Scott Schoenhaus

Scott Schoenhaus inquired about any changes to the underlying assumptions for the reiterated guidance, particularly regarding Q1 outlook, and asked about the guidance's assumptions for biotech market recovery and cancellation projections.

Answer

CEO Shawn O'Connor confirmed no significant changes to guidance assumptions since October, noting Q1 seasonality and challenging Pro-ficiency comps. He stated that the guidance does not project a significant uptick from biotech funding but acknowledged it as potential upside, and discussed ongoing software renewal consolidations and service project cancellations as normal business risks factored into forecasting.

Scott Schoenhaus asked if anything had changed in the underlying assumptions for the 2026 guidance, particularly regarding services caution, software headwinds, and the first-quarter outlook, and whether the guidance assumes a biotech market recovery.

Answer

Shawn O'Connor (CEO, Simulations Plus) confirmed no significant changes to the 2026 guidance assumptions, noting normal seasonality and challenging Q1 comps for Proficiency. He clarified that the guidance does not project a significant biotech funding uptick, making it a potential upside, and discussed how forecasting accounts for software renewal consolidations and service project cancellations.

Scott Schoenhaus of KeyBanc Capital Markets questioned the steep sequential decline in the implied Q4 margin guidance and asked for details on the significant drop in software renewal rates.

Answer

CEO Shawn O’Connor explained that the Q4 margin pressure is primarily due to a top-line revenue step-down, as cost savings from the recent reorganization will not fully impact results until later. He attributed the lower renewal rates to specific client consolidations affecting GastroPlus and Monolix, but stated he expects the long-term rate to return to the historical 90-95% range.

Scott Schoenhaus from KeyBanc Capital Markets asked for more detail on the services business, particularly regarding demand for Medical Communications (MC) services and cross-selling opportunities. He also requested clarification on the assumptions driving the guidance for a moderate Q3 and a steep revenue ramp in Q4.

Answer

Executive Shawn O'Connor clarified that the Pro-ficiency (ALI) software business is tied to clinical trial starts, which were slow in Q2. The MC unit, however, won a significant contract with an existing client, expanding support to a new drug. He highlighted cross-selling as a key strategy to increase average revenue per customer. O'Connor explained the shift in seasonality, with a stronger Q4, is driven by the more continuous revenue from the acquired ALI/MC businesses and the back-half loading of service project starts.

Scott Schoenhaus asked for clarity on the company's expected back-half revenue ramp, questioning if anything had changed in the last 90 days. He also followed up on whether the service revenue delayed from Q1 would fully flow into Q2 or if there would be an 'air pocket' in the quarter.

Answer

Executive Shawn O'Connor clarified that the commentary was meant to manage expectations for Q2 consensus, not to signal a major shift in seasonality. He noted that guiding to 24% of full-year revenue in Q2 is not a significant deviation from historical norms (e.g., 26% in the past). He explained that while some project activity will naturally push to the back half of the year as budgets are finalized, it does not represent a major change in their outlook.

Scott Schoenhaus asked for details on the assumptions behind the 10% to 15% organic growth guidance for fiscal 2025, particularly regarding the biotech end market. He also requested more color on the GastroPlus renewal slippage mentioned in the prepared remarks, asking if it involved a large pharma client and the reason for the pushout.

Answer

Executive Shawn O'Connor explained that the fiscal 2025 guidance is conservatively based on current market conditions and does not assume a significant reacceleration in the biotech market, though the company is poised to benefit from any improvement. He clarified that the GastroPlus renewal 'slips' were primarily timing issues related to paperwork and not non-renewals. However, he did note one instance where a client's M&A activity and site closure led to a change in their license needs.

Scott Schoenhaus asked if the four METHODIQ molecules would be non-prescription or prescription. He also inquired about ODDITY's strategy for leveraging technology to expand its physician network for the prescription side, given the shortage of dermatologists.

Answer

Lindsay Drucker Mann, CFO of ODDITY, clarified that the four METHODIQ products are non-prescription (OTC and cosmetic), and ODDITY Labs' molecules are not expected to be prescription in the near to medium term. She explained that ODDITY uses third-party networks of board-certified physicians, with technology focused on providing clinicians strong signals from user inputs (demographics, vision tools for lesions) and integrating records. The METHODIQ app also facilitates progress tracking and direct clinician chat to drive compliance and success.

