Earnings Call: Q4 2021

Mar 29, 2022

Annual report

Good day and thank you for standing by and welcome to Q Health Inc. 4th Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised this call is being recorded. I would now like to hand the conference over to your host today, Caroline Korner, Investor Relations. You may begin. Thank you, operator. Welcome to Q Health's 4th quarter 2021 earnings call. Joining me on today's call to discuss our results are Ayub Ptak, Chairman and Chief Executive Officer and John Gallagher, Chief Financial Officer. Our prepared remarks will be followed by a Q and A session. During this call, we will be making forward looking statements, including statements related to We We wish to caution you that such statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those we projected or implied during this call. In particular, those described in our risk factors, including in our final prospectus related to our initial public offering dated September 23, 2021, and in our Form 10 ks for the fiscal year of 2021 that will be filed following this call. You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on assumptions and beliefs as of the date hereof and Q disclaims any obligation to update any forward looking statement except as required by law. Our discussion today will include non GAAP financial measures. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Information regarding our non GAAP financial results, including a reconciliation of our historical GAAP The non GAAP results can be found in our earnings release, which was furnished with our Form 8 ks today with the SEC and may also be found on our Investor Relations website at With that, I would like to turn the call over to Aayub for his comments on 4th quarter business highlights. Aayub? Thank you, Caroline, and thank you, everyone, for joining us today. We've made tremendous progress towards our goal of creating a new way to access the healthcare system, combining accurate diagnostics, Virtual care and soon antiviral delivery all on a single platform uniting healthcare providers, enterprises and consumers. I'm happy to report we've achieved significant growth in our installed base, shipping to date nearly a quarter 1000000 Q Readers. This large increase of our installed base across all of our customer categories, thanks sophisticated customers in the traditional health such as Johns Hopkins, the University of Pittsburgh Medical Center to enterprises such as Google, Netflix and Salesforce to government agencies and individual households is reflective of our core platform capabilities, speed, accuracy and integration with the digital ecosystem. With these core platform capabilities in mind, The growth in our installed base is particularly important as Q Reader is durable and capable of running all future tests in our menu expansion pipeline. Excitingly, we launched our direct to consumer offering in Q4 with integrated virtual care, e commerce capabilities, including same day delivery and video based supervised testing, all natively integrated into our accessibility friendly mobile apps. Today, we have over 220 up 2.5 times since the end of Q3. Our $618,000,000 in 2021 revenue During our 1st year as a public company, up from $23,000,000 in 2020 demonstrated our ability to execute a coordinated strategy Our manufacturing product and commercial teams to bring our vision of the future of healthcare to life. Our mission of delivering more integrated and Accessible Healthcare is a global one and we're glad to update that we've begun commercialization internationally in Canada through distributors, enterprises and a direct to consumer offering as well as in Singapore. In addition to signing many new agreements, we also extended our existing agreements and expanded our relationships with many of our Including Google, the NBA, MLB and many other major sporting leagues. We also announced a partnership with Albertsons, wherein today, Albertsons customers at over 900 locations and communities across the U. S. Can get a Q test administered by their local Albertsons Pharmacists. This is an important public health initiative Through the quarter, we purposefully and radically expanded our distribution in the healthcare provider space. I'm pleased to share that we are now distributed by Cardinal Health, McKesson, Medline and Henry Schein and we will continue to expand our reach to smaller healthcare provider clinics and other fragmented To the Department of Defense, we shipped 6,000,000 Q COVID-nineteen test cartridges and 30,000 Q readers over the contract life, demonstrating our ability to scale manufacturing and deliver on large contracts. Through this agreement, our product reached underserved communities in 18 states, Thousands of schools, nursing homes, correctional facilities and community health clinics across the country and the military. Today, we continue our DoD conversations regarding broader opportunities to utilize their installed base. For example, we recently awarded an IDIQ catalog contract from the Defense Logistics Agency with a value of up to $50,000,000 which facilitates the acquisition of Q products for any federal