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spk00: Good morning, ladies and gentlemen, and welcome to the Freesia Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will provide instructions for the question and answer session to follow. First, I would like to introduce Balaji Gandhi, Senior Vice President, Investor Relations for Freesia. Mr. Gandhi, you may begin.
spk06: Thank you, Operator. Good morning and welcome to Freesia's earnings conference call for the fiscal second quarter of 2023, which ended on July 31st of 2022. Joining me on today's call are Haim Indig, our chief executive officer and co-founder, and Randy Rasmussen, our chief financial officer. A complete discussion of our results can be found in our earnings press release and in our related Form 8K submission to the SEC, including our quarterly stakeholder letter, both issued after the markets closed today. These documents are available on the investor relations section of our website at ir.freesia.com. As a reminder, today's call is being recorded, and a replay will be available on our investor relations website at ir.freesia.com following the conclusion of the call. During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry, and the anticipated performance of our business, including our outlook regarding future financial results. Forward-looking statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings included in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow. Our forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which these statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles in order to provide additional information to investors. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and stakeholder letter, which were furnished with our Form 8K, filed after the markets closed today with the SEC, and may also be found on our investor relations website at ir.freesia.com. I will now turn the call over to our CEO, Hyman Diggs.
spk04: Thank you Balaji and good evening everyone. Thank you for participating in our second quarter earnings call. In case you didn't spend the last 30 minutes reading all of our earnings material cover to cover, let me share some key highlights and additional commentary. Revenue in the second quarter was $68 million, up 33% year over year. I want to thank the team for putting up our sixth consecutive quarter of over 30% revenue growth. In the quarter, our average number of healthcare services clients was 2,776. We added 250 average healthcare services clients sequentially, establishing a new freezer record for the fourth straight quarter. This represents 40% year-over-year growth. Healthcare services revenue, which is the combination of subscription and related services, and payment processing revenue was up 29% year-over-year in the second quarter. On a per-average healthcare services client basis, subscription and related services revenue remained in the $11,000 range in the second quarter, reflecting both our land and expand go-to-market motion and the significant growth in average healthcare services clients. Payment processing revenue grew 20% year-over-year in the second quarter after having grown 38% year-over-year in the last year's second quarter. In last year's second quarter stakeholder letter, we attributed the 38% growth to catch-up utilization from the reopening during the pandemic. Frisia now impacts more than 1 out of 10 patient visits in the United States every day, helping patients become more activated in their health and achieving better health outcomes. The size of our network and the strong execution by our team helped fuel growth in life sciences revenue of 46% year over year, which was on top of the 95% year over year growth in the last year's second quarter. Moving on to our outlook for the rest of the fiscal year, we now expect revenue for fiscal 2023 to be in the range of $273 million to $275 million, tightening our previous range of $271 million to $275 million. We expect average healthcare services clients to increase by at least 200 in the fiscal third quarter as our investments from the last couple of years continue to fuel our growth. The operating leverage we began to see in the first quarter gained momentum in the second quarter, and we expect to return to adjusted EBITDA profitable in fiscal 2025. Based on our strong performance, we've taken up the adjusted EBITDA outlook for the fiscal year to a range of negative $109 million to negative $106 million from our previous range of negative $126 million to negative $122 million. We remain comfortable with our ability to finance our fiscal year 2025 growth plan and expect to end fiscal 2023 with $165 million to $170 million in cash and cash equivalents. We believe our investments over the last couple years are helping us keep our product best in class, build more amazing new products, expand our relationship with existing clients, and grow our network with new clients. We believe our capital allocation strategy sets us up to deliver on our financial targets for fiscal 2025 and beyond. We continue to focus on driving shareholder value.
spk18: Operator, I think we can open it up to Q&A now.
spk00: Your first question comes from the line of Anne Samuel with JPMorgan. Your line is open.
spk08: Hey, guys. Congrats on the strong logo growth. I was hoping maybe you could provide a little bit of color on the EBITDA guidance raise. You know, it's quite a bit more than the second quarter outperformance. I was just wondering, are there any incremental efficiencies you're finding in the back half? And if so, you know, what are those? Thanks.
spk18: Thanks for the question. I mean, I think
spk15: We're really proud of the team for focusing on spending money smartly. I think as we had stated in the past, we think about each dollar that we spend very carefully. The team has done a great job watching the expenses, and I think that just continues in our culture. We think about every person that we hire and every dollar that we spend on software or services as important. It's just a continued focus on making sure that what we spend money on adds value to the business and helps us grow. And where we don't need to spend money, we hold back.