Scott Schoenhaus inquired about Methodic's four molecules, specifically whether they are prescription or non-prescription, and potential margin differentials. Schoenhaus also asked about Oddity's strategy for leveraging technology to expand its physician network, given the shortage of dermatologists.

Answer

Lindsay Drucker Mann, CFO, ODDITY, clarified that Methodic's four products are non-prescription (OTC and cosmetic), and ODDITY Labs will not produce prescription products in the near to medium term. She explained that Oddity uses third-party networks of board-certified physicians and can scale to other practitioners. Technology supports clinicians by providing strong signals from intake funnels, integrating with provider systems, and enabling progress tracking and direct chat within the Methodic app to enhance compliance and outcomes.

Scott Schoenhaus of KeyBanc Capital Markets asked about the expansion opportunity for Brand 3 beyond acne into more acute conditions like eczema, and how Oddity views its trajectory as it evolves into a healthcare technology company.

Answer

CEO Oran Holtzman confirmed the significant opportunity, stating the initial launch will focus on acne and hyperpigmentation, where they have strong offerings. While products for eczema are ready, the initial push will be smaller. He highlighted that a large portion of Oddity's existing 60 million users suffer from these conditions and were used as design partners, providing a strong foundation for the launch and future category expansions.

Scott Schoenhaus of KeyBanc Capital Markets asked for clarification on why Brand 3 will have a lower gross margin and inquired about the operational workflow of the telehealth platform. He also asked how Oddity balances organic development versus M&A at Oddity Labs.

Answer

Global CFO Lindsay Drucker Mann explained that Brand 3's lower gross margin is due to the prescription component, which has higher costs like doctor networks, but affirmed the overall unit economics are expected to be very strong. CEO Oran Holtzman added that for Oddity Labs, the company uses a dual approach: pursuing M&A for strong pharma teams and partnering with external platforms to accelerate discovery and supplement internal capacity.

Scott Schoenhaus asked if Doximity gained more market share this quarter than its typical 'double the market share' rate, what drove this, and how market share dynamics are factored into the back-half guidance.

Answer

Anna Bryson, CFO, clarified that annual growth is the best measure, with Doximity growing at about two times the market rate (15% vs. 7% market growth for calendar 2025). She attributed this to unique native solutions and industry-leading ROI, expecting continued outperformance despite market fluctuations.

Scott Schoenhaus asked if Doximity took more market share this quarter than its typical "double the market share" rate, what drove it (e.g., self-service portal, outsized growth), and how market share dynamics are contemplated in the back-half guidance.

Answer

CFO Anna Bryson clarified that annual perspective is best for market health, stating Doximity grew about 15% for calendar year 2025, roughly two times the market growth rate (estimated 5-7%). She advised against making assumptions based on a single quarter due to the integrated programs smoothing the upsell cycle. She expects similar market growth rates next year and believes Doximity can continue to grow at two times the market rate, noting strong upfront pacing.

Scott Schoenhaus from KeyBanc Capital Markets asked about the factors contributing to Doximity's increased business visibility and what future steps could be taken to enhance it further.

Answer

CFO Anna Bryson confirmed visibility is better than ever, crediting stable client budgets and internal initiatives. Key steps include moving clients to longer-term, multi-module integrated programs with immediate start dates and leveraging the client portal for better upsell cycle insights. She expects visibility to improve further as more clients adopt these 12-month integrated offerings.

Scott Schoenhaus asked for clarification on why the percentage of subscription revenue under contract at the start of the year is 'just under 70%', compared to 'just over 70%' a year ago. He also inquired about the expected mix of renewals versus mid-year upsells for the remainder of the guided revenue.

Answer

CFO Anna Bryson clarified that while the initial percentage was higher last year, strong upsells throughout the year meant the starting contracted amount was closer to 60% of the final total revenue. Therefore, starting FY2026 at 'just under 70%' is a prudent position. She added that the current guidance is more heavily weighted towards renewals, reflecting caution about the variability of upsells in the current environment.

