter results and then provide our expectations for the third quarter and the full year.
Mark: Collection of the lower art cycles per utilizing member, which Pete described earlier as well as the benefit in the year ago period from manufacturer driven drug price increases, which did not occur over the first half of this year.
Mark: Turning now to our member engagement metrics approximately 15600 art cycles performed in the second quarter, reflecting a 5% increase versus the second quarter last year.
Speaker Change: The female utilization rate was four 7% a decrease as expected from the record <unk> five zero percent that we reported a year ago and a modest increase sequentially from the 0.46% in the first quarter of this year reinforcing that the slight variability we saw earlier in the year was not indicative of a new map.
Speaker Change: So trend.
Speaker Change: Over the back half of the year, we continue to expect that the rate of utilization will be consistent with historical levels, albeit somewhat lower than what we saw in 2023.
Speaker Change: Turning now to our margins gross profit increased 13% from the second quarter last year to $68 3 million, yielding a 22, 5% gross margin an increase of 80 basis points as compared to the year ago period, as we continue to realize efficiencies in our care management resources, even as we deliver.
Speaker Change: Cost containment for our clients.
Speaker Change: Along with net income of $55 four to $62 4 million.
This equates to 57% and 64 cents earnings per diluted share or $1 53.
Speaker Change: $1 61 of adjusted EPS on the basis of approximately 98 million fully diluted shares.
I'll remind you that our net income projections do not contemplate any discrete income tax items, nor does it consider any impacts associated with the share repurchase program, we announced today.
Speaker Change: 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 of over 18%.
Speaker Change: Now I'll turn the call back over to Pete.
Pete: Thanks Mark.
Pete: Today's remarks, and the upcoming Q&A give you a clear perspective about the strong state of our business overall, even with the change in our forecast driven by the lesser than expected art cycles per female utilizing but which is not material to the health of the business.
Pete: If you arent aware, we're hosting an investor day next week on Monday August.
Pete: August 12th here in New York City.
Speaker Change: Put together an exciting agenda featuring a lot of projects team that you don't normally get to me at Investor event. Our goal is to give you a look into how we think about capitalizing on our market opportunities and what gets us excited about the future.
Speaker Change: Several clients are participating and we've created panels from the point of view from both providers and members curiously.
Pete: Curious it in joining US please send a note to James as registration is required and space is limited.
Speaker Change: With that we'll open the call for your questions. Operator can you please provide instructions.
Speaker Change: Yes.
Operator: We do ask that while posing the question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
Speaker Change: where your normalized revenue growth rates should be. Are we gonna be exiting the year at a run rate that is?
Speaker Change: the quote, new normal for this business, where are you seeing?
Speaker Change: The various different moving pieces beyond, obviously, the additional services, which are a nice uptick, but to get back, I don't know if you want to call it growth acceleration, growth normalization, or whatever the new normal for this business should be, and I'm taking away from next week, I apologize, but
Speaker Change: Just trying to get down to the bottom of the growth opportunities.
Speaker Change: No, it's a fair question. So the biggest driver in growth is and will continue to be adding logos and lives.
Speaker Change: I'm happy to have Michael expand on where we're at so far. I talked in my prepared remarks.
Michael: that we're pleased with where we are relative to adding lows in lives.
Michael: versus where we were this time last year, but nonetheless, you know, happy to give more color. Beyond that, you know, barring again any surprises or changes relative to, you know,
Michael: volume of utilization, if you will, per unique member, you know, that will still remain the single largest driver of growth for us as it has in the past.
Michael: Thank you. Your next question is coming from Jailendra Singh from Truist Securities. Your line is live.
Jalindra Singh: Thank you and thanks for taking my question. Actually, I'm going to follow up on the last question from Michael about this long-term growth in the business.
Speaker Change: I know we have seen three different issues this year in the first seven months of which two issues we still don't know why those happened and I understand the strong demand in among employers and employees but
Speaker Change: So, based on your experience thus far, does that change in terms of how you think about your approach to guidance in future? And also, related to that, have you guys thought about any changes you can do in your business model, even in terms of provider contracting or employer contracting, which can result in less variability in your results?
Speaker Change: Regarding the first part, you know,
Speaker Change: We're certainly going to do a couple of things. One is continue to get as much additional information as we can to inform our models and guidance, and also to the extent that we can get more real-time information through our providers and through the data that we get that will inform us. That will be something that we're going to continue to work to enhance versus our current algorithms and models.