spk08: That's great to hear. Maybe just another one. Your life sciences business was once again, you know, really, really strong. And that seemed to be bucking the trend that we're hearing from other companies with life sciences customers. So we're just hoping you could provide a little bit of color there on, you know, what you're seeing in life sciences and if there's been any shifts in the marketplace.
spk19: Well, first, how you doing, Andy? First, the network's grown a ton.
spk04: So the investments we've been making and growing the network have really It really paid off in being able to just expand our footprint, deliver more messages to more patients that add more value. Second, the team is just amazing. They've been doing a great job. And, you know, I don't think we would be where we are if we hadn't been investing in the products and in the people. And I'm just so impressed by execution all the way through with our life sciences, or frankly with everyone. But I'm calling it out based on this question.
spk07: That's great. Congrats on a great quarter.
spk19: Thank you.
spk00: Your next question comes from the line of Glenn Santangelo with Jefferies. Your line is open. Oh, yeah. Good evening, and thanks for taking the question.
spk02: Haim, I just also wanted to follow up on the digital advertising question. I mean, could you give us a sense for maybe how much of that is already contracted when you look at sort of the balance of the year and maybe how much you have to win on a quarter-by-quarter basis? Because I'm just kind of curious, you know, with half the third quarter just about over, I'm kind of curious as to what type of visibility you may be having that life sciences growth through the balance of the year.
spk04: We have a fair bit of visibility to the fiscal year, but we still have a bullet. There's a couple of things, Glenn, around just the way we've always done our fiscal year. January is sort of the real bogey for us that we – we don't have as much visibility to because often those come in in next year's contracts. Does that make sense? Because if our clients are fiscal year, then it really comes in next fiscal year, that one month bogey.
spk02: Right. So you're kind of suggesting you have pretty decent visibility up through December, right? But the final month of Q4 falls into theoretically a different fiscal year for your clients. Is that what you're saying?
spk19: Yeah, I'd say we have decent visibility.
spk02: Okay. And then I just wanted to follow up with Randy on the balance sheet. Randy, I mean, you guys, this is the first time I think I've seen you give specific cash flow guidance by forecasting the cash balance at the end of the year. And if I sort of, you know, look at that number 165 to 170 million and take that sort of in concert with kind of your EBITDA guidance for this year and also the fact that you're calling out fiscal 23 as being the low watermark and EBITDA is kind of the implication there that you feel very comfortable sort of making it, you know, through your fiscal 25 goals of adjusted EBITDA profitability with the cash that you currently have in the balance sheet. And I'm also curious, is there any other sort of, you know, capacity that you have access to that we should be thinking about?
spk19: Thanks.
spk04: Glenn, I'm going to let Randy answer that question. But I think the reason we decided to put it out there and print it, it's just a lot easier. There's just no confusion, right? Because this way we don't stumble around with the answer that we think is important to a really important question.
spk15: And then I'll let him answer it. Glenn, you're exactly right. We're confident where our cash balances are. We don't have any borrowings on our line of credit. And we have adequate cash to execute on our 2025 plan, so we're feeling really good about our cash.
spk19: And, Randy, how big is that line of credit? Just remind us.
spk18: It's $100 million.
spk19: Okay, perfect. All right, thanks, guys.
spk00: Thanks, Brian. Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.
spk05: Yeah, hey guys, nice quarter. Thanks for taking the questions. Another one on the guidance outlook. I don't think in the past you've offered guidance on net new client additions. You're expecting another strong quarter there of at least 200. So what's helping with the visibility there? Is that related at all to some of the trial packages you're allowing people and seeing high conversion there such that you have a pretty good feel that those are going to turn into paying clients by the end of the quarter?
spk19: Well,
spk04: So, yeah, we do have pretty good visibility to the quarter, and Balaji wanted to make it easy for everyone to model, to be fair. So we just took Balaji's advice on giving a little bit more visibility so it was easier to model.
spk06: But, Ryan, I don't think it's a change in our visibility.
spk19: It's just more disclosure.
spk05: That's Balaji. I appreciate that. And then maybe just at the prepared comments, you have a comment in there about the potential to drive traffic Revenue per client for the subscription-related services up to $126,000 versus where it is today, so a tenfold increase. Can you talk a little bit longer term about how that will figure into the growth algorithm, maybe after the bolus of new client additions starts to slow down, how you can push them to get more value from your system by expanding the services that they purchase? Thanks, guys.
