Progyny, Inc. Q1 FY2022 Earnings Call

Thank you, Paul, and good afternoon everyone. Welcome to our first quarter conference call. With me today are Peter Anevski, CEO of Progyny; Michael Sturmer, 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 today’s call contains forward-looking statements, including, but not limited to statements about our financial outlook for both the second quarter and full year of 2022, including our expected utilization rates and mix, the impact of COVID-19 including variants on our business, clients, member activity and industry operations; our ability to acquire new clients and retain and upsell existing clients; our market opportunity, size and expectation of long-term growth; our plans for the expansion of our business, including expansion into other markets and the services offered; our business performance, industry outlook, strategy, future investments, plans and objectives and other non-historical statements as further described in our press release that was issued this afternoon. These forward-looking statements are subject to certain risks, uncertainties, assumptions, and other important factors, including those related to Progyny’s growth, market opportunities, general economic and business conditions and the impact of laws and regulations, including laws and regulations restricting reproductive rights. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these risks and other important factors that could cause actual results to differ materially from these forward-looking statements are discussed in our periodic and current reports filed with the SEC, including in the section entitled Risk Factors in our most recent 10-K. During the call we will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, gross margin, excluding stock-based compensation and operating expenses excluding stock-based compensation. Reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors.progyny.com. I would now like to turn the call over to Pete.

