Q1 2020 Earnings Call
Good afternoon, and welcome to the progeny Inc. first quarter 2020 earnings conference call.
All participants will be and they listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star keep followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
To withdraw your question. Please press Star then too.
Please note. This event is being recorded I would now like to turn the conference over to James Hart, Vice President Investor Relations. Please go ahead.
Thank you Andrea and good afternoon, everyone welcome to our first quarter conference call with me today, our David Schlanger, CEO property, and Peter Nevsky, President CFO and COO, we will begin with some prepared remarks before we open the call for your question.
Before we begin I'd like to remind you that today's call contain forward looking statements, including statements about our positioning to successfully manage the impact of cobot, Nike and the associated economic uncertainty on our business our financial outlook for the second quarter of 2020.
I could probably 19 on our second quarter results and beyond our expectations on the timing of recovery at the utility industry assumption opportunity services provider clinics or number of members and the impact of cobot 19 on our client and our ability to acquire new clients and maintain existing client.
I could see our remote working environment, our market opportunities inside business performance, our industry outlook financial outlook plans and objectives for future operation and other non historical statements. As further described in our press release. These forward looking statements are subject to certain risks uncertainties assumptions, including those related to projects growth market opportunity.
Okay, and general economic and business conditions.
We think 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 operation.
Although we believe these expectations are reasonable we undertake undertakes no obligation to revise any statements to reflect changes that occur after this call.
Descriptions of these 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 FCC, including in the section entitled Risk factors in our annual report on form 10-K.
Fiscal year ended December 31st to 2019 as well as our press release at AK Steel were issued this afternoon.
During the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA reconciliation for the most comparable GAAP measures are also available in the press release, which is available at investors got caught you need dot com I'd now like to turn call over to David.
Thank you Jamie. Thank you everyone for joining us. This afternoon, we hope that each of you your families in your loved ones continued to be healthy and said okay.
I'm pleased to open today's call by reporting that everyone. A project is doing well.
Overnight gene has had an unprecedented impact around the world as a pandemic big began to unfold. We made the decision to work from home starting in mid March.
He will describe later, we're well prepared to make the shift your virtual to virtual work environment. We are extremely proud of how Archie mismatches transition.
They have not only continue to provide the same high quality service and our clients and members expect but also maintained their motivation topologies mission.
On this call our focus will be to help you understand the specific impacts it kind of it.
So the industry and our business, including our members and clients as well as how we have responded matching the business and the return to normalcy that we are beginning to see.
When we last spoke with you on March that's an issue financial guidance. The pandemic was still in its early stage in the U.S., nor clinics warzone seeing any meaningful impacts their patient volumes over the course of the subsequent two weeks Oh. It was declared a pandemic state and local authorities to get issuing stay at home owners and then March.
Gene The American Society reproductive medicine issued guidelines recommending that fertility clinics, she sees initiating new fertility treatments.
The significant majority clinics in our network chose to adhere to SRM guidelines and our volume up fertility treatments and dispensing of the related medications declined significantly over the latter part of the core.
All of the uncertainties created by the pandemic, it's duration its geographic reach and our members access to treatment, we refer to our financial guidance shortly thereafter.
Although many clinics remained open not limited basis for emergent need to perform initial consultations well telemedicine most patients were able to progress actual treatment and that drop in patient activity negatively impacted our first quarter results.
Through the end of March and into the first half of April we saw significant reductions in the utilization of the benefit by our numbers dealt with was 15% when compared to the early part of Q1, 15% of what we consider to be normal levels.
Despite this we reported 72% increase in revenue over the first quarter 29 team as well significant growth in adjusted EBITDA net income and more than $12 million a positive operating cash flow. This quarter. These results were due to the strong start we had to the year prior to the impacts uncovered 19.
In April the New York Department of Health declared that fertility isn't a central Hall service and stayed at that Colin except the authority to treat their patients and perform procedures during the pandemic.
Then on April 24.
Sure and updated its guidelines, which were reaffirmed as well.
