Progyny, Inc. (PGNY) Earnings Call Transcript & Summary

Well, thank you, everyone, and welcome to this session of the BofA Global Healthcare Conference. With me today -- I'm Michael Cherny, the healthcare tech and distribution analyst at BofA. Much more importantly that we have the Progyny management team. Peter Anevski, CEO; Mark Livingston, CFO. I know they both take on many more roles and many more hats beyond that, but at least from a official title perspective.

We don't have any slides today, so we're going to go to a fireside chat, but maybe just pet to level set for anyone who is listening for the first time, what is Progyny, from a very base level perspective?

Sure. Progyny is a carve-out benefit for fertility services, reproductive health in the U.S. And basically, in its simplest terms, our approach towards providing fertility as part of your medical coverage is very different than the traditional carrier approach where our entire plan design and the way that we approach it, including the way that we partner with our providers, including the way that we take care of our patients with high-touch patient concierge services effectively all create significant value for the companies in the form of a better member experience, in the form of favorable clinical outcomes, and that's in a nutshell, difference between us and what the common alternative of traditional carriers.

And I think just to level set that totality because I'm glad you mentioned multiple components. It's not just about better member experience and the interface that you have. It's also about better clinical outcomes, which obviously translates as well to better cost trend for your members. How do you -- bringing all of that together within that service complex to make sure that you're hitting all those components because there's an element in place where sometimes better member experience means spending more, but there's an element and component upfront, the more you spend upfront for your members, the better it comes on the back end. So how does that all play into the way that you service your members?

Yes, it's a great question. So in order to be able to accomplish the end result, which is favorable clinical outcomes for everybody who doesn't follow fertility closely, clinical outcomes are reported by every clinic for every cycle in the U.S. to the CDC. And everything we measure against for our members and our experience is against those clinical outcomes. So in order to create an environment where you can drive and create an impact, favorable clinical outcomes, you have to have 2 really important components. You have to have a close relationship with the patient in the form of high-touch concierge because fertility is a very complicated journey. It's very customized to the individual, and it has to be dealt that way. And then you have to have a really tight collaborative relationship with your providers so that you're, first, enabling them through your benefit design to make the best medical decisions that are consistent with best practice compliance in terms of what the industry believes is the best way to do it. And then you also have a relationship with them, both relationship but contractual where they're sharing data with you and you're constantly monitoring, what they're doing to ensure that, that compliance, the best practice is happening, a significant majority of the time. The end result is favorable clinical outcomes, but without first educating the patient and making sure that they're in a place where they're going to make the right decisions with their clinician in order to comply with those best practices, you're potentially setting yourself up for a difficult road. And so it's those 2 legs in the stool that create that favorable outcome. And by the way, for us, we've been doing it since 2016. So we are in market since 2016, and have been not only creating but improving outcomes since then and national averages by the way, have not been approved.

And I want to touch quickly before I dive into some of the more recent dynamics about that patient care advocate model that you have, that high-touch approach. Can you just remind people or families who are new to the story, walk through exactly how your team of clinicians is engaging with a member from the day that they decide we're having trouble with having a baby, whether it's couple of fertility issues, same-sex couple, single parent by choice, all those elements, where they engage with Progyny, and how frequently and what type of engagements that really [indiscernible]

Sure. So I'll do [indiscernible] first, it's the easiest. On average, we're engaging with a member 15 times during their journey. That's the Progyny care management team, right? It starts with the dialogue that says so tell me what's been going on. And through that dialogue, there's a path that's suggested to the member, alternatives that are presented to them, including clinics and where they specialize. And then the journey begins there as they go to the clinician, they're interacting back with the patient care advocates for many reasons, including to support including understanding and better clarifying questions that they may have that -- and/or validating sort of questions they may have, et cetera. And all of that is the journey that is fully customizable under our benefits. So the beauty of our benefit is that it's a benefit that's set up from an equality perspective in terms of giving everybody the same attempts at getting pregnant. But within that, there are 17 different smart cycles that are all -- treatment bundles that are all designed to be modified and selected for the individual member so that their personal journey is dealt with. Now the reason I bring that up is because carrier plan designs are one-size-fits-all plan designs. And commonly, that's what creates the natural abrasions between how people are covered versus the complicated fertility journey. So all of that is how it all works basically and how it all ends up with a positive plus 81 NPS score. Again, 6, 7 years in a row, which is ending result of people being really happy, members being really happy with the journey, even though it's a very, very complicated, difficult treatment protocol.

