Progyny, Inc. (PGNY) on Q2 2021 Results - Earnings Call Transcript
Operator: Good afternoon, ladies and gentlemen, and welcome to the Progyny, Inc. Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.
James Hart: Thank you, Catherine, and good afternoon, everyone. Welcome to our second quarter conference call. With me today are David Schlanger, CEO of Progyny; Pete Anevski, President and COO; and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your question. Before we begin, I'd like to remind you that today's call contains forward-looking statements, including but not limited to statements about our financial outlook for both the third quarter and full year of 2021. The impact of COVID-19 including variants on our business, clients, member activity and industry operations, our ability to acquire new clients and retain existing clients, our market opportunity, size and expectation of long-term growth, our corporate governance, plans, business performance, industry outlook, financial 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 and assumptions, including those related to Progyny's growth, market opportunities and general economic and business conditions. 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 and other risks 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-Q. During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. 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 David.
David Schlanger: Thank you, Jamie, and thank you, everyone, for joining us today. We are pleased to report that we had a solid second quarter, reflecting not only our continued strong revenue growth and margin expansion, but more importantly, our further success in scaling the business, growing our presence in the fertility industry and building long-term value in our business. We believe 2021 will be another year where we not only achieve exceptional client retention, but also deepen many of those relationships through upsells and expansions. In fact, a large number of our existing customers have already committed to service expansions for 2022. And while client retention is critically important to the growth of our business, so too is sales activity and our selling season is off to the strongest start we have ever seen at this point in the year as it relates to both new sales and up-sell commitments. Additionally, we have built a strong pipeline of active opportunities that we are continuing to pursue over the remainder of this year's selling season. We believe this positive momentum across many facets of our business demonstrates how Progyny remains in its strongest ever competitive position that our market opportunity remains very robust and that all of the macro factors that have been contributing to our growth remain fully intact. You have likely seen from our press release, we have slightly revised our outlook for the second half of the year to reflect a lower level of expected utilization for Q3 that began somewhat suddenly at the end of June with a drop in the pace of new appointment scheduling for July and August as compared to what we would normally have expected to see. I want to be clear that we don't believe that this is indicative of any macro change in behavior. In fact, 90 plus percent of our members have been going through treatment as we would normally expect. For a small percentage of members, the uncertain and changing external environment appears to have caused a slight pause in their pursuit of treatment. It's difficult to gauge whether this is associated with the summer vacation season after 16 months in the pandemic or the impact of the Delta variant or both. Fortunately, we're already starting to see indications in the most recent week that the pacing of appointment scheduling is returning to more typical levels. And while we believe this is an anomaly that will be short-term in nature, we expect it to have a modest impact to near-term results and we've adjusted our guidance accordingly. While Mark will take you through the results in more detail, here are a few of the highlights in the second quarter. Revenue in the quarter nearly doubled over the second quarter of last year to $128.7 million. Adjusted EBITDA of $18.5 million in the quarter reflected a nearly fivefold increase in the second quarter a year ago and our margins continued to expand at a healthy rate. Art cycles more than doubled from the year ago period to a record 7,340. Average members for the quarter grew more than 30% from the year ago period to 2.8 million showing the resilience of both our business and our clients during the worst of the pandemic. Another highlight during the second quarter was the CDC and the Society for Assisted Reproductive Technology releasing their latest fertility data, which affirmed two things. First, our outcomes continued to significantly outperform the national averages as they have done each year over the past five years. And second, our outcomes have continued to improve each year while the national averages have stayed largely the same over those five years. But the lack of improvement in the national averages really underscores not only how differentiated the Progyny approach to managing fertility is as compared to the rest of the industry, but also how difficult it is for a competitor to replicate our approach. Otherwise we would see their improvements reflected in better outcomes. Unlike Progyny, both the traditional carriers and the new entrance in our space are struggling to demonstrate their value as they are unable to either impact or measure the outcomes for their members due to their benefit design member support and network models. We are exceptionally proud that Progyny is the only company with a five-year history of achieving proven, documented outcomes over thousands of patients that far exceed the national averages with over 60,000 completed art cycles since the launch of our benefit in 2016. And we believe that outcomes are the best measure of the value of a fertility solution. From the employer's perspective, better outcomes result in better financial value, happier employees and higher retention. To illustrate this Progyny's live birth rate is now 25% better than the national average, reflecting our success not only getting people pregnant more quickly, but also in a healthier way that results in a few – significantly fewer miscarriages. Consequently, the typical Progyny client will have to fund significantly fewer rounds of treatment across their member population than they would under a competitive solution. When you add in the value of the medical cost avoidance from fewer multiple births, the Progyny benefit provides meaningful financial savings, both in terms of medical and pharmacy costs, as well as improved employee productivity. And we do so while also creating an experience where each member feels educated, supported, and cared for throughout their journey. The combination of our superior algorithms and the exceptional experience we deliver has also allowed us to consistently achieve an industry leading NPS score from our members, which now stands at its highest level ever. This high level of member satisfaction as well as our leading clinical outcomes provide the foundation upon which we have continued to build the company scale and industry presence. To talk about the progress we made in the second quarter from a sales and client perspective, I'll now turn the call over to Pete.