Advising that practices could reopen for all procedures slow so long as it could be done in a measured way that it's safe for patients and staff.
Fortunately mini clinics had already begun prepared you protocols to address patients that stake.
Such as reducing the number of people in the clinic at any one time screening patients before each appointment and requiring that patients where I'm asking that P to eat you start clinical staff.
Most clinics have published their safety protocols on their website for patient convenience. These preparations have put fertility clinics and a stronger position to open sooner rather than later services.
Over the last few weeks, we're already seeing week to week acceleration, the volume of Asian appointments and medication dispensing.
Acceleration member activity demonstrates that members are anxious to return to treatment and is evidence that the pause in treatment they indoor hasn't them their desire to achieve your family building goals by the end of June.
We expect to see all of our network clinics opened in providing their full range of services inpatient volumes.
And you their ramp up as members, you're more and more comfortable with the safety protocols established by the clinic of choice. They still too early at this point to know when when number utilization which aren't.
The levels.
I would members waiting for treatment has added a significant amount of stress to a journey that already enormously challenging for many people and progeny has been there to help support that our patient care advocates have been in frequent contact with their members and had been providing the most important guidance, including around the issues how cold it could impact their unique treatment journeys.
We've held women at Webinars mental health and wellness not helping members understand how to effectively use telemedicine started utility journey.
These events have had very strong turnouts, which is another positive indicator your our members orchards in their treatment jokes.
We've been able to provide this high level support because despite the drop in volumes and revenues. We made the decision to keep the full project team intact, we give us what the belief that the disruption to our industry will be shorter than it will be for many other industries and because we felt it was important to preserve the talented organization and unique culture, we have built.
And to continue to leader who are members during what we do especially trying period.
Our member satisfaction scores, a continued trend at or above the levels. They worked harder to scan data showing that our members have been appreciative of our efforts.
We've also been there or providers, we've been frequent contact with our network physicians to go both direct conversations as Wall Street surveys, we've been sharing the survey results with our net to help our physicians understand another two years have been impacted and how they are approaching koby related issues and challenges.
We know the clinical reopening.
Or after the prepared.
And we believe in our network is well positioned to effectively manage the backlog of projects progeny number volume we expect to see.
Practitioners are telling us that they are adapting to safely T to safely accommodate weeks that's expected patient backlog. For example, many will be practicing with ABTS, extending our smoke doing to weaken on weekends as necessary in order to manage the Boeing.
In addition, many are leveraging telemedicine and in some cases conducting the typical multiple office visits for consultations into a single offices.
In addition for some of the largest clinics on the east coast in West Coast Medical Tourism has been a meaningful portion of their practice volumes specifically from patients traveling from Europe or Asia as travels frictions remain in effect medical tourism remains curtailed. This will create additional capacity at these clinics to manage their backlog of U.S. patient.
As we are beginning to see clinics reopen members Reengage, we believe fertility will be on the leading edge of the recovery relative to other areas of econ.
As it relates to the overall comedy back to spend a moment discussing how cold it has impacted policies employer points.
We all see the unprecedented job losses unemployment claims reported.
On some level all companies have been meaningful meaningfully impacted by code. Fortunately, however, taken as a whole progeny customer base as aborted the worst with these impacts.
As of March 31, we have 2.1 million members.
I'm pleased to report that as of today, there has not been a reduction to our 2.1 billion numbers and we believe there will not be your debt reductions members as result of code.
We are facing this this on a review we performed on each of our clients taking into account our normal conversations with them as wells what they have said publicly anything about the impacts of koby to their workforce.
Were two important conclusions of Mr view first the clients that represents a significant majority of both our revenues our revenues a membership haven't announced any workforce reductions or meeting or meaningful furloughs. In fact, several of our largest customers have publicly said, they're hiring or committed to make no were.
She is in 20 twond.
Second the those industries that had been most impacted by cope with 19 to this point.
Typically hospitality travel restaurants retail clothing publishers, we believe that impact across these revenues from any announced layoffs or work or furloughs at clients. In these industries will be de Minimis. In addition, many of these companies are continuing to provide for medical benefits to any affected employees for an extended period of.
