Good day and welcome to the Progyny Inc Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to James Hart, Vice President of Investor Relations. Please go ahead.

Thank you, Tara and good afternoon everyone. Welcome to our second quarter conference call. With me today are David Schlanger, CEO of Progyny and Pete Anevski, President, CFO and COO. We will begin with some prepared remarks before we open the call for your questions. Before we begin, I’d like to remind you that today’s call contains forward-looking statements, including statements about our positioning to successfully manage the impact of COVID-19 and the associated economic uncertainty on our business, our financial outlook for the third quarter and full year 2020 and full year 2021, the impact of COVID-19 on our business and industry operations, financial outlook and member utilization rates, our expectations and the timing and extent of recovery of fertility industry and the resumption of fertility services that provide our clinics, the strengths of our client base and their ability to manage the impact of COVID-19, our ability to acquire new clients and retain existing clients, our market opportunities in size, our business performance, industry outlook, financial outlook, strategy, plans and objectives for future operations and other non-historical statements as further described in our press release that was issued this afternoon. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Progyny’s growth, market opportunities and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our periodic and current reports filed with the SEC, including in the section entitled risk factors and our most recent 10-Q. During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA. Reconciliations with the most comparable GAAP measures are also available in press release, which is available at investors.progyny.com. I would now like to turn the call over to David.

Thank you, Jamie and thank you everyone for joining us this afternoon. We hope that each of you your families and your loved ones continue to be healthy and safe. This quarter we saw the return of our members into care and because of this we’re reporting second quarter that is meaningfully stronger than we had expected when we reported our first quarter results to you in May. But before we get into the drivers of the results, let me briefly remind you of how this quarter began. In early April the significant majority of the clinics in our network had curtailed their operations to comply with the guidelines provided by the American Society for Reproductive Medicine which at that called for the succession of new fertility treatment cycles during the onset of the COVID-19 pandemic. As a result, our treatment volumes at their low point dropped to approximately 15% of what we would otherwise have expected to see. In late April and early May, our clinics began planning for the reopening. In accordance with revised ASRM guidelines on the safe resumption of care and by the end of the June virtually all of the clinics in our networks were providing their full range of services. Guidance we gave you in mid-May was based on what we were seeing at that time and assume we will see a steady build in appointment volume and member activity through the end of June. We’re pleased to report that the rate at which our treatment volume recovered was even faster than we had anticipated. By the end of June, utilization of fertility services by our members increased to approximately 90% of what we would have ordinarily expected to see and as a result, our revenue of $64.6 million in the second quarter was…

I’ll begin by discussing member activity during the quarter since that had the orders impact to our results. As David mentioned in light of the ASRM guidelines that were originally issued on March 17, significant majority of the clinics in our network weren’t open or were only providing limited treatments such as initial consults when we began the second quarter. That caused our utilization levels at the lowest point in April to be only about 15% of what we would typically expect to see. As the clinics reopened, member activity built over the second half of the quarter and see week-over-week increases in utilization, with utilization in June ending at approximately 90% of what we would typically expect to see. This acceleration is very positive indicator of the recovery curve in fertility is greater than we were able to see when we issued our minimum revenue guidance in May. Our view then was based on what we were seeing at the time and reflected our estimate of where utilization might progress to over the remainder of the second quarter. Recovery ended up being both faster and better than we had anticipated. As a result utilization across the full second quarter was approximately 65% of what we typically would expect to see, as compared to the approximately 45% level that we assumed in our minimum revenue guidance of $45 million for the second quarter. Our utilization rate for the second quarter this year was 0.35% for all members and 0.32% for female utilizers as compared to the utilization rates of 0.53% and 0.46% respectively a year ago. The number of ART cycles were comparable 3,400 and 34 cycles completed during the second quarter, this year as compared to 3, 378 from the second quarter last year. Despite the lower than normal…

[Operator Instructions] our first question will come from Anne Samuel with JP Morgan. Please go ahead.

As we think about the 58% growth in 2021, what kind of utilization are you assuming? Are you seeing that gets back to normal or what kind of cadence should we be thinking about?

Right now we’re assuming the same cadence that we’re seeing today that we’ve been seeing for the last let’s call it, month and half, two months because there is no ability to understand what’s going to happen with COVID-19 and whether there’ll be a vaccine and when and then when that vaccine will be widespread etc. we think it’s prudent to continue to assume at 90% level.