So let's dive in a bit to some of the recent performance and how we think about where you're set up. COVID obviously has created unlucky ranch for a whole host of utilization-related businesses and especially in the early days of COVID, you were no stranger to that dynamic. You start to see utilization pick back up. Where are we in terms of where you think normalized utilization should be? And for the areas where you're not at normalized levels or areas where there's still holdups, how much of it is still COVID-oriented versus decision-oriented on the part of members in terms of how they think through when they want to get into their fertility journey?

Yes. So you're right, the onset of COVID caused the biggest disruption in the fertility industry and then with us also, that was more around the industry shutdown, if you will, in response to the public perceived demand for sort of every medical professional in word of increasing capacity, right? Fast forward to June of 2020 when the industry reopened. And then slowly but surely over time, utilization came back to what we call normal, right? We've been seeing what we call a normal utilization or what we would expect based on our member profiles and the industries that those members are in from a client perspective as normal activity really since, I'll call it, the middle of Q1 of this year, and continuing through today. So when you look at our utilization numbers, if we look at the way we analyze it is we take the clients that were pre COVID versus the client -- and the same clients we have today as a cohort. We look at their utilization with sales we're now back to normal. New clients in the mix are going to affect the overall top line numbers when you look at our utilization rates through June, for example, versus pre-COVID utilization rates were basically comparable -- up literally 100 basis point or 2 off but that's a mix of clients and just the reality of demographics, not utilization level still looking to get back to normal. So -- and to go to your last question, we are not seeing any level of reduce utilization even now, even today as a result of what people believe may happen, which we're not seeing at all happen, which is concerns around inflationary economy and therefore, people may be deciding to defer the timing of when they're going to try and have a baby and therefore, would impact our utilization negatively. We're not seeing that.

To those side as well, last summer was a bit wonky in terms of utilization outside of COVID. You had grand reopening of the U.S. and what you called out, I think rightfully so, of people just saying, I'm going to go take a vacation. I'm going to go do something now that I can after being locked up or 15 or so months, and that hit that pause. Is there any reason to think that you'd see similar trends in your book of business this year [indiscernible]

So yes, it's a great question. A year ago this time, this summer, sequentially, if you look at the summer results versus Q1, we were down, right, from a trend perspective sequentially, our guidance as otherwise this year. And again, we're -- that alone sort of says, we're not seeing the same thing, right? That small pause that we saw -- and it's on the margins, by the way. That's sort of the best thing about the model and investing about the fact that even though it's an utilization model, the overwhelming desire to have a family still materially overrides what is impacted on the margins from a utilization perspective. So what you're describing was a small impact in percent. But nonetheless, a sequential decline, a couple of $4 million, $5 million from Q1. Our guidance suggests otherwise, for this year and for the balance of the year, our guidance is out there. And so at the end of the day, that's why I say -- when I say our utilization has continued at normal levels, it continues to be today, it continues through today.

And that guidance is an important metric in my view because I know you started the year with what -- and we don't have that much history. So maybe this isn't the best comparison, but with a fairly wide guidance range in terms of revenue, fully understanding that, especially as we come back from COVID, there's a piece of uncertainty. As you've gone through the year, as you talked about as utilization has normalized, that guidance has come up, I think, twice the speed. Correct me if I'm wrong there.

Yes.

At least, the [indiscernible] So as you think about that component, especially thinking back to how your business performed pre-COVID, even before you were public when you had that trajectory. Aside from utilization, are you seeing that same level of behavioral components as well? I'm going to touch on some of the inflationary dynamics that you would expect to see where even just pure utilization of fertility services, but that the entire business, the entire interactions that members are having with the business are where essentially Progyny will be going forward.

The short answer is yes. So we're seeing -- and you said it a second ago, we're still a young company. But even as a young company, the activity we're seeing this year from a mix perspective, from a patient utilization perspective, et cetera, is consistent with pre-COVID experience. There was a bit more -- and again, on the margins, but when you look at it within a quarter, and you look at it within a sequential trend looks like an impact, but really on the margins overall for the year. There were impacts last year vis-a-vis the country reopening vis-a-vis the variant that we experienced in the fourth quarter last year that leaked into the first quarter of this year. That was highly contagious but less impactful from a health perspective. That we're not seeing. And so mix and engagement appear to be as much as we would expect to be based on pre-COVID history, and we expect that to continue.