Pete Anevski: Thanks, David. Good afternoon everyone. Each selling season, we focus on three areas: first, expanding our market share through the acquisition of new clients; second, retaining the clients we already have with an emphasis on whatever clients are coming up for renewal that year; and third, expanding our relationships with our existing clients through up-sells. I'll walk you through what we've seen in each of these areas over the past quarter, starting with new client acquisition. As a reminder, we began the year hearing that consultants and benefit buyers were looking for 2021 to be a more normal year for them than 2020 was in terms of their ability to evaluate new benefits and make changes to their health plans. And while that early sentiment was encouraging, ultimately, the best barometer to measure the progress of this season is sales commitments. And on that measure, we've seen that demand among prospective accounts has returned to pre-COVID levels. The second and third quarter are the heart of any selling season for us with significant activity as our sales team actively manages the opportunities that are in different stages in the pipeline. Typically, this involves helping potential clients understand in detail how the Progyny benefit works and how our superior outcomes translate into not only significant financial savings for the company, but also higher workforce productivity and employee satisfaction. As a result, we’ve historically seen the majority of client decisions are made at the tail end of the summer or early fall. And while a certain number of commitments have always come in during the second quarter, the commitments we received today are the most we've ever received as of this point in the season and well beyond what we expected to see at this point in the year. It's impossible to know whether some of this is because of certain better than managers simply choosing to commit to us earlier than they normally would, particularly since many of those early commitments have come from the not now accounts that had deferred the decision from the prior season and they were well primed to make a decision somewhat earlier this season. Nevertheless, we believe the record level of commitments that we've received to date is a strong indication that prospects are in a much better position to make decisions this year as compared to 2020 that the demand for fertility and family building benefits continues to grow. In every sales season, our goal is to grow the absolute number of new clients and covered lives from what we achieved in the prior season. Given how COVID affected companies' decision-making last year, we're looking to 2019 is the baseline for which we want to meet our growth goals this year. And with the early results we've achieved thus far, we believe that we're on track to return to the historic trajectory of sequential growth in new clients and new covered lives that we had been on prior to COVID. Turning now to renewal activity, in addition to the excellent start we've had to our selling season, our client retention continues to be exceptional. In fact, a number of clients whose agreements were up for renewal this year, including some of our largest and longest tenured accounts agreed to contract renewal during the quarter. One of our guiding principles is that we have to earn our renewals every day and this influence is every interaction that we have with clients and members. We recognize that signing a new client can often be based on the promise of what you say you can do, but the renewal is going to be based on the reality of what you've been able to achieve for them. We believe the high retention rate we've historically achieved and the renewal activity we've seen amongst our largest clients continues to affirm that we're helping our clients achieve their goals. Specifically, we're lowering their cost in an area of critical importance to their targeted workforce while also providing a superior experience and better results for the employee seeking care. In addition to the renewal activity, another important indication of the value we provide to our clients can be measured through their appetite to expand their Progyny relationship, either by enhancing their coverage with additional smart cycles, by adding additional services such as Progyny Rx or by including employee populations that may not have had access to posit in the past. As one final data point and the momentum we're seeing in the market, we're pleased to report that we've seen healthy upsell demand and have already achieved our sales target for upsells this year. Although there are still upsell opportunities in our pipeline for 2022, the majority of upsell commitments do generally occur early in the sales year, the new sales activity. Turning now to utilization. Although we can't control utilization, we're able to look at each client and consider a number of factors to model a range of