David Larsen

David Larsen inquired about the finality of the top 20 biopharma CRM decisions, the mechanisms for potential win-backs, and the distinction between the CRM product and Veeva's clinical business.

Answer

Peter Gassner (CEO) reiterated that the top 20 CRM decisions are distinct from the clinical business, which is a minor and stable part of Veeva's revenue. He explained that CRM win-backs could occur due to regional implementation failures, executive changes, or the eventual need to replace custom-built Salesforce systems with industry-standard solutions after several years.

David Larsen asked for clarification on the four top 20 biopharma clients who did not commit to Vault CRM, specifically if they signed with Salesforce or verbally committed, the finality of these decisions, and how a win-back scenario would work.

Answer

Peter Gassner (CEO) reiterated that CRM is a minor and declining part of Veeva's business, unrelated to clinical. He explained that win-backs occur due to regional implementation failures, project cancellations, executive changes, or custom-built systems (often resulting from Salesforce's open platform) reaching end-of-life, leading clients to seek more industry-standard solutions over time.

David Larsen of BTIG asked for the total number of Vault CRM wins during the quarter, seeking to understand the sequential trend and the source of these wins.

Answer

EVP, Commercial Strategy, Paul Shawah reported 13 total Vault CRM wins in the quarter. He clarified that these wins were a mix of both brand-new customers and migrations from the legacy Veeva CRM. He also noted that quarterly numbers can be lumpy and that he expects the volume of migrations to increase significantly in fiscal 2026 and beyond.

David Larsen of BTIG asked for details on the data sources supporting Crossix, specifically whether they include retail, specialty, hospital-administered drugs, and facility-level data.

Answer

CEO Peter Gassner confirmed that the data network supporting both Crossix and Compass is comprehensive, covering retail, specialty pharmacy, and hospital-administered drugs. He highlighted its particular strength in 'complex therapies' and noted this unique data sourcing strategy is key to enabling effective measurement and audience targeting in Crossix, which was a core goal of the acquisition.

David Larsen asked for color on the 20 new Vault CRM client wins in the quarter, noting the number seemed unusually high.

Answer

EVP, Strategy Paul Shawah confirmed the 20 new customers, clarifying that most are small to mid-sized companies, primarily in the U.S., selecting their first CRM system ahead of a product launch. He affirmed that Veeva is winning virtually all of these deals and that the quarterly number was indeed unusually high.

David Larsen asked why Veeva is not seeing the same challenges as CROs and inquired about the significant uptick in Vault CRM wins during the quarter.

Answer

CEO Peter Gassner explained that Veeva is insulated from CRO challenges because its revenue is primarily from long-term enterprise licenses, not per-study services. EVP of Strategy Paul Shawah clarified that the number of Vault CRM wins (13) was typical for a quarter and that these are mostly pre-commercial companies where Veeva has a very high win rate.

David Larsen asked about the competitiveness of Veeva's clinical suite compared to legacy players and the strategic importance of having both commercial and clinical solutions on the single Vault platform.

Answer

CEO Peter Gassner asserted that Veeva has the 'broadest offering that anybody has had before,' combining clinical operations and data management suites. He described the single platform strategy as 'tremendously significant' for improving IT efficiency and, more importantly, connecting commercial and clinical functions, a vision he expects smaller biotechs to prove out first.

David Larsen asked about the mix of telehealth product revenue, specifically the split between branded and compounded GLP-1 scripts in weight loss, the reasons for a sequential decline, and the outlook for the obesity health product line in 2026. He also inquired about the percentage of new obesity health members on branded products, the impact of insurance coverage (Medicare, Medicaid, commercial) on revenue, and the value proposition of LifeMD's clinical services and retention levels compared to competitors like Amazon or Costco, especially with the advent of oral GLP-1s. Finally, he sought clarification on the revenue impact of a recent revision.

Answer

CFO Marc Benathen stated that weight management accounts for over 50% of total revenue, with a slight sequential decline and a flat subscriber base. He noted that over half of new patient sign-ups are for branded therapy, impacting economics due to lost fulfillment fees on personalized compounds. CEO Justin Schreiber emphasized that 2026 growth will be driven by better pricing for branded therapies, increased payer coverage, and potential FDA action against compounded products. He confirmed that the majority of new patients are expected to be on branded products, potentially reaching 75% or higher with lower prices. Schreiber also highlighted LifeMD's readiness for Medicare coverage, the positive impact of insurance enablement on customer acquisition costs (over 1/3 reduction), and the significant number of patients (at least 25%) who previously discontinued due to lack of insurance coverage. He differentiated LifeMD through its comprehensive portfolio of services, in-house compounding pharmacy for other products, and integrated marketplace, contrasting it with retailers that lack providers. Benathen clarified that the previously disclosed revision had a $1.1 million impact on the current year but no impact on quarterly results as adjustments were applied to the respective periods.

David Larsen inquired about LifeMD's relationship with LillyDirect, including the revenue model, and the company's perspective on Novo Nordisk's competing program. He also asked about the company's strategy for personalized compounded medications as GLP-1s come off the drug shortage list, including the data and lab work involved in personalization.

