Q4 2020 Earnings Call
Welcome to help equities fourth quarter fiscal 2020 earnings Conference call. Please note that this event is being recorded.
Please go ahead Mr. pod.
Thank you Libya.
Good afternoon, welcome to help equities fourth quarter fiscal yearend 2020 earnings Conference call. My name is Richard Putnam I do Investor Relations here for Healthequity.
Joining me today as John Kessler, President CEO, Dr., Steve Neeleman, Vice Chairman and founder of the company Darcy Mott, the Companys executive Vice President and CFO and Ted Bloomberg, Our Chief operating officer.
Before I turn the call over to John I have three important reminders to provide first a copy of today's press release posted earlier. This afternoon is available for reference on our Investor Relations website at <unk>, our Dod Healthequity Dot com.
Second our comments and responses to your question reflect management's views as of today March 16th 2020, only and will include forward looking statements as defined by the FCC, which include predictions expectations estimates and other information that might be considered forward looking there.
Many important factors relating to our business, which could affect the forward looking statements made today.
These forward looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from statements made here today.
The result, we caution you against placing undue reliance on these forward looking statements. We also encourage you to review the discussion of these factors and other risks that may affect or future results.
Core market price overstock detailed in the latest annual report 10-K, and subsequent form 10-Q's for current reports filed with the FCC.
We assume no obligation to revise or update these forward looking statements in light of new information or future events.
And third during this call we will reference certain non-GAAP financial measures included in our press release, where you can find additional disclosures regarding these non-GAAP measures.
Including reconciliations of these measures with comparable GAAP measures I'll now turn the call over to our CEO John Kessler.
Thank you Richard and Hello, everyone and thank you for joining us on what we know is a busy an eventful day.
Today, we are announcing strong results for Healthequitys fiscal year ended January 31st 2020, and we're providing guidance for 2021.
With a focus on the strategic operational and financial impact on our business of the covert 19 pandemic and of its economic follow up after briefly touching on the results I'll offer comments on the strategic implications of the pandemic fallout Ted will provide an update on wageworks integration and our operational response to the pandemic and Darcy will lead us.
Through the details of the F., why 20 results and our outlook for up by 21.
Today, we reported record operating results market share gains and fulfillment of our promise to deliver a measure of immediate accretion from the Wageworks acquisition.
Slide 20 revenues of $532 million are up 85% year over year and adjusted EBITDA of 196 million is also a record we previously announced definitely 20 sales, including record organic HSH openings, a market, leading 5.3 million age of say members 11.5 billion, an agency assets and 12.8.
Million total accounts, including.
Both agencies and complementary consumer directed benefits were CDB participants at fiscal year end.
Earlier this month Devaney research published its calendar 2019, H.C. market assessment quantifying healthequitys market share gains Healthequity estimates that h. assays grew 13% market wide well Healthequity grew HSH, 15% and that excludes those reported by Devon year in 2018 for the acquired Wageworks and.
5% overall market wide Devon your estimates that HSH assets grew 23% well health equity assets grew 29% during Devon years estimation period and that again excludes those reported by devaney or in 2018 for the acquired Wageworks.
If you do include those it would be 49% overall, so that's a lot of numbers. According to Devenir team purple delivered faster organic HFSA account growth versus the market, we delivered even more faster growth in Asia sei assets on an organic basis and even more added to its lead that we did well.
Acquisition.
Calendar year end Healthequity had number one market share of 19% by age assays and was a close second by age Sei assets at 16%. We promised you a 10th straight year of market share gain Devon has been doing this report for 10 years and the team delivered that promise on organic basis, and then added significantly more.
With the Wageworks acquisitions.
From that acquisition. We also promised first year EPS accretion on a non-GAAP adjusted basis and again the team delivered last June just before announcing the definitive purchase agreement, we guided F. why 20, non-GAAP adjusted yes to between one dollar and 35 and one dollar and 42 per does.
We did share.
Using our current definition of non-GAAP adjusted heap, yes.
The acquisition was closed in August and today as far as he will describe we're delivering f. why 20, non-GAAP adjusted EPS of a Buck 73 per share, which is 22% to 28% first your accretion versus our immediate pre acquisition expectation.
She will discuss these results in a few minutes, including the obligatory reconciliation to GAAP measures.
We believe Healthequity is positioned for a vigorous response to the cobot 19, pandemic and its fallout or industry I.
I'd like to start with yield on custodial cash.
In Q4, 23% of our revenue came from yield on custodial cash that was down from 48% in our Q2, including cash in H. assays in CDB client held funds.
Revenue reported that industry wide the comparable figures, 53% of revenue in calendar year 2019 was attributable to net interest margin.
So we've become far more diverse and the main reason for this difference is our one partner total solution approach to HSH and complementary consumer directed benefits.
The F. why 21 guidance, we provide today assumes the federal reserve Bank, which returned its benchmark rates to post 2008 crisis conditions yesterday maintain from there.
Relatively modest implied impact of roughly 4% reduction in revenue from the midpoint of our prior guidance reflects the duration of fixed rate deposit agreements in our custodial cash program.
As we've said many times the program prioritizes relative stability over maximum return and from our perspective that prioritization is now paying off reduction in interest expense on health equities outstanding indebtedness significantly offset lower custodial revenue as Darcy will discuss.
What happens over time, those these conditions persist for Healthequity data from well over a decade of custodial operation provide a sense of how yields on our custodial cash program change with interest rates banks offer typical customers on time deposits.
Healthequity has typically earned on HSN cash 75 to more than 125 basis point premium to averaged three to five year Jumbo Cds three to five years being the target duration for agency cash under our custodial policy.
This premium exists not by accident, but because our depository partnerships are not average healthequity provides high visibility to future deposits and flexibility on duration needs and carries all of the non interest expense of attracting retaining and managing HFSA members. While our depository partners are those that are best able.
To make use of that visibility and flexibility from among well capitalized said early insured institutions.
In fact, the company's lowest custodial cash yield for any fiscal year, 1.52% occurred during fyfifteen.
National average jumbo CD rates were at or near their crisis year lows during fyfifteen with three years Cds, averaging <unk>, 0.51% and five year Cds, averaging 0.80%.
By contrast, healthequity yields on HSN cash have not maintain a consistent relationship.
To the gyrations of treasury yields over our history.
Towards the future doesn't always looked like the past, but healthequitys experienced during the last prices as well as its lower exposure to rates versus competitors and versus its history should serve us well.
Today's guidance reflects a commitment also reflects our commitment to continue the integration process discussed over the last two quarters and to do so at full speed.