Speaker Change: And considering the couple of surprises we had this year, you know, in the future our ranges will definitely, you know, get wider, right, to sort of capture some of that.
Speaker Change: regarding changing how we do business.
Speaker Change: It is a care consumption model, and without putting in some sort of minimums by client or anything else like that, it's hard to sort of mitigate the variability in actual consumption.
Speaker Change: So, there isn't thinking around that as we sit here now. That doesn't mean things may not evolve, but as we sit here now, that's not the plan.
Speaker Change: Okay.
Speaker Change: And my follow-up on the 2025 selling season commentary, last year you guys called out several not-nows, employers. Have you seen them coming back this year? And additionally, are you seeing any change in their behavior or their approach, either in terms of scope, of coverage, of benefits with respect to the benefit?
Speaker Change: So here's, so relative to coverage...
Speaker Change: We're not seeing any change in what employers are adopting in terms of their early commitments.
Speaker Change: It's consistent with prior year, whether it's number of cycles, whether it's fertility preservation in the form of egg freezing, whether it's RX, I made the comment in my prepared remarks that the take rate for RX for new clients is...
Speaker Change: is really high as it has been in the past. All that is positive. There's also positive results relative to the take rate of some of the newer products that we have out there. So that's also positive.
Speaker Change: As it relates to the not-nows, the majority of the early commitments are not-nows.
Speaker Change: And so yes, they do come back. They come back every year and they're the head start, for lack of a better term, for the sales season because they've looked at the benefit in prior years and are making the decision earlier in the year.
Speaker Change: Great, thank you.
Speaker Change: Thank you. Your next question is coming from Stephanie Davis from Barclays. Your line is live.
Stephanie Davis: Hey guys, thank you for taking my question.
Stephanie Davis: I was hoping to follow up on some of the prior questions.
Stephanie Davis: Can you just dig in one level deeper as to what data you saw that made you anticipate this?
Speaker Change: There's lower level of cycles for either in the back half of the year. And given that you do have cohort level data, what gives you confidence that this isn't a cohort maturation issue?
Speaker Change: So, the first part of the question, we look at...
Speaker Change: where we're at this time in the quarter.
Speaker Change: versus where we're at this time in the previous quarter and in the first quarter.
Speaker Change: And the reduction or the slower rate of growth in cycles per female utilizing member is consistent with what we saw in Q2, which was a slower rate of growth than what we would normally expect off of Q1.
Speaker Change: As it relates to maturation.
Speaker Change: I think it's really early, considering this is, right now, a new trend.
Speaker Change: To conclude that.
Speaker Change: And I think...
Speaker Change: We sort of do the math overall in terms of the impact.
Speaker Change: They're still...
Speaker Change: Staples per utilizer growth, it's just not at the rate that we would expect with the normal seasonality that we see in the business.
Speaker Change: Understood there. And then when you think about the the bullishness on the selling season today and kind of how it's coming ahead.
Speaker Change: Do you have any thoughts on how government lives could contribute in this upcoming selling season now that you have a hunting license or how that mix of commercial versus government opportunities is shaping up in the pipeline?
Speaker Change: Yeah, so this is Michael. First, as Pete said in the remarks, it's certainly the, we still have, you know, lots of decisions.
Speaker Change: I'm still to come.
Speaker Change: But as it relates to both commitments to date, as well as what remains in that active pipeline.
Speaker Change: We certainly feel good about.
Speaker Change: And then, you know, to the partners question, yes, I mean, what the partnerships allow us to do is really...
Speaker Change: The value prop stays the same as it relates to the partners, and the areas where we consistently differentiate remains the same in those partners.
Speaker Change: But it really, the partnerships really provide us two things. One is another reference point for, you know, our differentiation and our leading solutions.
Speaker Change: The second part is, it provides...
Speaker Change: additional paths towards
Speaker Change: bringing employers on and you know in particular around you know the contracting process and the decision to sort of change.
Speaker Change: Our partnerships really help ease that last mile if you want to think about it that way. So our prior partnerships continue to be valuable to us and great levers.
Speaker Change: And, you know, that's how we look at as we add partnerships going into the future and look for that same sort of impact and effect on new business.
Speaker Change: Helpful. Thank you.
Speaker Change: Thank you. Your next question is coming from Allen Lutz from Bank of America. Your line is live.
Allen Lutz: Good afternoon. Thanks for taking the questions. Pete, last quarter you mentioned the Alabama Supreme Court ruling as a potential driver of utilization. Can you just provide an update on what you saw there in 2Q? Is there anything to call out on a state-by-state basis? Thanks.
