Progyny, Inc. (PGNY) on Q2 2022 Results - Earnings Call Transcript
Operator: Good afternoon, ladies and gentlemen, and welcome to today's Progyny Inc. Second Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Vice President of Investor Relations, James Hart. Sir, the floor is yours.
James Hart: Thank you, Tom, 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. 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 third quarter and full-year 2022, including our expected utilization rates and mix; the impact of COVID-19, including variance 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 of services offered; our business performance, industry outlook, strategy, future investments, plans and objectives and other nonhistorical 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 and 10-Q. 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'd now like to turn the call over to Pete.
Peter Anevski: Thanks, Jamie. Thanks, everyone, for joining us today. We're pleased to report that Progyny had a very solid second quarter with record quarterly revenue of $195 million, reflecting 52% growth over the second quarter of 2021. Over that same period, we also grew adjusted EBITDA by 78% to $32.9 million, while expanding our adjusted EBITDA margin to its highest level -- highest ever level of 16.9%. The strength in this quarter results reflect that member activity continues to be healthy and at the levels we would expect to see further affirming both the essential need for fertility treatment as well as the strong desire our members have in pursuing the care necessary to realize their family-building goals. I'll pause for a moment to underscore why we believe the essential nature of fertility is a critical point. There is historical data demonstrating that the utilization of fertility services endures even during periods of economic uncertainty. The significant reason is that treatment is time-sensitive for many patients or even a short delay can become a factor in whether or not they have a successful outcome. Another reason is that people looking to add a child to their family have a very strong sense as to when it's the right time for them to do so, which often overcomes any financial concerns they may have over the short term. We've seen this durability take place over the past two years when the vast majority of people who have needed fertility treatment continue to pursue care even against the backdrop of a global pandemic. This trend was also consistent with what happened during the great recession a decade ago when overall volumes remained healthy even though the significant majority of the market at that time was cash pay and presumably much more economically sensitive than a covered patient would be. Although we've seen -- although we've all seen how inflation and a potential softening in the economy has become a major focus for companies and investors this year, we aren't seeing any related impact on our business thus far. Member engagement with the benefit continues to be strong. We continue to have positive and productive renewal discussions with providers, and we aren't seeing employers change the way they think about the benefit, either in terms of adding it if they don't already provide coverage today or in keeping it if they do. In fact, consistent with prior-years, a healthy portion of our employer customers are planning to expand their coverage for next year. This enthusiasm among employers of all sizes, fertility and family-building solutions isn't surprising given two factors. First, despite the presence of inflationary headwinds and tighter monetary policy, unemployment remains at historic lows and the labor market remains extremely tight, with more than two job listings for every one employed -- unemployed person. And second, recent survey data continues to reveal that fertility is one of the most sought-after benefits amongst the millennial population in their workforce. That generation now ranges in age from their late 20s to their early 40s, which happens to be the most common age cohort for a fertility patient, so it isn't surprising for these employees to expect fertility as an essential component of their health benefits. A recent survey from Mercer highlights that compensation alone doesn't build engagement as much as a well designed benefits program does and goes on to site women's reproductive health and fertility, in particular, as the top areas employers are focused on to meet the needs and expectations of employees. In short, we believe the macro trends continue to be very supportive for fertility benefits, and we're seeing that reflected in the positive momentum of our current selling season. We begin each season with focused priorities for growth: one, to expand our market share through the acquisition of new clients; two, to retain clients whose agreements are up for renewal; and three, to grow with our existing clients through expansion and upsells. With respect to the first priority, new client acquisitions, we are now in the heart of our selling season and at this point, overall pipeline size and commitments received to date continue to be favorable relative to the record level of activity that we experienced a year-ago at this time. We've built a strong pipeline of active opportunities that we're continuing to pursue over the remainder of this year's selling season. As with prior selling seasons, in the majority of opportunities we pursued this year, we are competing against the incumbent carrier who is often participating solely on the basis of being the manager of a prospect's overall health plan. As you would expect to see in a growing market, buyers are becoming more sophisticated with some choosing to use an RFP process. Although the majority of opportunities aren't using an RFP, we believe a more in-depth review of fertility benefits provides Progyny with an