That’s very helpful and then I guess for those cycles that were delayed earlier in this year and you’re still kind at 90% rate. Do you expect that pent-up demand to ever return or are you thinking about those just as lost cycles?

Some portion of those are lost cycles, some portion of those are coming back already. A portion of those we will never know because as we’ve mentioned in the past not everybody who paused called us and told us they were pausing, they just never scheduled any appointment in the first place. So we only have visibility into a portion of those that scheduled and cancelled and what they’re doing. And so I think it’s a combination of things. So it’s hard to sort of pin point exactly, when and what portion will return when.

The only thing I’d add Anne is that, a lot of factors go into the decision making as to when you’re ready to have a child, it’s not simply the COVID-19 situation, it’s the economic situation. What your job security is, etc.? Are you living in the place you used to live in? So it’s really hard to know, number one why people paused and so also hard to know number two, why and when they will come back precisely. Because all of those factors kind of have to triangulate to make it be right time for someone to pursue having a child.

That’s really helpful. Thanks guys.

Your next question comes from Stephan Tanal with SVB Leerink. Please go ahead. Q –Stephan Tanal: Really helpful update guys, thank you for that. I guess just following up on Anne’s question. Thinking about the guidance for next year, can you give us a sense for what that assumes for new member adds and how you’re thinking about net new clients, first average client size. Just a little context there would be helpful.

As David mentioned it’s early in the selling season to sort of start framing one of the variables that contribute to next year’s revenue which is new client adds, size of clients etc. versus all the variables that went into coming up with the 525 minimum expectation that we have for next year. I think it’s just early to start putting out numbers like that. We’re certainly will be prepared to do that when we finish this quarter and the selling season and report Q3. But I think it’s premature to start for aiming that.

The 525 next year, it looks at a bunch of factors including as we mentioned with Annie’s [ph] question before and assumed utilization rate for existing members. It also looks at what we sold to-date, what’s happening from an employment perspective with our customers and also look at the remaining pipeline and make reasonable assumptions about how much of that remaining pipeline we expect to bring on board. And also the pipeline of potential upsell, so it’s triangulating a lot of factors to get to that number, so you have to take all of them into account. Q –Stephan Tanal: Yes, that’s there and I appreciate that, it’s early and we’ll sit tight for that. I guess maybe a higher-level question though, sort of similar point. Maybe if you can give us a flavor for what kind of key drivers of upside could be, where are the big swing factors to see there? I think utilization at 90% is one that I’d spike out, but is there anything else you’d call out in that regard where you can end up doing better or worse or anything that could appreciate the swing/

As we mentioned in the remarks, we have a robust pipeline of accounts that are just distracted right now with COVID. If the COVID situation resolves itself in a quicker, more satisfactory way to most people, we believe that many of those accounts could potentially be mid-year implementations next year. We’re not – that’s a potential upside to what we’re talking about. But again given the situation now very difficult to predict what’s going to happen three or four months from now. Q –Stephan Tanal: Great, that’s helpful and maybe one more for me on yield. You guys had commented on the conversations you’re having with existing clients through COVID and pre-IPO. I know at least I was concerned to some degree about the potential for corporates to dial back fertility benefit, [indiscernible] pull them all together. I know in April you said you haven’t seen any activity like that and Pete it sounds like that’s still the case. is that right and is there any more context you can give us around those conversations and what you guys maybe learned here as – you’re headed to what maybe month three or month five actually of recession here?

So you have its direct relative to, we haven’t heard of any concern with our existing client base and we have a nice [indiscernible] talks to all of them regularly and so it hasn’t been concern expressed to us from our base, so that’s a very positive update. The second piece of that is, there has been positive conversations contemplated amongst the factors that went into the 525 [indiscernible] positive conversations around upsell opportunities which is good and so, it’s another strong sign, not only are they not considering cutting. Where it makes sense for them, they’re considering sort of expanding and so that’s positive. So overall the base we talk about existing the year with the base intact, it’s really in line with all of those conversations and so far, not hearing any trepidation from our base of clients around the benefit and offering the benefit and in anyway considering stopping the benefit because of some concern around cost cutting. As David, we are fortunate we have base of clients that overall because – have used the indicator of the employee base itself and the fact that they haven’t announced and some of them haven’t even announced hiring, they haven’t announced any meaningful reductions in workforce or furloughs. I think it says a lot about sort of the uniqueness of the client base that it hasn’t been impacted.