Additionally, we're seeing that our strategy of placing installed base is working for the public sector customer category. Leveraging our public fiber relationships and successful deployments, we've converted several end user public sector organizations and states into direct customers, such as the states of Minnesota, Colorado and Wyoming among others. To help us tell Q's unique story of We have the Chief Marketing Officer, Nitin DeGaul, to our team. He joins us from Abbott, where he led the marketing launch of their continuous glucose monitoring system. We're excited to leverage Achin's skills and experience with marketing and payers, consumers and healthcare providers. Eileen Scheel joins us as Chief Communications Officer. Previously, she Corporate Communications at Cleveland Clinic and Medtronic. We're excited to have Nitin and Eileen join to help bring awareness to the brand, Connect to our customers and tell the story of Q. They join what has rapidly become a world class leadership team here at Q. The best known sports leagues such as MLB, NBA, NHL and many NCAA teams utilize Q and in this new category of molecular testing anywhere, anytime We're finding innovative ways of marketing and bringing to life our vision of the future. It is such a unique time where diagnostics has entered the cultural consciousness And behavior and expectations of how the healthcare system should work have evolved dramatically because of COVID. We've partnered with some of the biggest athletes and stars to help bring our product Brand story to life in the minds of our customers from NBA All Star Karl Anthony Towns to Super Bowl champ Aaron Donald and actress Gal Gadot, all avid Q users. Now you may have caught our Super Bowl ad, which was seen by 107,000,000 viewers and drove a 10,000 times increase in our traffic to our website after it aired. Our number one goal with our Super Bowl ad was to increase awareness of our brand and establish Q as a digitally connected smart health lab platform that will serve consumers beyond COVID. As we have created this new category of molecular testing, spending the home and the traditional healthcare system, we've had to rapidly scale our manufacturing. Last year, we increased our production capacity to nearly 100,000 test cartridges per day measured over a 7 day period as part of completing our DoD agreement. This represented nearly a 50 times scale up of a novel molecular testing product in the course of 1 year, fully integrated, highly automated and domestic. This is a result of a decade of investment in product design, automated manufacturing and excellent execution by our operations team. The strength and ownership of our manufacturing capabilities provide us with a core competitive advantage going forward for quality, cost and supply capability. All of these investments we have made in scaling our manufacturing from biochemistry production to cartridge manufacturing will serve our test menu expansion with no modification required. This shortens the path from R and D to at scale commercialization for our future test menu. So let's talk a little more about one of our key growth drivers, Menu expansion is critical to our future because each test will significantly expand our addressable market, but more importantly allow Q to become ubiquitous as a natural choice to turn to at the first sign of respiratory symptoms or for sexual health concerns. As consumer behavior has evolved to expect immediate answers for health issues, Just as we experienced with other parts of our life from food delivery to transportation, we believe this paradigm has shifted in consumers' lives for testing for infectious diseases. Similar to how glucose meters and pregnancy tests have changed the paradigms for their markets. Our pipeline and development include tests in the respiratory, sexual health, women's and men's health, cardiometabolic and wellness categories, all of which will run on the Q Reader. The Q Reader is the basis of our installed base and which we have shipped nearly a quarter 1000000 units of. Our R and D team is making exciting progress executing well against our near term milestones for menu expansion. Starting with our goal of COVID 510 clearance, we completed clinical enrollment in February ahead of schedule and expect to submit our COVID product to the FDA for de novo review in Q2 for 510 clearance. For our flu AB test, We began enrolling patients at our clinical study sites in December as planned. We expect to continue enrolling patients in the study through Q2 with the expectation to submit for FDA de novo review in Q3. Blue season has been light this year, so we anticipate including Bank samples are part of our FDA submission. Notably, funding for both the COVID and flu clinical studies is provided by BARDA, Biomedical Advanced Research and Development Authority, a division of HHS and a long term partner of Q. For our flu AB plus COVID multiplex test, we are in late stage technical development and can detect And differentiate between flu AB versus COVID. We will continue to optimize this asset's performance. We expect clinical studies to begin in the second half of 22. This