We expect more growth opportunities as competitors with variable rate exposure within complete solutions are with outsource platforms or insufficient scale find more difficult to compete under these conditions, we expect greater attention to the proven cost savings to both employers and consumers from HSH some complementary.
Cdps some portions of our solutions, such as Cobra and commuter administration may see either increased or decreased utilization in the short term.
But in any event, we see this as an opportunity for long term growth head is going to walk through where we are an integration along with our efforts to deliver purple to our members clients partners and to each other during the pandemic debt.
Thank you John before discussing the progress on integration I want to thank those responsible team purple has been nothing short of extraordinary providing remarkable service to our members clients and partners, while embracing our Eric integration goals all in very challenging times.
Q4 is of course are busy season, and this was the most successful one in recent memory, we couldn't be more pleased with how our team members wrap their arms around our partners clients in members by meeting all critical service levels, we are especially delighted to report that we met or exceeded service levels on the leg.
See wageworks platforms that had not been achieved in years, all while delivering customer satisfaction score significantly higher than last year.
These successes were made possible in large part by the service case project I discussed last earnings call any incredible commitment that our team members have demonstrated.
We can't wait to see what the team is capable of as we make service delivery, even more efficient and effective going forward.
The Wageworks integration remains on track.
As a fiscal year end, we've achieved approximately $30 million permanent run rate cost and revenue synergies up from 15 million at the end of Q3, and we're on track to meet our $50 million commitment. This fiscal year, one year ahead of schedule.
Our investments to deliver a total solution a unified platform also remain on track as a fiscal 20 year end, we had spent $32 million on these investments with another plan 60 million in fiscal year 21.
We will sunset five legacy platforms. This fiscal year, one of which is already complete.
We consider a platform to be sunset. When there are no members active we served on the platform and all run out services for members have been completed.
Just this week, we will deploy the first phase of our unified experience as our first HSH asset migrations are completed.
We are on track to complete the onshoring of round the clock member service in Q2 of this year.
We appreciate the understanding in patients the bulk of our clients partners and members are showing as we make these changes they understand that they're getting an upgrade as well as the step closer to the total solution they want.
I won't repeat a lot of what Bill said last month about our sales marketing and relationship management teams.
Well, let me simply reiterate that our pipeline is strong our cross sell efforts are delivering real impact and we had been able to use the integration is an opportunity to reactivate and strength in distribution relationships.
Of course every client partner and prospect is prioritizing their response to the Covidien 19 pandemic.
That will likely slow some decisions.
The economic follow me as John suggested ultimately create new opportunities or accelerate existing ones.
The team is committed to deliver on its integration service and sales goals, even as we join many others in good citizenship to slow the spread a little bit 19.
Current business continuity plan Healthequity has transitioned to a work from home posture with offices open for critical physical functions such as mail processing only.
Team members are equipped to work at home for an extended period.
We are monitoring critical service partners as they implement their business continuity plans.
We have also taken steps to provide greater financial security to team members extending paid time off for those who may need it hang for broadband and other work at home costs and expanding our helping hands program for anyone in extraordinary indeed.
We have asked members clients and partners for patients, but more importantly for feedback on where we can improve as we all adjusts to the circumstances.
In closing we are confident the measures in progress I. Just described will help us achieve additional synergies and improvements to enhance our purple service and drive margin increases and we are working hard to realize them in this fiscal year to help offset the revenue decline that John discussed.
However, our first priority is to maintain our service levels and be where our clients and partners need us to be.
We'll now turn the call over to Darcy to review the financials and new guidance.
Thank you Ted.
I will review, our fourth quarter, GAAP and non-GAAP financial results.
Reconciliation of our GAAP measures to the non-GAAP measures is found in today's press release.
Our fiscal fourth quarter financial results include the operations of Wageworks, which was acquired on August Thirtyth.
The Wageworks acquisition Diversifies, our revenue growth opportunity, reducing the overall impact of interest rates and rate variability on total revenue.
In Q4 revenue grew overall and organically in each of our three categories.
Service revenue grew to $122.2 million rising from.
30% of revenue in the pre Wageworks second quarter, 261% in the fourth quarter.
This is primarily attributable to the increase in CDB to 7.5 million.
Along with the 5.3 million HSH that we now administered including those that came from the acquisition of Wageworks.
Custodial revenue of $49.4 million in the fourth quarter increased 39% year over year attributable to growth in Asia Sei assets in a higher year over year annual annualized interest rate yield at 2.41% on HSC assets custody by health equity during the quarter.
[music].
Custodial share of total revenue declined to 25% from 50% in Q2.
As John mentioned, 23% was attributable to cat custodial cash assets.
Going forward, we have multiple paths to grow custodial revenue.
Continuing to grow balances transitioning all accounts to health equity custody. It process, we process, which as Ted mentioned is already underway.
And growing revenues from client held funds.
The Asia say at the table of today's press release includes additional detail to help you assess these opportunities.
Interchange revenue grew 104% in the fourth quarter $229.7 million driven by the increase in in average total accounts.
Our large base of total accounts offers multiple opportunities to grow interchange revenue growing going forward, including more favorable interchange shares with partners.
Gross profit grew to $113.7 million compared to $44.1 million in the prior year.
Gross margin was 57%, including the change in revenue mix, resulting from the Wageworks acquisition.
Operating expenses were $99.1 million or 49% or revenue, including amortization of acquired intangible assets and merger integration expenses, which together represented 15% of revenue.
Income from operations was $14.5 million.
We had a net loss for the fourth quarter of $200000 or breakeven on a GAAP EPS basis.
Our non-GAAP net income was $28 million compared to $19 million, a 45, 47% increase.
Non-GAAP net income per share grew to 39 cents compared to 30 cents per share last year.
Adjusted EBITDA for this quarter increased 125% to $61.3 million and adjusted EBITDA margin was 30%.
For the full fiscal year revenue was $532 million.
Resulting in gross profit of $325.9 million or gross profit margin of 61%.
Income from operations was $77 million and adjusted EBITDA was $196.5 million.
Turning to the balance sheet as of January 31, 2020, we had $192 million of cash and cash equivalents with $1.22 billion of term a debt outstanding and no outstanding amounts drawn underline and credit.
Turning to guidance for fiscal year 2021.
Based on where we ended fiscal 2020 and the economic environment now.
Expected for fiscal year 2021, we expect health equity will generate revenue for fiscal 2021 in a range between 770 and $790 million.
We expect our non-GAAP net income to be between a 124 and $132 million.
Resulting in non-GAAP diluted net income per share between $1.70 and $1.81 per share.