As we talked about from kind of the very beginning when we took the company public. Fertility benefits are a situation where the employer is agreeing to provide coverage for health condition and once, they provide that, it’s a very sticky benefit. They tend not to dial that back. This isn’t some kind of digital tool that’s easy to get rid of. It becomes kind of fundamental part of their medical coverage and as we suspected even in a rougher economic environment companies are not dialing back on the level of medical coverage. Q –Stephan Tanal: Great to hear. Thank you, guys.

Your next question comes from Sarah James with Piper Sandler. Please go ahead. Q –Sarah James: I think it’s important to distinguish in your new sales conversation, if a client is telling you not now because of COVID, is that a budget related or capacity of HR professionals towards prioritizing return to work related comment?

Those conversations have purely been a distraction factor that they’re managing through issues and situations with their workforce; they never had to deal with before. So it starts with having a remote workforce, managing, who’s coming back where. All the issues of managing a remote workforce. I mean you see announcements every day from companies about what they’re doing with their workforce. So it has truly been distraction factor. It has not been a budget factors and it’s why they’re saying, once we get past this and figuring out what our long-term plan kind of plan is with respect to where employees work, they want to have conversation with us. As again remember the companies we’re speaking to are relatively well positioned given the impacts of COVID. So for them it has not been a budget issue. Q –Sarah James: Great and has the needle moved on the pipeline at all as far as two-thirds of the customers being companies that have already had fertility insurance in the past, are you seeing that mix change at all?

We’re early into the selling season Sarah, the number of sales wins is you know it’s still small relative to where we end up the year. So I actually haven’t even looked at it with respect to the sales win, we have to-date. But we still are going after both accounts that had coverage before and those that haven’t and are having success in both of those areas.

Yes, the focus if you recall is more of the industry is that make the most sense relative to least impact from COVID as sort of the largest overlay. Q –Sarah James: Great and then last question and then I’ll yield. Can you talk about the shift to virtual sales? Can we run rate the step down in sales and marketing expense for the rest of the pandemic and has this shift in method had any impact on your clothing rate by selling virtually? Thanks.

The level of cost relative to being – its cost saving relative to being virtual versus traveling is nominal versus the cost of the staff in terms of the client acquisition. So it’s not a significant savings, it’s incorporated in the guidance that we have, but I wouldn’t call it significant. The bigger dollars are really around the people and the relationships that we have externally around client acquisition more so than the T&E [ph] kind of cost.

On the second part of your question, every year we get better at managing the pipeline. Understanding the quality of pipeline and kind of actively managing the pipeline and making sure that we’re accounts that are real prospects. So we continue to do that. Obviously close rates will be determined at the end of the year. But again we – as I said in the prepared remarks. We are happy with the quality of the pipeline we have. Q –Sarah James: Thank you.

Your next question comes from Glen Santangelo with Guggenheim. Please go ahead. Q –Glen Santangelo: I just want to follow-up David on some of the commentary around June and July, maybe can you give us a sense for maybe what you’re seeing geographically and I’m kind of curios. If you look you at the Southern states, you look at some of the hot spots like the West Coast [indiscernible]. The issue really lasting for the level of concern [indiscernible] what are you seeing on a region-by-region basis?

So what we’re seeing is that, the most important thing for people getting back into care is that the clinics are open for the full range of services and prepared to treat patients. So that is the most important thing and we haven’t seen any correlation between the states you see on the news as being kind of hotspots in having high levels of COVID and growing levels of COVID with utilization. So once ASRM change the guidelines and the clinics adjusted their practice behaviors to take into account, safety protocols. Patients went back into care and that’s been pretty consistent regardless of geography.

Yes, so I’ll just add to that. So literally down to the state of the states that you heard about the most. [Indiscernible] for us that, there is a tiny little impact but they’re not important to us relative to size which is Florida and Georgia. But the other ones you can hear it about like Texas, California which are larger states for us and more important. We have not seen an issue. When we look at all sorts of activity from the beginning of June through today. We have not seen an impact even though those states are hot spots and some of them be getting worse, some of them have been higher and remain flat etc. So on a region-by-region, state-by-state basis especially where it’s important to us. We don’t see it concerned relative to the hotspots that are out there in the country.