multiplex test does have an EUA pathway that could simplify the clinical and regulatory versus a standard 510. For RSV test, we are progressing on late stage technical development and expect to be in clinical studies in Q3. Last year's RSV peak was during the summer. Within our sexual health category, our chlamydia and gonorrhea multiplex test is progressing well. The chlamydia and gonorrhea multiplex test is in late stage Technical development and we expect to commence clinical studies for this test in the second half of twenty twenty two. We currently have a COVID-nineteen Omicron specific test cartridge under review of the FDA. At the request of BARDA, we were able to complete primer design, assay development and updates to the Q Health app and all required studies in a 9 week period. We submitted for emergency use authorization on March 3. So we look forward to updating you on progress on that test in the near future. All in all, menu expansion is proceeding at a very fast clip and we have a robust set of tests showing strong progress that will increase our addressable opportunity. Combined with significant upgrades we've made and are making to our digital capabilities, which all of our diagnostics results flow seamlessly through, we think we're in pole position to enable a new experience of the healthcare system across many of the most common reasons individuals use the healthcare system. I'll expand further on our digital We're investing heavily in and rapidly building the technology enhancements for our integrated care platform. Our software development team has recently been focused on building Out of the integrations with leading electronic medical record systems, expanding internationally to ex U. S. App stores and building the next generation of digital capabilities for Q, including streamlined test to treat workflows that include prescription delivery. We believe our planned future enhancements will provide an even more comprehensive and seamless digital health experience, including efforts we are making to enable reimbursement directly on our platform. Right now on Q, you can take a molecular diagnostic test for COVID-nineteen, share your results securely with a physician and visit with them and they can write a prescription all without leaving the app. We are getting very close to having our eureka moment of linking diagnostic results with virtual care and the final piece antiviral prescription delivery. Our solution for COVID-nineteen is a major proof point As this diagnosis, virtual care prescription delivery format is the heart of our vision for Healthcare 2.0 and will apply to other respiratory products, sexual health infections and even for managing chronic diseases. Wouldn't it be great if when your kid has a sore throat, You could just reach for Q, run an accurate molecular test and detect strep, talk to a doctor and have an antibiotic delivered. In summary, with continued expansion of our customer base, test offerings and software and services, our team is making great strides towards our mission of making healthcare more timely and accessible. As we continue to build out the business, we are excited by what we have in store for the near term future And I look forward to updating you on our progress on future calls. With that, I'll turn it over to John to walk through our financial results. Thank a significant increase from revenues of $13,300,000 in Q4 of the prior year. This was driven by our production capacity ramp, delivery on our initial DoD contract and expansion of our customer base across all Private sector revenues for the quarter grew to 54% or $104,000,000 This is the first time private sector revenues surpassed the public sector, reflecting growth and diversification in our customer Public sector revenues for Q4 were $88,500,000 and accounted for 46% of revenues. During the quarter, we completed shipment of our initial contract with the DoD. Also in the quarter, The expansion of our installed base continued as we sold approximately 40,000 readers, bringing our total number of readers shipped Over 160,000 units as of December 31, 2021. And due to the strong demand in the Q1, as Ayub highlighted earlier, We've now shipped more than 230,000 readers. Please note that as we onboard new customers and because of the linkage to COVID prevalent, We expect reader sales to fluctuate quarter to quarter. Disposable test cartridge sales in the quarter were 165 The increase in gross product margin was driven by higher volumes as we expanded our production capacity throughout 2021. And despite global supply chain constraints, we have been successful in obtaining necessary components and meeting our customers' expectations for supply of our product. Operating expenses were $66,300,000 in the Q4 of 2021 compared to $19,000,000 in the Q4 of 2020. Sales and marketing expense was $21,200,000 in the 4th quarter. We have ramped our spend as planned with a focus on digital marketing, advertising and growing our commercial and marketing teams, including launching direct to consumer during R and D expense was $21,700,000 in the 4th quarter. Again, as planned, We have ramped our investment in R and