expected utilization that in the aggregate has proven to be highly accurate over a prolonged period of time. While utilization in the second quarter was within the range of what we expected as the third quarter began, we saw a sudden change in member behavior that resulted in lower scheduled volumes for initial consults and treatment cycles. We've spoken to some of the – our largest network partners who confirm that they're also seeing softer volumes with their non-Progyny patients as well. While we can't know for certain what drove this change given that we're not able to speak to people who don't pursue treatment, we believe it's not a coincidence that this change of behavior began around the end of June, which is when many states across the country reopened and relaxed restrictions put in place because of COVID. With so many people across the country having been unable or uncomfortable traveling or visiting their families over the past 16 months, we believe that there was a pent-up demand among a portion of our members to resume these activities such that this became an immediate priority in the short-term and consequently chose to defer their pursuit in treatment. There may also be some impact due to the delta value in surge in some areas of the country. However, as David discussed, we don't see this as being a new macro trends because we're already seeing indications that the pacing of appointment volumes is returning to normal. And while this recent activity may have a short-term impact to our results, we view this largely as an anomaly that should correct itself in relatively short order. Let me now turn the call over to Mark to talk about the results of this quarter. Mark?
Mark Livingston: Thank you, Pete, and good afternoon everyone. I’ll start by walking you through the second quarter results and then provide our expectations for the third quarter and the full year. Revenue grew 99% over the second quarter last year to $128.7 million. Our growth was primarily due to higher number of clients and covered lives as compared to a year ago. Though as previously reported, revenue in the prior year period was negatively impacted by the lower utilization that resulted from the short-term closure of fertility clinics at the onset of the pandemic. Looking at the components of the top line, both medical and pharmacy revenue doubled over the second quarter last year, with medical revenue growing to $92.3 million and pharmacy increasing to $36.4 million. We had 182 clients as of June 30th, representing an average of 2.8 million covered lives during the quarter. This compared to 134 clients at an average of 2.1 million covered lives in the second quarter last year, reflecting growth of between 31% in lives over the last year. Turning now to our utilization metrics. There were 7,340 art cycles performed during the second quarter. This is more than double the number of cycles from the second quarter last year and reflects our highest ever quarterly total. The female utilization rate this quarter, which, as a reminder, is a component of utilization that corresponds most closely to our financial results, was 0.47%. This compared to 0.32% a year ago, though the utilization rate at that time was negatively impacted by the temporary disruption in fertility care related to the pandemic. Although utilization rates will vary from quarter-to-quarter due to a number of factors, our second quarter utilization was equal to with what we saw in the first quarter of this year. Turning now to our margins and operating expenses. In addition to the factors I'll highlight in a moment, I'll remind you that our margins and operating expenses as a percentage of revenue in the second quarter of 2020 were negatively impacted by our decision to keep all of the Progyny workforce intact even with the pause in treatments at that time due to the onset of the pandemic. Gross profit more than doubled from the second quarter last year to $29.6 million, reflecting a 23% gross margin and an increase of 450 basis points from the year ago period. This increase is due to the favorable impact of the previously disclosed new terms with our pharmacy program partners, the ongoing regular contract renewals with our providers and the efficiencies that we continue to realize across our care management service teams. Sales and marketing expense was 3.1% of revenue in the second quarter, reflecting a 250 basis point improvement from the year ago period. The leverage we are achieving in sales and marketing reflects not only our improving scale, but also the benefits of our high client retention rate, given that our acquisition costs are largely borne in the first year or so after a new client launches with Progyny. G&A costs were 10.8% of revenue this quarter as compared to 14.6% in the year ago period as we continue to realize efficiencies across our administrative functions as we grow the business. With the across-the-board improvements in