Time further reducing the potential impact of project.
Obviously, the broader economic situation, it's still evolving we will need to continue monitoring what's happening with our clients.
Turning now to be in passive coated 19 to our 2020 selling season.
This point in the year, we are actively selling we would be in any well pitching new new clients as well as reengaging with prospects previously gave us a knocked out during the prior selling season.
Consistent with how what typically happens we continue to expect with the majority of client decisions will be made at the end of summer early fall.
Although much of what we're doing up to now is fairly consistent with prior sell seasons, we have had to make certain adjustments to our selling process itself.
For example, we ought attending conferences and have shifted from meetings that would normally be a person to virtual and telephonic meetings.
But despite these challenges our sales team is healthier engaging with prospects and our sales executives have been successful and getting meetings with potential clients.
Despite the fact that pandemic has created a certain level of distraction for many HR teams. We believe that the level of sales activity. We are seeing this environment is positive and encouraging that's comparable to what we saw last year at this time.
We have however, adjusted the focus of our go to market efforts by more narrowly prioritizing sales activity and being sensitive to those companies. We approach we are pitching to airliner hospitality companies. For example, instead, we're focusing on industries that are better position in this environment and where we've done well historically such as technology.
Oh, Gee consumer package goods pharmaceutical software financial services.
We're also focused on targeting a higher percentage of our companies who higher percentage of companies who are currently offered for Trinity College, leveraging the strength of the cost savings within our value proposition.
Our program offers significant savings compared to a carrier program, which is always important but those savings to become even more relevant in an uncertain economic climate.
Historically, two thirds of our clients at some level of utility coverage parts are adopting project and nearly all those cases the programs work through their carrier. So we clearly understand how does this actually market ourselves to that audience.
Last year really the selling season, we received a handful of commitments from clients, who had previously told US not now to part sales season, we are experiencing similar level of early commitments for 2021.
We experienced as of this time last year.
And just the last few weeks, we were awarded business for 2021 by two of these companies.
A handful of early calling commitments does it make an entire sale season, but these early commitments and in particular the two we recently received or good indicator that there are companies out there who are willing and able to make a decision even in this difficult environment.
It's impossible to know what the world will look like in late summer early fall when our new client prospects will be making their benefits decisions for 2021, but with what we can control right now we're seeing good activity, including the handful of early commitments or do you see the receipt of new are keys and the prospects. We are moving through the sale stages of the pipe.
[music].
Another area, we can control by continuing our emphasis on upselling to existing customers by adding progeny are actually hit for example, whereby convincing them to cover more cycles with property Rs or program provides hard dollar savings when compared with traditional PBM and we believe that this is particularly compelling message and this second.
I think environment as companies are looking for ways to be more thoughtful with what they said.
We are collectively going to unprecedented times. However, some things don't change one of them as desire to have children and started family. In addition, all of the macro trends that have helped contribute to our growth remain intact. The high and growing rates have been facility. The lack of adequate coverage and do you estimate it's highly prevalent.
Medical need.
The need for inclusiveness any quality in the workplace and the need for employers to get the most of their health care dollars. We believe that as we collectively emerging this crisis tragedies mission, how we accomplish it cost effectively for our clients becomes even more important.
As we look back across other times of National crises, we see that people tend to use these periods to think about what is really important to that these moments family of failed family building become even more relevant to people that it was before we believe employers will embrace this cycle trends that result from the coldest Nike pandemic.
Net family building benefits could take on even more significant as.
Finally, we have 135 clients today because of thousands of companies covering facility to their carriers, we can demonstrate tangible financial benefits to the project program, which is why we continue to believe that we've got meaningful opportunities going forward.
That I'd like to turn the call over to Pete to walk you through the financials in greater detail.
Thanks, David.
I'll begin today by reviewing our move to a merchant bar.
Which was a seamless transition because you already have to wait tools and systems in place sort of comedy virtual office and working remotely for everything.