Answer

Executive Justin Schreiber clarified the arrangement is with a third-party pharmacy used by LillyDirect, not Lilly itself, which facilitates cash-pay access to Zepbound for LifeMD patients. LifeMD earns revenue from virtual care, not the medication sale in this channel. Schreiber expressed optimism about price reductions from both Lilly and Novo, viewing it as a positive trend for patient access. Regarding compounding, he stated that LifeMD, as a healthcare provider, works with vetted third-party pharmacies and will follow legal guidance while prioritizing patient access to affordable medications, potentially including personalized GLP-1 versions if they respect intellectual property.

David Larsen inquired about the future of GLP-1 compounding in light of FDA commentary, the potential impact of new branded or generic GLP-1s on LifeMD's business, and the safety and quality assurance protocols for its new in-house pharmacy and its third-party compounding partners.

Answer

Executive Justin Schreiber stated that LifeMD is treatment-agnostic and that increased access to branded therapies would be a "big win" for the company. He expressed doubt that the FDA would prohibit compounding entirely and emphasized that LifeMD's own pharmacy does not compound GLP-1s. Schreiber detailed the rigorous diligence process for their third-party compounding partners, including internal and third-party testing, and reviewing public FDA inspection records.

David Larsen inquired about the specifics of LifeMD's relationships with Lilly and Novo, particularly the pricing model and potential for revenue sharing, and also asked about the conversion rate from compounded to branded GLP-1 scripts. As a follow-up, he questioned the company's strategy of embracing insurance versus competitors' cash-pay-only models.

Answer

CEO Justin Schreiber clarified that LifeMD receives no compensation or revenue share from Lilly or Novo; the company prices its clinical care services separately. He noted they are successfully helping patients access branded therapies but will share specific conversion data in future quarters. CFO Marc Benathen addressed the insurance question, stating that accepting insurance is a crucial long-term strategy to expand the addressable market, lower customer acquisition costs, and improve retention, despite the added complexity.

David Larsen asked for clarification on the prior period dollar amount and the mid-year true-up impact in Q3, specifically if it was a total $24 million unfavorable impact. He then questioned the likelihood of similar prior period adjustments in 2026 related to 2025 claims, and the reasons for past lack of visibility. He also inquired about PMPM revenue growth expectations for 2026, specifically the percentage increase from improved coding and favorable Medicare Advantage rates, and the PMPM cost trend in the quarter.

Answer

Leif Pedersen (CFO, P3 Health Partners) confirmed a $3 million net decrement from prior period items and a $21 million impact from the mid-year true-up in Q3, totaling $24 million unfavorable. He explained that non-delegated plans and late data materialization caused past visibility issues, but new processes and improved payer relationships should prevent material swings in 2026. Aric Coffman (CEO, P3 Health Partners) stated that the aggregate base rate improvement for 2026 in P3's four markets is about 5%, separate from coding improvements, which will have more clarity next quarter. Pedersen confirmed that normalized Part A and Part B costs were flat year-over-year (2025 YTD vs. 2024 full year normalized), implying potential gross margin expansion in 2026 if this trend continues.

David Larsen asked for clarification on the prior period dollar amount and mid-year settlement impact in Q3, and the likelihood of similar prior period adjustments in 2026 related to 2025 claims, questioning the past lack of visibility. He also sought expectations for PMPM revenue growth in 2026, factoring in improved coding and favorable Medicare Advantage rate increases, and the PMPM cost trend in the quarter.

Answer

CFO Leif Pedersen stated that the prior period amount (2024-related) was a $3 million decrement, and the mid-year true-up was a $21 million unfavorable impact in Q3, totaling a $24 million unfavorable impact. He expects more consistent booking methods in 2026 to prevent material swings, noting that 2025 normalization helps compare to a lumpy 2024. CEO Aric Coffman added that improved Joint Operating Committees with payers and new personnel should reduce miscommunications. Coffman indicated a 5% net improvement in premium for 2026 across P3's four markets, aligning with the national aggregate, with coding improvement details to follow next quarter. Pedersen confirmed that normalized Part A and Part B medical cost trends were flat year-over-year (2025 YTD vs. 2024 full year), implying potential for 500 basis points of gross margin expansion in 2026 if trends continue.

David Larson from BTIG sought clarification on the components and timing of prior period adjustments, the nature of contract discussions with health plans, and the feasibility of adding clauses to protect against late data. He later followed up on the flat medical cost trend and drivers for PMPM revenue growth.

Answer

CFO Leif clarified that a late data batch was a Q1 issue, while Q2 adjustments related to a 2024 RAF accrual miss in a now-exited county and a quality measure. CEO Eric Hoffman described payer negotiations as highly collaborative, with 75% of priority contracts completed. He noted that while they strive for protective clauses, tight operational collaboration is key, and having delegated claims data provides a safeguard. Leif confirmed the medical trend was flat on a normalized basis, and Eric highlighted that improved burden of illness capture is a key driver for future revenue growth.

David Larsen of BTIG requested more detail on the improving utilization trends, asking if they were seen in Q4 or Q1, how complete the Q1 data was, and if a specific medical trend percentage for Q4 could be provided.

Answer

Chief Medical Officer Amir Bacchus clarified that while some utilization metrics showed slight improvement in Q4, overall costs were elevated. He confirmed these positive utilization trends, based on census data from the first six weeks of the year, appear to be continuing into Q1 2025. Bacchus attributed this to a combination of P3's provider initiatives and changes in health plan benefits. He did not provide a specific medical trend percentage for Q4 but reiterated the year-over-year improvements for 2024 versus 2023.

