Progyny, Inc. (PGNY) Q2 2020 Earnings Report, Transcript and Summary

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 significantly above our guidance of a minimum of $45 million in second quarter revenue. From the onset of the pandemic we believe that fertility would be able to recover more quickly relative to both other areas of the economy that have been significantly affected by COVID-19 as well as other areas of healthcare such as hospitals. The return of the significant majority of our members into care during this quarter affirms that belief. While non-emergency procedures across much of healthcare remains well below, where they would be normally be. Our treatment volumes demonstrate that fertility is time-sensitive and that most people who need care aren’t willing to defer it for an extended period of time because they know that their likelihood of success may be compromised by a meaningful delay. Though our clinics have the capacity to fully address our member demand and the volume of members pursuing treatments have substantially return, July treatment volumes have remained slightly below normal levels at approximately 90% of our expected utilization because utilization levels are still not quite at 100%. This highlights that there is a small [indiscernible] members who continue to have some trepidation about receive care at this time. For those individuals we believe this pause will be only temporary and that members will eventually pursue treatment when they feel comfortable doing so, whether that is later this year or sometime in 2021. In fertility doesn’t go away by itself and for those individuals who have decided that having a child is one of the most important goals in their lives, we know that these members appreciate that ART treatments will give them the greatest chance at realizing their dreams. And Progyny will be ready to support them when they’re prepared to take that next step on their journey. Turning now to our new business development activities. As companies have continued to maintain their work from home environments. Our sales activity in the quarter likewise shifted entirely to virtual and telephone interactions. In addition, all of the key industry conferences have shifted to virtual platforms and we expect that will be the case for the remainder of the year. Our sales and marketing teams have responded well to these challenges. For example, in order to increase our opportunities to engage with prospective clients and to build our pipeline we’ve been holding regular webinars, provide benefits managers with timely content and insights from key opinion leaders on topics that we know are high importance to them. These lead generation activities combined with our normal sales channel such as benefit consultation introduction to prospective accounts have allowed us to generate a robust pipeline. We believe that the cost savings we achieved to our superior outcomes are resonating more deeply in this current environment and are helping to drive this level of sales activity particularly with those prospects who are already providing fertility coverage. While we continue to have success in generating good level of activity both in getting initial meetings with prospective accounts and then progressing those opportunities into subsequent rounds of review. HR teams from a number of prospective accounts are telling us, that they’ve needed to prioritize their COVID responses above their consideration in any new benefits this year. As a result, our overall level of our opportunities for the 2021 planned year is less than what we would otherwise expect. At this point in the year, we still can’t yet know what our 2020 selling season will ultimately produce and as is typical. We continue to expect that the majority of clients call [ph], clients decisions we made at the end of the summer through the early fall. So although still too early to know with certainty, we currently expect to see a greater percentage of accounts in this selling season give us a “not now” as compared to what we’ve seen in prior seasons. And we expect to enter the 2021 selling season with a very robust pipeline of well-developed prospects for either a mid-year 2021 or January 2022 start date. Despite this challenging environment, our preliminary expectations for 2021 or for a minimum of $525 million in revenue reflecting an accelerating growth rate of 58% from the midpoint of our 2020 guidance. This expectation takes into account of new sales and upsell commitments to date as well as our view into the remaining pipeline and upsell opportunities with which we’re still actively engaged. As is our custom, we’ll also continue to work with each of the “not now” accounts and help them get into position to add the benefit when they are able to do so. Historically, these “not now” deferred accounts have been an important source of new business wins in subsequent years. We saw that again this year with some of our initial wins this season and we would expect that to be the case again next year. As for our existing customer base, we believe the caliber of our clients as well as their commitment to their workforce and their loyalty to the Progyny benefit is one of the most underappreciated aspects of our business. When everyone has been affected by COVID and many have felt the impact of the resulting economic slowdown. We continue to see that our client base has largely avoided the worst of these impacts when taken as a whole. As of June 30, we have $2.2 million members reflecting a small increase from our March 31, member base. The increase is primarily due to growth from our existing customer base as some of our clients have continued to add to their workforce this year despite the broader economic conditions. As we look across our clients, taking to account both their public disclosures as well as our own conversations directly with them. The clients who represent the significant majority of our revenues in membership haven’t announced any workforce reductions or meaningful furloughs. As a result, we continue to believe we will maintain our members from our existing client base for the remainder of this year. We also continue to believe that all of the macro trends that have been contributing to our long-term growth profile remain intact. Specifically the high and growing rates of infertility driven by the continued increase in the average age when women are having children, the lack of adequate coverage for this highly prevalent and growing medical need. The need for employers to get the most from their healthcare spending and the need for diversity, equality and inclusion in the workplace which has become more important than ever. With respect to diversity, equality and inclusion. Fertility benefits can be one of the most impactful ways a company can demonstrate its commitment in each of these areas. In addition, while it is important for companies to support all of their workers’ healthcare need through adequate coverage. It can be equally important to provide employees with the resources they need to have successful outcomes because fertility treatments are often an extremely emotional and difficult journey. Unsupported patients often chose to stop treatments simply because they don’t have the proper tools to cope with the stress involved. In partnership with one of the largest fertility practices in the country. We’ve recently conducted a study which revealed that patients who are provided multiple contacts with care advocates such as our PCAs. Are more likely to continue down their treatment pathway toward building their families. We’re pleased that ASRM recently accepted our submission to present this important research at their last annual industry-wide event the Scientific Congress and Expo, this fall. With that I’d like to turn the call over to Pete to walk you through the financials in greater detail.

