Q2 2020 Progyny Inc Earnings Call
Okay and welcome to the progeny Inc. second quarter 2020 earnings Conference call.
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I'd now like to turn the conference execute James Hart, Vice President Investor Relations. Please go ahead.
Thank you Sarah and good afternoon, everyone welcome to our second quarter Conference call with me today, or David Schlanger, CEO Promenade, and Peter Nasty, President and CFO and feel we will begin with some prepared remarks before we open the call for your questions.
And again I'd like to remind you that today's call contains forward looking statements, including statements about our positioning to successfully manage the impact of koby, Nike and the associated economic uncertainty in our business or financial outlook for the third quarter and full year 2024 your 2021.
Dr. Kogan 19, our business industry operation.
Remember utilization rate or expectations and the timing extend to the recovery of the fertility industry and the reduction in fertility services provider could.
The strength of our client base and their ability to manage he can talk to cope with my team our ability to acquire new clients and retain existing clients our market opportunities inside our business performance industry outlook financial outlook strategy plan objectives for future operations and other non historical statements. As further described in our press release that was issued this afternoon.
These forward looking statements are subject to certain risks uncertainties assumptions, including those related to project is growth market opportunities and general economic conditions. We based these forward looking statements largely on our current expectations projections about future events occur natural trust and we believe may affect our business financial condition or results of operations, although we.
[laughter] teachers are reasonable we internally, we undertake no obligation to revise any statements to reflect changes that occur. After this call descriptions of these and other risks that could cause actual results could differ materially from these forward looking statements are discussed in our periodic and current reports filed with the FCC, including in the Texas entitled Risk factors.
And our most recent tempt you during the call. We will also refer to non-GAAP financial measures such as adjusted EBITDA Reconciliations with the most comparable gosh also available in the press release, which is available investors don't progeny dotcom I'd now like to turn call over to David.
Thank you Jamie. Thank you everyone for joining us. This afternoon, we hope to each of you your families in your loved ones continue to be healthy and say this quarter. We saw the returnable members into care and because of this we're reporting a second quarter that is meaningfully stronger than we'd expected reported our first quarter results to you in no way, but before we get into the drivers are the result.
Let me briefly remind you of how this quarter began in early April so did significant majority of the clinics in our network have curtailed their operations to comply with the guidelines provided by the American Society for reproductive medicine, which at that time coal for the cessation of new fertility treatment cycles. During the onset of the cobot 19 pandemic.
As a result, our treatment volumes at their low point drop to approximately 15% of what we what we would otherwise have expected to see.
In late April in early May or clinics began planning for the reopening in accordance with revised SRM guidelines on the safe assumption of care and by the end of June virtually all of the clinics or network, providing their full range of services.
Guidance. We gave you in mid May was based on what we were seeing at that time and assumed we would see a steady build appointment volume and member activity through the end of June. We're pleased to report that the rate at which are treatment volume recovered was even faster than we had anticipated.
By the end of June utilization of fertility services by our members increased to approximately 90% of what we would have ordinarily expect it to see and as a result, our revenue of 64.6 million in the second quarter was significantly above our guidance of a minimum of 45 million in second quarter revenue.
From the onset of the pandemic, we believe that for Duke fertility would be able to recover more quickly relative to both other areas of the economy that had been significantly affected by cobot 19, as well as other areas of health care such as hospitals.
The return of the significant majority of our members into care a during this quarter affirms that belief well non emergency procedures across much of health care remain well below where they would normally be or treatment volumes demonstrate that fertility. His time sensitive and that most people who need care are willing to defer it for an extended period of time.
Because they know that their likelihood of success, maybe compromised by any meaningful delay.
Nor clinics have the capacity to fully address our member demand and the volume of members pursuing treatment has substantially return July treatment volumes have remained slightly below normal levels at approximately 90% or expected utilization.
Because utilization levels are still not quite at 100%. This highlights that there is a small minority of members continue to have some trepidation about receiving care at this time.
For those individuals we believe this pause will be only temporary and that members will eventually pursue treatment when they feel comfortable <unk> comfortable doing so whether that is later this year or sometime in 2021.
Infertility doesn't go away by itself and for those individuals who have decided that having a child is one of the most important goals in their lives. We know that these members appreciate that a archie treatments for gives them the greatest chance it realizing their dreams and project will be ready to support them. When they are prepared to take that next step on their journey [noise].
Turning now to our new did business development activities. That's companies have continued to maintain their work from home environments. Our sales activity in the quarter like likewise shifted entirely to virtual and telephonic interactions. In addition, all of the key industry conferences have shifted to virtual platforms and we expect that that will be the case for the remainder of the year.
[music].
Our sales and marketing teams have responded well to these challenges for example in order to increase our opportunities to engage with prospective clients and to build our pipeline we've been holding regular webinars to provide benefits managers with timely content insights from key opinion leaders on topics that we know our high importance to that.
These lead generation activities combined with our normal sales channels, such as benefit consultant introductions to prospective accounts have allowed us to generate a robust pipeline.
We believe that the cost savings we achieved through our superior outcomes are resonating more deeply in this current environment and are helping to drive this level of sales activity, particularly with those prospects were already providing fertility coverage [noise].
Well, we continue to have success in generating good level ethic of activity both in getting initial meetings with perspective accounts and then progressing those opportunities into subsequent rounds of review HR teams from a number of perspective accounts are telling us that they have needed to prioritize their cobot responses above their consideration of any new benefits this year.
As a result, our overall level of arts <unk> I've covered the opportunities for the 2021 plan year is less than what we were otherwise expect at this point in the year, we still can't yet know what our 2020 selling season will ultimately produce and as is typical we continue to expect that the majority of clients called client.