Thanks Jamie. Thanks everyone for joining us today. We are pleased to report that we’ve had a solid start to the year, achieving record quarterly revenue growth of 41% over the first quarter of 2021, as well as the continued expansion of our adjusted EBITDA margins as compared to the year-ago period. These strong results demonstrate that our member activity has returned to the levels that we typically expect to see, and based on what we see we believe that the impact of COVID and the Omicron variant more specifically is behind us. In addition to our strong financial results this quarter, we also successfully onboarded a record number of new clients who represent more than 1.2 million new covered lives that now have access to our solution. In any year the first quarter is a critical time for us because the substantial majority of our new clients will look to begin their fertility benefits at the start of their health plan year, which for most companies is January 1. To address this dynamic, each year we prepare for a step function increase in our business volumes, which encompasses everything from the number of inbound contacts to our PCA's, to the amount of appointments booked, to the level of patient activity that we're actively monitoring across all the clinics in our network. Coming on the heels of our record selling season, we had the largest sequential step-up business volumes in our history this quarter. We have successfully managed the addition of our newest clients, while also continuing to provide industry-leading service to all of our existing clients and members, demonstrating our continued ability to scale our operations at an accelerating rate. Although the 2022 selling season has only just begun, we're pleased to report that the early activity we've seen so far, as well as the caliber of the logos we are engaging with, has continued to affirm our momentum as the brand of choice for Fertility and Family Building Benefits amongst the best-known and most successful companies in the world. At this point in the selling season, our sales team is actively working and building pipeline through all the traditional channels, including direct ads of prospective accounts, by engaging with the benefit consultants and channel partners, by participating in important industry events and conferences, and by responding to inbound RFP opportunities. Now lastly, in addition to pitching new logos, we are also re-engaging with deferred accounts who have given us a ‘Not Now’ response in the prior selling season, but these companies may now be in a better position to consider adding Progyny benefits. The early activity we’ve seen throughout all of our sales channels has been positive, and we're seeing strong year-over-year growth across all the internal metrics that we use to measure sales momentum, including new pipeline added, overall size of the pipeline and closed deals to date. We are also seeing the market for fertility benefits continue to mature as the conversations with prospects are less and less about whether or not they should add fertility coverage to their benefit packages. Instead, the discussions are primarily focused on understanding the strength of our solution versus the alternatives. We believe this ongoing shift is a positive indication that benefit buyers are increasingly becoming aware of the relevance of fertility and family building benefits to their targeted workforce and their need to offer the coverage in order to attract and retain the best workers. Not only is this shift translating into more selling opportunities for us overall, it's also allowing us to spend more time demonstrating how Progyny is differentiated from any other fertility benefits manager, particularly with respect to member experience and our clinical outcomes. In any sales year, we set for ourselves a goal to grow the absolute number of new clients and covered lives as compared to the prior year. Although it remains very early, given the strength that we're seeing in the sales season thus far, we believe we're on track to meet our internal expectations at this point. As we've done in the past, we expect to share more insight with you as the season progresses. We continue to anticipate that the majority of client decisions as usual will be made at the end of the summer and early fall. Another important development during the quarter was that the CDC and the Society for Assisted Reproductive Technology released their latest fertility outcomes data, which affirm that Progyny continues to significantly outperform the national averages. This not only marks the sixth consecutive year that we've achieved industry-leading clinical outcomes in infertility, but in our most recent data we also achieved across-the-board improvements to all the relevant metrics. This once again reveals that Progyny is uniquely helping people to get pregnant faster, have healthier pregnancies and deliver healthier babies. Now with just a few of the key results and the latest data. Our pregnancy rate improved to 17% better than the national average, while our live birth rate, which had been 25% better than the national average a year ago, is now 27% better. To give you a sense for just how impactful this is, our higher live birth rate means that Progyny clients need to fund on average significantly fewer rounds of treatment than they otherwise would have, had they been using either a carrier program or one of the VC-backed startups. In addition to just bearing an employee the emotional and physical toll of having to endure multiple rounds of unproductive treatments, our higher birth rate also translates into meaningful cost savings, not only for the client who is sponsoring the coverage but also for the employee who generally has an out-of-pocket cost share. The latest data also shows that while Progyny’s pregnancy rate and live birth rates have continued to improve since 2015, the national averages for those metrics have largely remained flat, revealing that while we have continued to improve our solution and the results we achieve year-after-year, the other benefit managers don't seem to be making those improvements, suggesting they either lack the focus or the ability to do so. Finally, our single embryo transfer rate improved to 91%, the highest it has ever been, while our multiple birth rates improved to 2.5%, which is also the best it's ever been. If you aren’t aware, multiple births are a driver of high-risk pregnancies and the leading cause of pre-term births, both of which have costly consequences for employers and patients. Our superior outcomes translate into significant downstream medical cost savings in the form of lower maternity and NICU costs, as well as a reduction in chronic care costs associated with low birth weight babies. The sustained superiority of our outcomes, as well as our ongoing focus on creating the best possible member experience as evidenced by our leading NPS scores is a key reason why the world's leading brands are choosing to work with Progyny. To conclude, we're very pleased with our results this quarter, which demonstrate that we’ve continued to execute against all of our strategic initiatives. The early momentum we're seeing in our sales season is also increasing our belief that Progyny is in its strongest ever competitive position, that our market opportunity remains largely unpenetrated, and that all the macro factors that have contributed to our growth remain intact. Let me now turn the call over to Mark to walk you through the quarter.