Oh cloud based ickes assets, an architecture provides flexibility we needed to be able to work effectively the remote barb.
We had we already had robust business continuity plan in place there was implemented so that all of our teams have been able to perform their functions and I have to secure environment without any compromises the data security functionality or any degradation to levels inserts.
As a result, there was no disruption to our day to day processes or to our business controls. In addition, all the services, we provide to our members clinics and clients continued as normal without any interruption.
Our Pcs for example in T. have access to all the tools and resources they need to continue supporting members while working from home.
As David mentioned, we've kept the project team intact. Despite the drop in feeling volumes at the back end the core.
We made this decision in anticipation of the resumption serves as the clinics as well as the corresponding went up toward normal treatment levels.
Has that ramp happens our care management team will be ready to support our members and the clinics.
We haven't flexibilities to make this decision given the strength of our balance sheet.
As of March 31st we had 91.6 million of cash an increase of 11.3 million for our balance sheet at December 31st and total working capital of approximately 120 million with no debt.
Because of our substantial cash balance our near term positive cash flow zero debt and untapped $15 million credit facility.
Full confidence in our ability to manage through any temporary disruption to our business. During this period.
The significant majority of our expenses are valuable in conjunction with Green bonds, you don't incur and clinical lab costs about treatment and there are no minimum guaranteed payment you know our provider specialty pharmacy networks.
Within cost of services own portion that is 100% variable is employee related costs, what's your management functions for Pcs.
Revitalizations provider account management.
Well the organization, we're taking prudent actions to manage our cost where it makes sense do so.
We're deferring expenses, where it won't have an important in running the business, we're continuing to higher and I would view and all this and see what roles. He could be filled now versus those roles that could be deferred until later in the year.
We have significantly reduced travel expenses are being displayed the all discretionary costs across the organization.
Turning now to the results for the quarter, we were on track to deliver a strong first quarter, both from a financial perspective as well as in the number of treatments performed prior to the impact of Tokenized business I'll walk you through the highlights the please keep in mind that comparisons to prior year do not reflect our partner.
So given the dramatic reduction in volumes due to tokenizing that we saw toward the end of the court.
Generated 81 million about an increase of 72% when compared to 47.2 million in the first quarter last year.
We had 132 clients at the ended the quarter and approximately 2.1 million members at March 31st versus 78 clients and approximately one the 1 million members. The same time last year.
But so many benefits revenue increased 47% to 59.4 million, what's a grocery being driven by a higher number of clients and covered lives.
Pharmacy benefits Rotten increased from 6.8 million in the first quarter last year to 21.6 million this quarter due primarily to an increasing the number of clients with the project or ex benefit as compared to last year.
Approximately 70% of our clients now have the Rx benefit compared to 60% of our clients a year.
[laughter].
Turning to our utilization second chance and utilization patterns, we're on pace for a strong quarter, it's who we experienced the drop the sharp drop in volumes over the last part in March.
Utilization rate was trending slightly above last year and so we saw the impact the panned out.
As a result, we ended up with the slight decline utilization during the quarter.
The first quarter do utilization rate was <unk>, 0.46% for all members and 0.41% for female utilizers as compared to <unk>, 0.53% and 0.47% respectively a year that.
There were 4443 or segments performed in the quarter, 69% increase from the first quarter last year.
Pandemic also causes a different next in art cycles delivered during the quarter versus the prior year period. For example, there was a higher percentage of cycles that were cancelled make treatment and while each of those contributed a small amount of revenue the completed cycle. They're fully included in the article count consistent with CDC repair.
40 methodology.
Turning now to our expenses in margins.
Gross profit of 16.6 million increased 67% from the prior year period.
Gross margin was 20.5% and reflected a modest decreased 60 basis points from the 21.1% gross margin reported in the first quarter canine teeth.
The slight decline was primarily due to our decision to maintain our care management functions during the pausing treatments caused by covert Nike.
That was the marketing was 4% of rather than in the first quarter, reflecting an improvement of approximately 100 basis points as compared to the first quarter last year.