David Larsen asked about the sources of accretion for the Amedisys transaction and the sustainability and key drivers of the calculated 32% year-over-year EBITDA per script increase. He also inquired about the typical earnings lift or margin per drug when a drug launches as a biosimilar or goes generic.

Answer

CEO Jon Rousseau explained that accretion from the Amedisys transaction would come from seamless integration, applying BrightSpring's practices (payer contracts, IT, technology, people), and potential synergies in technology, while retaining all employees. CFO Jen Phipps confirmed the EBITDA per script increase is directionally accurate, driven by higher growth in specialty scripts, which have the highest gross profit and adjusted EBITDA, with over 40% growth. Mr. Rousseau noted that the company does not reference specific margin information for generic conversions, but it's common knowledge that more manufacturers reduce procurement costs, leading to lower drug prices, which is favorable for all stakeholders.

David Larsen asked about the sources of accretion for the Amedisys transaction and other acquisitions, seeking insight into how BrightSpring drives incremental margin and profit. He also inquired about the sustainability and drivers of the reported 32% year-over-year EBITDA per script increase and the typical margin lift when a drug goes generic or biosimilar.

Answer

CEO Jon Rousseau explained that accretion comes from seamless operational integration, applying BrightSpring's practices, payer contracts, IT, technology, and people practices, focusing on growth and efficiency synergies while retaining employees. CFO Jen Phipps confirmed the EBITDA per script increase was directionally accurate, driven by higher growth in specialty and specialty scripts, which have the highest gross profit and adjusted EBITDA. Jon Rousseau noted that while specific margin lift data isn't referenced, generic conversions typically reduce procurement costs and drug prices, benefiting all stakeholders.

David Larsen of BTIG asked for commentary on the growth of the home health business and the potential impact of the proposed CMS reimbursement rule, noting that a temporary reduction could lead to a future rate lift.

Answer

CEO Jon Rousseau agreed that the direct financial impact from the proposed home health rule is not material to BrightSpring, as home health is a small portion of revenue and hospice is the larger part of that business. He noted that their measured growth strategy positions them well to scale into the market, potentially benefiting from future rate improvements after temporary adjustments phase out.

David Larsen asked for details on potential scenarios involving pharma tariffs, specifically how an increased wholesale acquisition cost would flow through to customers and how quickly the company would be reimbursed for higher costs.

Answer

CEO Jon Rousseau reiterated that there are no meaningful tariffs in place and the environment is uncertain. He explained that for brand drugs, reimbursement is tied to cost and adjustments happen right away. For generics, the market is globally competitive with many sourcing options, and the company would expect reimbursement increases to follow any cost increases. He confirmed that for brand drugs, reimbursement for higher costs is generally immediate.

David Larsen asked for details on BrightSpring's Accountable Care Organization (ACO) arrangements and its approach to value-based care, noting general investor caution in the sector. He also inquired about the stability of specialty drug pricing and any potential risks to its strong revenue growth.

Answer

Executive Jon Rousseau clarified that BrightSpring's ACO involvement is 'purely upside' with no downside risk, serving as a complement to its core services to improve patient outcomes. He noted positive early results in cost reduction and expects to realize shared savings this year. On specialty pricing, Rousseau described the market as stable, with revenue per script benefiting from a diverse portfolio of approximately 150 drugs. He emphasized that strong, stable relationships with PBMs and payers are key to this consistency.

David Larsen from BTIG inquired about the potential impact of the Inflation Reduction Act (IRA) on BrightSpring's business and asked if increased Medicare Advantage (MA) volumes were creating a tailwind.

Answer

CEO Jon Rousseau stated the IRA's impact is manageable, noting constructive conversations with the manufacturer of the one specialty drug on the 2026 list and a positive CMS clarification of a true-up mechanism for LTC pharmacies. On MA, he explained its main relevance is to the home health business (about 30% of its volume), where relationships and rates remain constructive due to high demand and the company's quality scores.

David Larsen asked about the drivers behind the significant increase in service gross margin and the company's effective cost control, including sales and marketing. He also inquired about the potential impact of interest rate declines on custodial revenue for fiscal years 2025 and 2026.

Answer

Scott Cutler, President and CEO, attributed improved service gross margin to more efficient service delivery, reduced call volumes due to better service quality, and investments in technology like AI for claims automation and HSA Answers chat, seeing significant future opportunities in automation. James Lucania, CFO, declined to provide specific modeling guidance on interest rate impacts, stating that placement rates depend on market conditions at the time of placement.

David Larsen from BTIG asked about the status of the CHIP-enabled stacked card and the general availability of the 'Assist' portfolio products. He also sought clarification on the plan to get all 9.9 million HSA members to use the mobile app for authentication.

Answer

President and CEO Scott Cutler confirmed the chip card has been rolling out since last year and is driving interchange revenue. The 'Analyzer' tool is now generally available to larger clients. Regarding the app, he clarified the goal is not for every member to download it, but to require any *active* member engaging with the platform to authenticate through the mobile app by year-end to secure the perimeter.

David Larsen asked for specific details about the fraud activity, including whether it was a single actor, if it was resolved, and if the FBI was involved, and also pressed for a timeline on when gross margin might return to 65%.