our cost structure, adjusted EBITDA increased nearly fivefold during the second quarter from $3.8 million a year ago to $18.5 million this quarter. Our adjusted EBITDA margin of 14.4% reflected a modest increase from the first quarter of this year and an 850 basis point improvement from the year ago period. Adjusted EBITDA margin on incremental revenue in the quarter was 22.9%. We continue to believe that margin on incremental revenue is useful as a forward indicator for where the business is capable of moving, and it highlights our expanding rate of margin capture on new revenue. Net income was $18.7 million in the second quarter, or $0.19 per share, this compared to a net loss of $1.1 million or $0.01 per share in the year-ago period. The higher income in EPS as compared to a year ago primarily reflects the margin improvements I just described, as well as a tax benefit of approximately $0.07 per share, which includes the favorable impact of deductions associated with equity compensation activity. Turning now to our cash flow and balance sheet. Operating cash during the quarter – used during the quarter was $7.5 million. This compares to cash provided of $2.2 million in the year ago period. The year-over-year difference is primarily attributable to the short-term use of working capital we described to you last quarter, and which relates to a change in the timing of payments we received under the new pharmacy partner arrangements. The payments owed to us are reflected in the balance sheet as accounts receivable and are also the primary contributor to the increase in AR as compared to the first quarter. We continue to expect that our operating cash flows will normalize by the third quarter. As of June 20th, we had total working capital of nearly $140 million, reflecting $94 million in cash, cash equivalents and marketable securities and no debt. Now turning to our expectations for the third quarter and the full year 2021. To reflect the slight reduction in utilization that we've seen as of the start of the quarter, we are projecting third quarter revenue of between $121 million to $130 million, representing growth of between 22% and 31% over the prior year period. For adjusted EBITDA, we expect between $14 million to $16.5million, along with net income between $3.1 million to $6.7 million or between $0.03 and $0.07 earnings per share on the basis of approximately $101 million fully diluted shares. For the full year, we now expect revenue of $510 million to $530 million, reflecting growth of between 48% and 54% over the prior year period. On this basis, we now expect adjusted of between $67.5 million and $72.5 million and net income of between $43.2 to $50.4 million, or between $0.43 and $0.50 earnings per share based on approximately $101 million fully diluted shares. As a reminder, our net income ranges for both the quarter and the year do not reflect estimates for discrete income tax items, including the income tax impact related to equity compensation activity. At the midpoint of this guidance, we expect to see continued expansion of our margins in 2021, with adjusted EBITDA margin on incremental revenue of 21.5%. Let me now turn the call back over to David for some closing remarks.
David Schlanger: Thanks Mark. To conclude, we are pleased with both our results this quarter as well as the progress that we have made in the execution of our strategic initiatives, particularly as it relates to our selling season. At this point in the season, we are ahead of where we thought we would be for sales commitments for launch dates in 2022, which includes a strong conversion rate of the not-now deferred accounts from previous seasons. We are also having good upsell success within the existing base and the continued high level of renewal activity, including from our largest clients. In addition, we have a strong pipeline of active opportunities that we continue to pursue. With the sales commitments we have received to date from new client launches and upsell starting January 2022 as well as our expectations of what we believe we should be able to close from the active sales pipeline over the remainder of the season using historic close rates as we look into 2022, we are comfortable that we can continue to achieve a comparable rate of revenue growth as to what we expect to achieve in 2021. With that, we'd like to open the call up for your questions. Operator, can you please provide the instructions.
Operator: Certainly. Your first question is coming from Anne Samuel with JPMorgan. Your line is live.
Anne Samuel: Hi, guys. Thanks so much for taking the question. I was hoping maybe you could provide a little bit more color on utilization. You said it rebounded. Is it back to where it was pre-June drop? And is your thought that maybe some of those – if those new appointments were deferred while people go on vacation, do you think that those are able to recover in the back half of the year? Thanks.