Thank you, Pete, and good afternoon everyone. I'll begin by taking you through the first quarter results and then provide our expectations for the second quarter and full year. Revenue grew 41% over the first quarter of last year to $172.2 million, exceeding the high end of our guidance. The growth versus the prior year was primarily due to an increase in our number of clients and covered lives as compared to a year ago, which more than offset the impact the Omicron variant had on member activity in January, which we discussed with you last quarter. Looking at the components of the topline, medical revenue increased 25% over the first quarter last year to $110.9 million, again due to the growth in clients and covered lives, while pharmacy revenue increased 84% in the quarter to $61.3 million. The growth in pharmacy revenue was primarily driven by an increase in the number of clients who have the integrated solution. A year ago 73% of our clients had Progyny Rx; today, that is now 83%. This increase reflects not only the strong take rate we saw among our newest clients in the most recent selling season, but also our continued success with upselling among existing clients. While we continue to be very pleased with the progress of pharmacy adoption since we launched this service, there remains a future upsell opportunity to a meaningful portion of the client base. We ended the quarter with 264 clients, representing an average of 3.9 million covered lives during the quarter. This compared to 179 clients and an average of 2.7 million covered lives in the first quarter last year, reflecting 48% growth in covered lives over the past year. Taking into account those clients who launched their benefits following March 31, we have over 265 clients today with at least 1,000 covered lives, reflecting more than 4 million covered lives consistent with the expectations we shared with you on our fourth quarter call. Turning now to our utilization metrics. During the quarter, there were more than 8,900 ART cycles performed, which represents our highest ever total of cycles. This reflects a 36% increase in cycles as compared to the first quarter of last year. The female utilization rate in the quarter, which principally drives our financial results, was 0.45% as compared to 0.47% from a year ago. I’d remind you that as the year began, we saw a peak of the Omicron variant causing short-term interruptions or delays in the treatment journey for certain members. Nevertheless, our female utilization rate remains consistent with the historical ranges we've typically seen, excluding that brief period at the onset of COVID two years ago when most clinics closed, which again reinforces both the essential nature of fertility treatments, as well as the time sensitivity for most patients. A contributing factor to our revenue each quarter is treatment mix. In particular, the utilization associated with consults and diagnostic testing, which occur at the early stages of fertility treatment, contribute less revenue than the procedures that happen later in the members' fertility journey. Our revenue in the first quarter reflects a higher proportion of that early treatment revenue than we typically expect to see in other quarters of the year. Lastly, I'll note that utilization rates will always vary from quarter to quarter due to other factors, such as the timing of when new clients go live, the time of the year, and the demographic mix of the newest clients. Turning now to our margins. I’ll also remind you that late last year we issued a broad-based grant of new activity across our workforce, which increased the level of non-cash stock-based compensation expense across the P&L. We have included a table in our press release today to show you the impact that stock compensation had on our gross margins and operating expenses. Gross profit increased 14% from the first quarter last year to $32.9 million, yielding a 19.1% gross margin, reflecting a decrease from the year-ago period due primarily to the impact of non-cash stock-based compensation. Excluding the impact of stock-based compensation in both periods, our gross margin of 22.7% reflected a decrease of 200 basis points from the first quarter of 2021, due to the impact of onboarding care management resources in advance of the client launches happening beyond March 31, as well as the temporary inefficiencies experienced during the initial ramp-up period of a new pharmacy partner. Given that the majority of the clients who were scheduled to launch after March 31 are now live, we anticipate that second quarter gross margins will improve on a sequential basis. Turning now to our operating expenses, sales and marketing expense was 5.8% of revenue in the first quarter, as compared to 3.3% in the year-ago period. Excluding the impact of stock-based compensation from both periods, sales and marketing was 3% of revenue in the quarter, reflecting an increase of 30 basis points from the year-ago period. G&A was 13.4% of revenue this quarter as compared to 10.7% in the year-ago period. Again, excluding the impact of stock compensation from both periods, G&A as a percentage of revenue improved 270 basis points from the year-ago period to 5.5%, reflecting the inherent nature of our expanding margins on G&A as we grow revenue. With our strong top line performance and operating efficiencies, adjusted EBITDA grew 44% this quarter from $17.3 million a year ago to $24.8 million, which was slightly above the higher end of our guidance range and in line with strong revenue. Our adjusted EBITDA margin of 14.4% this quarter reflected a 30 basis point expansion from the year-ago period. Net income was $5 million in the quarter or $0.05 per share. This compared to net income of $15.2 million or $0.15 per share in the year-ago period. The decrease was primarily due to higher non-cash stock-based compensation expense in ’22, partially offset by operating efficiencies realized on our higher revenues. Turning now to cash flow in our balance sheet. Operating cash used during the quarter was $11.3 million, which compares to $0.5 million of operating cash generated in the year-ago period. As a reminder, we generally see a short-term use of working capital at the beginning of any year, as we work through the integrations for those newest clients who have recently launched the benefit. In addition, each period was impacted by timing items, including the timing of member activity both for the current quarter, which is back-end weighted, and Q4 as well, which was much more front-end weighted. The negative impact of this timing on cash flow was further exacerbated in both periods due to the previously disclosed impact of the Omicron variant. Also as a reminder, we signed new pharmacy partner agreements, including new rebate agreements, which represented a significant improvement in the economics on the Rx business, and extended payment terms an additional 90 days. As a result, as our Progyny Rx business grows, we’ll experience negative timing on cash flows, which is the effect of the combination of our actual growth, plus the extended payment terms, particularly for the first two quarters of this year, which have significant growth over the prior year due to favorable adoption of Progyny Rx. As of March 31, we had total working capital of approximately $180 million, reflecting $105.7 million of cash, cash equivalents, and marketable securities and no debt. Turning now to our expectations moving forward. Given the strong start to the year, we are pleased to be in a position to revise our guidance upward for 2022. For the full year, we are raising the low end of the range and now expect the revenue to be between $735 million to $775 million, reflecting growth of between 47% and 55% or approximately 51% growth at the midpoint. We are also raising our guidance on profitability. We now expect adjusted EBITDA of between $111 million to $122 million, while for net income we now expect between $7.3 million to $14.2 million or between $0.07 and $0.14 earnings per share on the basis of approximately $105 million fully diluted shares. I'll remind you that our net income projections do not contemplate any discrete income tax items, including the income tax benefit related to equity compensation activity. To the extent the related activity occurs, we will continue to benefit from those discrete tax items throughout 2022. At the midpoints of this guidance, we are expecting to see continued expansion of our margins in 2022 with an adjusted EBITDA margin of incremental revenue of more than 19%. For the second quarter of 2022, we are projecting revenue between $188 million to $193 million, reflecting growth of between 46% and 50%. For adjusted EBITDA, we expect between $28 million to $30 million, along with net income of between $1 million to $2.3 million or between $0.01 and $0.02 earnings per share on the basis of approximately $102 million fully diluted shares. With that, we’d like to open up the call for your questions.

