Care.com, Inc. (CRCM) CEO Sheila Marcelo on Q3 2018 Results - Earnings Call Transcript

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About: Care.com, Inc. (CRCM)
by: SA Transcripts

Care.com, Inc. (NYSE:CRCM) Q3 2018 Earnings Conference Call November 8, 2018 8:00 AM ET

Executives

Mike Goss - VP, Finance

Sheila Marcelo - Founder, Chairwoman, CEO & President

Michael Echenberg - CFO & EVP

Analysts

Jason Kreyer - Craig-Hallum Capital Group

Darren Aftahi - Roth Capital Partners

Neeraj Kookada - JPMorgan Chase & Co.

Ben Rose - Battle Road Research Ltd.

Operator

Greetings, and welcome to Care.com's Third Quarter 2018 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mike Goss, VP of Finance. Thank you; you may begin.

Mike Goss

Thank you. Good morning, and welcome to Care.com's financial results call for the third quarter ended September 29, 2018. During the course of this conference call, we will discuss our business outlook and make other forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These may include, among other things, projected financial results or operating metrics, anticipated business and marketing investments and strategies and expected results of those investments and strategies, anticipated future products or services, anticipated market demand or opportunities for our products and services and other forward-looking topics.

Such statements are only predictions based on management's current expectations. Actual results or events could differ materially from those predictions due to a number of risks and uncertainties, including those set forth in the press release we issued today as well as those more fully described in our filings with the Securities and Exchange Commission.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

We will also be referring to non-GAAP measures on this call, including adjusted EBITDA, which we refer to as EBITDA throughout this presentation. This measure represents pretax income or loss, including the accretion of preferred stock dividends less depreciation and amortization, as well as certain other unusual and noncash adjustments such as stock-based compensation, M&A and restructuring costs.

We also refer to non-GAAP EPS, which represents net income or loss less certain unusual or noncash expenses, such as stock-based compensation, M&A and restructuring costs. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release and Form 10-Q to be filed.

We will also be referring to profitability on this call. When we refer to profitability, we're referring to it on an adjusted EBITDA basis, unless otherwise noted.

Today's call is available via webcast and a telephone replay will be available for 1 week following the conclusion of this call. To access the press release, supplemental and financial information or the webcast replay, please consult the IR website.

With that, let me turn the call over to Sheila Marcelo, Founder, Chairwoman and CEO of Care.com.

Sheila Marcelo

Thank you, Mike. Good morning, and thank you to everyone for joining us. Q3 was another quarter of profitable growth and healthy cash generation for us. With 12 quarters of consistent profitable growth under our belt, we continue to invest in the founding vision of the company to penetrate ever more of our large total addressable market with 48 million households in the U.S. alone.

Our mobile-first platform provides families access to affordable, high-quality care options for families from full-time care for their children to afterschool care to senior care and situational needs through Care@Work. In addition, our mission is focused on improving the overall care provider experience and being the leading destination for millions of caregivers to find sustainable jobs. Between our leading consumer and enterprise platforms, we believe we play a critical role in building a scalable care infrastructure to address the future of work for both families and caregivers. We are excited to have made great progress toward driving long-term growth and believe the building blocks are in place to accelerate growth in 2019.

Now turning to our Q3 financial highlights. Total revenue was $49.2 million, growing 10% versus the third quarter of 2017 and in line with expectations, while Q3 EBITDA totaled $6.9 million, exceeding our expectations. And with EBITDA margin at 14%, we marked another consecutive quarter of double-digit margin. Our continued profitability flowed through to healthy cash flow generation, taking the combination of cash and short-term investments up about $6 million versus the end of Q2 to $120 million at the end of Q3.

Starting with our U.S. Consumer business, which, as a reminder, combines U.S. matching and payments, we saw end-of-period paying-member growth at 11% versus prior, laying the foundation from which we expect to accelerate growth in 2019 and beyond. We achieved this end-of-period member growth while improving our unit economics, driven by efficiency gains in our costs to acquire new members. While we did see a slight decline in ARPU, which we anticipated based on the mix shift toward longer subscription duration packages, this was more than offset by growth as expected in the length of paid time of these members.