Scott Schoenhaus asked how the emergence of larger multi-million dollar brand deals, including a new $15 million-plus brand, should influence expectations for revenue opportunities and budget unlocks throughout the year.

Answer

CFO Anna Bryson highlighted the rapid growth in deal size, noting the first $10 million-plus brand was only two years ago. While stating there seems to be 'no limit yet' to brand investment, she cautioned that it is 'too soon to tell' how these large upfront commitments will impact the mid-year upsell season, as the focus has been on the annual buying cycle.

Scott Schoenhaus asked about market share dynamics, questioning if the new client portal is helping Doximity regain share, and inquired about the outlook for market conditions and share gain potential next year.

Answer

CEO Jeff Tangney acknowledged that the portal addresses a past weakness of not being the 'easiest to buy' despite having the best product. CFO Anna Bryson commented on the market outlook, stating that while pharma remains under-indexed digitally, near-term budget growth is expected to stay in the mid-single digits following a post-pandemic 'digital detox.'

Scott Schoenhaus inquired about the 25% Network Solutions growth, AccessOne expanding TAM in life sciences, and opportunities for incremental Network Solutions revenue via the AccessOne acquisition.

Answer

CFO Balaji Gandhi clarified that AccessOne aligns with the increase in the TAM for payment solutions ($6 billion), not directly Network Solutions. He noted AccessOne's strong footprint with health systems and medical groups, emphasizing its near-term opportunity in payment solutions.

Scott Schoenhaus asked about the opportunities for incremental network solutions revenue via the AccessOne acquisition, noting its embedded presence in health systems and specialty network groups.

Answer

Balaji Gandhi (CFO) clarified that the AccessOne acquisition primarily aligns with the increase in Phreesia's payment solutions TAM by $6 billion, not network solutions, despite AccessOne's strong footprint with health systems.

Scott Schoenhaus highlighted the strong growth in subscription revenue per provider client and asked about the ramp-up and traction of new modules, including the recently monetized Phreesia on Call.

Answer

CFO Balaji Gandhi confirmed the metric's strength is a reflection of several factors: adoption of new products, expansion within the existing client base, and a focus on landing larger new clients. He noted that the growth is broad-based across recently launched products rather than being driven by a single module.

Scott Schoenhaus asked for an update on the three acquisitions from fiscal 2024 and their expected contribution in fiscal 2026. He also questioned if the company would consider share repurchases as a form of capital deployment.

Answer

Executive Balaji Gandhi clarified that the acquisitions have been contributing to growth as expected. He also stated that while the company values flexibility, its priority for capital deployment remains on driving profitable, durable growth, rather than share repurchases.

Scott Schoenhaus asked for an update on the monetization of recent acquisitions like Access and ConnectOnCall and the company's strategy for growing subscription revenue per client.

Answer

Executive Balaji Gandhi stated that while it's too early to claim full monetization, Phreesia is pleased with the progress. He emphasized focusing on total revenue per client, which is expected to increase, rather than isolating the subscription revenue component.

Scott Schoenhaus requested more color on the fiscal 2026 targets, specifically the growth assumptions for Network Solutions versus the subscription business, and inquired about potential M&A opportunities.

Answer

Executive Balaji Gandhi indicated that Network Solutions will continue to grow as a percentage of total revenue over time but declined to provide specific line-item forecasts. He also clarified that comments about free cash flow generation were about strengthening the company and investing internally, not signaling specific inorganic M&A plans.

Scott Schoenhaus questioned the ceiling for HealthEquity's app adoption, given 1.7 million downloads, and the potential for incremental gross margin improvement with broader adoption.

Answer

Scott Cutler, President and CEO, explained that the focus is on active, engaged members and improving the overall engagement and experience through the app, rather than a direct gross margin improvement from app adoption.

Scott Schoenhaus from KeyBanc Capital Markets asked for a breakdown of the $3 million fraud cost, specifically regarding insurance reimbursements, and requested details on how new fraud detection investments are preventing malicious activity.