advantage as it reveals our leadership scale, depth of expertise and the superiority of our solution. While we typically receive a certain number of early commitments, which reflect not only the client's readiness to make a decision, but also their eagerness to begin preparation for the launch, this year, we've received a record number of commitments as of this point in the season. We believe this is a strong indication that the demand for fertility and family-building benefits is robust and continuing to grow, reinforcing the macro trends I referred to earlier. And as usual, we expect that the majority of client decisions will come in the late summer and early fall, which is when most companies finalize decisions in time for their open enrollment. Some themes have emerged so far this season that are worth noting. First, we continue to break new ground by adding clients in new verticals. Some of our early wins are leading brands who are first-time logos for us in that industry, including our first automobile manufacturing client, our first hotel and hospitality client and even our first major state university program. While the systems -- I'm sorry, while the clients we already serve today represent a broad cross-section of more than 30 different industries, we are extremely pleased to be diversifying even further for 2023. Second, we're pleased to see continued momentum this year from industries that we brought on in previous years. For example, we're seeing some early momentum this year in health care and hospital systems, which is particularly exciting for us as these are amongst the most sophisticated buyers of a medical benefit, given their awareness of what's important in assessing the quality of that benefit. We also continue to see companies benchmark themselves against a specific industry leader. These companies don't aspire to be the first adopter of a new benefit like fertility but once the leader separates itself by adding it, these companies respond by adding the benefit in order to reestablish parity and maintain their competitiveness as an employer in that industry space. While this dynamic provides opportunities within those industries we already serve, we believe it lends further importance with respect to the new verticals we are bringing on as well. In that it lays the groundwork for more opportunities to pursue in future seasons. A third theme is that our early wins are establishing benefit coverage levels that are comparable to what we've historically seen. This reveals the companies aren't pursuing some light version of the benefit in response to the economy. We're also pleased to see the takeaway on Progyny Rx continues to be high. In any selling season, our goal is to grow the absolute number of new clients and covered lives over what we achieved in the prior season. And with the results we've seen thus far, we believe we're on pace to meet this objective once again. Turning now to the second priority in our selling season. At this point in the year, we've seen that renewals have once again been consistent with our typical rate of near 100% retention. This is a testament to both the quality of our solution as well as the integrity in our sales and account management process. Clients know what to expect when they sign with Progyny. And once they've launched, our frequent communication and detailed reporting around our program ensures that they clearly understand how we're improving the efficiency of their health care spend, while also helping their workforce realize their family-building goals. The strong renewal rates are a positive sign and it's noteworthy that we aren't seeing existing clients look to reduce their benefit for next year, which is yet another validating point to the resilience of fertility as a benefit even when adverse economic conditions are present or on the horizon. Turning now to upsells and expansions. In any sales year, we pursue multiple pathways to grow relationships with existing clients. These include adding services like Progyny Rx, expanding coverage with additional smart cycles or adding newer populations within the client. This year, again, we're seeing clients expanding their relationship with Progyny by adding new services. 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. As the leader in value based care in the fertility industry, we understand that measuring and comparing clinical outcomes is one of the best means of objectively demonstrating value to our clients and members. By now, most of you know that our clinical outcomes outperform national averages across every critical measure of fertility success. That means our members get pregnant, meaningfully faster, experience significantly fewer miscarriages, have healthier pregnancies and deliver healthier babies. And while we've been publishing our outcome since we began offering the benefit in 2016, we've not seen either the traditional carriers or newer point solutions demonstrate their value by improving their outcomes or, in some cases, having a meaningful enough level of activity to report on. This quarter, we sought to set the standard for what a fertility program should provide to their clients regarding outcomes by engaging Milliman, a global leader in actuarial services to conduct an evaluation of the methodology that we use to calculate our outcomes and compare them to the national averages. This means Progyny is the only fertility solution that is not only publicly publishing its outcomes, we're the only one to have taken the additional step of having an independent validation of those results. We believe this study raises the bar with respect to what companies should expect from their benefits provider and further advances Progyny's position as the industry leader in fertility solutions. Let me now turn the call over to Mark to talk about the results for the quarter. Mark?