Pete Anevski: Yes. So its rebounding, it’s not rebounded yet. So just to give you some clarity, as we were entering the quarter or exiting Q2, we were basically on pace to what we would have expected. And then we dropped – scheduling pacing dropped significantly relative to what we would have expected. And that's been recovering. It's not recovered yet. And because we do believe it is related to the activity that we talked about in terms of pent-up demand for people to just basically get out of the house, get on vacation, get to see their family, et cetera, and because it's already rebounding, including the early scheduling that's happening for September, we do believe it's going to rebound. We're not sure if it's going to fully rebound, which is why our guidance doesn't reflect. Slightly adjusted the overall guidance down for the year, down to $530 million, but we do believe it's going to rebound somewhat.
Anne Samuel: That's really helpful. And then maybe just a question around the selling season. In your conversations, are you finding that you're speaking to more clients that don't have fertility benefits that are maybe starting to look to add more fertility benefits? Or is it still a similar mix as you've seen in prior years and your conversations are taking away from those with existing benefits?
David Schlanger: We've historically – about two-thirds of our new clients have had some level of benefit in the past. Although as we've spoken about in the past, Annie, the level of benefit varies pretty dramatically. And about on-thirds has had really no coverage at all. Those trends are largely intact this year also, where there's a large group of accounts that we're bringing on that had coverage before, but a certainly not insignificant minority that have had no coverage before. So that continues. So takeaways from the carriers are a really important source of business. But companies that have not provided coverage before continue to be a strong source of business also. And that's consistent with many of the industry trends we've all been seeing, that the percentage of employers that are offering coverage continues to grow every year.
Pete Anevski: The other thing that's also happening, which has happened in the past is when existing companies that have a fertility benefit today take on the Progyny benefit, usually, they're expanding with their offering to their employees versus what they've been doing under a dollar max plan. And that's also been consistent. Current sales activity in those companies that are purchasing that do have the benefit, that's happening this year as well.
Anne Samuel: Great. That was helpful. Thank you.
Operator: Your next question is coming from Michael Cherny . Your line is live.
Michael Cherny: Good afternoon. Thanks for taking the question. Just diving a little bit on the revenue side. And I know there's probably some randomness to this, but it looked like revenue per art cycle fell pretty meaningfully. It was, if I'm doing my math correctly, up one-and-change percent last quarter, down 8% in 4Q, down 7% this Q, up 1.6% in 3Q last year. Is there anything, any rhyme or reason to that? And does any of that tie into the dynamics you saw around utilization and maybe how utilization was used in terms of how broad or how deep each of the art cycles that was recorded was?
Pete Anevski: Yes. There is. It is always mix, primarily. And the mix – the medical revenue in total isn't only from the art cycle. Here's a simple example. So to the extent that you have a different level of mix in dollars, and they will show up in utilization for those starting out treatment and giving initial consults, that's going to drive a different level of revenue per art cycle versus periods where you don't. So if you look at the change year-over-year, for example, in revenue for art cycle, you see a drop this year in Q2 versus last year. That drop isn't any fundamental change in pricing or anything like that. It's really just a function of the fact that a year ago, if you remember during COVID, there were a lot more folks just doing initial consults in Q2 and not going on the treatment as a mix. And so the overall medical revenue divided by art cycles looked higher versus this year you're back to more normal activity in terms of mix. And that does fluctuate in each quarter. Q1 is generally every year, even normal years, the highest percent of initial consults, which again would drive that number appearing to be higher, and then it's going to drop sequentially.
Michael Cherny: Got it. And just another question. You had a pretty nice sequential improvement in new members in the quarter despite not adding many new customers. Obviously, the fill there is same-store growth from your existing customers. Obviously, you have a number of customers that are still very much heavily in hiring sprees. As you think ahead those growth rates for next year, are you expecting a normalized level more or less of same-store member growth versus what you had previously?