Speaker Change: Yeah, so, so, um, we surmised last year, last quarter.
Speaker Change: that the short-term dipping utilization was caused by that.
Speaker Change: If you recall, we also talked about the fact that it returned.
Speaker Change: back to normal levels.
Speaker Change: And that's consistent with what we reported for the full quarter for Q2 and also what we're seeing right now for Q3. So the good news is that it was a short-term dip and not something that persisted.
Speaker Change: We're not seeing anything today on a state-by-state basis that is of any meaning to call out.
Speaker Change: Okay, great. And then I want to follow up on...
Speaker Change: Some of the comments around the selling season a little bit stronger than last year. Can you talk about how quickly you think the fertility market is growing in 2024? Do you think it's changed at all relative to 2023? And do you think Progyny is taking share? Thanks.
Speaker Change: So the first thing is I do think we continue to take share.
Speaker Change: Based on the rate of lives growth that we have every year versus the growth in the market.
Speaker Change: and relative to how much the industry is growing in 24.
Speaker Change: It's hard to say it's anecdotal, you know, because when I say that...
Speaker Change: As companies take coverage, whether it's through carriers or through us or any of the other competitors that we have.
Speaker Change: The coverage is very different with different benefit plans, right? Carriers have generally plans that are dollar maximums, so therefore a limited coverage and not comprehensive coverage. And many companies sort of, you know, depending on those dollar maximums or what they offer, don't offer...
Speaker Change: coverage across the board or coverage for a number of cycles to ultimately get pregnant successfully just based on the math of live births.
Speaker Change: Success rates and the cost of IVF so so you know coverage comes in two forms overall the thing I always point to you is that you know if you look at the
Speaker Change: The CDC data around heart cycles that are reported every year, and I think the last year that's reported is 21 and 22.
Speaker Change: Amen, 20.
Speaker Change: 21 is the last year that's recorded. The rate of growth over the last 10 years is roughly 10% a year compounded annual growth rate in juxtaposed against what's happening with live births which are have been on a decline you know we sort of look at that data point as what's happening in overall
Speaker Change: Growth in terms of access to coverage.
Glen Santangelo: Thank you. Your next question is coming from Glen Santangelo from Jeffreys.
Speaker Change: Got it. Thank you.
Speaker Change: Thank you. Your next question is coming from Glen Santangelo from Jeffreys.
Glen Santangelo: Your line is live. All right. Good evening. Thanks for taking my question. Hey, Pete, I hate to beat the dead horse here, but I, you know, as you sort of pointed out,
Glen Santangelo: You know, and some of the other answers. We've had, you know, different issues, whether it be, you know, the 4Q call, the 1Q call, and now, you know, tonight. And so I guess, you know,
Speaker Change: Listening to your answers, it kind of sounds like, you know, each quarter the issue was a little bit different, but...
Speaker Change: You know, one thing that we get questions about is it seems like the common thread, you know, throughout this year is that all the economic indicators are sort of trending down. And so I guess the question is, why is it unreasonable to think that it's at least not in part to a weakening consumer? I mean, you seem pretty confident that you're not seeing any weakness in demand. And I'm just kind of curious as to what gives you the confidence to sort of say that when it seems like it could be, you know, a logical answer.
Speaker Change: Yeah, look, certainly that could be one answer, right? So I'm not saying that's impossible. Here's what I'm saying. When I say the demand is still there, you look at the top of the funnel, i.e. unique utilizers and utilization rate,
Speaker Change: We're closer to the high end of historical.
Speaker Change: utilization rates as opposed to the lower end of historical utilization rates and to me that's a positive especially when last year we had that you know was a was a record year if you will in terms of utilization rate right so that's sort of why I make that first comment
Speaker Change: Other than that, right now what we're seeing, when we talk about the other issues, the other issues were...
Speaker Change: Mix which was first half of Q1 that resolved itself. We called that out for one reason to talk
Speaker Change: to talk about, you know, why the utilization rate versus the revenue that came with it in Q1, you know, why that was lower, and that's why we called it out.
Speaker Change: The second issue around the utilization rate and dip was temporary and as I answered on the previous question was already resolved and so far as we continue into Q3 doesn't appear to be a persistent issue it appeared to be a short-term issue.
Speaker Change: This one is new and it is a, as a percent.
Speaker Change: small drop in cycles per utilizer, but the utilizers are still utilizing.
Speaker Change: It just happens to be impacting the future outlook, and because we're not seeing that correct itself yet, if it does correct itself, we're guiding to it, and that's why we're explaining it.