Moving on to sales and marketing, which was 33% of revenue in Q3, a 7-percentage-point decrease versus the third quarter of 2017. Our continued leverage in sales and marketing has driven by decreasing CAC through a combination of product investments and overall paid marketing optimization. CAC for the quarter was $73, down 25% from $98 in Q3 of 2017. We continue to believe that the efficiency of our model, along with the big opportunity we see across U.S. matching, payments and Care@Work, give us the flexibility to invest incrementally to drive long-term growth and increasing profitability.

These improvements in our unit economics are directly related to continued progress in our product initiatives; specifically, Care 3.0, made up of pre-match, match and post-match experiences. On pre-match initiatives, we continue to see conversion improvements on both mobile and desktop, and this includes senior care, our fastest-growing vertical. In addition, our ongoing investment in high-quality pertinent content to establish domain authority for families seeking information about care has helped drive growth of our high-intent seeker traffic and the overall premium seekers we acquire organically. Our substantial mobile redesigns of our job posting, search and profile features are contributing to the match part of the experience. And continuing with our roll-out of post-match initiatives, we've done further testing of on-the-job guide features with different entry points, with the goal of exposing more members to these features and thereby further driving up engagement.

Now turning to the provider side. We continue to make improvements in our provider experience, as we believe more active and engaged providers will yield an overall healthier marketplace. In Q3, we made improvements in provider enrollment and onboarding on mobile, as well as progress in our provider curation initiatives, which help highlight the more active and experienced providers on our platform. With our leading position as the largest online family-care platform, we have been investing in improving our matching algorithms and have begun to invest more in segmenting our millions of caregivers to provide higher quality, more targeted and curated options to address the idiosyncratic needs of families across full-time, on-demand, after-school and other types of care.

Finally, as part of our Care 3.0 strategy to broaden our offerings, we continue to integrate our most recent acquisitions of innovative care solutions. As we discussed with you last quarter, both Trusted and Galore, now Care.com Explore, add great user experiences in technology along with talented teams. We continue to believe that we will be able to leverage their product platforms more broadly over time to enhance our care offerings and provide value to both sides of our marketplace.

Moving now to our Care@Work business, which continues to scale with year-over-year revenue growth in the quarter of 32%. We are very pleased with this performance. Our innovative Care@Work experience and exceptional service delivery are driving our high-revenue renewal rates of 100% plus, and our signing of an impressive set of new clients.

In particular, we're driving increasing penetration among the largest and most admired employers, in line with our stated strategy. As of last month, our roster of Care@Work clients now includes leading consumer electronics retailer Best Buy, which has introduced access to our digital platform and backup care services to its 110,000 U.S. employees. In addition, as widely reported in the media last month, one of the world's largest food and beverage retailers is now offering our digital platform, backup care and senior care planning services to its more than 180,000 U.S. employees.

It's notable that these national household brands have made these services available to their frontline employees, who are frequently the most affected financially when care support falls through. According to our Care.com 2018 Cost of Care Survey, 33% of families now spend 20% or more of their annual household income on childcare, while 7 in 10 families report paying rates higher than the U.S. Department of Health and Human Services definition of affordable care. Based on current conversations with other corporate client prospects, we believe making services like ours available to all employees will be a growing trend among employers across industries.

In addition to Best Buy and others, in Q3, we signed on new clients including Heidrick & Struggles and Rosetta Stone, to name a few. Renewals included clients from a range of industries, including Workday, Johns Hopkins University and Health System, MIT and Boston University Medical Group.

With the momentum we have in Care@Work, we're excited to have added new senior leaders to the Care@Work business to drive new growth, expand client relationships and further scale our global operations in this fast-growing part of our business, and we expect to continue investing in the growth of this SaaS-like business with its highly recurring revenue model.

In summary, as I reflect back to the founding of the company and the last three years of profitable growth, I'm excited about the progress we're making on our key strategic initiatives. We're better positioned than ever to deliver on our founding vision and mission of helping families and our caregivers, and I expect this to continue to translate into profitable growth and healthy cash generation.

Now let me turn the call over to Michael before we open it up to questions.

Michael Echenberg

Thank you, Sheila. I will now provide more color on our Q3 results, starting with revenue, which was $49.2 million. This compares to our guidance of $49 million to $49.3 million and represents 10% growth versus Q3 2017 revenue of $44.5 million.