Expect healthequitys adjusted EBITDA to be between 245 and $255 million for fiscal 2021.
Relative to our initial revenue guidance of 812 812 million to $820 million today's guidance incorporates a reduction of approximately $30 million to $40 million in expected revenues in F. Why 21, which is due to the deterioration of interest rate conditions and other.
Uncertainties.
We have replaced the depository contracts expired last year and have placed new deposits for this year in fixed rate depository agreements.
We do have a modest percentage of funds exposed to variable rates and current conditions leave us cautious with respect to yield on cast placements, we will make throughout the year in connection with the transition of legacy Wageworks HSC assets to the Asia to the Healthequity platform.
Lender present conditions, we expect the average yield on health equity 'cause Custodied HSH Cas overall to decline in F by 21 compared to our prior guidance given the current rate environment. We now expect the yield on the agency cash assets on the health equity platform to be approach.
Definitely 2.2% during F. why 21.
This reduction from our prior guide of 2.4% accounts for approximately $15 million of the revenue reduction.
An additional $15 million reduction is the result of lower yield on client Hill funds lower revenue anticipated from wage words, HSH cash and lower HSC invested balances due to declines in asset value.
However, the lower rate environment is also expected to reduce the amount of interest that we will pay on our outstanding debt as was discussed in previous earnings calls our variable rate debt is a natural hedge to raise on cash custodial cash assets.
Assuming rates remain at current levels, we expect to pay approximately $20 million less in debt interest in it and Thats why 21 versus our prior assumptions.
Today's guidance includes the effective approximately $30 million have achieved run rate synergies, Ted discussed, which will be fully realized in F. Why 21.
Our non-GAAP diluted net income per share estimate is based on an estimated diluted weighted average shares outstanding of approximately 73 million shares for the year.
The outlook for fiscal 2021 assumes a projected statutory income tax rate of approximately 25%.
In connection with you soon statutory tax rate.
You will note that at the request.
Have a number of our sell side analysts that cover healthequity and in an effort to simplify modeling of our projected tax rate. We have revised the method for reconciling net income net income to non-GAAP net income and GAAP net income per share to non-GAAP net income per share.
We have provided to reconciling tables in the press release, the first showing a reconciliation under the method that we have used throughout this year and the second table that provides a reconciliation under the new prospective method.
As Ted mentioned, we continue to focus on margins and the realization of synergies from our combined operations.
We're off to a good start for achieving the outline synergies that Ted discussed earlier.
Some of these synergies will be additive to both the top and bottom line for fiscal 2021 and beyond.
As we have done in recent reporting periods.
Our full year guidance includes a detailed reconciliation of GAAP to the non-GAAP metrics provided in the earnings release and the definition of offsets items included at the end of the earnings release.
In addition, while the amortization of acquired intangible assets is being excluded from non-GAAP net income the revenue generated from those acquired intangible assets is not excluded.
With that I'll turn the conference call back to John for some closing remarks.
Thanks Darcy.
So I guess I get a whole minute or two to be human here.
[music].
I think our investors and public market participants generally might wonder how ready.
Team at every one of their portfolio companies is to meet the challenges that we all are facing now and certainly the opportunities that we have here at Healthequity and I stumbled on one data point that might be useful last one evening last week as many of our team members are.
Assembling their workstations.
Work from home set ups and taking their test calls.
One of our permanent work at home.
Member services specialists said something out over our internal I am and I wanted to read here.
Your office refugees us Homesearch just wanted to know that were 100% here for you, we sort of specialize in all and cheap but all in.
Sarcastic quotation marks that comes with being remote.
So if you're feeling that need hop on over to Homi chat any time of day or night.
You'll find remote experienced peers, who are level experts and excited for the chance to help make things good as gravy and then sheet signs that hash tag one partner.
This little message when.
If you'll pardon the terrible upon viral with inside health equity the under the subject line. The following subject line, which I think says it all with teammates like this we can't fail.
And with that let's open the call up to questions.
Or maybe we won't open it up to questions only at the operator comes back ladies.
Question on the follow on line. Please press the star that the one kian just touched on telephone.
Your question. Please press the pound key.
And our first question coming from the line up and Sam meals with JP Morgan Your line is open.
Hi, guys. Thanks for taking my question.
Despite the lower revenue guidance. Your EPS guidance is still really good for the year and I was hoping maybe you could talk about where some of the incremental savings are coming from and maybe what you're seeing in terms of shift from the synergies maybe out of revenue into expenses.
Sure Darcy you want to begin speaking that and we can 10 or I can add.
Sure.
So.
In the environment, we've kind of gone through everything within our.
Our operating plan and we've we've tried to be understanding as we said that the revenue impact is.
Is approximately 4% of our total revenue as it was before and not that it doesn't have an impact but we've also taken a look at all of the things where we can actually make a difference we we don't control what the interest rate environment does but we can respond to it and so collectively as an organization. We've gone through every one of our on.
Supported efficiencies in synergies that we previously we had been working on so we already had a method in place to evaluate that and we've we've.
Taking a really good hard look at that and we think that we've made a commitment about how we could achieve some of that because we are.
Very committed to looking at not only our topline, but also our bottom line.
And with that maybe Ted or John can add some specifics about how weve, how we thought about this but we do believe that overall throughout the entire organization that their efficiencies to be derived.
Yes, Ted anything to say and then ill finish up.
Sure just what I would support.
Perspective, we have been.
Planning.
Efficiency management cost management since the day, we announced this acquisition and so.
The good news is that we've been thinking about it really hard.
And that allowed us to be ready when we needed to get as aggressive as possible within reason and balance being.
Managing costs as efficiently as possible, while continuing to provide purple service. Our team has done an unbelievable job managing these integrations, while finding efficiencies.
And delivering on those and so I don't think that Theres any special sauce other than other than being ready and having had thought about it you know.
It wasn't like the first time, we thought about expense management was when the fed cut rates. The first time, we've been thinking about it for quite some time.
And and I think the last part of your question was about.
Really about the mix between revenue and expense within our synergy number you know as you know.
We're anxious for the point, where we can stop talking about synergies and just talk about increasing efficiency. Nonetheless since it's the way things are we laid out a $50 million synergy target originally to be achieved at the end of halfway 22 accelerated that to the end of F. White 21.
As you will recall about 27 million of that was revenue and 23 million was expense we are sticking with that 50 million number.
Some of that revenue component.
Probably comes down, but we will make it up on the expense side and.
I had.
Much of that revenue will be just fine.
As Ted said earlier.
Happier getting paid for something then that we're doing ourselves than paying a third party to do it for us. So there was some real real savings there on the revenue side that will will will hang on just fine so.