Speaker Change: So, I could understand the perspective that that could be, you know, all of it could be looked at collectively as a softening a little bit around consumer demand, but I look at the top of the funnel and how many people are utilizing the benefit and is that changing as a starting point and indication of demand.
Speaker Change: And then on top of it, you know, the sales season and the demand from clients, the overall active pipeline, et cetera, and all those comments that I made, it tells me that there's demand from employees to their benefit offices, and that's why that demand continues.
Speaker Change: Okay, maybe if I could just ask a quick follow-up to maybe tighten up our model. I thought...
Speaker Change: You know, Mark, when we started the year at 5.4 million members, you know, we added 1.3. I thought we were supposed to finish the year at around 6.7, and now it sounds like we're going to finish the year 6.5.
Mark: Yeah, so you're right in that we were saying we were going to be approaching 6.7 million. We talked about it even in our prepared comments today that we did have an unexpected net reduction in members this quarter.
Speaker Change: We put that at about $100,000. I think that's...
Speaker Change: part of what you're seeing right there.
Mark: Again, the clients that we expected to launch and we announced that we're going to launch have all launched actually now that we're into the early part of August .
Speaker Change: So that isn't a factor, and to the extent that there is any type of organic growth across the balance of the year is sort of the difference between maybe it's 6.5 or rounding up to 6.6 or 6.6.
Speaker Change: But it's really just what we've seen in this last quarter that's impacted that number you're looking at.
Unidentified Speaker: Perfect. Thanks for the color, guys.
Speaker Change: Perfect. Thanks for the color, guys.
Speaker Change: Thank you. Your next question is coming from Sarah James from Cantor Fitzgerald. Your line is live.
Sarah James: Thank you. I wanted to ask about quarterly progression and then if I could afterwards come back on for a clarification of something in the release.
Sarah James: But when I look at your unique
Speaker Change: Female Utilizer Guidance Chart here. So you've got flat from 2Q to 3Q. I was wondering if you could help us understand some of the moving pieces in that assumption because you've got
Sarah James: You know, a full quarter of the in-account shrinkage now, but you also have a bunch of new accounts starting in 3Q, which is great, but usually comes with some utilization headwind, and then there's a different number of weekdays, which I'm not sure is
Speaker Change: Material or not for your business model. So could you help us think through the scale of those moving pieces as you come to your guidance?
Speaker Change: Sure.
Mark: You want to do it, Mark, or do you want me to do it? Yeah, I'll do it, and then Pete, if you have the color. So I think the important thing maybe is just to understand what the charts are. There's the lower chart, which is the one I think you're referencing, is showing the quarterly progressions of art cycles per unique female utilizer. So this is the component of what our utilizers are doing, how many art cycles will they complete in any one quarter.
Speaker Change: And if you look at 22 and 23, you see them progress from, you know, 0.50, 0.51 into the second quarter, a higher level at 0.55, and then continue to progress through the balance of the year. And that, the dynamic there is people who begin with...
Speaker Change: Good evening, we'll be conducting a test of our fire alarm system. Apologies.
Speaker Change: No worries. Yeah. I think he should be done in a second.
Speaker Change: Scott
Speaker Change: So you're seeing a higher mix of initial consults in the first quarter of the year, which then progresses as the year goes on. What we've seen this year, and this is what we're highlighting, is and you can see also the art cycles per female utilizer actually does sort of increase a bit year after year.
Speaker Change: What we saw in Q2 is a much, it's still an increase from .53 to .54, but a much lower increase than you can obviously see and perceive in prior years.
Speaker Change: And, you know, further, the reason that we're estimating a .54 here for the third quarter is because it's effectively what we're seeing at similar rates. So we've, you know, thought it was most prudent, again, and it's always been our guidance philosophy to show and to base our estimates on what we're seeing. And you can see, so from the low end of the guidance range, we have that stepping down a bit in Q4 to reflect the fact that there, perhaps there may be other unforeseen factors that may continue to bring that, you know, down as the year goes on. And the high end... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
Speaker Change: or the range where we do allow for it to increase a little bit, but of course, as you can see, versus 22 and 23, not as much as you would typically expect.
Speaker Change: So hopefully that's helpful.
Speaker Change: Sure, and then just to clarify, there's a pretty good-sized recast in that chart versus how you report the
Speaker Change: I just wanted to clarify, that's only the 300,000 member account, there's no other difference, because the seasonality
Speaker Change: It's quite different. One historically goes up in 4Q and the other seems to come down. I wanted to make sure I understood that.