Mark Livingston: Thank you, Pete, and good afternoon, everyone. I'll start by taking you through our second quarter results before providing you with our expectations for the third quarter and the full-year. Revenue in the second quarter grew 52% over the prior-year to $195 million. Our growth in the quarter was primarily due to an increase in the number of clients in covered lives as compared to a year-ago, including the launch of a number of new clients in the quarter. Looking at the components of the top line, Medical revenue increased 37% over the second quarter last year to $126.8 million, which again was due to the growth in our clients in covered lives, while pharmacy revenue increased 87% in the quarter to $68.2 million. The growth in our pharmacy revenue was primarily driven by an increase in the number of clients with the integrated solution. Approximately 84% of our clients now have Progyny Rx, which is approximately 11 percentage points higher than it was at this time last year. As of June 30, we had 273 clients, representing an average of 4.3 million covered lives during the quarter. This compared to 182 clients and an average of 2.8 million covered lives in the second quarter last year, reflecting growth of approximately 53% in lives over the past year. As we discussed with you last quarter, our client count for June 30 reflects the final group of companies that we won in the 2021 selling season who had scheduled the launch of the benefit in the second quarter. It also includes a handful of accounts that were won in the current selling season. While we always expect that the vast majority of our new clients will go live with their benefit on January 1 as that's the start of the health plan year for most companies, there are employers whose plan year starts on other dates. We also encountered a handful of clients each year who have a January 1 plan year but want to launch their fertility benefit to their workforce sooner than that. And while that's also the case this year, I'll remind you that these tend to be smaller clients who have the flexibility to manage an off-cycle change in their benefits. Accordingly, we wouldn't expect there to be significant incremental contribution to our 2022 results from these early launches. Turning now to our utilization metrics. There were nearly 10,400 ART cycles performed in the second quarter reflecting a 42% increase in cycles as compared to the second quarter of last year. The strong 16% sequential growth in ART cycles versus the first quarter of 2022 is a function of the higher average lives and treatments from the clients that launched in Q2, along with the impact of those members who began their journey slightly later in the first quarter given the prevalence of the Omicron variant at the start of the year. In the second quarter, both the level and pacing of utilization as it relates to treatment journeys was healthy and consistent with what we typically would expect to see. Our female utilization rate this quarter, which is what corresponds most closely to our financial results, was 0.44%. This compared to 0.47% a year ago. I'll remind you that utilization rates will vary from quarter-to-quarter due to a number of factors, including the timing of our launches with new clients and the time of the year. Turning now to our margins. Gross profit increased 48% from the second quarter last year to $43.9 million, yielding a 22.5% gross margin. This reflects a 50 basis point decrease from our gross margin in the year-ago period due primarily to the impact of noncash stock-based compensation, partially offset by efficiencies that we continue to realize in the delivery of our care management services. Sales and marketing expense was 5.9% of revenue in the second quarter as compared to 3.1% in the year-ago period. The increase of 280 basis points reflects a higher noncash stock-based comp, as well as investments we have made in our go-to-market resources. G&A costs were 12.1% of revenue this quarter as compared to 10.8% in the year-ago period. That increase of 130 basis points is primarily due to an increase in noncash stock-based comp, partially offset by operating leverage in G&A as we rapidly grow revenue. The press release that we issued today reconciles the impact of noncash stock compensation on our gross margin and operating expenses. Because of our strong top line performance as well as the operating efficiencies we've realized, adjusted EBITDA grew 78% this quarter from $18.5 million a year-ago to $32.9 million. Our adjusted EBITDA margin of 16.9% this quarter is the highest ever quarterly result reflecting a 250 basis point expansion from the 14.4% margin in the second quarter of 2021. This quarter, our adjusted EBITDA margin on incremental revenue was 21.7%. We continue to believe that margin on incremental revenue is useful as a forward indicator for where the business is capable of moving as it highlights our high rate of margin capture as we expand the business. Net income was $8.8 million in the second quarter or $0.09 per share. This compared to net income of $18.7 million or $0.19 per share in the year-ago period. The lower income in EPS as compared to a year-ago primarily reflect the higher stock comp expense in the current period as well as the $0.07 per share tax benefit that we recorded in the prior-year period as compared to the de minimis tax provision booked for the current quarter. Turning now to our cash flow and balance sheet. Operating cash flow during the quarter was $19.2 million, this compares to a cash use of $7.5 million in the year-ago period. Each period was impacted by timing items, including the short-term use of working capital at the outset of each year. In the current period, those impacts are beginning to reverse following the completion of those integrations for the newest clients who have launched the benefit. Also, as a reminder, last year, 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 expect that 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 the year. The payments owed to us under our rebate agreements are reflected on the balance sheet as accounts receivable. As of June 30, we had total working capital of $211 million, including $122 million in cash, cash equivalents and marketable securities and no debt. Turning now to our expectations for the third quarter and full-year 2022. With the strong first half results, we are pleased to be in a position to revise our guidance upward for 2022 for the second quarter in a row. For the full-year, we are raising the low end of the range and now expect for revenue to be between $750 million to $775 million, reflecting growth of between 50% and 55% or approximately 52% at the midpoint. We are also raising our guidance on profitability. We now expect adjusted EBITDA of between $114 million to $122 million. For net income, we now expect between $13.8 million to $19.5 million or between $0.14 and $0.19 earnings per share on the basis of approximately 102 million fully diluted shares. I'll remind you that our net income projections do not contemplate any discrete income tax items, including any income tax benefit related to equity compensation activity. To the extent that, that activity occurs, we will continue to benefit from those discrete tax items throughout 2022. For the third quarter, we are projecting revenue between $190 million and $197 million, reflecting growth of between 55% and 61%. For third quarter adjusted EBITDA, we expect between $29.6 million and $31.6 million along with net income of between $1.9 million to $3.3 million or between $0.02 and $0.03 earnings per share on the basis of approximately 102 million fully diluted shares. Let me now turn the call back over to Pete for some closing remarks.