There'll be some modest shift in that number but it won't be terribly large.
That's very helpful. Thanks, and then maybe just a follow up you talked about some of the moving pieces of the yield that's driving some stability there.
But assuming interest rates or it was there rule of thumb that we can think about in terms of what the out years would look like or the impact of how the current change in yields would flow through.
I tried to give some guidance on this topic in my opening remarks, and let me unpack it a little bit here.
And again, recognizing obviously, we're not providing out your guidance and all that kind of thing, but but if you look at.
We do have the luxury of having been specifically in our business in custodial operation for I don't know 15 years now and.
And if you look at the data over our history.
A couple of things become very clear, one, which I mentioned earlier, which is our yields do not by design do not follow the diary gyrations of.
Global fixed income markets, which are are influenced by all kinds of things positively or negatively around global global trade currency et cetera.
And and we never designed the program to do that and it doesn't.
What they are highly correlated to as you might expect is.
The.
Interest rates that banks pay on comparable duration.
Large, which you can just kitchen medium term $3000, but nonetheless, what I referred to as Jumbo Cds and.
If you look out over time, which tend to happen is that.
We have generated a premium to those of as I said in the remarks between.
75, 125 basis points.
If you look at the underlying behavior of the rates, which I think is key to answering your question right. Obviously theres a correlation these rates will drift.
Down.
Relative to where they were a month ago or our today, but they will likely drift down somewhat slowly because well they always do they always do because in part to that as the rates that banks are charging them because.
There are lot of factors at play.
Thanks continue need money and so forth and so.
I guess, our basic view is that a couple of useful guide points are.
What as we said in the in them in the discussion where rates have been where rates have been at the bottom of the last crisis.
And in general where our premium has been to what banks are paying their more typical customers and.
There is nothing we've seen in the past few weeks or frankly past few days that would lead us to a different conclusions.
Very helpful. Thanks to the color guys sure.
Our next question coming from the line of Greg Peters from Raymond James Your line is now open.
Good afternoon ring Youre your comments.
You said $20 million of lower debt expense I'm, assuming that's in your EPS guidance can you talk about your.
Free cash flow for this year and remember John you previously said source dusted that youre going to use free cash flow to pay down debt. So can you give us an update on the debt situation. Please yeah Darcy you want to take us.
Oh sure Simon.
Yep.
So we expect to generate cash from operations, we have a.
Few expenditures that we haven't had in the past one is being interest expense, which is incorporated into our our modeling and additionally.
We are as we're making the transition of Asia Sei assets from.
Both the melon Pat platform and the at Webster platform, there will be some cash payments made to facilitate that going on and those have been incorporated into our our cash flow, but we feel pretty good about our cash levels that we will maintain throughout the year and.
We will evaluate.
As our cash balances grow about paying off debt earlier.
In light of the current environment, we are the interest.
Benefit that we get from lower interest rates on the debt is.
Helps cash flow by that $20 million and so we're very pleased with that also.
Yeah, I mean, just just to be clear there Greg I think it's part of the Gist of your question was is the 20 million rate driven or is it based on repayment. The answer is it's entirely rate driven.
At some level.
It was I I guess I'd call it a happy accident Darcy might call it brilliant planning, but.
Theres theres a bit of a natural.
Correlation there or hedge between our variable rate exposure on the cash that we manage and.
The borrowings of our own corporate money so.
It's it's not an accident that.
Again looking at it from an EPS perspective, we're certainly free cash flow perspective that that that $20 million significantly offsets.
$30 million that Darcy talked about on the other side of this.
As to your question about repayment.
And generally the situation of our debt.
We've gone through and modeled out you're not only this year, but our thoughts with regard to the subsequent years.
And.
At this point.
We expect is that the cast.
Absent, let me put it this way as far as he said a moment ago absent and early repayment.
Our cash position at the end of the year would be.
More or less same place it is now principal better and that it would.
Growth in subsequent years, so we don't.
Really see a circumstance where.
Well I guess I put this way so that does raise the question since we do have excess cash of weather.
We should take this option repay debt it would be a little bit of the country move to what we see other people doing right now.
Obviously, but.
It's something we'll talk with our board about and we'll think about and if it makes sense, we'll do it but but whether we do so we're not.
I think the bottom line you should take from this is that.
That there is that that we feel pretty good about where we are from the perspective over time.
Yeah, I would add one other piece to that would that would probably be a later question anyway. So I mean as will answer right now in the current rate environment. We do believe that there will be opportunities for additional portfolio acquisitions.
As rates generally go down then those portfolios become.
A little bit more attractive in the marketplace and so we want to still maintain flexibility to be a glut purchase those.
Portfolios as they become available.
That was great mailed a couple answers my question. So my comment was a four part answer instead of a four part questions like yourself.
[laughter] I want more of those please.
[laughter].
So.
My second question.
Or my follow up I should say.
So.
Are you I'm curious about how the Cnineteen virus is affected call center volume in the last couple of weeks and I'm also curious about how you think might affect the RFP in sales process. This year as we think about results for year end fiscal 21.
It's had why don't you take this one.
Sure. So I will endeavor to give you a multipart answer to that question first let me start with.
The member services organization.
First off just a huge.
Thank you to our with our member services leadership, and our ITC leadership, we have well over 80% of our team members working from home today.
Today being the first day of the work from home experience, which is just you know with no degradation in service, we met service levels on all critical path platforms give or take in a day, which is which is great to see in that first day, we haven't seen an appreciable volume spike.
Maybe a little bit.
In the Cobra arena, but I don't think anything quite yet covert related although we'll certainly keep an eye on that and report back but our most important concern operationally, we're just making sure we continue to answer.
All phone calls, we get everyday both ourselves and our outsourced partners and everyone has answered the bell thus far today was.
As a great service day in that regard.
As it pertains to the RFP in sales process, we've been as you would expect monitoring this very closely.
We keep track in sales force kind of down to the meeting did the meeting get rescheduled did the meeting get postpone did the meeting get canceled at the meeting go from face to face to virtual and by far the.
Most of the sales meetings that we have scheduled our are not getting postponed or cancelled or getting rescheduled to virtual and so we consider that to be a positive sign that doesn't mean, we expect that no. One will delay these meetings or delay their decisions I think everyone's trying to grapple with how covert impacts them, but thus far.
One of the vast majority of.
If any changes that bill and his sales team have seen have just been to go from going face to face to virtual which is what we'd hope to see.
Thank you.
Thanks, Greg.
Our next question coming from the line of Jamie Stockton with Wells Fargo. Your line is open.