Answer

President and CEO Scott Cutler and CFO James Lucania clarified that the $3 million represents direct reimbursements to members, down from $11 million in Q4, and that there is no update on insurance recovery, nor is any included in the guidance. Cutler detailed that new investments are successfully targeting account takeovers, fraudulent fund transfers, and card-not-present transactions, resulting in sequential monthly declines in fraud.

Scott Schoenhaus drilled down on the cadence of service-side gross margins, asking whether the expected improvement in the second half of the year is driven more by an assumption of less fraud or by technology-driven efficiencies.

Answer

EVP and CFO James Lucania confirmed the improvement assumes both factors: stemming the event-driven fraud costs and continuing the underlying progress in reducing unit service costs. President and CEO Scott Cutler added that strategic investments in a secure mobile experience and service modernization to automate member interactions are key to driving down costs while improving the member experience.

Scott Schoenhaus of KeyBanc asked about the drivers behind strong investment account growth and inquired about what the company is seeing from employers regarding a softening job market and if guidance accounts for it.

Answer

President and CEO Jon Kessler attributed investment growth to the BenefitWallet transition offering new options, refined year-round digital outreach strategies, and market gains. On the job market, he noted guidance is macro-neutral. Vice Chair Dr. Steve Neeleman added that the sales team remains enthusiastic, as economic softening often drives employers toward cost-efficient consumer-directed plans like HSAs, providing a partial hedge.

Scott Schoenhaus of KeyBanc Capital Markets sought more detail on the selling season, asking for clarification on the 'demographics' comment. He also asked if recent tech layoffs were causing a spike in utilization.

Answer

CEO Peter Anevski clarified that 'demographics' referred to the industry mix of early client wins, which have higher utilization rates, thus yielding comparable expected revenue despite slightly lower committed lives so far. He also stated that the company is not seeing any change in utilization patterns related to tech industry layoffs.

Scott Schoenhaus asked for clarification on the low single-digit growth guidance and apparent margin compression for 2025, and whether new services or business model changes could improve visibility following 2024's demand variability.

Answer

CFO Mark Livingston clarified that underlying revenue growth is in the teens when excluding the departed client, and margins would be expanding if not for specific P&L investments in platform integration. CEO Peter Anevski explained that since member engagement is clinical, the company lacks deep insight into personal decisions that cause short-term timing variability.

Scott Schoenhaus from KeyBanc sought clarification on the 2025 lives forecast, asking if the 300,000 federal lives were still 'consulting only.' He also requested more color on the industry and size distribution of the newly added clients.

Answer

CEO Pete Anevski confirmed the 300,000 federal lives remain on a benefit that does not include the full medical services. He and President Michael Sturmer described the new client cohort as diverse, spanning nearly two dozen industries and having a size distribution that closely mirrors Progyny's existing client base, with a particularly strong season for 'jumbo' accounts.

Scott Schoenhaus from KeyBanc Capital Markets asked about the resilience of software demand by customer cohort, sought more detail on Q4 renewal discussions, and requested an update on the cloud versus on-premise revenue mix.

Answer

CFO Richie Jain stated that demand remains strong, with constructive renewal and scale-up conversations ongoing with large pharma customers, most of which occur in Q4. He acknowledged the biotech segment remains challenging. He clarified that the year-over-year decline in on-prem revenue was due to the timing of multi-year deals, while hosted revenue experienced strong growth.

Scott Schoenhaus followed up on a comment about a large customer renewal, asking for details and whether it involved a shift to hosted software. He also asked if the interest in alternatives to animal testing was broad-based across client tiers.

Answer

CFO Geoffrey Porges clarified that a large contract had elements renewed in both Q4 and Q1, contributing to on-prem revenue, and separately noted the Novartis deal boosted drug discovery revenue. CEO Ramy Farid stated that interest in their tox solution has increased from biotech companies, while discussions with large pharma were already deeply engaged prior to the FDA's announcement.

Scott Schoenhaus of KeyBanc, represented by Steve, asked for the current percentage split of the software business between cloud-hosted and on-premise contracts.

Answer

CFO Geoff Porges stated that in Q3, hosted software was 28% of total software revenue, up from 23% in the prior-year period. He noted this percentage fluctuates quarterly and will see a temporary increase in on-prem revenue in Q4 due to the Novartis deal, but advised investors to focus on the long-term upward trend for hosted adoption.