And again, just as a reminder, you are talking about it -- I think Pete's comments are right talking about especially from like a same-store sales standpoint. I'd just remind that in this year, we had a good stock of clients start in Q2. So whereas you saw that sort of lift from Q1 to Q2 -- and again, we had a little bit of impact associated with Omicron at the very, very beginning of the year, as Pete said, sort of mid-first quarter on. It's been normal. But if you look at it on a client-by-client basis, you see that sort of stability that he's talking about, even though we did see that jump off from Q1 to Q2 with some of those new client launches.

And Mark, it's a great opening to my next thoughts as always, as you know, I jump around the question. So we'll go with it. But is that new client momentum? So one of the things that has been clear with or without COVID impacts, the fact that your new client business and you RFP flow has continued at a very healthy clip. In terms of where you sit right now, how has that all progressed relative to what your expectations right? I know your previous comments on the call have been continued record RFP flow, continued engagements how you think that's progressing the way you would have hoped as we head into the file selection and eventual open enrollment period for employers and especially maybe also as a reminder, for the years of backlog that's also built up from customers you've engaged with. What is that typical sales cycle look like in terms of people deciding, especially who haven't had fertility coverage in the past, to look to outsource their fertility benefits to someone like Progyny.

There's a lot in there. I'll try and you know. First, all the clients that we won last year but had different date in terms of going live during the year, some of which were because their benefit year cycle is different. So they're not a calendar year company. Some of which were off cycle launches, all of them having sort of the way we expected. That's a positive thing because companies can still make a decision to confer or delay, et cetera. Relative to sales progression -- and I'll remind everybody specially the story. Last year was a record sales year. Many asked us last year -- how much of that sales year was carryover potentially from 2020 sales year because many companies were wrestling with employees at home, and we're not making changes to the benefits purposefully except for things like tele medicine and that sort of thing. And so that record sales that we had, where we sold almost as many clients as we did in a public cumulatively that we had when we went public in 1 year was -- who knows how much that was carried from the prior year. That said, we've had a positive sales here relative to overall pipe -- on active pipeline as we sit here now. We're in the middle of our -- what we call commitment season. So the majority of commitments happen in middle of August through early October. We're in a good place vis-a-vis last year, and the remaining selling season will tell. But overall, we're pleased with where we are in terms of overall activity. And as you said, the flow has been good. We get a lot of questions all the time as to whether or not there's any concern with the one in the recession and are they going to have the same level of commitments. Until the selling season is over, we don't know. But again, we feel good where we are right now.

And on that point, again, our other signals are around retention of clients and also the expansion of the clients that we have in-house. So our retention has been very strong as it has always been. And we've seen essentially virtually no clients reducing the benefit just as it's been for years now. In fact, a healthy amount of them adding to the benefit throughout the course of our upselling season.

And maybe remind us just how many pieces go into the upselling component of your business? Obviously, for anyone who's not using your pharmacy capabilities, whether they signed up with you before you offered pharmacy or you decided for whatever reason not to -- that's one clear one. But I always find this interesting about how you can upsell what's a utilization-oriented benefit. So just remind us exactly how that discussion occurs with your employer customers.

Yes. It's a really good question. The one that's most noticeably you just addressed it is if you didn't sign up originally, you sign up originally with the benefit, the biggest decision you make from a financial impact perspective to us, is whether or not you will also do the Rx benefit along with the medical benefit for fertility. Majority of clients year-after-year in our sales years have been doing that uptake and taking the Rx benefit with the sale last year. Last year, sales season was something like 90-plus percent of clients . That's the most noticeable one. But there are other upsells that are really important. There are upsells in the forms of I have a 2-cycle benefit, and I'm going to add a cycle there are upsells in the forms of, I don't have adoption and service as part of the benefit. I'm going to add that -- there are upsells in the forms of -- I don't have the tissue transfer. I'm going to add that. There are little things that are incremental relative to financial impact. But for us, our strong signs of how embedded the benefit is, how much they're still focusing on the benefit and whether or not they're expanding in any way, are all positive sides when Mark talks about healthy upsells that we view every upsell as positive. There's also upsells in the form of a certain set of lives. Most clients go live with all of their employees in terms of eligible medical employees. But sometimes, there are certain subset of their lives. They don't go live with. There's also upsells and now I'll give you the sentences or maybe they bought somebody during the year, and now they're going to add that population as well. So all things like that or what we call forms of upsells.