Answer

President and CEO Scott Cutler clarified that the issue is fraud from multiple bad actors, not a data breach or a single entity. EVP and CFO James Lucania reinforced that it was 'good old-fashioned account takeover,' not a cybersecurity incident, and declined to provide a specific gross margin timeline, reiterating that costs are expected to normalize in the second half of the year.

David Larsen from BTIG asked incoming CEO Scott Cutler about his key accomplishments at StockX and the expertise he plans to bring to HealthEquity.

Answer

Incoming CEO Scott Cutler highlighted his career focus on applying technology to solve problems across different industries. He expressed excitement about leveraging technology, particularly data and AI, to enhance the member and client experience at HealthEquity, building upon the company's strong market position and platform to make its services more accessible and effective.

David Larsen of BTIG requested details on the enhanced rates product, asking for the total dollar amount invested, confirming its classification within HSA cash, and inquiring about the portion of cash held in short-term instruments.

Answer

President and CEO Jon Kessler clarified that enhanced rate assets are part of the HSA cash bucket, not investments, as they are principal-guaranteed and liquid. EVP and CFO James Lucania directed him to the 10-Q for a detailed maturity schedule of the ~$16.4 billion in HSA cash, noting that about $600 million is in floating-rate investments and ~$1.9 billion is repricing in the remainder of the current fiscal year.

Asked about the drivers of the strong dispensing gross margin, the potential impact of drug pricing reform, risks from single-drug price changes, the reasons for pressure on patient service margins, and for a definition of 'fully delegated risk arrangements'.

Answer

The dispensing margin improvement is due to better procurement scale and a weak comparison quarter; the drugs are Part D. Drug pricing reform is seen as a net positive. No single drug poses a major risk. Patient service margin pressure is temporary, caused by new capitated contracts that are still ramping up. 'Fully delegated' means taking Part B oncology risk with added control over utilization management, network design, and claims adjudication, not total cost of care risk.

David Larson of BTIG inquired about the drivers of the significant increase in dispensing gross margin, the impact of drug pricing reform, potential single-drug concentration risks, the cause of pressure on patient service gross margin, and the specifics of TOI's 'fully delegated' risk arrangements.

Answer

CFO Rob Carter explained that the year-over-year dispensing margin comparison was favorably impacted by a DARP clawback in the prior year, but even normalized, margins improved due to better drug procurement from increased scale. CEO Dan Vernick clarified these were Part D drugs and stated that drug pricing reform is viewed as a net positive. Mr. Vernick also confirmed there is no significant single-drug risk in their portfolio. Mr. Carter attributed patient service margin pressure to the initial, lower-margin phase of new capitated contracts, which he expects to improve. Finally, Mr. Vernick detailed that 'fully delegated' risk involves TOI managing utilization, network design, and claims for Part B oncology spend, providing greater control without taking on global risk.

David Larsen inquired about the primary drivers behind the significant 44% year-over-year growth in gross profit, the seemingly light growth in patient service revenue, and the reduction in clinic sites. He also asked about SG&A management, the status of DIR fees, the impact of lapping a major lost contract, relationships with current payers, IV margins, and the potential effects of drug price tariffs on the business.

Answer

CFO Rob Carter attributed the gross profit surge to a $1.5 million one-time rebate from a distributor contract, favorable drug pricing changes, and higher dispensary volume. CEO Dan Virnich explained that clinic count decreased due to closing unprofitable locations, but total care sites grew with new MSO partners. Virnich also confirmed SG&A will remain flat, the $15 million drag from DIR fees has been lapped, and higher drug prices from tariffs would be a net positive for the fee-for-service business. Carter and Virnich both noted new contracts will ramp up revenue throughout the year.

David Larsen questioned the robustness of Astrana's data collection and processing, asking about the accuracy of risk coding for revenue and the completeness of claims data to mitigate unfavorable prior period development. He also asked for the specific cost trend percentage for the quarter.

Answer

President & CEO Brandon Sim attributed their data's stability and predictability to their unique delegated model, where they act as a pseudo-single payer, processing authorizations and claims in-house. This provides real-time visibility and minimizes prior period development issues. He confirmed the Q2 cost trend was just under 4.5% for the legacy business and that their risk adjustment practices are accurate and stable.

David Larsen asked about the robustness of Astrana's data collection and the risk of unfavorable prior period development, given industry-wide issues. He also inquired about the process for ensuring coding accuracy and requested the specific cost trend for the quarter.

Answer

President & CEO Brandon Sim highlighted that Astrana's fully delegated, pseudo-single-payer model provides real-time visibility into claims and authorizations, which significantly mitigates prior period development risk. He noted their in-house RAF and HEDIS programs ensure coding accuracy. He confirmed the Q2 cost trend for the legacy business was just under 4.5%, with MA and Commercial below that figure and Medicaid slightly above.

David Larsen asked about the robustness of Astrana's data collection process in preventing unfavorable prior period development and ensuring revenue accuracy through coding. He also asked for the specific medical cost trend percentage for the quarter.

Answer

President & CEO Brandon Sim attributed the company's stability to its unique, delegated single-payer model and in-house data infrastructure, which provide real-time visibility into claims and costs, preventing the negative PPDs seen elsewhere. He noted that coding accuracy is ensured through an in-house, NCQA-certified program, resulting in a stable 1.02 RAF. Sim confirmed the Q2 cost trend for the legacy business was just under 4.5%.