Thank you. Your first question comes from Anne Samuel at JPMorgan. Anne, your line is open. Please proceed.

Hi! Congrats on a great quarter and thanks for taking the question. You talked about seeing some early commitments already this year. I was wondering how common is that for you this early in the year and how many of those are not now’s versus maybe new pipeline wins?

Thanks, by the way. It’s common, so every year we get commitments this early and every year those commitments grow versus the prior year; this year's no different. And every year the number of early commitments that we get that are from the not now's grow over the prior year. Again, this year is no different. So it's sort of a continued trend, as you might imagine, because the volume of not now’s; some of those, by the way, are not now’s not only from the prior year, but literally two or three years ago when they come in. That continues to grow each year because, you know, as we get further and further in our tenure if you will as a company, we have more opportunities around not now’s. So it’s not surprising. It's certainly positive and certainly a good indicator of what's happening, but not surprising that we have commitments that exceed the prior year, and that's a trend.

That's helpful, thank you. And then when you set the full-year guidelines for the quarter, you had kind of spoken to the delta between the low end of the range and the high end of the range for the year as being some COVID conservatism. You said in your prepared remarks that you think a lot of Omicron and some of the COVID disruption is behind us now. So I was wondering how should we think about what the delta is now between the low end and the high end in terms of what you're embedding?

Hi Anne! It’s Mark. I think when we talked last quarter and looking at the range and sort of characterizing it, you know I think we said it’s always based on sort of what we're seeing and things obviously are looking fairly consistent with what we were seeing a couple of months ago when we last spoke. But we did say that it was – you know our view of it tends to be closer towards the higher end of the range as being what that expectation is and that we had built in some contingencies as utilization can go up and down. There could be impacts of variants. There are a variety of sort of eventualities like we saw last year. Given that we’re a couple of months down the road now and that we've gotten a solid quarter, we’ve also, like we said, launched a significant majority of those new clients. Now we haven't seen really an extensive amount of utilization from them yet just in terms of time. In fact, we had some launch even this week, so it’s always helpful for us to see more as time goes on there. But those are sort of the pieces that are baked into the range and again, why we felt it was appropriate to bring up the low end.