Yeah, Thanks for taking my questions.
I guess, maybe the first one just a I think Darcy you.
Kind of held out two buckets of headwind for revenue one from yield on the cash that you are costing and the other 15 million Bucks on client held funds.
Is that second bucket hitting the services.
Line from revenue standpoint, instead of custodial.
No so.
The what I would characterize the second bucket the first one being kind of the legacy health equity.
Cash yields of the second one is just kind of variable rates for both client held funds and.
The understanding that as we place new money.
From the transition from the wage.
Cash as it comes in is that those religious at lower rates of what we previously anticipated, but what we did do.
And.
So.
We anticipated this we've been in contact with.
Several of our depositories over the past few weeks, we've been contact with our banking partners et cetera and.
We expected that the the rate action would ultimately be taken whether they took it yesterday or whether we're going to take it on the 18th.
It's what we expected to happen and so as we've talked to people.
What we expect those rates to be that's what we've included into our our forecast for yields and for custodial revenue. So we anticipated taking the the fed rate would go to a zero bound which has an impact on LIBOR rates that that have some variability in our contracts and so those we anticipated go into the zero bound and that they would run.
I mean, there for the remainder of this year and so we've incorporated that into the model.
Okay.
And then maybe you know economic environment looks pretty choppy can you just talk about.
The trade off here.
Potentially higher unemployment as a headwind for the number of active accounts.
And.
Maybe an increase in demand for Cobra services, how do you think about that.
Yes, I think that first first sentence was probably the understatement of the week.
[laughter] I'll talk a little choppy.
Look I. This is we're fortunate I guess in this regard and that we have the benefit not only of the experience of of.
Health equity, but but also can reach back into the experience of Wageworks all the way back to its founding in 2000 and.
Yeah, because we take from that.
In general.
The business first one point in general the businesses less cyclical than people think in both directions and I think we've seen that certainly on the upside in recent years.
But but but importantly also.
The other direction that is to say.
I think.
It's pretty steady there are some things that do happen in.
Down environments that are helpful to the business and it's kind of funny because.
The original investment that was made in Wageworks.
Has made.
Roughly.
The day of the market peak in March of 2000 and.
So you can imagine that the investors were asked you know do you regret this et cetera over the next couple of weeks and months and their answer was no. We think this is going to be something that's a survivor and a fighter in this environment and it was.
And the reason for that is as follows.
First actually something you didn't mention which is in general.
Arguments people are more concerned about the sense and the dollars and we offer solutions that help employers and employees save money.
And at some level, it's that simple.
And that's something that that message resonates in this kind of environment.
Second as you mentioned as you did mention there is the element of.
Cobra, where.
You will see increased activity.
In all likelihood over the course of the coming months.
And and we get some benefit from that because Cobra is priced in part based on.
The actual activity that is acceptance of Cobra and as I mentioned in an earlier call.
This also kind of really.
What's happened is really a.
Gotten us.
I think hard about everything that we can do for our members who are in that situation.
So that we can really sort of them well, whether it's by offering cobra or by directing them to other alternatives. So.
I think.
The short answer is that I think the businesses is mildly counter cyclical I don't want to overstate that.
But I think in general there is that element to it the the thing that really does offset that I think more so than the lack of employment. There for lack of accounts is just the rate discussion we've been having.
The the fact that.
Uh huh.
The fact that you don't get obviously market increases that can help you out.
And one sort of a factor that I don't know how it will turn out in this instance, and.
The 2008 period, there was a fairly dramatic increase in saving behavior and that was helpful to the business whether that we will see a similar increase in this this time around I don't know.
Obviously, the crisis is much more related to something health and financial thing and all that so who knows but.
That's another variable that's out there. So that's again, a long way of saying sorry for the long answer but that.
That.
We think that Theres, a mild counter cyclicality of the business.
I don't want to overstate, but it's definitely there.
Okay. Thank you.
Thanks, Jamie.
Our next question coming from the line of Robert Jones with Goldman Sachs. Your line is open.
Okay, great. Thanks for the questions I guess, maybe just to pick up there around just the economic pull back and thinking if there is risk or precedents you started touching on this a little bit just to the to the cash levels that are kept in HSH any.
Any historical reference on those being drawn down more rapidly than a typical period and then I guess just thinking about new HSH any any precedent from from more challenging economic periods about just levels of of money in savings that people are willing to put into it just stays that you would you would reference.
Yeah, I mean, I guess I would it's hard because you don't have the counterfactual right but.
All you have as the data but.
But but in the aftermath of the 2008 crisis.
And certainly as it kind of seeped and that this was going to be around a while what you saw more generally in the economy, obviously was increased savings rates and.
That translated into.
What.
We are perceived to be.
Increased deposit rates into the H. assays.
It's interesting that the drawdowns.
Really do not appear to have much if any correlation to broader economic activity.
With with the important exception that obviously when people leave their job. If they are not on NHC qualified plan, many will draw those funds down that cutting but but.
But in general.
Havre, you might expect and I think this is echoed in other areas of retirement, which would be to see massive drawdowns.
This point I think people are are willing to take a pause on that and.
Instead try to manage their expenses elsewhere, rather than to drawdown funds that are there for their healthcare or what have you but.
Thats been our experience obviously as I say, we don't have the counterfactual. So it's it's not perfect but in general we don't see that one is as a material risk in the short or medium term.
No. That's there and then I guess, maybe just a follow up on the commuter benefit I know, it's not a huge piece of the overall pie, but was there any risk.
Is there is there any risk around just reimbursement is in fact, many employees are in fact, not commuting and then.
Looking forward is there any precedent or risk that you've seen for folks maybe not utilizing the commuter benefit as much.
You know given given an economic a pullback like we're seeing yeah. We have thought about this one.
And.
There is some and that's a little bit reflected in the caution of our guidance that that is they're out some upsides maybe around Cobra.
It could be a downside I.
I think the the issues that were concerned with here are the more practical ones and serving our customers well.
So.
We mail out to a lot of trans passes every month as well as load cards, and so forth and.
That's fair to say that I think for the month of April and into May transit agencies around the country or are evaluating what.
They are posture is going to be about people want refunds and for their monthly passes or that kind of thing and.
It's our job as the most connected NTT those agencies to be able to explain those policies where people ask us getting the right place, if we need to get them somewhere else and.
And to make that happen so.
Hi, it's some level.
Some of those answers boil down to what the public agencies that are for the most part of the trans inside of willing to do.
But.
I expect that.