David Larsen from BTIG asked for the percentage of clients using the self-service portal and confirmed if the guidance includes risks from potential tariffs, which could imply future upside.

Answer

CFO Anna Bryson confirmed that the 'majority' of clients are now using the portal. She agreed that the guidance's cautious approach to policy uncertainty could present upside if budgets remain stable. She emphasized that Doximity is well-positioned long-term, as any disruption would likely push pharma to focus spending on high-ROI channels like Doximity.

David Larsen asked for an explanation for Doximity's strong results in contrast to pressures seen in the CRO and biopharma sectors, and also requested revenue sizing for new products and insight into the product pipeline.

Answer

Co-Founder Dr. Nate Gross differentiated Doximity by noting it serves post-launch drugs, unlike CROs focused on early trials, and that drugs affected by the IRA are a small part of its revenue. CEO Jeff Tangney sized the point-of-care products at 20% of pharmaceutical sales and stated that the future product roadmap is a 'trade secret' but that AI presents a similarly large opportunity.

David Larsen from BTIG asked about the treatment mix between services like egg freezing and transfers, the Amazon partnership, and whether former clients ever return to Progyny.

Answer

CEO Peter Anevski noted that the treatment mix has returned to more normal, pre-2024 patterns, and clarified that egg freezing is a higher-priced service than a transfer-only cycle. He specified the Amazon deal is a partnership with their Health Benefits Connector program, not a direct client win, and confirmed that former clients have returned to Progyny in the past.

David Larsen of BTIG asked about the potential impact of tariffs on medication costs and the company's ability to pass them on. He also inquired about the political environment, specifically how potential policy changes regarding IVF coverage could affect the business.

Answer

CEO Peter Anevski responded that existing tariffs have no material impact. For potential future tariffs, he noted that while raw materials for drugs could be affected, Progyny has flexibility in its client contracts and would work with partners to mitigate costs. Regarding the political climate, he referenced a recent Executive Order aimed at protecting IVF access and affordability as a positive development, but refrained from speculating on the final policy recommendations.

David Larsen from BTIG asked about competitors offering low dollar-maximum benefits and whether Progyny offers a similar product to capture that demand, suggesting it could relate to winning more 'blue collar' accounts.

Answer

CEO Pete Anevski strongly refuted the premise, clarifying that new clients continue to adopt robust 2- and 3-cycle benefits, not skinny plans. He reiterated Progyny's position against arbitrary dollar-maximum benefits, calling them inequitable and clinically suboptimal because they force members to make decisions based on 'economic scarcity' rather than medical need.

David Larsen of BTIG asked about the deployment status of new technology solutions, sought confirmation on the timeline for the unique payer rate reset, and inquired about the potential impact of the proposed Medicare fee schedule.

Answer

CEO David Bourdon confirmed the digital check-in tool is fully deployed and clarified other tech initiatives. CFO Ryan McGroarty noted the final rate decrease from the one payer occurred in March 2025 and that contract renewals are staggered. Bourdon added that while early Medicare rate proposals look positive, Lifestance has limited exposure to potential legislative changes affecting exchange or Medicaid plans.

David Larsen of BTIG inquired about how MVE's performance compared to internal expectations and the overall market sentiment from customers regarding clinical trial activity and demand, given earlier pressures in the CRO space.

Answer

CFO Robert Stefanovich confirmed MVE performed well with 8% growth, improved demand, and margin expansion to 44.9%. Chief Scientific Officer Dr. Mark Sawicki described the cell and gene market as resilient, evidenced by Cryoport's growing trial count and strong CDMO partner results, noting that any funding challenges are concentrated in earlier-phase programs that do not significantly impact Cryoport's portfolio.

David Larsen asked about the impact of the broader macro environment, including potential tariffs and drug pricing policies, on client demand. He also questioned how tariffs might affect Cryoport's cost of goods and inquired about the drivers of the product revenue growth.

Answer

CEO Jerrell Shelton and Chief Scientific Officer Dr. Mark Sawicki explained that Cell & Gene therapies are largely insulated from tariffs and pricing pressures, as source materials are typically domestic. Regarding costs, Shelton stated they mitigate tariff impacts through supply chain diversification and will use surcharges to protect margins, a proven strategy. He also confirmed product revenue grew 2% and expects the trend of improving North American demand to continue.

David Larsen asked about the drivers of the 500+ basis point gross margin expansion, the sustainability of the Q4 margin level, revenue expectations for IntegriCell, and details on MVE stabilization.

Answer

CFO Robert Stefanovich attributed margin expansion primarily to cost-saving measures, with upward mobility expected in 2025, though new initiatives like IntegriCell may create initial drag. CSO Dr. Mark W. Sawicki stated IntegriCell has signed its first contracts but expects significant revenue contribution in 2026. Executive Jerrell Shelton reiterated that stabilizing order patterns cut across the entire MVE business.

David Larsen of BTIG asked for details on the MVE products business, including dewar and freezer demand, and requested an update on the BioStorage business's client onboarding and the progress of the new IntegriCell service.

Answer

CEO Jerrell Shelton described the MVE market recovery as uneven, with weaker freezer demand in North America and EMEA but a pickup in APAC (ex-China). CFO Robert Stefanovich noted that despite lower revenue, the products business maintains a robust gross margin over 42% and is cash flow positive. CSO Dr. Mark Sawicki confirmed that BioServices revenue grew 12% and new projects are ramping up. He also mentioned that the IntegriCell service launched in October, has signed its first contracts, and will contribute more significantly to revenue in 2025.