Speaker Change: So yeah, in the upper chart, the numbers that we've excluded from average members, and really it's only for 2024, remember, that is associated with
Speaker Change: And that's a full-year average now, and that's only the members associated with the federal plan, which has a different rate of utilization based on how they chose to I think we've talked about this, how they've chosen to design their benefit.
Speaker Change: The average members is a little bit lower than the 6.5 to 6.6 because it does factor in the full year averages, including Q1 and Q2, which didn't have those earlier launches.
Speaker Change: Got it. Is that what drove the recast for 23 or is that something different?
Speaker Change: I don't think we're recasting 23.
Speaker Change: of the year.
Speaker Change: Oh, no, I think if you look, the ART cycles per unique female utilizer, if you look in the upper chart, 22 is .96, that's the far right row on the lower chart, same .96.
Speaker Change: And then 2023 is a .99 for the full year, same as on the chart below, .99.
Speaker Change: Your full year versus quarterly on the bottom chart and the full years are all the way to the right.
Speaker Change: Got it. Yeah, maybe we can follow up a little bit more because I'm still getting some quarterly differences, but we can handle that later. Thank you.
Speaker Change: Thank you. Your next question is coming from Richard Close from Canaccord Genuity. Your line is live.
Richard Close: Yeah, thanks for the questions. Maybe just to expand on Sarah's line of questioning here.
Richard Close: Just looking at the bottom chart, and if you go back in time, I know you're only showing us 22 and 23 and so far in 24, but if you go back to earlier years,
Speaker Change: Have you guys ever experienced anything like this, where you've seen decreases in any corridors? I guess that's the first question.
Speaker Change: Yeah, there's, if you look back, depending on the year you look at,
Speaker Change: If you look at, you know, 2020, it was the first year of a COVID year.
Speaker Change: 2021 was a year that had a lot of variability because it was sort of the first still in COVID but sort of coming out of it during the year, the last two full years.
Speaker Change: We're more indicative of pre-IPO activity versus sort of those two COVID years in terms of the seasonality and sequential improvement.
Speaker Change: Okay, and then, you know, I know you don't have reasons, you know, to explain the variance here, the, you know, decline, but
Speaker Change: you know is there if you can expand upon what you said earlier in terms of trying to find out I mean just what's the process in terms of you know trying to figure out what the change is it seems like you'd really want to know that
Unidentified Speaker: Yeah, it's...
Speaker Change: aggregate what are, you know, conversations with 30,000 people.
Speaker Change: Utilizing the Benefit in a Quarter and start to...
Speaker Change: understand whether or not that will tell you anything. It's a combination of analyzing...
Speaker Change: – volume of Journeys.
Speaker Change: And whether or not that will tell you anything, a combination of do you see anything in any different area in the country or whether or not you see anything at any clinics.
Speaker Change: and see if that will tell you anything. It's also a combination of...
Speaker Change: As the outcomes come in, which we don't have today, for these cycles in Q2, and that'll tell you anything. So it's sort of all of the above, but we'll take time, because in real time, you don't know what's happening.
Unidentified Speaker: Okay, thank you.
Speaker Change: Okay, thank you.
Scott Schoenhaus: Thank you. Your next question is coming from Scott Schoenhaus from KeyBank. Your line is live.
Speaker Change: Thank you. Your next question is coming from Scott Schoenhaus from KeyBank. Your line is live.
Scott Schoenhaus: Hi team, thanks for taking my question. My first question is on, if we look at, you know, fertility benefits services average revenue per ART cycle, it really accelerated and spiked to levels we haven't seen in a few years. Can you give us some color on what's driving that?
Speaker Change: Sorry, the average per ART. Yeah, I think that what you're seeing there is if you have a, again, for the number of people that are utilizing the service,
Speaker Change: versus the number that are completing art cycles. It's a greater proportion. There is revenue associated with that. So you're seeing a higher proportion of revenue for non-art revenue to the cycles themselves. And that's going to push your average up.
Speaker Change: Got it. So it is a factor of this heart cycle per utilizer.
Speaker Change: Got it. My follow-up question is on this revenue mix. You know, if we look at, you know, the state-by-state revenue mix declines, is there any states
Speaker Change: or regions that are a clear glaring signal or discrepancies between what you did a year ago or if we can even drill it down more simply like the pharmacy benefit services revenue. Are the declines in that part of the business? Is it?
Speaker Change: Can you see big discrepancies state by state versus a year ago? Thank you.