spk06: Yeah, hey, Ryan, I could answer the bigger part of the question, but I just want to clarify, I think you might be doing some quarterly math on annual math, because I think we would think about the opportunity to be about 3x. You sort of took the quarterly subscription revenue we did per client and annualized that. It'd be about a third of the $126,000.
spk05: Yeah, no, I'm just referring to the comment in the release about the when you created the TAM of 6.3 billion, saying 50,000 subs and 126 subscription-related services. So getting up, you know, from current levels to that level. Oh, got it.
spk19: Got it. And maybe the second part of your question, behind financial.
spk04: Oh, no, I think I remember right. It's how are we going to get more people to buy more of our products and expand? Yeah, exactly. You know, it's a pretty simple philosophy that, you know, Started years and years ago when Evan and I started the company. First, you do what you say you're going to do. You provide as much value as you possibly can to your clients. You treat them really well. And then you expand your footprint. And then when you expand the footprint and you provide a ton of value and you treat them really, really well, they buy more products. And they're willing to try more. And then that product's successful. And then it provides a phenomenal ROI to them. And then they go to the next one and then another one. And you're able to do that because you – hire amazing people, and you pay them well to build great products, and then you implement it really well, and it becomes a virtuous cycle, all right, where you do what you say you're going to do.
spk18: You treat people well, and we just try to do that. All right, fair enough. I appreciate the comment. Thank you.
spk00: Your next question comes from the line of Richard Close with Canaccord Genuity. Your line is open.
spk03: Yeah, thanks. Congratulations. Maybe a somewhat of a follow up to that last question by Ryan, but you know, the average revenue per client declined and obviously you've had significant new client ads over the last several quarters. Also introduced new offerings over the last year, referral management and I guess auto schedule to name a few. But how are you thinking about the average revenue per client, you know, and timing of when maybe growth reaccelerates on that line item?
spk15: I can take that. So when we look at the average revenue per client, it also includes our payments business. So when we talk about it going down, we're really talking about the fact of payments where, you know, payments is growing 20%. where our client growth is growing up to 40%. So that's the main driver. If you look at the average revenue per subscription client, it's actually been very consistent over the last six quarters. But if you look at how many clients we've been adding, to the last three quarters, we've been adding over 200. The three quarters before that, it was around 100. So we're actually very happy that the subscription per client has remained fairly constant even though we've had a huge uptick in the number of clients that we're adding. So, you know, I think we think from our perspective that it's pretty healthy and it is hard to, you know, increase that statistic when you're adding so many clients every quarter.
spk03: Okay. And then maybe just on utilization, you made some comments there. And I was curious if you could provide a little bit more context, you know, stating revenue outlook incorporates our expectations for utilization in the current environment. Is there anything else to add in terms of just, you know, what you're seeing from utilization or expecting in the back half of this year?
spk06: I mean, Richard, are you asking about patient utilization in the ambulatory setting? I mean, we look at it regularly, and I think it's sort of embedded in how we think about our outlook for the year.
spk04: Or in the acute setting, we sort of see it all on a daily basis.
spk03: Yeah, but maybe a little bit more context in terms of what is baked into your guidance. are you looking for any improvement or is it just, you know, the status quo?
spk04: I'd say hope is not a strategy, Richard. Right. And generally not been like my philosophy. I'm a pretty, I'm a pragmatist on this. And I think Randy is too. Like we don't, we don't look for utilization to pop in the second half. I think that that's a, we, and you know, we don't see it. So. And we're not hearing our providers telling us they're getting ready for the big bolus that's about to come.
spk18: Did I answer your question? Yeah, that's fine. Okay.
spk00: Your next question comes from Ryan McDonald with Needham. Your line is open.
spk13: Hey, guys. This is Matt Shea on for Ryan. Thanks for taking the question, and congrats on a solid quarter. I wanted to touch on payments. So we've been hearing about rising – patient self-paid balances at some provider practices, which in some cases are turning to bad debt. Curious if you're seeing this with your clients, and if so, what impact rising patient balances might have on the payment outlook?
spk04: I haven't seen that in any of our numbers. And if we did see that, that would generally bubble up. And I haven't seen, I haven't heard of any. We also manage hundreds of thousands of active payment plans, and we don't see any general trend change in any of those across the country. Randy, have you heard?