And this may be a straightforward question, but it's one I do hear frequently is that upsell the smart cycle. A lot of the pitch of Progyny is you're taking for organizations to have a fertility method. Typically, it was a one-size-fit-all maximum life coverage, and that was it. With smart cycles, it's -- I always like the simplicity of it you essentially token things out for members they have an understanding of -- based on what they need to go through, here's what it will cost them relative to their benefit. How does the member feel, the upsell smart cycle interaction, how does it translate to your business, it's more smart cycles used, obviously, it's more revenue. But how will that -- how will the member know? And what will that do in terms of changing their behavior?

Was super positive for the member. So a simple example of your company is giving you a 2-cycle benefit before they give you now a 3-cycle benefit. In their mind, there's a 50% increase in the benefit, potentially. Now most people who don't even use the 2 cycles, right? So what it really says is we're here for you, even for the most difficult cases where you maybe need to get to the third cycle. So it was a really positive statement. Has that changed behavior? I'm not sure it changed the behavior in any way that on your path of a 2-cycle benefit, you do something different because in every cycle and every treatment bundle is set up to what you complete the treatment as opposed to dollar maximum benefits where you can run out of money literally in the middle of treatment as opposed to dollar maximum benefits where you're operating from a point of view of economic scarcity and therefore, you're making decisions. even within treatments, certain things that you might do or not do that are -- give you the most probability of success from a pregnancy and live birth perspective. But nonetheless, you think you're going to run out of money, so you don't do certain things, our benefits and like that. So it's really not going to change your behavior vis-a-vis exhausting your first 2 cycles in the way that you're going to do that is simply going to give you more confidence that should you fail, there is that third one that's available.

Great. And that speaks back to, I think, the number satisfaction and NPS [indiscernible]

Yes.

It's helpful something to level set on that front. I want to do another kind of level-setting question, but I think it's important as well in the face of what appears to be a rising degree of competition substitution. I use both words interchangeably sometimes even though it's not certainly the case. One of the things I think is important to note about Project it's all the work that was done upfront to make sure you're fully tied in with the payers, fully tied in with the providers. You have a curated network of high-quality physicians. You did all the pipelining upfront. Why is that so important now, especially as in an RFP cycle, even if it's not necessarily a direct head-to-head benefit that you're selling against. You're still sub-selling at something where an employer is making a broad decision around fertility and family building where they might choose one or the other, even if you offer somewhat different services.

I'll answer that question just make sure everybody understands one thing first. We primarily compete today, and throughout our history, with the national carriers, all the national players in the U.S. that can offer, a, fertility benefit usually a dollar maximum benefit where they can flick a switch on in terms of diagnostic codes that are now allowed and a company and track sort of how much spend against those codes and then maximize the dollars. That's where the whole idea of line on the benefit in the middle will be treatment cycle comes from, right? Same dollar amount given to people across the board, and so that's where that complication comes in. Then there are competitors that have emerged, trying to take advantage of that model. And so some of them do it in a reimbursement format. And so they just -- they say they negotiate a better cash rate and they offer -- and have a network of clinics just from a pricing perspective, and they'll offer a reimbursement. Problem with that and what you refer to in part of your question, which is not being integrated with the carriers is we are not integrated with the carriers, and it's just the cash reimbursement, you become an after-tax benefit. And that's pretty significant because you already had a dollar maximum benefit where you could run out of money. But on top of it, you're now going to get W-2ed for this portion of your medical benefit where otherwise you don't need to without benefit, you don't, right? So, then there's a second piece, which is now you have your relationship with your providers. Your providers are directly contracted. They're national, they're curated. They are the thought leaders in the industry that create all the science and research and advancement in the industry, many of which are part of our medical advisory board. And ultimately, that network is the network that helps you create that collaborative relationship in that ultimate experience in the form of healthier pregnancies faster and higher rates of live births, right? So once you've established that relationship, it's really hard for somebody else to do that. So then what do they do? They position themselves as owning a few clinics around the country, but you can never cover nationally what's needed for a national employer. And that's really important because at the end of the day, there are group clinics, group networks out that are in our network that have been after 30 years that have maybe 15 clinics, right? So the idea that you're going to somehow create a network magically right away that's going to cover the country isn't going to happen. And the reason why that's the plan or model now is because there is a struggle to get contracting with the other providers in the country because you're a benefit provider in one hand, but you're also a competitor really with them in another. And so the information-sharing part of the model and the collaborative part of model is critically important. And how many people would go into business with someone that they're competing with, and I'm going to ask our share of my data, right? So all of those components are so important and structurally important, and we believe the right way to do it, and been doing it and made a decision a long time ago, we would never own clinics. We're just going to partner with clinics and be true partners with them as opposed to having an inherent conflict of interest.