We continue to see economies of scale in sales and marketing given on nearly 100% client retention rate as well as greater efficiencies our operations.
DNA this quarter was 11.7% of revenue an increase of 210 basis points from a year ago quarter due primarily to the 1.7 million in additional cost associated with operating as a public company.
Adjusted EBITDA of 7.1 million this quarter increased 64% from the 4.4 billion reported first quarter last year.
Our adjusted EBITDA margin of 8.8% this quarter reflects a slight decrease a 40 basis points from the 9.2% margin in the prior year Keeley.
Slight decline in adjusted EBITDA margin reflects our decision again to keep the overall workforce in time.
The lower than anticipated revenue due to the disruption in treatment volumes from Coke Nike.
Net income was 4.1 billion, an increase of 61% or 1.5 billion from the prior period.
Net income attributable to common stockholders was four cents per diluted share on the basis of 99.7 million weighted average diluted shares outstanding.
Compared to one penny per diluted share on the basis of 15.1 million weighted average diluted shares outstanding in the prior year period.
The improvement reflects the higher net income as well the absolute in the current period, but weren't valuation adjustment expense related to the convertible preferred stock warrants that were in place prior to our idea.
Despite the impact Cove, it had to our volumes in the first quarter, we generated positive operating cash all 12.1 million, let's compare to.
Operating cash use of 6.2 million in the prior year period.
The increase was primarily due to the continued improvement now, let's say some processes of new clients.
We have historically seen at negative impact the cash flows in the first quarter. Following the clients wanted the benefit.
Is it because it usually takes a better time, we got the came across as he's running efficiently with new clients.
The first quarter, even though.
The number of new clients and members are continuing improvements in integration solutions with the carriers mitigated the normal impacts the task was in the first quarter implementation by ensuring the remittance processes with new clients and their carriers were running smoothly.
I saw this quarter was also favorably impacted by the timing of items, we highlighted last quarter, which amounted to approximately 6.7 million and include the payment providers and questions have already be interested.
Turning to our expectations going forward.
Oh, good reasons David discussed.
We believe the utility industry will recover more quickly relative to other areas of the economy that had been negatively affected by tokenizing.
Based on the member include activity. We are currently soon we're comfortable that are minimum second quarter results will be at least 45 million about.
4.2 million and that loss and an adjusted walk before interest taxes, depreciation amortization and 1.39.
However, although we are encouraged by the acceleration in the volume of appointments. We are seeing significant uncertainty remains at the timing of the resumption of services, how network clinics as well as how long it will take both clinics in patients to return to normal practice volumes and member utilization levels.
As a result, we aren't in a position to provide annual answer guidance at this time.
I'll close with how we think about coming out of the situation even stronger as an organization.
During this period, we are deepening our relationships with the clinics in our network by helping them understand whats happening across the industry.
Yes, strengthening our relationships with our clients by being there for their employees during an uncertain stressful time.
We have support your members by helping them manage stressed and uncertainty in this unprecedented situation.
We continue to believe that older macro forces that are driving our success them in place.
People will come away from the pandemic realizing that family Doby, it's even more important to them then they have already been.
Our superior outcomes and best in class member experience, what our clients measure. The return you have got it both in terms of the hard dollar cost savings and generate I saw the higher employee satisfaction and attention.
Our primary competitors would try to carriers are likely to be either more focused on their core business and less focused in retooling their practices to address for children later.
Despite the impact that just came down that we are well capitalized.
Because of our business model, we aren't significantly impacted from a cash or perspective, and we haven't thought remain cash flow positive.
As a result, we believe we're well positioned successfully manage the impact of dependent on our business.
With that led to open up the call for questions. Operator, Please open the call.
We will now begin a question and answer session.
You asked a question you May press Star then one on your telephone keypad.
If you are using these speakerphone, please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And our first question comes from Sarah James of Piper Sandler. Please go ahead.
Thank you again, great quarter guys.