The U.S. Consumer business grew to $38.5 million for the quarter from $35.4 million in the third quarter of last year. Within that, U.S. matching increased 10% from $29.5 million in Q3 2017 to $32.4 million this year. The primary driver was growth versus prior in end-of-period paying families, which accelerated to 12% growth versus Q3 of 2017. As expected, ARPU declined 1% from $34.02 to $33.55.

We continue to be encouraged by the mix shift toward higher-duration subscription packages, which flowed through to a Q3 increase in LOPT. While we don't typically do a deep dive into unit economics each quarter, I will note that Q3 saw a 2% increase in LOPT versus Q3 of 2017. We will provide our usual full update next quarter.

Payments revenue increased versus prior from $5.8 million to $6.1 million, driven by growth in clients, with the impact of cycling against the one-time influx of former Intuit customers last year having a moderating impact on growth. Our other businesses, which include International, Care@Work and Marketplace, grew 17% to $10.7 million for the quarter, compared to $9.2 million in the same period last year. Care@Work continues as a source of strength, with revenue growth versus prior of 32% to $4.4 million.

Now on to EBITDA. Q3 EBITDA was $6.9 million for a margin of 14%, which was above our guidance range of $5.25 million to $5.75 million. This compares with $6.1 million in Q3 of 2017. For the third quarter of 2018, net income attributable to common stockholders was $1 million, as compared to a net loss of $0.4 million in Q3 of 2017.

Before I discuss EPS, I'll provide color on our continued cost discipline. Our philosophy here remains unchanged as we continue to focus our investment dollars on projected top line needle-movers while carefully managing the overall pace of expenses to drive operating leverage. Note that we've decided to make certain investments originally intended for Q3 in Q4 instead to support key activities in the run-up to 2019. This was the key contributor to our better-than-expected EBITDA in the quarter.

Now on to the individual cost lines. Starting with gross margin, which was 76.5% in Q3 2018 compared to 79% in Q3 of 2017. This was driven mainly by a mix shift toward Care@Work, as expected.

On to sales and marketing. For the quarter, we reduced sales and marketing as a percent of revenue by 7 percentage points from 40% in Q3 2017 to 33% in Q3 2018, as Sheila described earlier.

R&D as a percent of revenue was 18%, compared to 14% in Q3 of 2017, as we continued to invest in innovating the core experience, notably through Care 3.0 and particularly on mobile.

G&A as a percent of revenue for Q3 2018 was 22%, a 2-percentage-point increase over the prior year. The increase versus prior in G&A as a percent of revenue is mainly a function of 3 factors: the new teams associated with the companies we acquired, a few new positions in M&A and HR that are now filled, and stock-based comp, though it has begun to normalize following an adjustment to our incentive program, as we discussed last time.

Moving now to EPS. For the quarter, GAAP EPS attributable to common stockholders on a diluted basis was $0.03, compared to negative $0.01 in the third quarter of 2017. Non-GAAP EPS was $0.18, as compared to our guidance of approximately $0.12, and as compared to $0.18 in the third quarter of 2017. The performance relative to our expectation is a function of the flow-through from EBITDA. Non-GAAP EPS was flat relative to prior, despite the fact that EBITDA increased by $0.7 million for 2 main reasons: the change versus prior in other income or expense, a function of revaluing balance sheet items denominated in foreign currencies, and an increase as expected in the share count denominator.

Regarding cash and short-term investments, we ended the quarter with a balance of $120 million, up from $114 million at the end of Q2 2018.

Now turning to guidance. I'll start with revenue. We are narrowing our full year 2018 revenue guidance to $192.1 million to $192.5 million, representing approximately 10% growth versus prior at the midpoint, which remains unchanged relative to our prior guidance. For the fourth quarter, our revenue guidance is $49.6 million to $50 million, representing roughly 12% growth versus prior at the midpoint. This expected uptick in growth in Q4 relative to Q3 is the beginning of our anticipated acceleration into 2019.

On EBITDA, our full year 2018 guidance is $31.6 million to $32 million, which raises the midpoint relative to our prior guidance, yielding EBITDA margin of 16.5%, at the middle of the range. We are guiding to Q4 EBITDA of $11.9 million to $12.3 million, representing margin of about 24% at the midpoint.