Great!

COVID wasn’t the only reason for the range, is sort of the short answer. Other factors, mix, slight change in expected utilization, etc., you know timing of the new launches, all could impact that range.

Very helpful. Thank you.

Thank you. And the next question is coming from Michael Cherny from Bank of America. Michael, your line is live. You may go ahead.

Hi! This is Charlotte on for Mike. Thanks for taking my question. So I’m going to start with, you mentioned earlier how you're viewing the competitive landscape right now and you just discussed the competitive positioning with other solutions in the market. Could you just outline what you think the biggest differentiators are for your service, for your clients?

Sure, it's really the totality of what we do, right. It starts with our unique plan design, our approach to offer you a solution that's all-inclusive in terms of the benefit. It starts with the network that we have, that's also unique. 20% of the providers in our networks generally don't take other carrier coverage or are very limited in terms of maybe taking one other carrier coverage, and it also is the overall solution and details of it, and the collaborative relationship that we have with our providers, and the process that we have, which is very data-driven in terms of monitoring best practices to ensure best outcomes for the patients. The last piece of it is the care navigation that we do through our patient care advocates. And so it's all of that combined and obviously there’s a lot of detail around that, that makes us differentiated versus anybody else out there, which is why we are now in the seventh year in market; six years in a row, demonstrating favorable outcomes versus national averages. That's also why we haven't seen really national averages move despite the fact that we’ve continued to improve.

The only thing I’d add to that is, we are an incredibly data-driven organization, not just in how we operate, but also how we can help support our providers and help drive those outcomes and I think one of the biggest differentiators we have is you know working in seven years of experience and tens of thousands of cycles and patients and the outcomes...

Ladies and gentlemen, please we remain on the line while we reconnect the speakers. Please remain on the line while we reconnect the speakers. Hello! You may go ahead Michael. The speakers are back in.

Charlotte, we don’t know what happened. For whatever reason the phone went dead, so we are back.

Not sure why we dropped off.

That’s okay. I think you were just discussing the data-driven nature of the business and the support young providers.

Yes. Any other questions?

Yeah, I guess just the next one would be, you know any color around the selling season so far, particularly as it relates to the pharmacy benefit and any updates there would be really helpful. Thanks.

Sure, I'll let Michael take that.

Hi yeah! No, so as sort of we said in the prepared remarks, we are seeing good early activity across all of our key metrics in our pipeline right now. That is the same for what we are seeing around pharmacy activity as well, and so you know again early in the year, still a long way to go, but all indications are positive for both medical and pharmacy.

Great! Thank you.

Thank you. And the next question is coming from Sarah James from Barclays. Sarah, your line is live.

Thank you! And congrats on the quarter.

Thank you, Sarah.

So when you last spoke, you guys talked about some of the puts and takes going into your guidance and I think at that time there was an assumption of no dollar impact from COVID or around utilization and how are you thinking about that piece now as it relates to your ‘22 guide.

As Mark just was going through it, the assumption in the range that still continues, but in the range that’s there – that we put out in the beginning of March. You know potential impacts from variants was part of the assumptions, but also other variables which would be mix, which would be, you know adding a slight variation from our expected utilization, etc., timing of launches from new clients, it's all part of it. So there is some assumption built in the overall guidance range, potentially for anything like another variant. As you recall from last year, the variants had a short-term impact. The one in the fourth quarter had the biggest impact, because it was so late in the year and so it had an impact on the year. But the others sort of seemed to work to themselves if they are mid-year. So that’s why it’s not a huge variable in the range, but it is a variable.

Got it. And then on the legislative front, so there’s been some articles around Roe v. Wade and just how that relates to fertilized embryos used in IVFs or potential future legislation around that. I'm wondering if you guys have any thoughts and what your exposure is to some of those states that would have stricter legislation?