Scott Schoenhaus of KeyBanc Capital Markets asked for more detail on the $35 million revenue impact from deal pushouts, including the types of clients involved. He also questioned the strategic shift toward hiring sales staff with more domain expertise.

Answer

CEO Dave Guilmette clarified that the delayed deals were primarily smaller, mid-market opportunities and specialty solutions that were pushed from H2 2025 into 2026. He explained that his direct observations in the market revealed a need for deep domain expertise, particularly for complex solutions like leaves and navigation, to better articulate Alight's value proposition and improve deal closure rates.

Scott Schoenhaus asked for an updated outlook on project revenue for the remainder of the year and requested more detail on the reported 30% growth in the sales pipeline.

Answer

CEO David Guilmette and CFO Jeremy Heaton responded. Guilmette noted that Q1 project revenue performed as expected, with continued softness in M&A. He emphasized that Q2 is critical for gaining visibility into second-half project work, which is typically more stable. Regarding the pipeline, Guilmette stated the 30% growth is broad-based, with strong opportunities in core administration, leave solutions, and navigation solutions.

Scott Schoenhaus of KeyBanc Capital Markets inquired about the outlook for project revenue, asking for updated thoughts on Q1 trends and back-half of the year comps, and also sought more detail on the reported 30% growth in the sales pipeline.

Answer

CEO David Guilmette explained that Q1 project revenue performed as expected and that Q2 is crucial for visibility into the second half of the year. He also clarified that the 30% pipeline growth is broad-based across core admin, leave, and navigation solutions. CFO Jeremy Heaton added that first-half project work is typically more discretionary, and they expect an improving profile in the back half of the year.

Scott Schoenhaus requested details on the key assumptions driving the low versus high end of the company's second-half 2025 revenue growth guidance of low-to-mid-single digits.

Answer

CFO Jeremy Heaton identified three main variables: the timing and mix of in-year ARR bookings, the performance of project revenue, and participant count fluctuations. CEO David Guilmette added that the mix of services sold, from small projects to large multi-year contracts, also impacts the timing of revenue recognition within that period.

Scott Schoenhaus asked about the drivers of future growth, specifically the mix between new logos and customer expansions, and sought more detail on margin expansion opportunities from operational efficiencies like increased digital enrollment.

Answer

CEO David Guilmette explained the focus is on growing Annual Recurring Revenue (ARR) through both new logos and expanding relationships with their existing Fortune 500 client base. CFO Jeremy Heaton added that margin expansion towards the 28% midterm target is supported by technology-driven efficiencies, such as a 35% increase in mobile enrollment, and the ongoing work with AlixPartners to streamline the operating model.

Scott Schoenhaus asked about the future growth strategy, specifically the mix between acquiring new logos and expanding existing customer relationships, and sought more detail on the opportunities for further margin efficiency.

Answer

CEO David Guilmette stated the growth strategy is a combination of attracting new logos and expanding services within their existing base of over 250 Fortune 500 clients, with a focus on ARR bookings. CFO Jeremy Heaton added that margin expansion towards the 28% midterm target will be driven by technology, such as the 35% increase in mobile enrollments, and operational streamlining efforts with AlixPartners.

Scott Schoenhaus of KeyBanc Capital Markets asked about the future revenue mix shift towards recurring revenue post-XT replacement cycle and the percentage of customers using leases versus CapEx, including any behavioral changes.

Answer

Randall Lipps, CEO, noted that while the revenue mix is slowly shifting towards recurring (currently around 50/50), strong product revenue will continue due to Amplify renewals and consumables growth. He stated that leasing represents a small portion of the business (~10%) and sees no major shift in customer purchasing behavior, though higher interest rates could make leasing more attractive over time.

Scott Schoenhaus sought clarity on the Q1 2025 guidance, asking what assumptions it includes for the remaining XT upgrade cycle. He also asked whether the shift towards expansions and modular solutions post-upgrade cycle is expected to benefit gross margins.