David Larsen of BTIG inquired about the year-over-year growth rate for 503A revenue and the outlook for GLP-1 revenue in the second half of the year. He also asked for more details on the company's preventive care initiatives, such as calorie and water intake tracking.

Answer

CFO Yemi Okupe clarified that the company thinks about the weight loss specialty in aggregate rather than by fulfillment channel (503A vs 503B) and expects robust growth to continue. CEO Andrew Dudum elaborated on the preventive care vision, explaining that the platform will layer in technology like AI-powered nutritionist agents and cognitive behavioral therapy tools to enhance personalized treatment plans and improve patient adherence and outcomes.

David Larsen asked about the company's willingness to accept insurance and inquired about its relationship with Eli Lilly, including any connection to LillyDirect.

Answer

CEO Andrew Dudum expressed 'very, very low interest' in accepting insurance, citing its complexity and inefficiency for consumers with high-deductible plans. He affirmed the company's commitment to a cash-pay model. Regarding Eli Lilly, he stated that while Hims & Hers offers branded Lilly products through the general supply chain, there is no direct partnership, though conversations with Lilly's leadership are ongoing.

David Larsen from BTIG asked for more details on the MedVision software for clinics, the product roadmap for physician offices, and the company's visibility into implementation schedules for the remainder of the year.

Answer

Randall Lipps, Founder, Chairman, President & CEO, described MedVision as a critical, fully integrated solution for managing medications in outpatient settings, which is an easy add-on for customers. He also stated that the company has 95-100% visibility into its installation schedule for the rest of the year and into next year, reflecting significant process improvements.

David Larsen asked about the expected progression of revenue growth, noting a seeming slowdown in the year-over-year guidance, and inquired about the sales progress of XT Amplify. He also asked for a characterization of the current hospital buying environment.

Answer

CEO Randall Lipps expressed strong confidence in the continued momentum of the XT Amplify portfolio, highlighting its role in strategic customer conversations about efficiency and future growth. He stated that the hospital buying environment has 'definitely improved' and that the company has not seen any slowdown in its revenue or installation processes, though sales cycles could potentially slow.

David Larsen asked about the new Annual Recurring Revenue (ARR) metric, specifically its expected percentage of total 2025 revenue and long-term goals. He also questioned if 2025 marks the final year of the XT upgrade cycle runoff, seeking clarity on long-term product revenue growth drivers.

Answer

CFO Nchacha Etta explained that ARR constitutes about 53% of total revenue and is expected to grow, driven by double-digit growth in Specialty Pharmacy Services. CEO Randall Lipps addressed the long-term outlook by stating that the innovation roadmap extends beyond the current cycle, with new connected devices for other areas of medication management increasing the addressable market. He emphasized that future platform upgrades will also drive growth.

David Larsen requested details on the sales force structure and go-forward strategy, as well as information on the company's CRM platform, backlog measurement, and how much of 2025 revenue is covered by existing backlog.

Answer

CEO Randall Lipps explained that the sales force has evolved to focus on enterprise-level solutions and relationship building, leading to better performance and predictability. He did not disclose specific numbers. Regarding backlog, he noted that connected devices are typically installed over 12-18 months but did not provide a specific coverage figure for 2025 revenue, emphasizing that investments in systems, people, and processes are driving more consistent results.

David Larsen from BTIG asked for the quarter's organic year-over-year growth rates, questioned the performance difference between GastroPlus and Monolix, and inquired about services bookings and current market sentiment.

Answer

CFO Will Frederick provided the organic growth rates: total revenue down 3%, software up 2%, and services down 13%. CEO Shawn O’Connor explained that Monolix's higher growth is partly due to taking market share. He also noted that while services backlog is up, project start dates are being delayed, and the client buying environment remains cautious.

David Larsen of BTIG inquired about the software segment's organic revenue growth, the reason for the dip in the fee-based renewal rate, and how to reconcile strong software sales with delayed services projects. He also asked for commentary on his thesis that biopharma needs SLP's software for trial efficiency and the potential impact of biopharma tariffs.

Answer

Executive William Frederick explained that organic software growth was 8% and the renewal rate dip to 90% was due to a single large, six-figure renewal that closed in Q3. Executive Shawn O'Connor added that software is viewed as essential infrastructure and is less impacted by cost-cutting than services, where clients can more easily delay project starts. O'Connor also noted that clients are now signing contracts for work scheduled later in the year, contributing to the back-half weighted forecast and overall client caution amid global tariff and regulatory uncertainty.

David Larsen asked about the significant rebound in organic software revenue growth to 18% in Q1, questioning the drivers behind the sequential improvement from negative 6% last quarter. He also inquired about pricing trends, the role of software as a leading business indicator, GastroPlus growth, and the geographic breakdown of the Asian market.

Answer

Executive Shawn O'Connor attributed the strong software performance to the MonolixSuite (CPP) platform, which saw significant uptake and a full commitment from a large pharma client for its PK Analytics application. He also highlighted major license activity in the QSP business and 30% growth in the Asian market, led by Japan. O'Connor confirmed pricing increases are in the mid-single digits and agreed that software is a key indicator of the business's health. He noted GastroPlus growth was approximately 4%.