Yes, the states with what are referred to as 'trigger bans' have slight variations in how they define abortion. From our perspective, the state that would impact us the most is Texas. Texas's 'trigger ban' specifically addresses embryos during pregnancy, unlike other states that generally refer to embryos without specifying that it pertains to those in the body. Additionally, Texas mandates the provision of fertility services, indicating that we do not anticipate significant effects on IVF related to these trigger bans. However, in other states, while there may be some risks, the impact on us is expected to be smaller. It seems that the primary focus in these states is on banning abortion rather than extending regulations to include IVF.

Got it. Thank you.

Thank you. And the next question is coming from Glen Santangelo from Jefferies. Glen, your line is open.

Yeah! Good evening and thanks for taking my questions. Hey Pete, I just wanted to talk about the selling seasons. It’s kind of encouraging that you're already starting to see some positive signs, and the reason I bring it up right is because some of the other companies in this space that’s selling to the corporate environment is starting to come back with the message that they are starting to see sales cycles get elongated. Maybe corporates are starting to prepare for the potential for a recession. But it sounds like you're not seeing that at all and early signs are kind of encouraging, but I'm just kind of curious in your conversation, does the potential outlook for a recession come up at all or even factor into their decision making?

Yeah, this is Michael. I’ll take that one. So the short answer is no, we're not seeing that in our sales activities. You know really the cadence of buying appears to be back to more historical patterns, and again I’ll reference back to the sort of the remarks earlier. You know we're seeing strong levels across multiple different pipeline activities and measurements. It's also sort of – it's also worth noting, you know our – there is an urgency and an emphasis around family building and fertility as a priority for employers, and companies are recognizing that the need to provide that coverage and services across their workforce, including in the millennial workforce in particular where family building and fertility benefits is close to the top of the list around the priorities. So again, we're – again, a long way to go in the sales season, but you know a positive start to the year.

And maybe that you just followed up on utilization, Pete I think in your prepared remarks you said member activity is sort of back to normalized levels. You know if we look at the utilization rates in the quarter, they are lower for all members and female only this quarter versus where they were four quarters ago, and I'm guessing maybe we saw some modest disruptions in omicron in the beginning of this quarter, but you know can you maybe talk about utilization year-over-year and how we should think about that? Maybe I should think about the quarter, you know progressed and we got past omicron as we’ve seen utilization increase and now you know we’re already into May here. Maybe you can talk about what the spring has looked like from a utilization perspective. Thanks.

Sure. One quarter itself is always difficult in terms of measuring utilization and saying whether or not that is or isn’t an indicator of what’s going to happen for the full year. I think the most instructive thing I could point you to is the fact that our guidance, you know we’re at the low end of our guidance. We're comfortable with the high end of our guidance and that didn't change. As Mark said before, when we generally guide, we guide based on what we're seeing from a utilization pattern perspective that's generally towards that high end, and then the variables that we talked about could impact whether or not we’re in the range versus closer to the high end. So we’re seeing patterns that are more normal, that early first quarter results versus a year ago are slightly down, but ever so slightly. It is partially part of that early in the quarter impact from the Omicron variant that spilled over into the early part of the first quarter, and hard to know exactly how much of that you know sort of recovered, if you will, by the end of March. But overall, you know when we say – you know it's important when we say utilization patterns are more typical of what we normally expect to see. You know that's sort of us analyzing by company, by industry expectations. Right. Mix always impacts overall utilization and becomes just a blend of different companies and industries that have different cohorts of employees at different age brackets if you will, and more or less concentration of employees in childbearing years. But the typical that we referred to is sort of what we expect to see given that backdrop.

Okay, thanks for the comments.

Thank you. And the next question is coming from Stephanie Davis from SVB Securities. Stephanie, your line is live.

Hey guys! Congrats on the quarter and thank you for taking my questions. We have heard of a number of large RFPs out in market for fertility benefit. So I was hoping to hear a refresh on your head-to-head win date. And given some of the comments that we heard from earlier and some of the other employer-facing names having a tougher time competing against the private, I'd love to hear how you're differentiating versus the private competitors in this space. The VC dollars are still flowing.