In keeping with typical patterns, we continue to expect Q4 to be our strongest profit quarter of the year. In that context, as I noted earlier, we have decided to make some marketing and product investments originally intended for Q3 in Q4 instead. As always, we make investment timing decisions based on what we believe is best for the business, and we believe this spending pattern will serve us well in the run-up to 2019.

This EBITDA guidance flows through to our Q4 non-GAAP EPS guidance of approximately $0.20, with an expectation of roughly 39 million weighted average diluted shares outstanding. For full year non-GAAP EPS, we are increasing our guidance to roughly $0.69. This is based on an expectation of about 39 million weighted average diluted shares outstanding for the year. As a reminder, as you think about 2018 non-GAAP EPS relative to 2017, note that the $0.69 of 2017 non-GAAP EPS would have been $0.58, absent the one-time benefit associated with the recently passed tax reform legislation.

We continue to expect to end 2018 with $126 million in cash and short-term investments, up from $102 million at the end of 2017.

Now to wrap up before opening it up to questions. We had another solid quarter with a focus on strategic initiatives designed to drive long-term profitable growth and continued healthy cash generation. We remain focused on these initiatives, including developing the next-generation Care.com consumer offering and adding more of the largest and most admired employers to our Care@Work roster to capture ever more of our large market opportunity. We look ahead to 2019 with momentum.

With that, I'll open the call to your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question is from Jason Kreyer with Craig-Hallum Capital Group.

Jason Kreyer

Nice work on the new ads on the Care@Work side, and some questions there: So it seems like the Care@Work benefits formerly seemed to be more of a C-level benefit employers were offering. Now, with the new ones you announced today, that's being rolled out to full employee bases of pretty large corporations. So just wondering the referenceability of the customers you've just added and if you're having more dialogue with companies about rolling it out more broadly?

Sheila Marcelo

Absolutely. Thanks for your question, Jason. Certainly more companies like the innovative companies that you heard in the news earlier this month, they of course wanted to take the lead and make that announcement. They're really providing it all the way from the C-suite to their frontline employees, and we're having more and more of those conversations. And I do think the trend with regards to the future of work is making sure that these frontline employees are juggling multiple jobs through not just one company but any company today, given that we're at full employment, who provides these benefits to these employees that are often gig workers juggling a lot, I think, makes them even more competitive. And so those are the kinds of conversations we're finding, and I do think there's more of a movement towards equality of all types of benefits for employees.

Jason Kreyer

Sharon, I think you cut out there for a little bit at the end.

Sheila Marcelo

I just repeated that I think there is a movement, Jason, I think, to your question around more companies providing this to all of their employees.

Jason Kreyer

Okay, wonderful. Thank you. Another question: Just to give me your thought process on the direct marketing investment. So for the last couple of years, that number has tracked lower. While you've reduced those investments, we've seen the ROI on that spend nearly double. As you go forward, and I know you've talked about a reacceleration of the top line, but how should we think about the trend line of the marketing investments?

Sheila Marcelo

Well, we haven't announced what we're planning to spend into next year, but we certainly have that flexibility, and as we announce our ROI, which we do every mid-year and end of year, we'll elaborate more there. But what we've been really doing is investing around improving mobile conversion. As you know, this transition that we had towards the mobile platforms for both mobile web as well as the apps, as well as investments in organic. And we're starting to see those product investments really pan out and seeing that improving ROI. And as that, obviously, continues, we've got the flexibility to really do a mix of continuous long-term R&D investment versus short-term gains with increasing sales and marketing. And so we'll be discussing that more, certainly, on the next call.

Jason Kreyer

Okay. I'll look forward to that dialogue. Just the last one: If you did a quick look-back on the Care - or, I guess, if you go back to before the Care 3.0 investments to where you are today, just curious if you can balance the post-match initiatives, and wondering that with the slant towards monetization, how are you on the monetization side on the post-match initiatives today versus, like, a year and a half ago?

Sheila Marcelo

Well, we've seen some leading indicators with improving LOPT, as Michael pointed in his prepared remarks, and that is helping, and you're seeing the mix shift to a longer term. And that is often an indication of users much more satisfied with the service and seeing the benefit of continuing to actually subscribe on a long-term package. So we're going to continue to invest there, and so we'll continue to provide the detail in the unit economics as a way to show our shareholders the progress we're making on our post-match features.