David Larsen questioned the 6% organic decline in Q4 software revenue and its comparison to internal expectations. He also asked about the dip in Q4 software gross margin and the negative services gross margin, inquiring if the latter was due to Pro-ficiency and seeking color on clinical trial activity trends.

Answer

Executive Shawn O'Connor confirmed the Q4 software revenue decline was due to a couple of renewal slippages and persistent challenges in the Asian market. Executive William Frederick clarified the services gross margin was impacted by a $2.5 million reclassification of international employee expenses from G&A into services cost of revenue, which was a true-up for the full year. Shawn O'Connor added that Pro-ficiency's business is valued across all therapeutic areas, particularly in complex trials, and is not concentrated in any single area.

David Larsen from BTIG asked about the potential impact of a 25% tariff on the pharmaceutical industry, how it would affect Evolent's model, and whether the increased costs could be passed through to clients.

Answer

Executive John Johnson explained that Evolent's Performance Suite contracts generally include clauses that allow for capitation rates to be updated in the event of significant unit cost changes, such as a tariff. Consequently, he does not expect such a policy would have a meaningful impact on the company's profitability.

David Larsen questioned the company's pricing power, asking if a 12% oncology trend is the new normal and if contracts can capture upside from favorable MA policy changes.

Answer

CFO John Johnson stated he does not believe a 12% annual oncology trend is the new normal or sustainable long-term. He explained pricing includes a standard inflator plus a formulaic update for population changes, but high increases are not a new baseline. CEO Seth Blackley added that Evolent's value is creating savings versus alternatives. Johnson also confirmed there is no direct contract linkage to capture upside from MA plan premium changes.

David Larsen of BTIG, LLC asked about the linkage between Evolent's rates and health plan premium increases, and also inquired about the potential impact of the upcoming election on the business.

Answer

John Johnson clarified that Evolent's rates are not directly linked to health plan premiums. CEO Seth Blackley added that the company does not expect the election outcome to significantly impact its business, as the fundamental need for specialty cost management solutions persists across all payer types regardless of the political environment.

Noting the growth in capitated revenue, he asked for more detail on the source of this growth, the company's visibility into these new members, and their outlook on capitated EBITDA, especially given the pressures seen by peers.

Answer

The executive confirmed the capitated growth was organic from existing contracts. While it's early in the year, the book is contributing positively to EBITDA, and they expect that to continue. He reiterated their cautious strategy of only taking on risk when they believe they are being adequately compensated, which is why they are performing well despite peer pressures.

David Larsen from BTIG sought clarification on the guidance assuming no new market entry costs and questioned the rationale for remaining in capitated contracts with a low 2% gross margin, which would seem to imply a negative EBITDA margin.

Answer

CEO Parth Mehrotra corrected that the guidance includes ongoing investment costs for markets entered in recent years, but assumes no *incremental* new markets. Regarding margins, he directed attention to the press release, which shows the capitated book generated a positive contribution margin after claims were incurred, which was the key financial objective.

David Larsen of BTIG asked for the company's thoughts on the recent physician fee schedule rule, particularly regarding higher reimbursement for advanced primary care, telehealth reimbursement, and the company's capabilities or plans in home health.

Answer

CEO Parth Mehrotra responded that while there are headwinds and tailwinds in the fee schedule, none are material enough to change the company's long-term outlook, and all are factored into guidance. He explained that while Privia has care managers for chronic conditions, it is not a major player in home health today, though it's a capability that could be expanded over time as the company takes on more risk.

David Larsen inquired about the key drivers for the strong corporate revenue growth, specifically asking for more details on the accelerating VA deployment and the government sales process. He also asked for the expected timeline for the SoHo channel's revenue decline to stabilize and questioned the potential impact of tariffs on the business.

Answer

Johnny Hecker, CRO and EVP of Operations, explained that corporate growth was driven by strong fax usage, adoption of advanced solutions, and new customer acquisition. He noted the recent FedRAMP high certification is creating new public sector opportunities, though significant revenue impact is not expected until after 2025. Regarding the SoHo channel, both Hecker and CEO Scott Turicchi stated that the revenue decline is a strategic, managed process focused on profitability, and its stabilization timeline is uncertain as it depends on the LTV to CAC of advertising spend. Turicchi also confirmed the company sees no direct impact from tariffs.

David Larsen from BTIG inquired about the market uptake of Consensus's advanced products, such as Clarity and its AI capabilities, and sought clarification on the drivers behind the significant acceleration in corporate revenue growth.

Answer

Johnny Hecker, CRO and EVP of Operations, explained that the Clarity product is in full production, using AI to extract structured data from unstructured documents for clients, with a focus on replicable solutions for prior authorization and clinical document classification. CEO R. Turicchi clarified that the reported 7.1% corporate growth was influenced by prior-year account cleanups, with a normalized rate of 5.5%. He anticipates a smooth progression toward the 2025 growth target of around 6.25%. Johnny Hecker added that market conditions have normalized post-pandemic and the company's realigned go-to-market strategy is showing positive results.

David Larsen requested the specific Q1 revenue from the DHA contract, its projected annualized run rate by Q4 2025, and details on platform usage to better assess the risk of contract non-renewal.

Answer

CFO and COO Mark Hirschhorn did not break out the specific DHA revenue but confirmed it will be the largest component when fully deployed. CEO Ido Schoenberg highlighted that the platform serves 9.6 million military members and families globally for scheduled visits and aligns with all four of the DHA's strategic pillars, making renewal highly probable.