spk15: Yeah, I don't think we've seen anything that would indicate what you're talking about in our data yet.
spk04: But I can pretty much guarantee there's someone at Frigio listening to this call right now that's going to try to figure out if that is the case. But if we do hear it, I'm sure we'll talk about it, but we haven't seen it in our numbers.
spk13: Okay, that's good to hear that. One other one would be, so Epic held a user group meeting conference in August and announced single sign-on to unify their patient portals and also mentioned the desire to develop and deploy some text-based scheduling and intake solutions. So it sounds like patient portals are getting better and EHR vendors are maybe interested in moving into text-based offerings. So just curious if you could comment on the competition and compliments that your EHR vendors, partners create, and then what impact Epic launching a text-based patient intake solution might have on your existing relationship. Thanks.
spk04: I can't comment on any specific company, but I can say that it's a lot of work to do the things we do at scale. And, you know, we've had competition for our products for as long as we've been running Freesia. And I think that that's a good, amazing thing. But doing what we do at scale with complex data and getting it live at clients and making sure that all variety of different patients in different settings can use it, pretty hard. And there's a reason why we have the investment we have in not just our current products, but in our future products that we feel pretty comfortable about our outlook. What we do is hard. But I also think competition makes everything better. And frankly, I'd love to see health care in America improve faster.
spk18: If it doesn't because more people are innovating, that's great.
spk00: Your next question comes from Stephanie Davis with SBB Securities. Your line is open.
spk10: Hey, guys. Congrats on the quarantine. Thank you for taking the question. I was hoping you can give us a refresh on the payment processing ramp when you first sign up a client. How should we think about the lag until you're at full run rate and what sort of optical drag could this create in revenue per just given your client growth continues to be outside?
spk19: Right. So Stephanie, you were a little bit choppy for us.
spk04: Okay. So I heard payment processing ramp, but I don't think any of us heard the question super clear. Do you mind repeating it?
spk10: All right, no worries. I am at a conference, so I apologize for any background noise. But I was asking if you could walk us through the payment processing ramp for when you first sign up a client and how that could lag until you're at full run rate, because I'm trying to look at the optical drag that you're going to have on your revenue per metric in the near term.
spk04: Yeah, so I'll answer some of it, and then I think you might have to answer the other part. So there's a couple parts about payments. One, is when we do a land and expand, some of the drag is just simply like as we add locations, we're picking up more payment, right? And then the other thing which I think is, you know, and as we add into the organization, we add more payments. But some of it also has to do with as we ramp, we pick up more cards on file, we pick up more payment plans, and that just becomes a building nature in how we ramp up payments But I do want to stress that there's also seasonality in our, in payment numbers. You know, they, you know, payments tends to not grow. In fact, it has just annual seasonality tied to the deductible is probably the best way to think about it.
spk07: Is there any, I'll continue.
spk15: You know, we count the customer when the first dollar of revenue comes in. So, As soon as they start using our payment solution, we will count them as a client. And as Hein said, you know, there's usually a ramp-up period where they're transitioning to us because there's always an incumbent payment provider in place. So it may take, you know, three to four months for them to fully be on to our payment solution or more.
spk18: It depends on, you know, how complex they are.
spk10: So another one on the payment processing side, because that was really helpful. Is it safe to guess that there was a shift away from last quarter's discounting, given the quarter-by-quarter increase in transaction yield? Or is there anything else to call out there, just given it's a healthy step up?
spk18: I mean, there's different things that can affect that.
spk15: I mean, it's also the mix of cards, like what they're paying with, if it's Amex or MasterCard. If it's card present, card not present, there's a lot of things that go into that that can affect that.
spk04: And there were some fee changes from the carriers.
spk07: All right. Thank you, guys.
spk19: Thank you, Stephanie.
spk00: Your next question comes from Daniel Grosslight with Citi. Your line is open.
spk16: Thanks for taking the question and congrats on the quarter, guys. I'd like to follow up on one of Richard's questions around utilization. You mentioned you're not going on a hope here, but if you listen to what many providers in the public markets have said on 2Q is non-COVID utilization remains depressed. Then if you look at the flu season that is happening in the southern hemisphere right now and speaking to doctors where they think kind of ambulatory utilization is going to go in the second half. Can you just put a finer point on how you're making utilization into your estimates now? Are your clients still at kind of less than pre-COVID utilization? And how should we think about that going into the second half of the year?