Operator

Our next question is from Darren Aftahi with Roth Capital Partners.

Darren Aftahi

Just a couple, if I may. First, just following up on the shift in timing. Can you just explain - so I understand increased product investment, but can you just explain the shift in marketing spend, perhaps, quarter-to-quarter, and why that would be the case? Is it just that you're seeing better efficiency and you want to spend more on a linear basis? And I guess my question is, does that change the curve of what we typically see in the fourth quarter, of a down marketing investment quarter, and is that going to be a cadence going forward? My second question would be around the integration of Galore and Trusted. I think you had said, or perhaps inferred, Trusted being an integral part into Care@Work going forward. I'm just curious when we're going to see some sort of impact on your P&L, at least on the top line, from those 2 acquisitions? And then lastly, just with the increased marketing investment, I'm just curious: You continue to talk high-level about senior care, but can you just indulge and dive a little deeper about your marketing spend and driving new caregivers, how much of an impact that's having on Care@Work versus your core consumer business? Thanks.

Michael Echenberg

Sure, thanks, Darren. I'll handle the first 2 and then hand it over to Sheila for the third. With respect to our management of investment and spending nimbly across time, the way that we think about it is, we've got a talented marketing team that is very in tune with market dynamics, and they're thinking constantly about a range of publishers and placements and day parts and verticals and getting the latest, best data minute by minute. And so when we talk about spending in Q4 on the margin, some dollars that, in an earlier view, would have been spent in Q3, it's not at the level of a major strategic shift; it's at the level of a very professional team managing a budget nimbly and efficiently. So we're talking about in the hundreds of thousands of dollars against a budget that's in the millions, as you know. And so it does not represent a change in the general shape of the year.

As I mentioned in my prepared remarks, Q4 is generally a quarter of lower marketing spend, and therefore generally a quarter of higher profitability, and we expect that to be true in 2018 as it's been in the past several years. With respect to Trusted and Galore and the - and our acquisitions generally, and the role they might play on the top line, the way that I would frame it is, with respect to those 2 in particular, the M&A philosophy here is, we are taking advantage of the benefit that we have as the leading player in the space, of being able to make build-versus-buy decisions, finding talented product teams that have built compelling product, oftentimes product that we ourselves had on our road map, and being able to buy it at a lower price and/or at an accelerated pace relative to what we would have done in a build scenario. And so, in the normal course, just as our internal product initiatives over time worked their way through to the top line, when we acquire and integrate these tuck-in acquisitions, it's the same sort of thing. And so when we talk about revenue, our revenue guidance, obviously, immediately you wouldn't expect to see a ton. Over time, just as Sheila was referring to in the last question from Jason, just as you see the benefit of those internal initiatives flow through to LOPT and from there to revenue, similar logic with respect to these tuck-ins. And then as far as your final question, I'll hand it over to Sheila.

Sheila Marcelo

Yes, and let me touch on a - a little bit on that second question as well. One of the exciting things on the product side with Trusted and Galore is it's really this move that we've always had for a number of years now around better merchandising and segmentation, as I shared in my prepared remarks, of overall child care to meet the needs of families, because there are a lot of different needs, as you can imagine, Darren, right? And so after-school, specifically on-demand, continues to be an important need that we see from families. We have a significant number of jobs that are posted for families trying to figure it out, especially with dual-income families, and now moving to full employment, more and more families are realizing, well, who's going to do the pick-up? And so the solutions of a combination of Trusted and Galore, which is now rebranded Care.com Explore, is really focused around, how do we address the need of this on-demand after-school?

So we're excited about that, but as Michael pointed out, we have to work through the integration and make sure that it's sound. And then you had asked the question as well that, how does that impact Care@Work and our offerings there? So we've always thought of the products that we built to be leveraged by both our B2C and our B2B business, and certainly these are differentiation features because as we know, many employees struggle to focus on overall productivity at work and what we call presenteeism, especially when they have school-age kids, to try and juggle and make sure that someone's taking care of them and someone's picking them up, since most schools end at 2:30 or 3:30. So we really do believe this can also be used by our Care@Work clients, who are excited when that rolls out.