Answer

Executive Kathleen Nemeth clarified that the strong 2024 bookings created a robust backlog, ensuring a "rich mix of XT revenue throughout 2025." CFO Nchacha Etta confirmed that gross margins are expected to improve. He cited two key drivers: the continued scaling of higher-margin SaaS and Expert Services, and the growing revenue contribution from the new XT Amplify and XTExtend products, which carry "even better margins."

Scott Schoenhaus asked how far along the XT Series upgrade cycle is, the mix of software versus hardware in XT Amplify bookings, and the expected mix and margin profile of the Advanced Services business.

Answer

CEO Randall Lipps confirmed they are 'substantially through' the G-Series to XT upgrade cycle from a bookings standpoint and that Amplify provides access to both new hardware and software. CFO Nchacha Etta stated that Advanced Services is expected to grow around 14% for the full year and will contribute more to overall margins as it scales. Lipps added that double-digit growth is expected next year, highlighting the strategic shift to reporting ARR.

Scott Schoenhaus of KeyBanc Capital Markets requested an update on the Upfront acquisition, focusing on bookings traction, the expected revenue ramp, and the timeline for the business to become EBITDA profitable.

Answer

CEO Dan Burton reported positive progress, highlighting a significant new patient engagement win that combines Ignite with Upfront's capabilities. He expects revenue from such deals to begin ramping in the second half of 2025. On profitability, he reiterated that while Upfront was a slight EBITDA headwind in Q1, cost synergies and management efforts are on track to make it a positive contributor (a 'tailwind') in the second half of the year.

Scott Schoenhaus followed up on the strong start to 2025 new platform client additions, asking if the shorter sales cycle and Q1 acceleration were primarily due to the nature of the Ignite platform versus the legacy DOS offering.

Answer

CEO Dan Burton confirmed that Ignite's lower price point is a key factor in shortening the sales cycle from the typical 12+ months for DOS. He emphasized that the acceleration is also heavily influenced by their large base of over 900 existing app clients. These clients are easier and faster to convert to the Ignite platform, as evidenced by two-thirds of 2024's new platform clients coming from this group, a trend expected to continue and drive results even in a typically slow Q1.

Scott Schoenhaus from KeyBanc asked about the strategy of selectively focusing on higher-margin opportunities in the pipeline and whether this could lead to technology revenue growth significantly outpacing services growth in 2025.

Answer

CEO Dan Burton confirmed this strategic focus. As the client financial environment improves, Health Catalyst is prioritizing higher-margin technology solutions in sales discussions. He stated this is already causing tech revenue growth to outpace overall growth, a trend he expects will continue into 2025. This mix shift acts as a tailwind for gross margin and contributes to the company's strong EBITDA performance.

Scott Schoenhaus inquired about the potential impact of pharma tariffs on customer R&D budgets and asked whether interest in the FDA's animal model phase-out was concentrated among smaller biotechs or was more broad-based.

Answer

CEO William Feehery confirmed that interest in animal model alternatives is broad, citing a recent webinar with over 800 registrants from biotech, large pharma, and government agencies. On tariffs, CFO John Gallagher noted some existing slowness in Tier 1 decision-making but no new customer behavior specifically linked to tariff concerns. Feehery added that Certara is insulated from direct tariff impacts, as any effect on R&D budgets would be indirect.

Scott Schoenhaus from KeyBanc Capital Markets asked for the current breakdown of GoodRx's pharmacy contracts between direct, hybrid, and traditional PBM models, and what the company considers the ideal mix.

Answer

CEO Wendy Barnes stated that 8 of the top 10 pharmacies are now on direct or hybrid contracts, based on each pharmacy's preference. CFO Chris McGinnis added that the specific mix is 'somewhat irrelevant' to GoodRx, as its multi-channel capability allows it to optimize transaction routing to benefit the patient and pharmacy, which ultimately drives the company's economics.

Scott Schoenhaus of KeyBanc Capital Markets requested an update on the Kroger direct contract and asked for the current volume breakdown between ISP, direct, and hybrid models compared to Investor Day disclosures.

Answer

Interim CEO Scott Wagner stated that over 30% of total volume now flows through direct or hybrid contracts. He explained that GoodRx follows each retailer's lead on contracting structure and that direct relationships allow for more latitude in helping retailers manage their categories, merchandise, and promote offerings.