Jonathan Block: Thanks, guys.
Jay Mazelsky: Thank you.
Operator: Our next question comes from David Westenberg with Piper Sandler. Please go ahead.
David Westenberg: Hi, thank you for taking the questions and congrats on continued strong execution here. So just a quick question again on that theme of pricing. I know that’s one a lot of people talk about but maybe more on the clinic level as we see continued constraints in labor and that’s really what we’re seeing. Are you seeing pressure from your customers to raise prices themselves? And do you think that’s going to continue for say maybe the next six months or so? And do you see any kind of potential to maybe ease in volume as their prices go up or is it equilibrium as because maybe labor is used in a more optimal way? And then just a second to really clarifying short questions. Can you say how many territories you actually added? And then just on the gross margin commentary, you said was it 18 million in terms of what the contribution was because of hedge gains? I’m just trying to make a sense of the 100 basis points of gross margin expansion. Thank you.
Jay Mazelsky: That’s a quite a different question today. Let me just start with the pricing piece. Obviously clinics control that. If you go back the last five or six quarters, a lot of clinics took multiple price increases on an annual basis. They typically, if you go pre-pandemic or pre-inflationary times, they would increase their prices eight, one time per year. I think a number of clinics on average increase at least two, in some cases three. And that was really just to reflect the higher costs of labor and retaining staff. And in some cases, they needed to add to staff. And so from an employment level standpoint, we think clinics are catching up or caught up. They’ve hired people. That’s not to say they’re all working 40 hour weeks.
And so in terms of pricing going forward, I think that’s really just a reflection of what happens in the economy. At this point, it appears that inflation has moderated somewhat, but we’ll have to see how that plays out. And I think they’ll make decisions based on how their businesses are doing. Right now, I think clinic revenue, practice revenue is pretty healthy for approaching 6% or so. So I think they feel like they’re in a pretty good place from an economic standpoint.
Brian McKeon: And Dave, to your questions on gross margin and hedge gains, what we were trying to highlight is terms of our year-over-year performance on margins that there is an effect from in 2022 as the dollar was strengthening, we hedge out, we tend to hedge in advance of the year to help us with our planning. And we had, in the second half of last year, eight to recognize the benefit from $18 million in hedge gains. So what’s happened with the foreign exchange dynamics is they’ve actually moved into a positive zone. So we have some benefit on revenue, but we’re going to have some reported year-on-year foreign exchange headwinds. We estimated 70-80 basis points in H2 that relate to just lapping those hedge gains that are roll off eventually.
So just trying to highlight that as a factor. We try to, each quarter, note what those gains or losses are, so you have that, and that’s in our disclosures as well. So, but just wanted to highlight that as you’re to understand kind of the outlook.
David Westenberg: Thank you for taking my long question.
Operator: Our last question comes from Balaji Prasad, with Barclays, please go ahead.
Unidentified Analyst: Hi, this is Micaela on for Balaji. Thanks for taking our questions. Can you talk about anything particular you saw in the quarter that drove the two-year stocked growth deceleration in CAG recurring? Thank you so much.