D with a focus on menu expansion and software development. G and A expense was $23,500,000 during Q4. Net income for the Q4 2021 was $34,200,000 compared to a net loss of $19,500,000 in the Q4 2020. This translates to diluted EPS of $0.22 in 4th quarter versus a loss of $1.16 in the Q4 2020. Net income for the 4th quarter an effective tax rate of negative 44.9 percent. The negative tax rate in the quarter was driven by tax benefits related to utilization of net operating loss carryforwards and some accelerated depreciation. Moving on to full year 2021, we had revenues of $618,100,000 in 2021 versus revenues of 23,000,000 dollars in the prior year. Private sector revenue accounted for 37.7 percent or $232,800,000 Total revenue and public sector revenue accounted for 62.3 percent or 385 point $3,000,000 during 2021. Disposable test cartridge sales for the year were $490,300,000 Product gross margin for 2021 was 55.1%. Operating expenses were $151,300,000 for full year 2021, including sales and marketing expense of 28,700,000 R and D expense of $42,800,000 and G and A expense of $79,800,000 Net income for full year 2021 was $86,400,000 which translates to diluted EPS of $0.59 and reflects an effective tax rate of 27.5 percent. Adjusted net income for the year was 100 and Adjustments are related to one time impacts pertaining to our September IPO. Moving to the balance sheet, We ended 2021 with cash of $409,900,000 This cash positions us with a strong balance and the ability to invest in the business and execute on our vision and strategy. I'd now like to move to our guidance. For the Q1, we expect revenues of $170,000,000 to 180,000,000 Our business today is highly coupled to COVID rates and resurgences. For example, the omicron surge meant we saw strong demand This makes it difficult to predict how demand will progress throughout the rest of the year, so we are not providing full year revenue But we plan to give an update on our Q1 call. As Ayub highlighted, we continue to make progress with the expansion of our testing into different categories, including and most near term respiratory and sexual health. Test menu expansion will diversify the business and we expect With that, I would like to thank you for your attention. And I'll now turn the call over to the operator for questions. We ask that you limit yourself to one question and one follow-up. And our first question comes from Matt Sykes from Goldman Sachs. Your line is now open. Hey, good afternoon, everybody. Thanks for taking my questions. I appreciate it. Maybe just, Abe, just start with you. Just on the direct to consumer strategy, Congrats on getting that out in the Q4. I know there was some adjustment in the pricing strategy that you had initially. I'm just wondering as you think about the course of this year in That strategy overall, how much is pricing a lever you think for that strategy to drive additional volumes in your mind? Or are there other levers that you're going to be using to continue to drive Hey, Matt, thanks for the question. This is John. I thought I'd jump in with the pricing That you have there. So, look, the move on pricing was in advance of our Super Bowl advertisement That you heard us talk about on the prepared remarks. And that was more about feedback that we've had related to accessibility of our product. So it's important to us to make sure that Q is accessible to as many people that want it as Possible and so that's why we're looking at moving the pricing down in advance of that. As it relates to direct to consumer, we've been very We're actually pleased with the uptake that we've seen there. It's still early having just launched it in the middle of Q4, but we've been really happy with With the uptake that we've seen and coincidentally we did launch it into a time where Omicron It was came shortly thereafter. So we've been pleased with the volumes, but I'd say stay tuned for more on Direct to consumer. And as it relates to pricing, then we're always going to seek to be competitive in the marketplace. Got it. Thanks, John, for that. And then just, you had mentioned that private sector revenue in Q4 surpassed out of public. Could you just talk about some of the drivers within that, whether it's corporate, direct to consumer, health systems? Is there any main driver there? And as you look Forward to this year, within those sub segments, do you see any big opportunities for you that could continue to drive that private sector revenue? Yes. So that was notable that for the first time private sector revenue was greater than public. And you're right, it represented 54% of our revenue on the quarter. And as we look at what some of the key drivers are, a reminder, we have 4 gives us access to the point of care market and then direct to consumer. So as we look at the acceleration that we saw in the private sector, Then it was across all three of the customer categories enterprise, provider and of course we launched direct to consumer, so we were getting revenue The first time there as well. One thing I'd point out is what's driving the acceleration, what are we going to see continuing into the future is, Hey, we've increased