And then to your last question on senior care specifically, it is our fastest growing. We've always had senior care since founding of the company, and so what's been a delight to us is that it's been organically growing, and for the past couple of years, we're just putting more marketing dollars against it and we're finding that the time really is now for senior care, with the demand for families looking for help, as you know, with the demographic tailwinds of a senior-care tsunami that's pretty much coming. So we're going to continue to invest there, and what makes our model unique is that through our direct marketing spend, we actually acquire both sides of the marketplace because of the strong overlap of women, who are the primary seekers of care for families, and also primarily caregivers, so that continues to be an attractive growth for - on both sides of our marketplace when we spend money.

Operator

Our next question is from Doug Anmuth with JP Morgan.

Neeraj Kookada

This is Neeraj on for Doug. So a couple of questions: One, the gross margin profile. So it kind of compressed a bit, and you attribute it to Care@Work, so going forward, is this the level that we should expect? And the second question is on the Care@Work and others, or line item. So Care@Work continued to grow 32%. So do you - and the whole item, kind of, or the sell, sequentially. So do you - could you give some color into the International and B2B business, and what are the dynamics there? Thank you.

Michael Echenberg

Sure, yes. So with - thank you for that. With respect to the first question around gross margin, yes, we've talked over time about how Care@Work is the one part of our business where the dollars that go to pay caregivers, particularly in the context of backup care, pass through our P&L, and that's obviously a lower gross margin proposition than our core business, which is a tech-enabled, negative-option, recur-bill subscription model with the nice high margins that we all like. The Care@Work business generally continues as a source of strength for us, and what we've said in the past is that over time, we could expect single-digit gross margin compression as a result of the faster-growing Care@Work business. We've also mentioned that at maturity, as you go lower down on the P&L, Care@Work gets back some of those points with lower sales as a percent of revenue, for example, than the core.

And so all of that is in line with what we've expected. As far as, obviously, guidance, per se, for 2019 and beyond, we haven't showed that yet, but we will on the next call, as Sheila mentioned. With respect to your other question, yes. So Care@Work, as a reminder, sits in this other bucket. So Bucket 1 on our P&L is U.S. Consumer, which is the combination of matching and payments. Bucket 2 is Care@Work, the smaller B2B business called Marketplace, and then our International consumer business. And so with respect to those two, of Marketplace, I'd say, as we've mentioned in the past, it's a business that we like. It's a business that can be important strategically for us down the road. Today, as a matter of prioritization, it's not in our strategic sweet spot, and so that's the reason why we don't focus on it on calls like this. But it continues to perform very, very nicely from a profitability standpoint, and more to come on that as we move forward. And then International, the International B2C business benefits from many of the same innovation initiatives and many of the same market dynamics, demographics, et cetera, as the Consumer business in the U.S. does, and we continue to think about managing the International portfolio as we've done in the past, with U.S. being the primary focus, internationally - International being managed very nimbly and entrepreneurially out of our Berlin office, and over time, being able to share best practices across international boundaries.

Operator

[Operator Instructions]. Our next question is from Ben Rose with Battle Road Research.

Ben Rose

With regard to what sounds like a nice shift in the mix towards elderly care, Sheila, I'm wondering if you could talk about the customer duration in that category, whether you're seeing any sort of meaningful increase in length in terms of customers staying with the platform and perhaps choosing different caregivers over time?

Sheila Marcelo

Thanks for that question, Ben. Certainly we've seen early indications of length of paid time slightly being longer for senior care, and it's not a surprise. It's sort of a logical thing to understand, that there's high turnover when it comes to caregiving in senior care because it's a very difficult job and it's also sometimes 24/7. And so the need is high to actually provide different types of care. And also, because senior care, symptoms tend to change, and less expected, whereas in child care you tend to kind of know the growth path of children and expectations. And so caregiving is certainly a different type of crisis-driven need in senior care. So we find just an ongoing need from our clients of always fulfilling whatever it may be and the changes that they're finding.