spk15: I mean, we look at it every week, and to be honest, there's some weeks that are up, and then there's some weeks that are down. So, you know, I think we generally feel like we don't have enough data to conclude that there's a COVID effect or there's not a COVID effect. You know, I think we model it in the sense of, like Haim said, we're not expecting some huge comeback. I think, you know, typically when you look at our revenues throughout the year, it's pretty consistent from quarter to quarter. You know, there's seasonality where there's more payments earlier in the year and then that kind of trails off towards the end of the year and newer clients come on and, you know, generally that's flat quarter to quarter, you know, during the middle of the year.
spk04: But we do have, like, we have the data in real time, right? We used to have big screens when we had offices where you could see utilization in real time.
spk06: Yeah. And, you know, Daniel, one thing I will say that I'll look now at 13 quarters, and I think in trying to help people at least do some modeling, the overall payment volume that we report every quarter, if you look at that, I think many of the analysts do look at it this way. If you look at that on a per-client basis, it's pretty clear the commentary from our letter and, you know, Heim's opening comments. that something unusual was going on with a lot of sort of catch-up utilization last year, and we're still working through that. I think that's pretty evident.
spk16: Yeah, yeah. Okay, good. And then, you know, some folks selling into the provider market, not your direct peers, but Other, I'd say, health tech, provider-focused health tech companies have had some issues selling into the provider market. They're seeing elongated sales cycles, et cetera. You're not seeing this, which is great. I'm just curious, what's resonating the most in the market now? And are you seeing any degradation in kind of a starting price and module upsells that would suggest that some folks are being a little more conservative given some pressures in the provider market?
spk04: So I'm going to take this opportunity to give a huge shout out to our provider sales organization and our go-to-market team, first and foremost. The reason we're doing well, without a question, is our client success team, our sales organization, our demand gen team, our marketing team, they are just doing a phenomenal job. I'm just so excited every time I get on the weekly calls and I listen in, and I just – that's the first point. And so I'm sort of calling them out right now and saying thank you, although they'll hear it on the all-company call later. Next, it's land and expand, and that's part of our selling motion. And I think that that's wildly important, and we've sort of been pounding on the table for more than 13 quarters, and we want everyone to understand that's our selling motion. But, you know, we believe at Frigia that we should build trust. The way we build trust is we land in an account, we provide a phenomenal amount of value, and we grow our footprint, and then we get the right and the privilege to continue to grow that account. And we think that's the way we've worked. That's how we invest money. It's more expensive on the onset, but the payback, we believe, is significantly better, and it gives us better visibility and a better client experience.
spk18: And, you know, frankly, our products provide just amazing value. Yeah, yeah.
spk16: So no degradation in kind of that starting price or no conservatism seen in folks buying up additional modules.
spk19: I like it. No, no, no. We haven't seen it yet.
spk18: Great. Thanks for the cover. Cheers.
spk00: Your next question comes from Jessica Tassam with Piper Sandler. Your line is open.
spk09: Hi. Congrats on the quarter, and thank you guys for squeezing me in. I was hoping you could maybe give us a little bit of detail about whether or not your life sciences revenue growth has anything to do with kind of your mix of specialists. And then just secondarily, was curious to know, how is life sciences revenue able to grow without specialists? kind of commensurate utilization per provider, just because we've historically sort of thought of that, the life sciences offering as being impression-driven, but would love to know if that's changed at all. Thanks.
spk04: No, no problem. All right, so I'm going to answer the second question first, mostly because I probably have already forgotten the first question, and so then I'll re-ask it. So, you know, I want to be clear, like the network has grown tremendously. And yet, most of our revenue monetization for life sciences, not all of it, but most of it, is after we deliver the message to the patient in a very targeted, consent-driven model. So patients opt in. But as the network has grown, our overall usage has grown. So since we've been public, the network has more than doubled. right? And so, you know, if you play it out, just 13 quarters, we just had tremendous amount of volume growth. We're seeing one out of every 10 visits right now in our network. So that's, you know, that's one. And two, it's not just the number of specialists, it's just the sheer volume of patients that we see has helped us. And, you know, having that view longitudinally and being able to provide the right type of content for them to help them drive the right type of care and has been very, very valuable to patients, which has allowed us to significantly expand our life sciences revenue. I don't know if I answered that.
spk18: NGS, I totally forgot the question.