You know I'm really encouraged by the conversations that you're having with new customers and the pipeline growth that you're seeing can you give us a little bit more color I'm not do you think the mix of industries might be better, particularly and I'm wondering if you end up more tech weighted that has I guess.
<unk> population and usually higher utilization count.
Is that something that that could be impactful as you grow in 2021, and I'm just more broadly how the scope of conversations you're having this you're stuck up to this time last year.
Hi, Seretse, David you know as he said on the coal we were having a lot of very positive conversations.
And the good news is that we been diversifying our customer base across industries for the last several years and and even in this you know very unusual situation. There a lot of companies that are really well position to to emerge in the pandemic very strong in or an or how strong businesses through it and they're not just.
Our company. So certainly we're trying to focus on all companies and from industries that that we believe are well positioned. So you know beyond the tech industry is theres industries like consumer package goods pharmaceuticals, and financial services that are extremely strong and that or you know kind of business as usual from selling perspective and or.
Good to talk in July. So obviously, you know you ought to be sensitive too you know a particular industry and company situation, we're doing that and that's the sort of recall, having having a you know success getting getting in front of preferred prospective clients.
Great and the clarity that you gave on the the trough in March at 15% was helpful. And then he said it's been improving week by week, where do you guys stands now compared to normal this time next year.
Well, it's it's a difficult number to put out there will not gonna for one reason, we've seen three sequential weeks of.
You know double digit growth off of that trial.
And it's been continuing but sort of the latest week I. Just gave you that number so it doesn't make a trend right, but we have our expectations I'm in terms of Q2 and sort of the minimal number that we put out factors Dan you know a reasonable expectation for continued acceleration not at that same rate.
At a reasonable expectation that we feel comfortable with based on sort of all the things that we're seeing be it prescribing and dispensing be it scheduled appointments be it a call activity et cetera, and so and so I think that's probably the most responsible answer I can give you relative to details on what we're seeing.
Yeah. The only thing I'd answer is that it's obviously, what we're seeing as we said in her prepared remarks that or members are anxious to get back into treatment. Their physicians are anxious to get to practice is open and both those things are happening simultaneously and that's all driving that excel.
Rationing member activity, so they're all good times, given what's happening in other areas of the economy.
Thank you.
Our next question comes from and Samuel of JP Morgan. Please go ahead.
Hi, guys. Thanks for taking the question, maybe if you could touch a little bit on what your providers are seeing in terms of patient apprehension about coming back in the office and how quickly do you think that the providers can work through that backlog of volumes and maybe what that means for cadence in the back half of here. Thanks.
So I'll take the.
I'll take the second part of the question first in terms of capacity <unk>. We if you know somewhere comments addressed a clearly capacity just in general right. So one of things that that create capacity for U.S. patients and probably members is the fact that you know a good percentage of volume.
In our business not dissimilar to sort of way U.S. population resides east and West coast on East and West Coast clinics do significant majority of of medical tourism from patients either from Europe or Asia.
And that volumes for some critics is 20, 30% not insignificant obviously with travel bans going on everything going on in the World you know that creates capacity in of itself.
The second thing is that the clinics have been.
Or you're prepared to do everything they can from an extended hours perspective.
In order to to get confidence to members as they come in for treatment.
In order to be able to handle the volume.
So that they spread out the hours, if they're going to operate to be able to handle you know any any backlog that you have to work through relative to you know the pause treatments that happened during this period.
And lastly, their expectations are that their cash business will suffer a bit.
During this time period, because even if you still have a job, but if you don't have coverage, you're probably going to be a little bit more considerably withstanding money versus covered members. So their expectation is that the the ramped back.
Normal levels will be you know first and foremost for them from their perspective covered members.
Then cash members than any medical tourism, so all that sort of grades inherent capacity relative to relative or you know the network as it relates to what else are saying, oh, the or have different strategies around ramped up.
Oh, Oh them have different protocols, many of them common, but they're going to roll them out at different paces can make sure that they don't do anything relative to building confidence with their members.
