Tom Cancro: Yes. Craig, I think growth in the average revenue per participant per month largely tracks with what we’ve seen over the past year. And that’s how we’ve modeled it in our guidance. So, you’ve got a single digit growth in each of the medication and the technology-enabled services revenue per participant, but the blend of the two increases because of some of the cross-selling that Brian has talked about.
Craig Jones: Right. So, you’re saying that the medication is going to grow faster on a member basis, that’s ?
Tom Cancro: The medication grows faster than the tech-enabled services. That’s correct. And the blend of the two grows faster than the individual pieces as the mix shifts and as the cross-selling that Brian alluded to with April coming on board starts to bear fruit.
Craig Jones: Got it. And then, I think Brian, you mentioned the backlog, it looks like just pretty incredible from 2Q to 4Q. Can you just walk us through the math and sort of how we got there?
Brian Adams: Sure. So, I’m just €“ I’m happy to provide a little bit of color on the top and then Tom could probably jump in on some of the specifics. But the way that we look at this and measure backlog today is based on the maturity of each of those contracts that we have in place. And so just to use an example, if we’ve signed a pharmacy services contract, we’re assuming at 250 members or participants or individuals at maturity of that center or location that you’re using our average PMPM of roughly $1000 on the pharmacy side multiplying that by the and then by 12 months. So, you get to a little over a 3 million contract. So, that’s on an individual or unit basis if you’re thinking about it and then we just build from there.
So, it’s really related to specific, which contracts we have in the pipeline, what services they aligned around, and we have seen significant expansion over the past few months coming in from existing customers. Tom, I don’t know if you have anything to add to that?
Tom Cancro: Just that the large increase in backlog was due to a large national provider that we €“ PACE provider that we signed with multiple centers who is taking both the medication services, but also some of the tech-enabled services.
Craig Jones: Okay, great. Thanks. That’s all from me.
Operator: Thank you. Our next question comes from the line of Ryan Daniels from William Blair. Your line is now open.
Unidentified Analyst: Hey, good morning. This is on for Ryan. Regarding the bit of EBITDA expansion you guys are modeling out for 2023, could you provide some additional color on which cost levers you anticipate to get you that extra 200, 250 basis points of improvement over the year? I know you mentioned some gains in gross margin as those 2022 headwinds ease, but any additional comment on cost optimization efforts would be great? Thank you.
Brian Adams: Jack, thanks for the question. This is Brian. I’ll start and then turn it to Tom to talk more specifics. But, you know, in 2022, we referenced that we had a couple of headwinds that we do expect to abate in 2023. The first was really related to higher shipping costs. And we’ve renegotiated or in the process of renegotiating more favorable terms with some of our largest shipping vendors. We’ve also identified some lower cost delivery methods and plan to use them. And then we’ve finally started to see the surcharges that we experienced in 2022 start to abate. All these are going to have a positive impact on our shipping costs in 2023. And then the second area that we mentioned on the call is really related to revenue mix.
And this mix was impacted by our Medication acquisition cost in some cases. And as Tom mentioned, we’re investing in automation and process enhancement that will ultimately give us greater flexibility in how we source medications at lower cost. Tom, anything you want to add as it relates to either of those?