spk09: No, I think you answered, honestly, all of them. I guess just my follow-up would be, is there sort of a life sciences ROI that you would be pointing us to? And then just curious to know, is patient insights I think you guys mentioned this in the letter. Is that a new billable product, and does it change your view of the TAM for life sciences segment at all? And that's it. Thanks.
spk04: So we do have a website for life sciences. It's lifesciences.freesia.com. You can totally go there, and there's a bunch of ROI examples on there. It's a great website. You should go there every day. I do. It's wonderful.
spk19: And then, wait, what was the other – Is there a TAM?
spk09: Yeah, it's a new fillable product.
spk04: We do sell it. We've mostly been bundling it in because it's so valuable. We have gotten just great feedback from clients on it, and we are using it right now. We're getting people used to using it as an offering. So I'd say right now it's mostly being bundled in. And if it does change the TAM, I promise you Balaji will make us put out another TAM and talk about it.
spk18: So that is not coming now.
spk07: Awesome. Thank you.
spk18: No, thank you.
spk00: Our next question comes from Jack Wallace with Guggenheim. Your line is open.
spk17: Hey, thanks for taking the questions, and congrats on another really solid quarter and really solid first half of the year. Just wanted to hit the software sales per software revenue per provider client question from a different angle. Maybe it'll help us get a little bit better context for the relatively flat rate we've seen over the last six quarters. You had some accelerating client wins. Just thinking about the cohorts from the first half of this year and how they've matched up relative to cohorts from the prior two years. Are these new customers coming on buying more or less software than the prior cohorts? And then to use the prior cohorts as a potential guide, what kind of lift in upselling have those prior cohorts seen, if not maybe on an annual basis, but some trajectory that to kind of just give us something to think about as you're building your client base.
spk18: Thank you. Yeah, sure.
spk15: I mean, I think, you know, we are generating, you know, most of the new revenue from new client ads, as you've seen in the numbers. So I think, you know, from the perspective of they are buying multiple products, you know, I think it's it kind of varies by customer size. So, I don't know if there's any, you know, distinct pattern. I think, you know, where we've seen it is just the sheer volume of new customers just has depressed that statistic or kept it, you know, flat. As I mentioned before, you know, we're adding a lot of clients, you know, twice at the rate that we have, you know, if you look over that last, you know, six-month or six-quarter period. And, you know, we continue to also expand in those those clients i don't think there's a particular you know pattern or cohort that um you know that's an indication i think we've just been we're just doing really well yeah we've just been telling in lots of different areas and across the board and you know uh jack the the other thing is you know we did um share four years worth of uh
spk06: you know, gross revenue retention and client retention. And then you obviously saw the subscription revenue for client holding it in spite of, you know, adding almost $789 clients year over year. So I think that just sort of suggests that people are still starting to work with us in the same way.
spk17: Yeah, that's helpful. And then just a housekeeping item for me. How many SDRs did we end up with at the end of the quarter? 189.
spk18: Got you. Thank you. I'm sorry, 187. Your next question comes from Joe Vrulink with Baird.
spk00: Your line is open.
spk01: Great. Hi, everyone. I think in the past you've discussed six to 18-month timeframe changes. for really knowing the productivity of a new hire. And I guess we're kind of in that timeframe for last year's class, and we're also now starting to see the revenue per employee metrics trending higher on a year-over-year basis. Is productivity all going according to plan, or does the improved EBITDA outlook for the year essentially say this is now tracking better than your expectations?
spk04: I would say I do know. I'm just trying to think how much. I'd say the team is doing unbelievably well and we're tracking better than our expectations.
spk15: All the metrics we are tracking are moving in the direction that we want them to very strongly. We expect productivity to go back to where it was. Our cost to acquire is looking really good. Our revenue per employee is looking good. I think we're pleased.
spk01: Okay. Great. And then I know this fiscal year is meant to be the low watermark for EBITDA. I'm curious if you look at specifically the trend in subscription gross margin that increased sequentially and obviously you onboarded a lot of new clients. So I would imagine you probably had a stable customer success and implementation team behind that. Do you think it's too early to maybe call the trough in subscription gross margins and we should kind of expect further improvement from these levels or might there still be some incremental investments needed there?
spk15: I mean, in Q1, we had actually talked about that, you know, we had an expectation that, you know, gross margins less, you know, payments or the subscription margin as you're referring to, you know, would would go up in the low 70s. And I think, you know, this quarter you see it improve. And, you know, that improvement, like everything else, we've done a little bit better than we thought. You know, I think the organization is really thoughtful about spend and how we're using resources.