And again, I say this all the time, I always complementing Pete. The foundation of the business is the outcomes and allowing people to be able to build their families faster through higher live birth rates, et cetera. And so -- and I think it was really your first question, as we sat here is what are all the pieces that kind of help make all of that happen. And I think to Pete's point here, and you said laying those pipes early on, I think it was essential because it -- beyond just claims management, pipes with the carriers, those pipes that we're talking about with the providers, sharing that data back and forth, allowing them to be better, giving them a plan and members that they can practice their best medicine, but also gathering that information. We've been doing that, as Pete said, for years and years now over tens of thousands of cycles, we've learned a lot, and we've shared a lot with our network. So it's a feeding cycle there that helps deliver those better outcomes which is great for the member and great for the companies because it saves money.

And on that provider side, I think it's a very important component of the fact that we have this curate network. So maybe just [ lowest ], at this point, how many providers are in your network? And how does the review culling process look in terms of bringing on versus potentially removing lower quality providers over time?

We have 900 providers in 650 locations around the country. Our providers represent 70% of all of the fertility cycles in this country. That's based on CDC data again in terms of what's important. We curate them based on a budget criteria around both volume of cycles that they're doing. And obviously, the outcomes they are already reporting in CDC. But then we have discussions with them around what's expected under the benefit from both a information-sharing perspective, but ultimately, from a results perspective because we give them all the tools that are necessary to be successful. Then we review with them regularly, including having real-time interaction with them in terms of what they're doing with patients in the form of a clinical score card that they get with data benchmarks against their peers. But that's part of the discussion that says, if something is fearing astray, they go on probation and they get taken out of the network. And so that's the process, that's been the process. Early on, we struggled to get the clinics into the network. Today, as we sit here now, 20% of the clinics don't take any other payer. That's a really important data point. They -- even if they're taking maybe 1 payer from somebody else, doesn't mean they're going to just take any money, right? They are very selective. And it was a big push on our part even without the inherent conflict of interest to get them on board initially, right? Now it's a -- it's their words not mine, to prove ourselves to beat the network. But back then, it was -- we had to prove ourselves back then we were a concept, not a proven concept. We're now a proven concept. So it's really our curation coming into the network based on hard objective data, but our monitoring of their practices with our members is what keeps you there. We have in our provider directory, we have a proprietary score for all our clinics. We call it a QCE score. And it's there -- based on each clinic, and their performance with our members so that when members go to provider directory and they are searching for a provider in their area or around the country, medical tourism is common in the U.S. for fertility. They can see how that provider is doing vis-a-vis our providers in our network, which are already doing better than national averages. And so the whole of it sort of is interrelated and ties together, and all of it is what delivers the overall value and the overall consistent NPS score even with the rapid growth that we have. No degradation in service whensoever.

And I don't think you said it, but obviously, we have a rigorous credentialing process around licensing and et cetera that we ensure.

Yes, that's already given. But...

Yes. I know.

It's always great to have 2 management members here. Mark knows whatever Pete left out of the conversation, so It works well. I want to go back to the customer base. When you came public, it was kind of well-known and acknowledged that you had a very strong base of tech customers, which, I mean, just a mathematically would be from what you disclosed, has clearly evolved into numerous other industries with kind of leading entities within each of those industries. As we do think about the publicly disclosed positive job growth, some perhaps cutting back on job losses. How do you think about managing your business to prepare for what could be or appears to be fluctuations in the same-store employee base. No changes to how they're deploying the benefit, but just they might be employing different amounts of people than what they had previously.