They'll they'll figured out and we'll be there too from our perspective to make sure that our members get to the right place, but but I think it's fair to say that in the short term, there's something there do I think that people coming into Manhattan or permanently going to.
Stop taking transit.
I doubt it it's possible if they do they may have to park and I'm, not sure where they're going to park, but they would be using our benefit there too so.
I feel like in the long term. This is an excellent benefit and it'll be fine, but but yes, it's certainly possible there'll be some short term blip.
Great. Thanks, so much.
Uh huh.
Our next question coming from the line of George Hill with Deutsche Bank. Your line is open George Yes.
Good afternoon, guys and thanks for taking the question I'll say first I'm still trying to wrap my head around the it's a little bit choppy economic lay out there off.
Labor.
I'd also just need.
Well, there's a lot less be dependent areas more fees than other banks as we all read this morning, the Wall Street journal for that.
Pretty going on.
Well.
Okay got you is now what are your for del Mar Memphis.
I am I thinking though.
Well, yes, John before the effect.
This weekend wasn't just first time that you guys thought about the interest rate environment.
All the said comments and I guess my question is it's more of an anecdotal question like what can you do as you start thinking about.
We're going to be dramatic changes in the rate environment I guess when do you start to when do you start to put the plans into place I guess like the quantitative question I would ask this could you talk about what the duration of you re contract. So right now in Camel, how should we think about double the timing of the visibility that you guys topic, you've talked about spread you talked about thinking when the jumbo CD.
The rates kind of like you know can you talk a little bit, but about the leveling the rates contracts and stuff like that and just how like how do we think about the visible.
Yes, so so our rate contracts are laddered to a.
Maximum of five years with a target average duration of between three and five and as we said in the past we tend to be in terms of average duration closer to the three than the five but.
With with the longest operations at this point in the year because we've we've.
We'll have just struck these in the last few months for new cash and the like.
So that kind of gives you a feel for how this sort of schools out overtime.
Consistent with Darcy his comments I think.
To your earlier question.
<unk>.
We first of all when I say this is something we always want to have some level of contingency for recognizing that.
Our actual job is to run the business.
As as efficiently as possible recognizing that there are factors, we don't control and so.
We should try and run the business in such a way that we don't we don't try and run around adapting to them win win when we when it does make sense. So so we actually.
This regard.
In.
I want to say as as we got into late certainly into.
Mid to late February.
Oddly enough around the time of our initial guidance on the revenue side. You know this was definitely something we began thinking about.
We admittedly I think we're not economic forecasters as you know George but but we think internally had the view that.
It was possible that that this would be worse.
Then it appeared to be just looking at at what the pictures were showing about economic activity in other countries that had been affected.
And the tendency of our federal reserve and so forth to jump in.
Try and save today so.
We've been thinking about that over the last number weeks and as Ted said.
Kind of.
Said, okay, what does that imply about.
The for lack of better term the IR are on any of it on any investment, we're making and if if the answer is that it made a change than we made a change and I think thats, how you'd want us to handle it rather than.
Imagining.
Oh, you know theres some.
Cost thing, we would've gotten otherwise that we're not getting now so.
Or that we view the or.
So the other way around some cost savings, we were just sort of hanging around with.
And so the effect of that.
Is fairly modest I mean, obviously most of what we're saying is theres going to be a rate reduction and.
That will affect.
Topline and level.
More modest second the bottom line, but most of it does flow through.
I guess I'd say, one other thing, which we haven't said, thus far and that is.
One thing that isn't clear is how.
How quickly.
Others in our industry and so forth will respond to this in terms of the rates. They pay are the members.
We as I think you know George we.
Define how we approach that issue in our custodial agreement with members it as a formula it's based on what's going on in the competitive market. So that we don't.
Employee any discretion in that area.
But but it it will affect the end result, we have conservatively I think assumed for these purposes that.
There is no change in what we pay our members and so forth whether that turns out to be the actual outcome is debatable, but but that seems like an appropriate conservative assumption since we have no control over.
No. That's super helpful. I guess sort of cycle of a quick follow up as we think about the competitive environment in the sales environment.
I guess how long.
In terms of you're not seeing necessarily an impact in selling but one would think in churn is probably going to go down.
I guess, how do you think about how long this at this kind of crisis drags on.
Like when the when do things need to start to show signs of improvement can you guys to continue to have the ability to take market share.
I guess I can join the thousands of other corporate executives, who said I'm not an epidemiologist because I'm not.
Sorry, I was just trying to add 11, either but.
As I, usually do but.
I think.
What the answer to that question in both directions, and I want to be glad I think what Ted was trying to say is of course, there will be some impact on sales that will be true for every company.
Just people will kind of be frozen in place to some extent, but.
We have been heartened by the fact that.
HR is one of those functions that can work virtually and how quickly our customers and prospects have transitioned to working universal environment and focused our energy on both for our sales teams and to your point about churn our account executive teams and our client service teams getting those are the first people we wanted to get too.
Lined up on.
Exactly how they would conduct themselves in a remote context, I mean, not just trained up on how the software works, but how to look you're most professional in that environment and I.
I was in a a finalist meeting or.
At the end of last week, while I was trying to rescue college refugees from Boston and.
Hi, there so broken up about their school will be cancelled by the way. It's just there just crying it's terrible but.
Thats also sarcastic as I'm sure anyone coaches kits knows but but in any event.
Was.
It was.
At some level, it's a different version of.
How you use your time and how you you present your best but it may be the case that sales executives can be just as we're more efficient in this environment.
Then they are in the normal way of selling its just different and those we adapt to it well, we'll do well and we're going to try and adapt to well.
Okay I appreciate the color. Thank you sure.
Thanks Art.
Our next question coming from the line of Donald Hooker with Keybanc. Your line is open.
Okay, great good afternoon.
A couple of conference call or too, though you had you had referenced that there might be some intentional turn in your business I eat you might consider walking away from some unprofitable contracts with Wageworks for a couple of quarters in as you've gone have you have improved off anything in your when do you think about your revenue guidance. That's what I was wondering.
You know in your revenue guide and does it or is there any kind of pruning of some unprofitable businesses as well or.
Can you say about that nothing's changed in that regard.
From our prior revenue guide I mean, I think actually Ted can provide some good color.
On how we've approached this in different situations, because we have identified cases.
Where we have unprofitable business and we're trying to some about that so Ted you want to speak to some of that but.
Sure I think the headline is is not yet a material revenue number where we are having these types of conversations but nonetheless, we are having them and they are.
Basically what we're doing is kind of a full throttle contract review, where as contracts come up we are taking the opportunity to ensure their fair for both sides and what we're finding is.