our customer base since the Q3 call. We're now up to more than 220 Directly contracted organization. So that's a significant increase over where we were on the Q3 call and that's As you would expect, that's in enterprise and it's in it's centered in provider where you've seen us make recent announcements With large healthcare networks like Johns Hopkins, University of Pittsburgh Medical Center and then even last week, For the first time in retail pharmacies with the partnership that we have with Albertsons, which is now going to be in 900 different retail pharmacies. So That has given us a very good customer base and that's what's driving the growth that you see in the private sector. Great. And if I can squeeze in one more, just on the public sector, there's obviously been some news regarding federal level funding for COVID, but it seems like you've been able to pivot towards states and other levels of public sector opportunities. Could Could you maybe talk about how your public sector strategy may pivot over the course of the year, just given the funding environment, which may change or be dynamic throughout the course of the year? Yes. As you look at the public sector, you're right, Matt. We completed the delivery on the initial contract, which Allowed us to deliver 6,000,000 test cartridges and 30,000 readers, which created a large installed base for us in the public sector. And we completed the delivery on that in Q4. And what we've been seeing is that we're getting engagement directly from the states, which is as we would expect related to having a durable installed base across the public sector. And so while it's still early and it takes time to have direct engagement with these states, We're seeing the right demand signals coming in and playing off of the installed base in the public sector. Great. Thanks. Appreciate the time. Thanks for the questions, Matt. And thank you. And our next question comes from Tyus Sivan from Morgan Stanley. Your line is now open. Hey, guys. Good afternoon and thanks for the time here. Maybe, John, just to kick things off on the Q1 guide here, Could you give us a sense for what the mix of public versus private sector assumed in the guide is? And secondly, In terms of I think you mentioned sort of not giving the full year guide just yet given some of these COVID trends here. I'm assuming that implied sort of a month over month decline through in terms of your January through March trends here. Would you be able to give us sort of an exit run rate for revenue in March, even though you're stopping shy of giving a formal guide here? Yes. Hey, Jeff, thank you. Thanks for the questions. Yes, first on the private versus public, I think you know, but we're in an RFP process with DoD and that process This is ongoing. We don't have an update actually on that process related to this phone call today. But what I would tell you is that When you look at the mix, because we've delivered the initial contract in Q4 that, with the guide on Q1 of 1 $70,000,000 to $180,000,000 is almost entirely private sector. And it's notable actually pertaining to the prior question, Private sector revenue in Q4 was $104,000,000 So as we're looking at this guide on Q1, It's $170,000,000 to $180,000,000 which is almost entirely private sector. So significant growth Across these key customer categories that I was just mentioning. As you think about the no guide On the year and how to think about the quarter, yes, I mean, look for now, our revenue achievement is tied to COVID prevalence as we know And COVID isn't predictable. And what you did hear me say though is the beginning of the or the first Half of the first quarter, we had higher volumes. And as we're exiting the Q1 right now, the volumes are lower. Not going to be able to guide what that translates to, but we're certainly at a time right now where COVID testing volumes are a bit lower as we exit the quarter. Got it. That's helpful. And then as we think about the rest of 'twenty two, I mean, I think, Ayu, you mentioned in your prepared remarks Going live in Canada and Singapore today, I believe India is also in the mix here. So how are you thinking about Revenue contribution from OUS cumulatively over the course of this year? So the way we think about international expansion is, look, we have a value proposition and vision of how Deliver healthcare, we think that the need is consistent globally, meaning everybody wants, to have accurate diagnostics That they could leverage to have a more meaningful virtual care conversation and then ultimately get treatment. We think that's a universal Sort of customer need and it's global. So that's one element. The other element from a business strategic Perspective is that not only with COVID, but some of the respiratory elements, they're going to have an element of seasonality to it. And as a result, you really want to be in the Northern Hemisphere, you want to be in Southern Hemisphere, you want to be in different countries to mitigate, sort of that demand pattern. So Long term, we want to have good commercial operations internationally, not only because it's Basically executing on our vision, which we