Peter Anevski: Thanks, Mark. Before I close, I wanted to touch on a concern we heard in the past around whether or not fertility treatment will become an unintended consequence of the overturning of Roe v. Wade. We've not seen or heard of any clinics across the U.S. changing their practices or have seen any legal analysis, which suggests access to IVF will be negatively impacted. Now to conclude, we're pleased with our results in the quarter and first half of the year, as well as the progress that we've made in our selling season for 2023 book of business. While there are economic headwinds on the top of investors' minds and certainly, this is impacting some industries, we're not experiencing the same level of impact given that the overall macro trends that have been fueling our growth continue to be strong. Those trends include the growing need for fertility as people increasingly defer family building later in life and access to care is growing, as employers are increasingly realizing the need to offer fertility benefits to their employees. With that, I'd like to open up the call for your questions. Operator?
Operator: Thank you. The floor is now open for your questions. And the first question today is coming from Anne Samuel from JPMorgan. Anne, your line is live. Please go ahead.
Anne Samuel: Thanks, congrats on some great results today. You said in your prepared remarks that you're starting to see some clients expanding with new services. I was wondering if you could just talk about what those expansions look like and what's catalyzing those conversations?
Peter Anevski: Sure. Thank you, by the way. There -- the upsell services that we generally have sold in the past, so there -- whether or not they're reviewing their benefit and understanding, do they have enough smart cycles purchased or do they want to expand the number of smart cycles that they're offering each employee or each eligible member, whether or not they're going to add Rx they didn't have it already, whether or not they're going to add certain populations that may not be today covered or maybe they acquired a company that they now want to put under the benefit. Those types of things in terms of expanding their benefits.
Anne Samuel: That's helpful. Thanks and then just your adjusted gross margins expanded quite a bit in the quarter. I was just wondering what drove that? And are you seeing maybe some better pricing that might flow through going forward? Thanks.
Mark Livingston: Yes, so certainly sequentially, we were expecting gross margins to go up. And I think we highlighted this last quarter. So the company was really built this year for the level of revenues that we have and we launched all of those new clients that we referenced last quarter here in the second quarter. So that incremental revenue was expected. And so we naturally expected gross margins to go up in Q2. So it's really sort of our expectations. As far as pricing goes, yes, there's nothing that I would call out in terms of pricing impacts going forward.
Anne Samuel: Great and maybe if I could just sneak in one more. Your commentary around the selling season has been really positive so far. I was just wondering if you might be willing to share how you're thinking about next year and how we should be modeling?
Peter Anevski: Well, I can't -- not that I can. We think it's early, and I want to go back to a normal cadence of talking about from a dollar expectation perspective for the November call overall sales activity. I think the commentary -- and I'll remind you, as I remind everybody, the majority of commitments do still happen middle of August through early October. But the activity so far is really strong relative to commitments to date relative to overall remaining active pipeline, et cetera. And so that's really the commentary, I think that we can provide at this point before we start quantifying 2023.
Anne Samuel: That's great. Thanks guys.
Operator: Thank you. The next question is coming from Michael Cherny from Bank of America. Michael, your line is live. Please go ahead.
Unidentified Analyst: Hi, this is on for Mike. Thanks for taking my questions. Just looking at the results in the quarter, you reported pretty strong revenue growth, but it also looks like you're seeing some pretty significant growth in your accounts receivable and days sales outstanding. Could you just break down what's driving that growth?