And it just confirms that we say consistently, is that. Members understand that fertility treatments have a level of time sensitivity to them. And that, you can delay care for too long before you start compromising your likelihood of success. So members understand that and if once they see doctors are open and can safely treat them, they’re going into care. Q –Glen Santangelo: Maybe, if I could just ask one more quick follow-up question on the selling season. I’m kind of curious in your conversation. If you’re seeing any changes in the competitive landscape and by that, I’m kind of curious, if you’re seeing any of the managed care companies maybe pricing their benefit a little bit differently than what they had in the past. Any sort of changes in that regard that are worth calling out?

No, we’re not. In fact, as I mentioned the main difference is the distraction in COVID and companies telling us, they’re not really changing, making any benefits changes this year because of – all hands-on deck dealing with COVID issues, remote work force issues. So we’re not hearing we’re not being awarded business because it’s going to a competitor. So I would say, competitive environment feels largely the same. Q –Glen Santangelo: Okay, thank you.

Your next question comes from Michael Cherny with Bank of America. Please go ahead. Q –Michael Cherny: I’m guessing as you work with your [indiscernible] organization to retrench during COVID, you learned a lot of things about both the services you’re providing your customers as well as how you provide them. Kind of separate question from the remote sales process. But David you talked in the past about the potential to bolt-on additional services and capabilities to your to further enhance your offering above and beyond the strong fertility benefits you have. Has anything regarding the recent COVID disruption open up your eyes, other potential avenues or things that might move further up the pecking order that you might want to pursue, that you realize your clients need from you in this day and age?

I mean I still think that we’re looking in the areas that we looked at before. The one change is that, I think we as an organization have worked through our own COVID distractions and now can kind of refocus on those areas which we’ve been doing over the last short period of time. So again it’s still the things that make the most sense for us that we’ve talked about in the past. So that really hasn’t changed, it’s really hasn’t changed. I think we’ve talked about expanding mental health benefits looking at adjacent areas of women’s reproductive health. Some of the vertical areas we talked about. These are all things that we are now more actively discussing and thinking about. Q –Michael Cherny: And tying back to 90% utilization that you’ve seen in recent trends in the last couple of months. I guess can you [indiscernible] little more sense of the range of what you’re seeing. You noticed it wasn’t necessarily [indiscernible] outbreaks, but are you starting to see some of the fertility specialist go back feel above 100% capacity. And I guess how fast and how far can they stretch that?

It is interesting. There are certain clinics that did go above 100%. There are some that are still at 70%, so it was surprising honestly because I did comparisons of clinics in the same area. So as an example, in the Bay Area they were pretty dramatic differences in what clinics we were doing. It doesn’t mean that they were necessarily that much for their overall business before us in certain areas some were higher and some were lower. So there’s variability. But its netting out to the 90% of what we would normally would have expected based on early volumes in the beginning of the year which historically has been very instructive for us in terms of predictability. But it’s varied significantly within areas that are in the same markets and the variability of those clinics to our business is very different.

[Operator Instructions] your next question comes from Ralph Giacobbe with Citi. Please go ahead. Q –Ralph Giacobbe: So you mentioned the 90% assumption which does seem reasonable, if not conservative. Have you made any assumptions around the employment backdrop softening or did you keep that consistent with current trends as well?

We kept it consistent with current trends particularly around our existing base as we talked about. We haven’t heard or seen any announcements around either lays off or furloughs with those and we haven’t made any other changes to our assumptions relative to new sales expectations around the employment backdrop. Q –Ralph Giacobbe: Okay and then just a follow-up on you have a clinician base, that obviously hasn’t seen patients and it’s taken a little bit of hit on their earnings. Any upward pressure on their charges and maybe just remind us of how that contract works? Thanks.

The contracts are fixed. They’re generally two-year terms. They all are two years based on when they enter the network and so they’re fixed for the duration of the term. Literally only one clinic on our entire network asked the question. But didn’t push on the issue at all relative to or reconsidering any sort of price adjustment during this period. And other than that, other than getting one question from one clinic, nobody else even raised the issue. I think everybody sort of feels like, it’s just a burden to bear if you will during this unprecedented pandemic, so nobody else asked the question, so we’re not feeling any pressure related to price. Q –Ralph Giacobbe: Okay, fair enough. Thank you.

This concludes our question-and-answer session and the conference is also now concluded. Thank you for attending today’s presentation. You may now disconnect.

Thank you, everybody.

Thank you, everybody.