Pete Anevski: From everything that we're seeing, we do expect normal levels. So last year, I think we grew on the base, over the year, around 200,000 lives, off of the beginning of the year around 2.1 million lives in round numbers. So something in that range plus or minus some percentage points is a normal activity in terms of growth. And we see that. What happens is, unfortunately, the reporting that we get from clients isn't always perfect each quarter, and we do our best to make sure we get the most perfect reporting. But the reality is that there's sometimes a lag in reporting. So there is sometimes, within a quarter versus the prior quarter, a bit of a catch-up system truing up numbers with our clients. So the sequential growth isn't perfect over just a quarter, but over the year, I think, is much more indicative of what's happening.
Michael Cherny: Got it. And if I can just squeeze one more in. When you think about the new revenue guidance range for this year, and completely understand the variability that COVID either, for a number of reasons, is likely to be causing. Can you just give us a sense on where you see utilization or activity versus normalized levels would fall based on the low end and high end of the range?
Pete Anevski: Yes. So, I'll do Q3 and then full year. Q3 at the low and high of the range has us at either down 5% of what we expected or, said a different way, 95% of what we expected is happening. And at the low, 11.5%. To put that in perspective, we're currently at roughly 10% down, but have been improving. We were down further, as we had talked about in our comments, earlier in the month, and it's turning around. And so the expectation is that, we believe, because of the reason that we said, it's going to keep turning around. But nonetheless, those are our assumptions. For the full year, we're on the high down roughly 2% and on the low roughly 5.5% for the full year in terms of our revised guidance. Again, we don't know exactly what's going to happen and whether or not all of it could come back, but that's our view right now based on where we're at in terms of scheduled deployments for Q3.
Michael Cherny: Perfect. Thanks.
Operator: Your next question is coming from Stephanie Davis with SVB Leerink. Your line is live.
Stephanie Davis: Hi, guys. Thank you for taking my question.
Pete Anevski: Hi, Stephanie.
Stephanie Davis: So first I was – I was hoping you guys could give us some color on the key selling season. Maybe frame it in the context of prior year's selling season. Traditionally, you've always had a typical $20 million step up from 4Q to 1Q. But given this 2022 ramp in client cohorts, should we think of that as far too low as we get into the out years?
Pete Anevski: The easiest way probably to think about -- well, are we talking about 2022, we're talking about – we're not talking about – we're not giving any commentary for years beyond that. So we talk about out years, we did make a comment relative to our expectations for 2022 growth versus full year guidance 2021 growth as compared to 2020. And based on our view right now in terms of early commitments that we've already gotten in new sales activity as well as the up-sell activity that I talked about that's been favorable, our view is that 2022 to see comparable revenue growth off of 2021 full year guidance as 2021 full year guidance implies growth off of 2020 actuals.
Stephanie Davis: And when I think about that kind of similar growth, is that assuming that utilization is flat? Or is there any assumption that you're – I mean, your hot growth summer disruption becomes a baby boom as we get to a more normalized environment.
Pete Anevski: It assumes normal utilization assumptions, not hot growth summer utilization assumptions, as you call it. Just to use your words. It assumes normal levels, doesn't assume any catch-up in any other sort of pent-up demand or anything. And so that's what it assumes. And so what it does, if you remember, the way we do it, is it takes into account client by client, industry by industry, our expectations for those clients. Obviously, those that are booked so far and those that are – and again the upsell activity and client by client, that activity rolls that up in terms of expectations from those clients in those industries and yields utilization result. And all of that is sort of factored into the comment that we're making around expectations as we sit here right now for 2022 revenue growth.
Stephanie Davis: And last one, just to think about the out year, if we didn't have all of this utilization disruption in the year, how should we think about the revenue range or the missed opportunity that could be coming back in a bolus?
Pete Anevski: Well, the thing that we think about, which is positive around sort of this activity, put aside for a second – there is a little bit of bumpiness in utilization activity, is the return to normal level of sales activity, both on the upsell side, as well as on the new sales acquisition for new clients. And I think that's sort of the most favorable trend that we're seeing and continue to see and then continue to be excited about in terms of remaining pipeline as we continue to get through this sales year, but the early activity and early commitments certainly is positive relative to where we're at which is why we're able to – we're comfortable making the comments that we are around potential 2022 growth.