spk18: So, you know, we expect that margin to continue to improve the second half. Great. Thank you very much.
spk00: Your next question comes from Joe Goodwin with JMP Securities. Your line is open.
spk12: Great. Thank you so much for taking my questions. So your employees have sequentially come down the past two quarters. I'm just curious, is that natural attrition or is that forced attrition? Any commentary would be great. I think it's natural.
spk04: We've not had – I don't know how you answered that question. Look, I think it's natural attrition. And, you know, we I think the team has done a very good job of making sure that folks we want to keep are well rewarded. And the team has done a phenomenal job. But yeah, we do see ebbs and flows. But I think more important is I think I'd say our team is up 2x from 12 months ago. Yeah. And almost triple over three years. And almost triple over three years. And we tend to look at it not on a quarterly basis,
spk18: you know, but trending over time.
spk12: Understood. Okay. Thank you. And then you commented on the retention briefly earlier in the call, but has, so there's been no movement on your, on your client retention, health healthcare services, client retention at all, even seen anything made from the macro or anything like that?
spk18: No, it's consistent with, you know, we look at it on a monthly basis and it's consistent where it's been in the past year or so. Okay, thank you.
spk00: Your next question comes from John Ransom with Raymond James. Your line is open.
spk14: Hey there. If we were to look at the customers you're adding today, you know, you talked about 200 and then the ones you added this quarter. So let's just call it 450 round number. Is this customer class on average a bigger – that of providers as in bigger hospital systems or bigger doctor groups? Or is the average sort of TAM on a per provider basis today kind of the same as you've added all along?
spk19: John, they're all different sizes.
spk04: They're enterprise clients. They're small. They're medium. The one thing they all are, though, is they're all land. And then we look to expand them. And we are, we're absolutely seeing more Large clients, but we're also seeing tons in the midsize, and we're seeing, you know, those that are part of networks. I'd say the team has just done a phenomenal job of selling across the spectrum and helping to provide, you know, freesia to all those that need it. We think of it in terms of more enterprise versus health systems.
spk14: Okay. And then secondly, I mean, I think, you know, we understand the core of Freesia, and you guys are adding new capabilities. If you were to kind of isolate on one or two capabilities that you've added, is there anything that, you know, gosh, this is going better than we thought, and this could be the next big revenue? Or is it more that this is, we should think about it as the company is what it is, and these are just enhancements that kind of, you know, accentuate around the core, if you will?
spk04: Well, I don't think the company is what it is. We've been making significant investments. I'd say the investments we've been making around products and life sciences have been great. Hopefully, over the next couple of years, we'll be making some other announcements and some new products that are getting a lot of traction. We're excited about it. But our access products have been unbelievably successful, and that's around appointments and how people get into We've had, you know, Insights has just been just, it's one of the most rocking products we've had in years. So I'd say, John, we've made big investments in R&D and people, and those investments, we're starting to see payoff, right? We're building great products that are adding a ton of value.
spk14: And I don't... You went virtual a couple of years ago. I may have my timing off, but it doesn't sound like that's really been an impediment to productivity or creativity.
spk04: We just had to... We were already hybrid pre-COVID, right? So in a lot of ways, I think this made it easier for everyone to work on an equal playing field. Has it been harder for some? Yeah. Like right now, Balaji and Randy are sitting around my kitchen table, right? So...
spk14: What's for dinner? What's for dinner, Balaji? Is it good or no? We have takeout.
spk19: Next time you'll have to cook us a healthy meal.
spk04: But, you know, I think, like, as an organization, our view is, you know, how do we make sure that we just do what's right for our clients and build great products? And our product organization is It's just done a phenomenal job of understanding what the client needs are and just iterating and building and testing and making sure that the products we build get used and provide a phenomenal amount of value. And we just care about making sure that we make healthcare outcomes. And we attract people that want to do it.
spk18: Sorry, I broke up. That's it for me. Thanks, guys. Appreciate it.
spk00: There are no further questions at this time. I'll turn the call back to Haim for closing remarks.
spk04: I want to thank everyone for joining us for the call. I want to thank everyone on our REGIA team and all of our shareholders, and I hope everyone has a great start to the month of September, and hopefully we see everyone in the fall.
spk19: All right. Bye-bye.
spk00: This concludes today's conference call. You may now disconnect.
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