They were perhaps legacy wage.
That off more than they could chew is really around certain providing certain services in certain customization, which were.
Probably unnecessary and in any event unprofitable and we're just having candid dialogues both with partners and with actual employers about whether or not we can continue to do those things and and if so if they really need done would they be amenable to a price increase to support them in those those conversations while modest enough.
There are going reasonably well be because we're.
We're just being kind of candidate in forthright about how we see the world and the fact that we want to stay partners with folks, but that we won't be able to do it under the under the terms of the agreement and we've achieved some some successes and renegotiating some of those deals, but I mean, we're not talking a material revenue.
Move out relative size. The overall business. It's just kinda, it's really more good hygiene and we have to continue to do it.
I mean, I will say, Don I think part up maybe where your question is going is to understand year over year growth that kind of thing we did both in acquiring the company.
In.
Our our initial guidance after we acquired it in and certainly not most recent guidance, we did assume some level of incremental attrition in the current year.
Whether.
As a result of of pruning or of.
Just stuff happens.
For the moment, let's let's put that aside and.
We.
I think done pretty well, thus far as we reported with the sales numbers, but but.
That is that as a part of our thinking.
And maybe one one follow up on the renewal cycles.
In your guidance how much is sort of I think you had last call you were happy with some renewals that you had achieved yes. Its it sounds like is there like an ebb and flow I assume ebb and flow year to year real that off one years tougher than another good Santa like last year, you get a bunch of them.
Intuitive here.
Is there anything to think about in this upcoming year or that you're watching in terms of renewal cycle. Thank you. That's all thank you.
Yeah, I'll give a partial answer and then Ted if you'd like to add to it or.
Or Steve Steve participates in these two and he's he's available with us.
[music].
We were happy because we had.
A lot of.
The.
What's the word.
Guinea pigs going through that Python or whatever it is last year of renewals and we were very happy about the result of the renewal process, we didn't win them all but.
But particularly.
As the year went on we won a lot of them and.
We felt good about that so.
I think.
The Merry go round goes around again, it's probably the case this year to you to an earlier question that.
There will be.
A little less work done on this and that'll help us on the renewal side, we will certainly try to have it help us on the renewal side.
But.
Ted anything to really add to that.
Yes, I was just me I'll just make two points. The first one is.
It's a little early in the in this cycle, but we are monitoring very closely.
All of the RFP is that come in both from prospects and also from existing clients and I think thus far the ratio is reasonably favorable, but but its but it's early.
And second we understand that the bigger we get the more territory, we have to do that.
And out of every hundred RFP is in the industry last year, maybe 17 of a more clients and this year 19 would be or whatever the market share would dictate and so we're.
Allocating more resources to our enterprise clients precisely for that reason, we've doubled the size of our account executive team year over year to make sure that we build a deep and mutually beneficial relationships with these clients to try to head RSP is off at the pass or at least be ready to respond to them.
But.
No. It is something that we watch very carefully and ER and dust in either it's a little early to tell but thus far we feel like we're on top of it meeting. There is no surprise RFP is are we found out after the client was gone that they took start went RFP. We feel like we have a pretty good handle on on where we sit and so far so good but it's early.
One other 0.1 other point here is every especially as we as we.
Get.
Really accustomed to and as everyone understands the total solution we have to offer mean at some level almost every RFP is an opportunity for business expansion.
And we talked about Bill talked about in February call some of what's going on there and and so.
So.
If you are a.
Let's say a commuter and fsh client now.
The farther we get down the road of of total solution.
One team one company one partner on platform.
Easier it is for us to offer you incremental services that and to like those up in a way that that a few of our competitors can do one two or three or whatever but no. One can do them at the scale that weekend and.
And so I guess, that's just a way of saying, we also I think that Steve Lindsey and the team and Mary Lynne vehicle team that manages our our our strategic relationships with our larger employers in particular is very focused on.
Taking every one of these as an opportunity to.
Increase the number of services, we offer which again in a enough frugal.
Environment May really help us out we can I mean, there really are are genuinely.
Scale advantages there that we can take advantage of and in park pass onto our clients.
Thank you Sean this is used to add one comment maybe only person in America that actually had a business mean today.
[laughter].
If you get away from people proper social distancing one of our health plan partners was way way you're in Utah. They came up for a few trip and all the Sears were for closing so they asked one of the ones with them. So that's exactly what they said, though we were talking about what they're looking for and they said look we want it center for sure.
What do you know about individual coverage HR race I see is yours acres as people say had nice discussion, but it's I think what I'm thrilled about as I now with our partners is that we can say, yes, so much more often and not just yes. We can do it yes, we do it in scale, which is pretty exciting.
Thank you.
Our next question coming from the line of Mark Marcon with Baird. Your line is open.
Good afternoon, and thanks for taking my questions.
Just with regards to the slight economic fuel utility that we may end up experiencing.
Hello, how are you thinking about.
The amount of increase and Cobra activity and how does that actually flow through.
In terms of when when somebody goes on Cobra.
And what's the incremental expense and how should we think about that and then as it relates to the rate environment. How are you thinking about how your competitors may react with regards to increasing.
Their monthly you know account fees.
Sure on the on the Cobra point.
Let me say you guys sort of an eight apart a in a part b into the party was sort of when might that activity hit et cetera, and the answer really as we don't know.
I could mail answer syndrome, you, but I want.
The second part of your question regarding Cobra with sort of when someone goes on Cobra how does it work.
Depending on the arrangement there are sort of two components to the revenue stream from Cobra. One is a general fee that's typically on a per employee basis.
Rather than per participant basis, that's sort of reflects the fact that.
Were there were at the ready and Theres a general all businesses have a general amount of of churn that occurs.
And so forth. So so that that doesn't change very much but.
But but.
What does change is the acceptance rate and.
They're essentially the way that it works as I think you know is the the law allows.
The us to retain a portion a small portion of the premiums to cover our expenses.
So the more people that.
Our next.
It comes back to you have to offer Copel Cobra to everyone, regardless of why they left or employment. So in a in a different environment right you might find that well.
If people were leaving for their next job and their next job at health insurance kept send them the same paperwork, but they don't they don't ticket.
Here, you may see more people take it and.
So.
That's sort of the way the economics work, that's when the economics can get better for you.
But.
And then as I said earlier, where we're going to continue to look at how we can offer.
More to these participants so that they have a number of options depending on where their needs are.
But uh huh. So so I don't think anything would happen immediately in the first quarter or second quarter, but in terms of so first quarter in terms of economics, but as thing spool out.
I think we might see something.