Mark Livingston: Yes, so part of what's in there, and I tried to highlight it in my prepared remarks, in the first two quarters of the year, we'll see an increase in our receivables associated with our rebates based on the payment terms that we agreed, and again, it was a strong deal from an economics perspective. And given that we have plenty of cash in the books, we were okay with allowing that. But essentially, we collect -- we're earning rebates and getting -- in this quarter and getting paid for the rebates that were a couple of quarters back. So it's really referencing what we had earned. We're getting paid now for what we earned last year. So -- and then -- and really, it's all centered around the growth in pharmacy. So when you see from last year to this year, you'll see that growth, and that's what's really driving it.
Peter Anevski: You should start to see it correcting itself in the third quarter.
Unidentified Analyst: Got it. That's helpful. And then just a second question. Can you talk a little bit about utilization trends that you're seeing on newer cohorts? Thanks.
Mark Livingston: Yes, so the utilization is as we expect. There is a different -- each cohort will be different because the demographic makeup of each client group is different. So for example, we launched some customers here in the second quarter, including a larger one that was a retail customer. Now we would expect again, given the demographics of that company, that their utilization rate would be lower than what our overall average book of business is. And so again, they begin in their first quarter and then we'll typically see them rise a little bit as people begin to get into their treatment journeys, but otherwise, these cohorts and the past cohorts are effectively normal -- acting normally.
Unidentified Analyst: Great, thank you.
Operator: Thank you. The next question is coming from Sarah James from Barclays. Sarah, your line is live. Please go ahead.
Sarah James: Thank you. I just had a follow-up on the utilization front. So if you look at your more mature book, not the guys that started in 2Q, but earlier are they back to pre-COVID levels at this point?
Peter Anevski: Yes, if you look at it by client and those clients within the industries that they're in, they're back to normal pre-COVID levels, what Mark was referring to is the impact of newer clients and the demographics of the industries that they're in, and it would impact the averages. But overall, our pre-COVID -- or sorry, our clients that were around pre-COVID are back to normal.
Sarah James: Great, and then you mentioned earlier that your pharmacy sell-through is now kind of low to mid-80s. Where do you think that caps out your client base?
Peter Anevski: I wouldn't -- look, we try to sell every one of them. I'm not sure I would say it caps out, I would say that there's -- it's a matter of time in terms of whether or not they'll all buy upfront or whether or not there will be upsell opportunities in the future. Our success around upsell activity whether it's Rx or anything else in terms of their original plan design when they first come on board and then what they ultimately do is an indication of that, that continues. So I wouldn't sort of begin to guess where it caps out. We're in the high 80s already -- or sorry, the low 80s already. And I think that will continue to improve. Just the question is to where. But I think it's a matter of time that they come on versus whether or not they'll ever come on.
Mark Livingston: And just to be clear, the 84% is the cumulative take rate since effectively beginning of time. It has -- the take rate in our '21 selling season, out of that group was in the low 90s. So we continue to improve on that.
Sarah James: Great, and then one more clarification on your AR comment. When you said it's going to start to normalize in 3Q, does that mean normalize going forward? Or we're always going to see the seasonality where it's elevated in first half and then goes down in the second half? Because I don't think looking at past years, you guys have had that seasonality.
Peter Anevski: We had -- it was just one quarter, not two. So the payment terms got extended. So every year, as you have a step up in growth, you're going to have that same cash flow impact that will correct itself in the back half of the year. So it's a function of the growth and as a result of those payment terms that are on a 180-day payment term that's going to impact two quarters versus one in terms of as you have step-up in growth.
Mark Livingston: And just to be clear on what normal means. So in those first two quarters that we saw this year and in the second quarter of last year, it's an investment in working capital associated with the growth. So we don't -- again, to the extent that Rx begin -- continues to grow, there will be a smaller increase in working capital. But you won't see that up firstly. But to be clear, it doesn't mean that it comes back down or somehow reverses itself in the back half of the year. It's just -- we'll no longer be making as sizeable -- we don't expect to be making a sizable investment in working cap.
Sarah James: Helpful, thank you.
Operator: Thank you. And the next question is coming from Stephanie Davis from SVB Securities. Stephanie, your line is live. Please go ahead.
Stephanie Davis: Hi guys, thanks for the question. Congrats on the solid quarter. I was looking at your stock-based comp figure and I was hoping to hear a little bit more about your hiring and labor philosophy. Just wondering if that's shifted at all, given the push/pull of the macro backdrop with the growing number of sizable RFPs in the market and this is reflective of anything to call out?