And so you know I would say the most common thing that we heard is that or them either they're often running fully today with their full suite of services are ramping up volumes based on that protocols indoor their opening up their full suite of services within the next couple of weeks, but.
By quarter end, all expect should be you know fully operational with all of their services and have worked through whatever kings may exist from the new protocols are putting in place in order to be able to hang the volume that was that's probably the most common thing, we heard and sort of getting a tiny expectations for.
In their perspective, what they believe is going to.
And there.
It really as we sort of call to help ease kinda patients concerned there making their protocol.
They're telling patients what to expect when they get there and how the doctors are how the clinics are going what steps are they're going to go through to make sure that patients is that how to see experience, but they're also publishing them on the west Yes Yep.
That makes sense, that's really helpful.
Then I guess you know on the expenses side, how should we be thinking about you know how much of your expenses your variable Guinea talked about kind of holding the line on give some of your expenses that you won't get prepared for for the recovery in volumes, but you know as your as you when it comes down how much of that is they're able to serve as an off [laughter] you get you to probably.
Impute it right that you think about what we put out for a minimum for Q2, it's almost breakeven on an EBITDA perspective at 45 million dollar revenue line you know our historical gross margin, obviously is going to come down a little bit relative to this level of revenues you could probably in Q.
We don't break that number out and having but at the end is getting to the what we thought it was a meaningful data plan was putting out essentially what is breakeven revenue for us which is coincidentally, what we are looking for for Q2.
Great. Thanks, very much guys.
[laughter].
Our next question comes from Michael Cherny of Bank of America. Please go ahead.
Hi, good afternoon, thanks for all the color so far.
I want to go back a bit so that the some of the comments you made about utilization and ramping capacity one of the things that I'm curious about and deep dive a little deeper. It can you talk through some of the activities not just from a time perspective, and how long do open.
You know are there any hindrances or barriers that your fertility network providers have to worry about because the here about the lack of p. be available for professionals for patients.
Any of those in place and is there anything you can do seeing your side to help them as they think about re ramping they're there.
Their practices beyond just helping them manage the patient flow.
Yep.
There there are there aren't any concerns around P.D., so I'll start with that and we surveyed we we've talked to many and surveyed you know all of our largest clinics around the country and so there isn't concern as it relates to I'm keeping their employees safe.
And they're sassy, they're providing treatment and heavy equipment to do that so that's the first thing they're they're they're not concerned around restrictions as it relates to supplies in any kind of running there simply concerned around making sure which is why they were injured slowly from a from a patient volume for.
Is that the dampened demand undertone to have the name of your schedule. It slowly it more concerned about making sure that their staff as operationalized all the safety protocols.
They're putting in place and ensuring that those run smoothly before they continue to schedule more and more patients. It's sorta, it's sort of basically what they're telling us as a limitation short term that they believe as the operationalize. The working these protocols you know well will create a more capacity it's in that country.
So I do.
Thanks, Pete and I just one other question I think you did a great job highlighting your strong liquidity cash position I know in the past you talked about evaluating M&A and other in your potential services you could look too.
Bring into the fold is there anything they the organization learned through the cobot outbreak in through the utilization drop off you saw that opens your eyes, but other potential services or activities that makes sense to be within your business, whether it's no other high touch client model or.
Anything to help providers anything that that this outbreak is really uncovered in terms of where there's other holes across your channel that you think you can do a better job, helping with that what's currently in the market.
[laughter] is David I think that.
The the things that we're driving our thinking.
A couple of months ago are still driving the thinking any opportunities to both make our service.
More fulsome stickier for both the member client perspective.
Remain.
Remained similar with respect to women's reproductive health familiar things, we talked about before.
You know.
Supplemental mental health benefits for people going through this obviously, there's been particularly strs declined but those types of things some of the vertical opportunities we talked about before we're outsourcing services. We can bring in house, they will still makes sense us.
And and I don't I don't believe that decoded situation really exposed to any any weaknesses in our service no from an M&A perspective on the coast situation.