Speaker Change: Yes, as I mentioned before, I think somebody asked the same question.
Speaker Change: significant variance right now that we can see in call-out.
Speaker Change: and Mark had talked about in his prepared remarks.
Speaker Change: what drove the difference in growth rate in pharmacy revenue versus medical revenue.
Mark: and it's really tied to the revenue per cycle that's...
Speaker Change: didn't grow as much sequentially as...
Speaker Change: Q1 and Q2, as I had in the past.
Speaker Change: And therefore, and prior year did,
Speaker Change: And so you're going to comp off of a year that had more growth, and then on top of it, a manufacturer rate increases.
Speaker Change: We're in last year's, we're done by Q2 of last year, weren't by the end of Q2 of this year, so there's a combination of what impacted it, but no, there isn't anything to call out state by state right now.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from David Larsen from VTIG. Your line is live.
David Larsen: Hi, can you maybe talk a little bit about your conversations with benefits consultants? Like, we've had some discussions with a handful of them over the past.
Speaker Change: two years, and they highlighted to us that DEI, Diversity, Equity, Inclusion, was an important consideration when companies and plants would sign up for these benefits, and that was a driver of growth.
Speaker Change: We're now heading into an election cycle. You know, it's possible, obviously, that perhaps, you know, a more conservative-leading, you know, administration will take power. I mean, has that entered into the conversations at all or not? And it gets back to sort of this red-blue discussion. Thanks.
Speaker Change: Regarding the last piece...
Speaker Change: Even if the more conservative party takes power, the former President Trump, the Republican nominee has already said he supports fertility and IVF.
Speaker Change: And, you know, on both sides of the aisle, there's been enough statements out there, there's support for IVF, so I don't think that will create an issue for the industry.
Speaker Change: Regarding conversations with the benefit consultants, I think that the trend is positive relative to what's happening at benefit consultants.
Speaker Change: Over the last couple of years, they've effectively all created a center of excellence around family building benefits that wasn't in place before.
Speaker Change: That's an indication of the overall demand and how often the conversations are happening with existing clients or prospective clients of theirs and for them to be equipped to be an advisor to these clients. We see that as a positive. Michael, I don't know if you want to add anything.
Michael: Yeah, no, and then, you know, just also just from a sort of what's happening and how that plays itself out, again, I'd point back to, you know, Pete's comments in the in the prepared remarks.
Michael: And, you know, we're not seeing, we're not, you know, the active pipelines comparable to last year, you know, to date.
Michael: Again, the closes are good. Obviously, lots more to go, but you would start to see those things play out, and again, we're not seeing those things.
Speaker Change: Okay, and then just one quick follow-up, the revenue per art cycle increased a good amount sequentially.
Speaker Change: Is the mix back to where you thought it would be, meaning the revenue coming in per cycle and for each service is now high again and it's simply the overall utilization and membership that's lower than sort of what was expected? Thank you.
Speaker Change: Both dead there.
Speaker Change: The Revy-Varr cycle and the increase in Q2 is a function of
Speaker Change: The fact that...
Speaker Change: Utilizers who utilize services that aren't our cycles, right, are using other stuff. That drives the math that makes it seem higher, right? So if there's fewer cycles, but other services and other utilization is done, but they're not
Speaker Change: Art cycles, right? That'll drive the overall map because we're not really breaking out the two separately, right? That's what's driving that.
Michael: The mix is...
Michael: Normal, if you will, for lack of a better term, there isn't a significant mix change.
Michael: We had that mixed anomaly in the first six weeks of the year.
Michael: and other than that, it's been relatively consistent with what we would expect.
Speaker Change: You know, at different times of the year.
Speaker Change: So that is normal. But I just want to make sure you don't take away from that comment that the jump up is only around that. It's also around...
Speaker Change: This other item which is, you know, revenue per art cycle, I'm sorry, utilization.
Speaker Change: By female utilizers of the number of bar cycles per unique utilizer is down therefore Other services because they are utilizing the benefit They're utilizing it goes into the same math of a lower volume of bar cycles if that makes sense
Speaker Change: Yep, thanks very much.
Speaker Change: Thank you. There are no further questions in the queue.
Speaker Change: Thank you.
Speaker Change: Okay, thanks everybody for joining us this afternoon. As always, please feel free to reach out to me if you have any questions or follow-ups. Happy to assist in any way that we can. And again, if you're interested in coming to the Investor Day next week, send me an email and I will confirm your registration.
Operator: Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.