Peter Anevski: The stock comp activity is more a function of a grant that we did late last year that's impacting the year on a full-year basis, including this quarter. There is no change in philosophy. We haven't sort of adopted a change in the level of stock comp that we award to new employees. We've been operating under a matrix and continue to do so relative to the portion of compensation that ties the stock comp versus the portion of compensation that's cash comp. So no change in our approach nor the proportions of compensation, the increase in stock comp ties back to the grant we did late last year.
Stephanie Davis: Okay. Understood, then on the -- just a subject to some of those large RFPs and some of that pipeline activity, could you just tell us where you've been competing in each head-to-head and maybe where are you seeing either greater traction or the Progyny store will stick ?
Peter Anevski: I'm not sure -- I mean I'll let Michael answer that.
Michael Sturmer: Yes, I think in general, we continue to see -- first of all, we continue to see the health plan as sort of a constant from a competitive perspective, they own the benefits already. And again, in every case, we'll certainly come up against the health plan from that decision point. While there has been an increase in RFP activity, we've not seen that impact any of our key metrics to date, whether that be pipeline, as referenced in the opening comments, ahead on closes this year. And we're seeing consistency and comparability in our close rates. So again, there -- although there's slightly more noise in the marketplace, we're not seeing negative impacts from our new logo sales.
Peter Anevski: Right. And then in terms of where we're seeing it, there's no specific segment or industry or benefits or anything like that, that's outweighed relative to RFPs. It's sprickled across industries and consultants relatively equally.
Stephanie Davis: Okay, great. Thank you guys.
Operator: Thank you. And the next question is coming from Dev Weerasuriya from Berenberg. Dev, your line is live. Please go ahead.
Dev Weerasuriya: Hi, there. Thanks for taking my question and pardon me if I'm repeating something that's been asked, I'm kind of hopping through the call here. I wanted to just talk around a couple of things. One is just capacity for providers. The number of ART cycles have just growing at about a 10% clip over the last five years or so. But from what we understand, the capacity of the provider base hasn't dramatically increased. And given kind of where the fertility market is, expecting that to continue to grow. I guess what are you guys' thoughts on how that capacity and volume will reconcile with kind of the supply of the provider base, what bridges that gap?
Peter Anevski: The easiest way I could describe it is the conversations we have with our provider network. There is significant variability in what I'll call productivity per doc across the industry. And they all manage their businesses differently, but they manage them in a way that they don't -- aren't hitting limitations, as I understand it relative to being able to service all their patients, including their Progyny members. So we're not hearing, when I say we're not hearing, we're not having a challenge in getting our members scheduled with docs and getting them treatment. We're not feeling an impact relative to a capacity limitation of any kind to speak of. And so -- and the docs are adding docs every year relative to the fellowships that they have across the country, and they're opening up de novo clinics as part of their group network. So although the numbers that you're suggesting might indicate some limitation, it's not what we're experiencing or hearing in any way.
Dev Weerasuriya: Okay. Great, that's probably something I'll want to double-click on later, but let me just move on maybe just revenue. It's typically been back half weighted aside from last year. And this year's guidance kind of points to that trend coming back a little bit with the H2 waiting reemerging all the way to a lesser extent. Could you provide some color around what lens to that historically and why that may be reemerging now?
Peter Anevski: Sure, the biggest thing that's going to impact back half versus first half revenue is the number of larger usually not this many and not this size clients that have started in Q2 and some of which started within -- during the quarter, not literally on April 1, but that started in Q2 and their impact in Q3 and Q4 is going to impact the full-year where they weren't -- they didn't exist in Q1, right? So the step-up in revenue from Q1 to Q2 is driven primarily by those new clients that have launched, right? The other things that do impact it, though, naturally for the entire base is every year is front-loaded relative to eligible members utilizing the benefit from a consultation standpoint more so as a mix, more so than the back half as a mix that they're going on to treatment. And so the combination of those two factors is going to drive the back half of the year versus the first half of the year.
Dev Weerasuriya: All right, thank you so much.
Peter Anevski: No problem.
Operator: Thank you. And there are no further questions in queue at this time, and this does conclude today's Q&A session. I would now like to turn the floor back to James Hart for closing remarks.
James Hart: Thank you, and thank you everyone, for joining us this afternoon. We know that there are certainly lots of companies that are announcing. So we'll wrap this up quick and let you get back to that. Thank you so much. If you have any questions, please reach out. Otherwise, we'll look forward to speaking with you in the Fall.
Operator: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