From everything that we are hearing from our client base, we're not hearing about layoffs of any notable level. The most common thing we're hearing, if you hear anything, is a slowdown in hiring, which is not cutting and reducing it's just a slowdown in hiring. But at the same time, we're talking to many of them, and we're hearing about all the new buildings they're building and all the new areas that they're expanding, et cetera, right? So their plans don't seem to be slowing down relative to growth in the, I'll call it, medium term. But at the same time, that's the only sort of cautionary comment. And even when we hear about them, what we're hearing is in pockets of what they're doing, right? So they're not sort of telling us that we're going to literally slow down across the board. They're just seeming to be a little bit more judicious about where they're growing and where they're investing their money. And that's what we're hearing more confident. When we hear a comment. Otherwise, we're not hearing the comments. We also pay attention, by the way, not just our account managers have good relationships with our clients. And so that dialogue is happening. But it's not just that dialogue, it's also -- we pay attention to what companies are releasing and talk about sort of publicly. And so for us, and our client base, similar to comments we made when COVID -- the onset of COVID happened, and people worried about the impact of COVID, initially, nobody knew what was going to happen. And it was a worry that employers were going to start to come back on employees, et cetera. We were saying that the same thing. We're not hearing that yet. It doesn't mean it can't happen, of course, anything that happen -- but based on the best information that we have at best, the existing client base will slow down their growth. But as a cohort, we don't think they're going to decline in any way.

And maybe along those lines and thinking about the diversification of the customer base, I keep thinking about the updated logo pages that you put on the presentations, you see hard manufacturing companies. And as that's shown up there. You see, I think you have a teachers union in there. How have you been able to continually convince entities that may not have considered the robustness of having a carve-out fertility benefit just how important it is for their employee base to add on? And how does that speak to the broader awareness that you're seeing across the economy as a whole of supporting family-building benefits as a part of employers-employee satisfaction.

Yes. It is exactly the second part of what you said. It starts with -- there is a broader awareness around the fact that this is a real medical need. Then there's confusion sometimes in how to approach it. And again, as I said before, then there's the easy alternative, which is the path of least resistance when we go to my carrier and just turn it on and give some amount because a lot of people do it that way. And in fact, the majority of the country still does it that way if they covered it all. For everybody who doesn't know sort of the numbers, roughly 40% of the country has coverage for fertility, and all coverages the same, and 60% is, right? And so at the end of the day, and we've considered a condition that's what people trying to have a baby suffered from infertility or if you believe the latest CDC data 1 in 6, 1 in 5, it's a huge unmet need, only 2% of babies in the U.S. come from fertility, right? So now you go to a lower level by industry, how are they now adopting and the answer is like any benefit provider, they go to the board conferences that have benefited consultants. And they hear about the alternate approaches versus the traditional approach, and they ask about it, and some of them sign up. It's always helpful for us to break it to new industries. We're in today, 30 -- over 30 different industries. We signed up last year, a large healthcare system -- first healthcare system in the U.S. And I think about that is there's a network effect every year of those industries because others follow. So this year, we have a bunch of good activity relative to new committed clients and health care system prospects that we didn't have before. This year, we signed up our first automobile client or automobile manufacturer. This year, we signed up our first [ orage ] hospitality client, right? In every industry, like 1 fun example I think in this is corporate real estate. We have a bunch of corporate real estate clients. We sort of go, okay, is that really the industry. Well, not really, but a little bit in the sense that it's specialized but it's that network. It's an example of that network. In fact, we had only 1 room for a client at 1 point, now we have I don't know how many, but let's call it half a dozen or more, right? So the point is that we -- at the end of the day, the nice thing about the macro trend of people realizing that reproductive health is important. It's part of a benefit offering that employees are focused on, juxtaposed against a tight labor market, even with looming recession. And then a competitive labor market. So even if you're not only competing with others in your industry, you're really competing in people switching the industries if you don't offer what people are focused on. And since this is a human need, ubiquitous to all humans, it is why we're able to sort of penetrate those other non-traditional, non-forward thinking historically, industries, I suppose like tech is usually one of the earlier adopters of innovative benefits.

Basically, we touched on topics that basically gets you to the top line. So I want to go a little bit further because you have a unique P&L. I don't have many companies in our coverage universe that have this level of revenue growth, and profitable business. I like to think about this, and I wouldn't say the exact same terms, but it's a very thin employee base and thin overhead to help drive those margins. So how do you think about it as you continue to pursue your growth targets, the best way to think about leverage on adding new customers on the utilization against what is a very well run and efficiently run employee base.