Michael Echenberg

The one thing I'd add to that, too, Ben, is when you think about the relationships that we have with families, in some cases we're talking about the very same families who might have come to us originally for help with childcare, and then you imagine a mom in the sandwich generation who has young kids and in very short order has aging parents who also need help. And so one of the things we like about our model is, when we succeed in establishing a trust-based relationship with that mom, what begins in one vertical gets parlayed into the other over time.

Sheila Marcelo

And we are starting to see that. Our metrics internally have started to show that improvement of moving across verticals, as Michael pointed out.

Ben Rose

Great. And looking at the Care@Work business, I guess you're up to about - at least, my understanding, somewhere in the neighborhood of 200 corporations and/or nonprofits that are using Care@Work. When you look at the opportunity going out the next couple of years, do you think there is a larger opportunity in terms of going deeper with your existing clients in terms of offering kind of a broader array of services, or do you see the greatest opportunity with kind of greenfield accounts in terms of companies and nonprofits that are not offering this kind of service to their employees?

Sheila Marcelo

Ben, I think the opportunities are both. We're starting to see it with clients where we're able to see upsells with additional services. They may start with digital and quickly sign up for backup care and senior care planning because they've had a really good experience, or they start with senior care and add digital, as an example. So I think it's both. It's also increasing number of employees that we're seeing that continues to improve, as well as overall utilization that then drives high renewal rates, as we shared, 100% plus. And so it's got a really good SaaS-like, highly-recurring-revenue business model. So we're going to continue to take advantage of that. I personally am spending a lot more time, especially with Care 3.0 under way, with our EBP running Care@Work around the strategy of product and product innovation and differentiation in Care@Work. So it continues to be a very exciting area for us to invest.

And so we'll share more of the news there as we roll out these new product initiatives. And then on growth of additional clients, we continue to target sort of a total addressable market of about 10,000 companies that are 1,000 employees or more. And that continues to be something that we still feel is fairly early in our penetration, and we're finding what's great is that not only are there companies that are the most admired signing up for our services, but it's also companies realizing that to be competitive, and that they're not normally the best places to work, therein an aspiration to be a great place to work, and they have to, to also to be - to survive in this fight for talent. And so we continue to believe that we are going to continue to really go after this massive market.

Michael Echenberg

Something I might add to . . .

Ben Rose

If I may, Sheila, just a follow-up - oh, sorry. Just a follow-up onto that, are you seeing any kind of peer pressure effect, like, within certain industries? I know, for example, amongst universities that you've had a decent amount of penetration there, but as you start going out into the general corporate market, is it your expectation, for example, that with the Best Buy sign-up, that there could be more retailers, both brick and mortar and online, that could look at that and say, gosh, we have to start to offer that for our employees too?

Sheila Marcelo

Yes, I think there's definitely peer pressure, especially when you have these aspirational national brands that are doing right by their frontline employees. And certainly they've been leaders in this space, whether it's in paid leave or other things that they've been leading in, now to say, hey, listen, we're also going to provide backup care. And by the way, it's a great benefit that we're going to - it's only going to be $5 a day for any employee for a daycare drop-off and $1 an hour up to 10 days a year. I mean, that is a spectacular offering that they're doing to really - to say to the world that we believe in our employees and we walk the talk. So I think when you have leading innovative companies doing that, I think companies start to realize, look, if they can make it work on their P&L, because it proves out in overall retention and a reduction of overall turnover, then the economics are there. That this isn't just a soft issue; this is a real need that families have so that they can show up to work, be productive and produce revenue for the company. And so we continue to obviously beat the drum on that right investment in people.

Ben Rose

Great. And sorry, just one - that was very helpful. Just one final question for Michael. Given the critical mass of services that you have now, are you seeing any improvement in the linearity of the quarter in terms of how revenue unfolds on a 90-day basis?

Michael Echenberg

Are you speaking specifically with respect to Care@Work, then?

Ben Rose

I guess I'm thinking kind of more in total, in terms of the total business, in terms of how a quarter unfolds now versus, say, like, a year ago. Is it getting more predictable, in a sense?

Michael Echenberg

I would say we're always taking advantage of the latest data that we've got and always looking to improve our forecasting. I would say with respect to revenue, the fact that we came in this quarter bang-on with respect to what we shared as our guidance range is a signal that we're in pretty good shape on that front. And so - but we're always looking to improve continuously here, just as we are across our business.

Operator

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.