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 volumes amid the COVID-19 pandemic revenue increased 15% to $64.6 million in the second quarter from $56.2 million in the second quarter last year. The growth was primarily driven by pharmacy benefits revenue which increased to $18.3 million this quarter from $10.5 million in the second quarter last year. Due primarily to an increase in the number of clients with Progyny RX benefit as compared to a year ago. Approximately 70% of our clients now have the RX benefit as compared to 60% of the clients a year ago and we continue to see opportunities to upsell Progyny RX, within the existing base given the better member experience when you have an integrated benefit and the hard dollar savings we can generate for clients, who take advantage of this benefit. Fertility benefits revenue increased 1% to $46.3 million reflecting the higher number of clients and covered lives partially offset by the decline in utilization impacted by the COVID-19 pandemic. At June 30, we had 134 clients representing approximately 2.2 million members which compares to 80 clients and approximately 1.3 million members we had at the same time last year. Turning now to profitability, our gross profit of $12 million this quarter increased 4% from the prior year period. Gross profit increased at a slower rate than revenue because of the impact of our decision to keep the care management staff in place in anticipation of a quick recovery of member activity. We made this decision in anticipation of the eventual resumption in treatment and to preserve the team that we built and it’s because we kept those resources in place that as the clinics began to reopen in May and June, we were in a position to help our members resume treatments as quickly as possible. As a reminder, the significant majority of our cost to services are variable in conjunction with treatment volumes. The only portion that isn’t variable is our employee related cost for care management which includes the patient care advocates or PCAs and the provider relations and provider account management teams. As a result, our gross margin was negatively impacted slightly in Q2 and came in 18.5% this quarter versus 20.4% in the second quarter of last year. Moving across our operating expenses. Sales and marketing was 5.6% of revenue in the quarter consistent with the second quarter last year despite the impact of the reduced volumes to our revenue. G&A was 15.7% of revenue this quarter, an increase of 10.6% a year ago quarter primarily due to the step up in public company cost incurred in the current quarter and our first full year as a public company. Our adjusted EBITDA of $3 million this quarter was significantly better than our guidance of $1.3 million adjusted EBITDA loss because of the faster than expected recovery in treatments and the higher associated revenues as well as high rate of margin capture on this incremental revenue. Our adjusted EBITDA margin of 4.7% this quarter as compared to 8.1% margin the prior year period reflects the impact of lower revenues due to the impact of lower than normal utilization from COVID-19 as well as approximately $1.7 million in incremental expense of being a public company and our decision to keep the overall workforce intact. Our net loss this quarter was $1.8 million, a decrease of $3.3 million from the $1.5 million net income in the prior year period. Net loss attributable to common stock holders in the current period was $0.01 per share on the basis of $85.3 million weighted average shares outstanding. There were no earnings per share attributable to common stock holders in the prior year period due to the impact of deemed dividends on preferred stock that had been outstanding at that time. Turning now to our balance sheet, at June 30 we had $91.4 million of cash and marketable securities compared to our $91.6 million cash balance as of March 31. In addition, as of June 30, we had working capital of approximately $102 million with no debt. Despite the impact COVID had to our volumes in the quarter. We generated positive operating cash flow of $2.2 million was compared to an operating cash flow of $4.2 million in the prior year period. Over the first half of the year, our operating cash flow of $14.3 million improved versus $1.9 million cash used in the first half of 2019. This is primarily due to efficiencies our carrier integration processes as well as some favorable timing items that carried over from the prior year to the first quarter as we discussed on the Q1 call. With our substantial cash and securities balance positive cash flow and an untapped $15 million credit facility. We continue to have full confidence and our ability to manage through any temporary disruption through our business from the COVID-19 pandemic. As we begin the third quarter, member activity in July has been consistent at approximately 90% of our typical volumes even as COVID cases have continued to rise to their highest levels since the pandemic began in certain states. This is case even in those specific regions of the country where COVID rates have been recently rising. We believe, this demonstrates that as long as members have access to care meaning the clinics are open, providing their full range of services and people aren’t affected by local stay at home orders, limiting their day-to-day movement then the significant majority of members who want treatment will pursue care. In light of the consistent level of utilization we have seen from the end of Q2 through the current scheduled appointments for the third quarter. We were issuing expectations for both the third quarter and full year. The guidance ranges we’re issuing today assume a number of factors including that member activities stays consistent at approximately 90% of expected utilization we’re experiencing today and that our member base remains intact. The ranges on the low end also reflect the potential negative impact to utilization certainly areas of the country that maybe more severely affected by COVID-19. On that basis, we’re projecting third quarter revenue between $88 million to $95 million reflecting growth of between 44% and 55%. We also expect adjusted EBITDA between $7.2 million to $8.8 million and net income between $3.6 million to $5.3 million. For the full year, we’re projecting revenue between $323 million to $340 million reflecting growth of between 41% and 48%. We expect full year adjusted EBITDA between $24 million to $28 million and net income of between $8.9 million to $13.1 million. As we look ahead in 2021, we believe our growth will be driven by combination of factors including one, the strength of our installed base which David addressed earlier. Two, our high rate of client retention. We haven’t had any accounts raise any concerns about continuing with the benefit next year. Three, our opportunities to upsell such as increasing our penetration rate of Progyny RX and four, our ability to continue to attract new clients despite the distractions that many companies are currently working through because of this pandemic. Our preliminary expectations for 2021 are for a minimum of $525 million in revenue reflecting an accelerating growth rate of 58% from the midpoint of our full-year 2020 guidance. And as David mentioned, we expect to enter the 2021 selling season with a very robust pipeline providing us with a sustained run rate for continued and significant growth well into the future. With that, we’d like to open up the call for your questions. Operator, please provide the instructions.

[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.