think is global, but also because it helps mitigate some of the seasonality we see in some portions of the menu. Got it. That's helpful. And I'll just squeeze in a third one here. One of the The salient features of your business model here is the onshore manufacturing and you're pretty scaled up there. So, Can you walk us through 2 things? I mean, 1, there's this input cost sort of pressures here, which everyone is going through. What does that mean for you guys having your manufacturing in house and already scaled up? And second, as we think about The supply chain environment and the ongoing sort of risks there, can you just give us a sense For the degree to which you have all the raw materials that go into the manufacturing process, are you building up sort of sufficient inventory to cater to sort of these real time changes in demand based upon COVID in the near term? Yes. So one of the things that we've invested heavily in over time is really automation. And automation meaning like the automated assembly of our cartridges Minimal human input. So that's been really very important for us from a quality perspective, a predictability of scaling up. And it makes it so that On shoring production made a lot of sense because we while we've created a lot of jobs over 1500 here, We also want to have a good cost structure and so the automated manufacturing allows us to do that. With regards to the actual supply chain, the operations team has done an excellent job, duplicating, Creating geographical redundancy on various components because when we created Q, I mean started Q, we understood That part of the business was going to be related to pandemics and we would need to be have A lot greater control over our own supply chain. So not only have we on shored big parts of it, the vast majority, but we've also Create a lot of our own critical components like our enzymes and our primers and having that capability has really served us and have allowed us To see the type of growth and scale that you saw going from $20,000,000 in revenue to $600,000,000 in revenue in the course of 1 year, That's all because of the investments that we made pre pandemic and because of the excellent execution following that. So we definitely See that the global supply chains are in turmoil and we see that with what is happening in China with COVID that there's a lot of Difficulty ahead, but for most countries sorry, for most companies. But we think we're in a great situation we think we're And a robust situation because of the investments we've made on shoring and also scoping in A lot of the work that needed to be done and just owning the vertically integrated manufacturing element. Got it. Super helpful. Thank you. Thank you. And our next question comes from Charles Rhyee from Cowen. Your line is now open. Yes. Hey, thanks for taking the questions. I appreciate it. Maybe I could ask A little bit about the 1Q guide a little differently. And you talked about the Albertsons Partnership assigning them plus the 220 new customers. Maybe first a point of clarification. John, you mentioned Now you shipped over 230,000 readers. I think I heard you say at the end of the Q4, you were at 160,000 readers. So does that mean We shipped 70,000 here in the Q1. Hi, Charles. Yes. Yes, your math is correct on that. So our installed base is now more than 230,000 readers shipped Through as of now, really through the quarter that is. That's correct. Okay. That's helpful. If we think about the Q1 guide, is it fair to think that part of that is shipping both readers And cartridges to places like Albertsons to set up for these kind of new partnerships? Or is this Or like how much would you say is that relative to readers already in the market and people using and ordering new cartridges? Yes. So related to your question, Charles, on readers, the way to think about it is Readers represent our installed base, but they don't represent a large proportion of our overall revenue dollars. So on a as we look at it, Readers on a quarterly basis generally represent anywhere between 5% to 10% of revenue. So I don't think you should I don't think you should think about the Q1 guide as $170,000,000 to $180,000,000 with a large portion of it being readers. In fact, It's going to continue to be predominantly cartridge revenue from new customers and we highlighted the new customers that we've added As well as from existing customers and the reorder rates that we've had from them on the contracts that they have in place. Okay. That's helpful. And with those new clients, are there any kind of upfront cartridge purchases? Or I guess more importantly, as we think about Past Q1, are there like minimum are there any kind of minimum cartridge purchase requirements Built into your contract, so you have some visibility on forward revenue, particularly on the cartridge side? Yes, Charles. So, we do have we've got a mix. Our business is a mix of a la carte business that people are buying at will and then we've got a mix of people that are on contract, both short term and longer term in nature. And so what we've seen is the buying patterns are adhering to the contracts that we have in