I’ll take the first part of your question first. So although there is – there are more RFPs out there in volume versus a year ago, the substantial majority of opportunities that we are talking to actually warrant an RFP. That still continues. It continued last year, it continued in prior years. We're still not seeing sort of the competitors that you have earned to the majority at the time competitive. It’s very early in the season to talk about our win rates not relative to our competitors. Our overall win rates are good, but it's early. So sort of you know it's very early to talk about win rates at all, because the majority of commitments, as we talked about, happen for us every year. This year would be no different; at the beginning, sort of you know near the end of the summer, going into essentially October. So we’re really early to sort of give you more color than that. But just overall although more RFP activity is happening, the majority of opportunities are still being done without RFP to do.

Super helpful. And the one-step follow-up as you talked about some of the record levels you're seeing in your pipeline, does that reflect any of the large RFP activity we’re seeing in the market or is that potential upside versus where you are today?

The overall pipeline and it being up over the prior year, yes part of that is the RFPs that are out there, but again, you know the majority of them aren't RFPs, so it’s sort of both, right. If you sort of look at you know RFP volume and dollars and pipeline versus non-RFP volume and dollars and pipeline, both growing really nicely year-over-year.

Thank you. And the next question is coming from Dev Weerasuriya from Berenberg. Dev, your line is live.

Good evening! Thank you for taking my questions and for a great quarter to start the year. I want to briefly discuss the market. If we consider the impact of market saturation or maturity on the fertility sector over the next five years, as more employers offer fertility solutions, this could encourage faster adoption of such solutions across the market. If we view this as an exponential curve, where do you think we currently stand in the market? I also have a quick follow-up to that.

I'm not sure I would sort of quantify or illustrate where we are. We are early in the curve. We are certainly still on the way up, and that’s really demonstrated by the fact that we continue to have opportunities year-after-year, growing not declining and we continue to win business year-after-year growing not declining versus prior years. So that's probably the best indication that we're still on – it’s still on its way up. I think that the math sort of supports that as well. The percent of the market that’s still underserved, the percent of the market that we’ve penetrated versus what’s out there, 265 clients and 8,000 large self-insured employers, not including the labor market, etc., there is still significant opportunity and we are very early on that curve.

Okay, thank you. And then just circling back to the competition here, I just wanted to focus on the clinical outcomes. How have – you know your guided clinical outcomes improved, but how has the delta between you and maybe the second-best player change over time? It’s interesting that these players are not catching up more quickly. What do you think, if you can provide some color as to why that may be? Is there something that's operationally different that's hard to do, maybe relationships or partnerships that are hard to mimic or change? Thank you.

Yes, I’m happy to answer that. First of all, the nice thing about that question is, nobody else has published outcomes. So I don't know who the second best is because they are actually not out there, and I always say the reason why that is, is because without a directly contracted network of providers where you are requiring to get that data and get on every patient, report on every patient, you're not – you don't even know what your outcomes are, right. Most of the competitors out there have some form of reimbursement model. A reimbursement model isn't impacting anything; it's simply just reimbursing, which is exactly what it sounds like. You're not managing anything, you're just reimbursing the costs, right? And so at the end of the day, we are only reimbursing and you're doing it via a rented network which a lot of them do. You don't really know the outcomes, which is why you’re not reporting them. And interestingly enough, even though large carriers could do that, because they have directly contracted networks, they are just not focused on it, right, which is why they are not publishing it. So it's hard to sort of describe why the number two, how far behind they are and whether there is a number two, I don’t know who that is. The reality is nobody else but us continues to publish outcomes year after year on every member that engages with the benefits.

Great! Thank you.

Thank you. And that's all the questions we had in queue. I'd like to hand the call back to James Hart for any closing remarks.

Thank you, Paul, I appreciate it. If anybody has any follow-up questions, please as always, never hesitate to reach out to me, and otherwise we look forward to speaking with you next quarter. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect at this time and have a wonderful day! Thank you for your participation.