David Larsen sought confirmation that the Converge platform deployment for the government is driving revenue growth as expected and asked for a breakdown of how much of the EBITDA improvement comes from cost reduction versus revenue mix.

Answer

CEO Dr. Ido Schoenberg confirmed the Converge deployment is proceeding as planned. CFO & COO Mark Hirschhorn clarified that while the vast majority of DHA revenue is recurring, there are some one-time implementation fees. He estimated that the EBITDA improvement is driven primarily by the shift to high-margin subscription revenue, with cost reductions contributing approximately one-third of the savings.

David Larsen of BTIG requested more detail on Amwell's cost reduction programs and asked about the nature of its client relationships, specifically regarding the delivery of ROI and clinical outcomes data.

Answer

CFO Mark Hirschhorn confirmed cost initiatives are ongoing to right-size the business but did not provide a 2025 forecast. CEO Ido Schoenberg described client relationships as 'intimate,' emphasizing that providing measurable ROI and outcomes data is a key feature of the platform and a core part of their high-margin revenue strategy.

David Larsen noted a potential $120 million gap between his annualized run-rate projection and the company's $430 million midpoint guidance for 2025. He asked for more conviction on bridging this gap, specifically how much of the required revenue is already contracted versus how much is a "go-get."

Answer

CFO Norman Rosenberg broke down the path to the guidance. He projected a ~$30 million increase in the transportation business to ~$225 million, which he feels is largely contracted. He noted the payer programs and PTI acquisition would contribute more than the analyst's estimate. He concluded that the remaining "go-get" portion is likely in the $25 million range, primarily within the municipal mobile health space, where contracts are in the pipeline but not yet signed.

David Larsen asked for the final 2024 medical cost trend and the company's expectation for the 2025 trend.

Answer

CEO Steven Sell and CFO Jeffrey Schwaneke stated the final recorded medical cost trend for 2024 was 6.8%. For 2025, the budgeted net trend is 5.3%. They provided a bridge: the 6.8% trend is reduced by 50 bps for the full-year impact of the 2 Midnight Rule and by another 100 bps for the effect of payor bid changes (increased member cost-sharing).

David Larsen requested insight into the company's visibility for technology revenue growth beyond Q1, noting that the full-year guidance of 13% implies a significant acceleration from the Q1 growth rate of approximately 10%.

Answer

CEO Dan Burton and CFO Jason Alger affirmed they have high visibility due to the recurring nature of over 90% of total revenue. The expected acceleration is driven by the revenue ramp from deals signed in 2024 and early 2025. Alger specifically mentioned that revenue from certain health information exchange clients (Ninja Universe) will begin later in 2025 due to longer implementation times, contributing to the back-half weighted growth.

David Larsen from BTIG asked about broader market trends like labor and inflation, the election's impact, and the company's EBITDA and margin expectations for 2025.

Answer

CEO Dan Burton observed that the market is normalizing, with easing labor and inflation pressures allowing clients to focus on innovation like AI, driving demand for the Ignite platform. He reiterated confidence in achieving approximately 50% adjusted EBITDA growth in 2025, driven by a mix shift to higher-margin technology revenue and operating leverage in R&D and Sales & Marketing. CFO Jason Alger added that more margin color would be provided in early 2025.

David Larsen inquired about the demand environment in the health system and med-tech spaces, and also asked for an update on the competitive landscape, particularly against rivals like Veeva and IQVIA, and any color on win rates.

Answer

CEO Kevin Coop described demand as 'robust' across provider and med-tech markets but noted that challenges include elongated sales cycles and increased budget scrutiny. CFO Rick Booth addressed the competitive question, stating they see strong support on renewals but pressure on upsells. He mentioned that IQVIA is a constant competitor but has not observed a profound shift, and did not report significant competitive losses to Veeva.

Requested more details on the trusted partners ecosystem, including its revenue model, revenue contribution, and any illustrative anecdotes, highlighting its value as a one-stop shop.

Answer

Rajeev Singh explained that the ecosystem's power comes from deep, closed-loop integration with clinically-vetted partners, which allows Accolade to prove value and drive better outcomes. This integration and curation is why customers purchase these solutions through Accolade. The ability to guide clients to the right partner and demonstrate ROI is a key market differentiator.

Asked about the nature and size of the Q1 revenue timing benefit, whether the prior long-term guidance of $1 billion by fiscal '29 is withdrawn, and for comments on the broader market environment and its impact on pricing.

Answer

The Q1 revenue timing benefit was about $6 million from a performance guarantee recognized earlier than expected. The $1 billion revenue target is now expected about a year later than fiscal '29, but the adjusted EBITDA margin expansion goals remain intact. The broader environment of rising healthcare costs continues to be a tailwind, driving demand for Accolade's services.

Asked about measuring activation rates for trusted partner vendors, what typical rates are, and how much revenue comes from these partners (excluding PlushCare and EMO).

Answer

Activation rates vary by service and population need. An example was given for a diabetes vendor where initial year utilization might be around 1.5% of a total population, with the opportunity to grow that rate each year. It was noted that partners see significantly higher utilization (e.g., 2x) when Accolade is involved. Revenue from these partners is currently a small but strategically important and rapidly growing part of the business.