There's 2 ways to think about it, right? As we continue to grow, we continue to leverage the same things we've been leveraging relative to margin drop through vis-a-vis revenue, right? We're constantly within that, investing in the business, right? The things that -- the infrastructure is there, but the things that you had that made sense when you're a $0.5 billion company versus when you're approaching a $1 billion company, so that always make investments we're doing that also, right? Then there's the other investments in terms of exploring other things we might do including the things that we talked about and announced, we are -- we've stood up and are now going to go live with the male and fertility solution, for example, with a network of reproductive urologists that go with that, right? It's an extension of what we're already doing already in a way. But it's another form of coordinated care that makes the experience much better. That took an effort, right? We stood up, and are now going to go to market, start to sell our -- and as close to this benefit as possible with regulatory limitations, a Canada solution, right? That's our toe to being in the water for hospital international expansion. That's another area, right? So it's really always making sure that you're -- as you grow in size are as efficient as you can be from a throughput perspective and still drop through margin, but also at the same time traditionally spending money on the business and continue to invest and support that growth for the future is just -- and we're able to do that on every one. One of the things that helps, by the way, is the high retention rate that we have because we don't have to keep acquiring those clients, if you will, they have natural growth also in the form of either upsells or just as they're growing as a company. That always helps. And so on the sales and marketing line, for example, that's mostly about new client acquisition and not about spend on the existing base. So that's just an easy natural area of drop-through that will continue.

And like you describe the dip your toe in the water Canada because when you think about at least timing on your business, pharmacy was obviously more than dipping a toe in the water, and now that is a significant portion of revenue. The urology side, we wait to see, and Canada obviously, whether it's just Canada or other countries, could be massive or could just be -- we're going to try and leave a small base. So be it as we think about other areas of potential service geographic expansion. Should we think about more focused on making a few smaller bets versus the potential to go all in on something that's more significant in sourcing of some other capabilities, additional family-building services. How should we think about strategic desire, strategic rationale behind some of these expansions beyond the core?

Yes. The pharmacy example is a really good one for 1 reason. It was so obvious to us to go all in, if you will, because it was probably the most common thing that we were hearing when we took over management of the company that was missing for the better, right? So that was sort of an easy one. The other ones that we're doing, including these other things that we're also sort of testing, if you will, that we're not talking about yet, or dipping our toe in the water. Why do I say that? Because we want to test wheel demand, we want to task effectiveness. One of the things that investors asked us to do is make sure that we don't -- they like the profitability profile. They like our ability to sort of grow and expand profitably, and they want to make sure that we don't confuse that profile, if you will. So part of it is just fully understanding where we can get leverage and still expand and do things. And so the testing idea, I like that concept. Yes, that's the way we're going to probably do most of it. And when it works, we'll throw real money behind and expand those areas.

I think we're just about out of time. I'm going to wrap up the question I tend to ask all the time to any company in these settings. Where do you think people miss most about your story? What do you think is the element that when you get questions from investors that you wish would just sink in more something that you really want to make sure it gets hammered that doesn't get appreciated enough?

I think the completeness of the offering in every leg of the stool that we talked about, and how important is that all those components work together and make sense, which is easy to describe hard to do, or to continually to do is, I think, sometimes potentially underappreciated because we make it look so easy, for lack of a better term. That plus, I think the amount of focus on in utilization levels, even with the now history of what I call marginal impact with the global health pandemic. I think there's sort of sometimes too much focus on short-term utilization rate versus full year long-term, longer-term utilization rates. So I think a lot of times I say even though we're not technically a SaaS model, where in many ways like a SaaS model, the combination of our retention and the predictability of utilization by company for us is a huge asset, a huge win in the last pieces. The level of relationship that we have, considering we're just a carve-out benefit within the medical world with our clients puts us in a really good position to get real insight as to what they're thinking about, and hopefully gives us a road map as we dip our toes in the water and a lot of things for some nice interesting expansion beyond what we're doing today.

Perfect. Well, Pete, Mark, James Hart and the audience, thank you so much for coming over and doing this. I always great to catch up and hear more about the story.

Thank you for listening to us. Always a pleasure.

Thank you.

Thank you.