Stephanie Davis: That's helpful. Thank you guys.
Operator: Your next question is coming from Ralph Giacobbe with Citibank. Your line is live.
Ralph Giacobbe: Great, thanks. I guess first one, just anything you can tell from a geographic perspective on markets, any more or less impacted from the lower scheduling?
Pete Anevski: Yes, the specific market date is actually confusing. So, in markets, for example, that are having – that are getting hit harder by the Delta variant, right, there's some of those markets, although smaller for our book of business, but nonetheless, they're actually up a little bit, right. However, other markets that are also getting hit are down and they're the ones that are sort of dragging down the overall results. They are some of our bigger markets. So as we look at market by market throughout the country including our largest markets, it's not consistent. And that's what sort of makes the whole thing difficult. But the one thing that is consistent is that generally across the book of business scheduling pasting is down. And as a result because the drop sort of occurred pretty much across the board, across markets, it continues to be what we believe, which is just sort of short-term activity related to literally people getting out of the house and deferring for a short period of time, any treatment decisions they're going to make and that's just impacting our visibility into what we're seeing currently. And unfortunately, as we've talked about in the past, that visibility is limited. We have decent visibility, pretty good visibility into a current month and a lot less visibility into the next month, but it's generally about a four week or so visibility. So as a result, we can only look at what we see and patterns at what we see and we look at it and then make our best educated guess.
Ralph Giacobbe: Okay. All right, fair enough. And then I guess, historically, how often do you see abrupt changes in scheduling? Is this really sort of a one-off time, obviously outside of the COVID period? And if I heard you right, it sounded like it started in – ended June or early July, and so it's been over a month now and it still hasn't recovered. And if you could, what's the magnitude of the change, I guess I'm just struggling with just trying to size or think about how much lower scheduling is.
Pete Anevski: Yes, I think the – let me answer the first question first. It started literally – so this is new in terms of this level of drop this quickly across the book of business. And like you said, aside from put aside COVID and it happened literally the last week of June into the first week of July. It leveled off for like three weeks and is now improving. So the level of it is roughly we're down now roughly 10% from what we would have expected, right. but it's gotten better. And so, the recent activities as you might imagine because of just math, the recent activity has been real strong in terms of starting to recover, but hasn't recovered fully yet because people, again, only generally schedule out about a month or so out, right. And so that's the activity that we're looking at. And the turn of that activity – first the flattening and not worsening of that activity, and then the positive activity in terms of scheduling pacing that we're seeing now in the most recent week or so. And so that's what's giving us optimism that it's a very short-term anomaly for the reasons that we said, both the fact that it dropped dramatically and we generally don't see that as well as the fact that it seems to be already recovering combined with our conversations with our largest clinics in terms of what they're seeing in their book of business. And so, it's sort of the collective view that gives us the view that says we think it's an anomaly. And just to remind you, our – and our expectations, as I've commented on the prior question, for the quarter, at the mid-point for Q3 is 8% down. And if the improvement continues, hopefully, we'll be either at or above the high end, but who knows. Right now, it's too short-term in terms of the improvement and when it started versus the date of this call.
Ralph Giacobbe: Okay. All right, fair enough. And one more, if I could, squeeze it in. I just want to – I think the math is straightforward, but just figured I'd ask. The 2022 revenue growth in line with 2021, I think that's about a 50% increase at the mid-point. Just want to sort of confirm that we're looking at the right numbers and the midpoint off of the current guide would suggest about $780 million of revenue for next year.
Pete Anevski: Yes. You're right. That it's off the mid-point around 50% and comparable would be around that. That's right.
Ralph Giacobbe: Okay. All right, great. Thanks very much.
Operator: Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor back to James Hart for closing remarks.
James Hart: Thank you, Catherine, and thank you everyone for joining us today, feel free to reach out for any follow-ups. Otherwise, we look forward to speaking with you next quarter again.
Operator: Thank you, ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time in a wonderful day. Thank you for your participation.