Obviously some of this will depend on legislation to and what to.
Congress may mandate that employers do.
And then your second question can you repeat the second when I kind of remember it but I want to get it wrong.
Just.
Some of your competitors have been a little bit more aggressive with regards to them, but monthly account fees.
Thinking what they're going to make it up in terms of rates and so I would think that some of them or upside down on that part of the equation and I'm wondering.
If you go back to your you know Osama bin through nine experience. What did you end up seeing with regards to how quickly they started adjusting and how do they got a competitive dynamics in the O eight.
That's exactly what happened in that period, where are you did have people, who were kind of upside down and.
Either.
They exited the business or are they adjusted.
And they did that in fairly short order and I have to believe that.
To some extent in sales processes and the like that.
Just as we are that all of our competitors are looking at this issue.
Right now and.
What I think is maybe the differences that.
We're all looking at it from different perspectives, depending on where we are in the industry.
We.
As I commented upfront.
The way, we see the marketplace going is that people want a total solution that includes the age of say in the complimentary program.
Just because you happened to be a custodian or you happened to be in investment firm.
Or what have you.
Doesn't mean that they only want this from you.
They want to.
They only want that service. They want you to provide the solution looked at from their perspective, and and we're in a great position to do that and in one of the happy accidents in this context is that.
Looked at in the aggregate that solution is far less exposed to rate uncertainty in variability. So we think we have a lot of levers that we can pull and that's reflected in the data I mean, if you look at.
As Devon, you're describing to the average HFSA generates more than 50% of its revenue from.
Cash net interest margin that number would actually be bigger if the accounting were the same way. We do it that is to say and I'm not saying has to be but that is to say because we're not a bank. We you do gross accounting.
But.
The point is that most HSH generate most of their profits from net interest and to the extent that.
You are at a place where.
That's sort of all you're doing you in this kind of environment you can't make it up on volume.
So I think the net of all that is to say I think we and other competitors who.
Our on them, but certainly we where we have we think the service that people want and.
That provides us some different provides us some.
Sort of cushion for lack of a better term from rate variability, we think we'll be in good spot.
But but as to answer your question I think people looking at it right now.
Great. Thanks, a lot.
Our next question coming from the line of Sandy Draper with Suntrust. Your line is open.
Thanks, very much a lot of my question, Jim asked but maybe one I think that's about a year ago or maybe at the end of last year, you guys talked about a lot of of new initiatives investments in technology and other areas that.
Because things were going well you had a lot of margin you're going to you're essentially more aggressively investing in the business. It sounded like what you in the prepared comments that you certainly weren't slowing down any on the integration, but are any of those projects being sort of put on the back burner right now as things that you can do.
To to offset in sort of factored into guidance, how you're holding maybe EBITDA a little bit better.
Even though theres a headwind or are you delaying those things or.
Are those things still pretty much going as planned and it's really just cost savings or get as you continue to integrate the businesses.
I think at the moment really the ladder.
We there the things that.
As an example, I mean, probably the Prime example of this.
As we said.
We at the time.
We are.
We've made a considerable investment.
To assure ourselves that as the entire world, including we.
Move from kind of.
[music].
From a.
On Prem data to cloud based data right that.
We can develop and scalable way and could you get product to market fast and all that kind of stuff and.
That's definitely a future facing investment.
We've tried to design, what we do in a way that it generates return along the way and.
Most of that return is not in in.
Interest rate et cetera, it's in the speed to bring product to market and therefore lower development costs. So.
These changes haven't really affected the IR are there at this point, but it is something we'll look at we'll we'll probably have a discussion on this topic.
For example at a board level just to think about what we're doing we're certainly mindful of the fact that.
If we needed.
If we felt that it was prudent to manage cash or something along those lines than those of the kind of things, we would do because that you're effectively increasing cost to capital.
But.
For the moment since the return on those projects is not based on changes in interest rate.
Theres no reason not to do them and we've always said that.
We're prepared to do things as long as the we feel like they're generating.
Positive return, we're going to do things, we generate the most positive return to you as investors. So so thats we are doing.
Great. That's really helpful. Then just a quick one maybe either for you John. Thank you Center Darcy I think you said you're pretty much assuming the 30 million dollar reduction.
Revenue guidance from the last time, you gave it you're assuming it's pretty much all flowing through to EBITDA was that correct.
Yes, Darcy one hit that one.
Yes, that's correct.
We gave a little bit broader range on.
There may be some uncertainty that we've included in the revenue, but but generally speaking thats correct. There the rate information, we gave close to the bottom line.
Okay, great. Thanks.
Our next question coming from the line of Alan Bank of America. Your line is open.
Alan.
Hey, Thanks for taking the question.
On the 4% reduction in revenue guidance, I guess, what would need to happen in order to Miss This new range would LIBOR in treasuries have to go below zero is there any way to just kind of grain what's embedded in this updated range.
Yeah. The short answer is yes.
That is to say, we have not assume negative rates.
Mostly because.
Very candidly, we're not exactly sure how to do so.
I hate to put it that way but.
In other words is a negative rate is really a fee what do you do with that and so so and we've had a lot of conversations both with the folks who.
Advise us from a policy perspective, but also with with our bank partners and the like and.
And certainly Jay Powell has said that he would be extremely reticent notwithstanding.
Situation to go negative rates that he's not sure it's a viable policy tool.
So so I mean, that's certainly something we have not assumed.
Second.
I guess I'd say.
And then that's the that's the biggest thing I'll stop there actually and.
There are some other things that could occur that would have modest impacts but.
That's about it.
We've tried to be as conservative as we can recognizing that the.
These are good times to be conservative.
Okay and then for my follow up have you seen I know, it's very very early but have you seen any increased spending trends as it relates to the current virus or any shifting of assets from invested asset to catch the war.
Anything that you're able to call out at this point not really.
Great. Thanks.
Thank you and I'm showing no further questions at this time I would like to turn the call back over to Mr. John for closing remarks.
Yeah. Thanks, thanks, everyone for being patient with us.
Today, we certainly one of the long, but probably for good reason and.
We'll continue to try and keep you informed as we know more but I.
I think kind of the message that you heard today is is a little bit.
Obviously, we're not to.
Ecstatic about the rate environment, Nobody is but it's also true that.
As Ted said.
Got a team that's.
Performed extremely well and really performed extraordinarily over the last few months and.
Is ready to do more and that's what we're here to do deliver for you. So.
Thanks for your patience and that will keep at it.
Ladies and gentlemen.
But today. Thank you for your participation you may now disconnect today.
Thank you operator.
Thank you.
[noise] [noise].
[music].