They have creates more opportunities for us given the fact that some companies maybe more financially mousetrap. They were before itself its financial hardship there maybe some assets on the market that valuation perspective might start making more sense. So that's kind of how we're looking at enhanced M&A opportunities are there some damage.
You know companies that are damage financially, but that still have a good service and product or product that might make sense.
Maybe just a follow up to make sure I might want to home down even a little bit further you know the whole world appears to be moved to some type of virtual care and Tele medicine. Your patient care advocates have long been at the forefront of that are there any other tools that you can see institutionalizing for them, but just because of how much of health care.
Turning now delivered virtually that's something that was becomes another opportunity for project.
<unk>.
Look I think you're right.
Our our P series and you can have a big portion of our business model embrace the notion of you know kind of remote care very early.
Last years Weve automated many of those many of those interactions that need to the automated and kept our human level the ones that really matter and really moved the needle pick from a member perspective in having a good experience. So whether it's the emotional support peas, whether it's really really getting good clinical education and support around making the right.
Visions I think we found the right balance you know between what you need to automate what you should keep you know what the human touch and the reality is the fertility treatments are always going to be delivered by doctors for medical procedures. So so that would be somewhat of a limiting experience but.
Having said that.
<unk> for about you know enhancing medical mental health support you could you know we certainly as we think about that think about telemedicine and telemedicine platforms will do that so.
So I don't know if that answers your question, Mike or not.
It certainly helps thanks, so much too.
Our next question comes from Ralph Jacoby of Citi. Please go ahead.
Thanks, Good afternoon, yes, so it sounds like expectations for clinics in your network to be up and running for the end of June was hoping you could just give us some sense. There you know rough ballpark what percentage of the clinics are sort of open and available to see patients today I, just wonder how sort of how much of a ramp from where.
We are today to get to sort of full buy into Jim.
They're open and available they're just not open and available to full suite of serves right [laughter]. So many of them were open and available early in April.
Up until now basically doing tell Madison councils, and even those weren't partial console because the diagnostic services as needed for four console work being done during this time period.
They're there so when I talk about then being fully open their full suite of services, it's really doing all treatments that they normally would do by the middle of May and then ramping up the volumes you know no you know taking into consideration the new protocols. They put in place by the end of.
The core and so that's probably the best way I can I can frame that it's hard to say what percentage because it that the the their controlling sorted that capacity. If you will right now in terms of getting through backlog just by virtue of making sure that they're protocols operationalized as I mentioned before they will all.
No. They all tend to be up and running again by the name, but that doesn't mean that the volumes will be going through there like they normally see it just means that that at that point they'll be ramping up volumes in terms what their scheduling in anticipation of creating so you know confidence with any other members that that come through there and any.
The thing that you know that talk to their friends et cetera. So I I, that's probably the best way to think about it but in terms of being open open all of them are going to be you know expect to be open full set of services by the middle of made that doesn't mean, the volumes will be there and actually the important bar that we're trying to make sure that they understand.
Yeah, Okay fair enough and then I just wanted to ask about pharmacy benefits really outperformed our model I think you talked about penetration going up to 70% at this point any change in initiatives are focused their appetite you don't see seems high obviously and then anything in the corner in terms of maybe pull forward of some of that.
Relates purtill, what benefits or is that not the right way to think about it. Thanks, Doug yes. It is rising by itself. So the answer is the percentage of clients that we put out no why don't you equal somewhat larger summer smaller there was a pull forward and our earlier launch than originally expected for one of our larger clients.
It was an existing client that as an up sell took the pharmacy benefit or that combined with the client. Another war signed it went live in Q2 last year and now the cycling in Q1 of this year versus the prior year that had the Rx benefit is why.
The increase in pharmacy.
Can you is that significant hazardous.
Okay. That's helpful. Thank you.
This concludes our question and answer session I would like to turn the conference back over to James Hart for any closing remarks.
Well, thank you Andrew and thank you everyone for joining US today. Please don't hesitate to reach back out if you have any question and we look forward to speaking with you again yeah.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.