place. And as mentioned earlier, We're also seeing our revenue achievement tied to the prevalence of COVID. So it was Those volumes were higher in the first half of the quarter. And as we exit the quarter, those volumes are lower. And that's not a surprise to anybody here, I don't think. But you should view the 170 to 180 as being a mix of both of that. Appreciate it. And maybe if I can sneak one last. So you talked about Onomacron specific assay. Does that also is that also able to detect that This new BA. 2 variant as well? Yes. The Omicron specific test is definitely able to detect BA. 2 in addition to BA. 1. And where we think it could be useful, is in distinguishing from Omicron versus what was In the past and also was in the future, because the therapies, as we've seen, are actually variant specific in a pretty significant way. Most of the monoclonal Antibody stopped working with Omicron BA. 1 and the rest started failing with Omicron BA. 2. Paxlovid on the other hand still working for both strains and or variants and then we'll have to see what comes next after Omicron And that could help guide this genotyping assay for Omicron could help guide the therapy decisions once available. Great. Thanks guys. Appreciate it. Thanks, Charles. And thank you. And our next question comes from Mark Massaro from BTIG. Your line is now open. Hey guys, this is Vivien on for Mark. Thanks for taking the questions. So you've spoken about your manufacturing lines and processes remaining consistent to accelerate approval. Could you maybe provide some color on which of your pipeline offerings you're placing the highest priority on in the near term? And maybe also remind us on the pricing of those. Thanks. So the menu expansion is definitely a parallel process sort of thing. We have team members who are dedicated to One assay versus another assay. So we've identified a set of them that are very important, and that are near term. So flushing out the respiratory category, Flushing out the sexual health category, those are really near term priorities because it fits in this really important model of going from Diagnosis to talking to doctor to getting the treatment and all of these have that structure available, meaning there's treatments for almost all of them. And so we don't think of like rank order system for them. We think of As a category, these are the ones that we really want to pursue and let's pursue them in parallel. As an example, the Omicron Test was a very short development cycle for us and it's a good example of what It's a good demonstration of our capability. We've really built a modular system that is able to be updated very quickly. And so we're feeling really and with the milestones we laid out across the different tests that we have in our development pipeline, I think that shows that we're executing really well on the R and D side, and the clinical study side as well. And as it relates to the other part of your question on price, as we roll out our menu expansion tests, We're going to seek to be competitive on what the price points are out in the marketplace on tests like those. And we've got the P and L to be able to do that. We've got a strong gross margin profile. We've got And we've got the ability as you've seen us do to be able to adjust price when necessary. And so when we look at menu We're going to seek to be competitive on any in each of the tests that we roll out. Okay, great. And if I could just add a follow-up, could you briefly comment on gross margins? I know there's been talk of inflationary and Supply chain pressure. So how should we be thinking about your prior target of 60% margins by 2023? Yes. So we're not guiding on the margin today, but I think part of your question is though We were 46% in Q4. That's down from 60% what it was in Q3. So what's driving that? And the answer to that question is a couple of things. It's really twofold. One is cost increases. So you heard us talk a little bit about Navigating the global supply chain constraints and as it relates to our cartridges and our readers, we have been Successful in obtaining the components that we need to fulfill all of our customers' orders and expectations, which is great, but we have had to pay up a little bit for that and that's reflected in the margin. In the margin. And that's as it relates to materials, as it relates to freight and the like. So That's one component of what you see with the 46% gross margin on Q4. And then the other component is customer mix shift. So we highlighted That the private sector is now in the quarter with 54% of our total revenue achievement And that's great. It's good customer diversification and we talked about the expansion of our customer base. But as it relates to the margin, there is as we do that mix shift and we shift more to private sector and away from public sector, then there's less deferred revenue that's Recognized and deferred revenue has a higher gross margin. So when you take those two things together, that's what's reflected in the 46%. Okay, great. Thanks for taking the questions. Thank you. And thank you. And I'm showing no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.