Decisions, we made at the end of the summer through the early fall. So while it's still too early to know with certainty. We currently expect to see a greater percentage of accounts in this selling season give us a not now let's compare to what we have seen in prior seasons and we expect to enter the 2021 selling season with a very robust pipeline of well developed price.
Specs for either a midyear 2021 or January 2020 to start date.
Despite this challenging environment, our preliminary expectations for 2021 offer a minimum of $525 million in revenue, reflecting an accelerating growth rate of 58% from the midpoint of our 2020 guidance.
This expectation takes into account, so new sales and up sell commitments to date as well as our view into the remaining pipeline and upsell opportunities with which we're still actively engaged.
As is our cost them. We will also continue to work with each of the not now accounts and help them get into position to add the benefit when they were able to do so historically these not now deferred accounts have been an important source of new business wins in subsequent years, we saw that again this year with some of our initial wins this season, and we would expect that to be the case.
So again next year.
As for our existing customer base, we believe the caliber of our clients as well as their commitment to their workforce and their loyalty to the progeny benefit is one of the most underappreciated aspects of our business well every company has been affected by coated and many have felt the impact of the resulting economic slowdown we continue to see that our client base has.
Largely avoided the worst of these impacts when taken as a whole as of June Thirtyth, We had 2.2 million members, reflecting a small increase more March 31 member base [noise].
The increase is primarily due to just bought primarily due to growth from our existing customer base as some of our clients have continued to add to their workforce. This year, despite the broader economic conditions.
As we look across our clients taking into account booked or public disclosures as well as our own conversations directly with them. The clients who represents a significant majority of our revenues and membership haven't announced any workforce reductions are meaningful furloughs. As a result, we continue to believe we will maintain our members more existing client base for the remember.
Manger of this year.
We also continue to believe that all over the macro trends that had been contributing to our long term growth profile remain intact, specifically the high end growing rates of infertility driven by the continued increase in the average age when women are having children. The lack of adequate coverage for this highly prevalent and growing medical need the need for employers to get the most.
As from their health care spending and the need for diversity quality and inclusion in the workplace, which has become more important than ever with respect to diversity a quality of inclusion fertility benefits can be one of the most impactful ways a company can demonstrate its commitment in each of these areas. In addition, while it is important for companies to support all of their worth.
Workers health care needs are adequate adequate coverage it can be equally important to provide employees with the resources they need to have successful outcome.
Because fertility treatments are often an extremely emotional and difficult journey unsupported patients often choose to stop treatments simply because they don't have the proper tools to cope with the stress involved.
In partnership with one of the largest fertility practices in the country. We recently conducted a study which revealed that patients who are provided multiple contacts with care advocates such as rpcs are more likely to continue down their treatment pathway towards building their families.
We're pleased that SRM recently accepted our submission to present this important research at their largest annual industry wide event. The scientific Congress in Expo. This fall with that I'd like to turn the call over to P to walk you through the financials in greater detail. Thanks, David.
I'll begin by discussing member activity during the quarter since that had the largest impact to our result, as David mentioned in the lightly yes around guidelines that were originally issued on March 17 significant majority of the clinics in our network aren't open or were only providing limited treatments such as initial consulates when we began.
That caused our utilization levels at the lowest point in April to be only about 15% of what we would typically expect to see as the clinics reopened member activity Bill over the second half a quarter and we saw a week over week increases in utilization with utilization in June ending at approximately 90%.
What we would typically expect to say.
This is salvation is very positive indicator of the recovery curve infertility, there's greater than what we were able to see when we issued or minimum revenue guidance and Matt.
Our views on was based on what we were seeing at the time and reflected our estimate up where utilization might progress to over the remainder of the second quarter.
Recovery ended up being both faster and better than we had anticipated.
As a result utilization across the full second quarter was approximately 65% of what we typically would expect to see as compared to the approximately 45% level that we assumed in our minimum revenue guidance of 45 million to second quarter.
Our utilization rate for the second quarter. This year was 0.35% for all members and 0.32% for female utilizers as compared to the utilization rates, a 0.53, and 0.46% respectively a year ago.
A number of art cycles were comparable 3434 cycles completed during the second quarter. This year as compared to 3378 from the second quarter last year.
Despite the lower than normal volumes amid the covert 19 pandemic revenue increased 15% to 64.6 million in the second quarter from 56.2 million in the second quarter last year.
The growth was primarily driven by pharmacy benefits revenue, which increased to 18.3 million this quarter from 10.5 million and the second quarter last year.
Primarily to an increasing the number of clients of progeny Rx benefit as compared to a year ago.
Possibly in 70% of our clients not the Rx benefits compared to 60% declines a year ago, and we continue to see opportunities to up sell project already within the existing base given the better member experience. When you have an integrated benefit and the hard dollar savings, we can generate for clients and take advantage of this benefit.
There's so many benefits revenue increased 1% to 46.3 million, reflecting the higher number of client and covered lives, partially offset by the declining utilization impacted by the koeppen 19 pandemic.
At June Thirtyth, we had 134 clients, representing approximately 2.2 million members, which compares to 80 clients and approximately 1.3 million members. We have the same time last year.
Turning now to profitability, our gross profit of 12 million this quarter increased 4% from the prior year period.
Gross profit increased at a slower rate than revenue because of the impact of our decision to keep the care management staff in place.
Yes, excuse me. This is the operator me personally last name.
It's you're bound by chance on mute.
Yeah.
You are now rejoining the main conference you already have our cost of services are variable in conjunction with treatment volumes. The only portion that isn't variable is our employee related cost for care management, which includes the patient advocates are Pcs.
And the provide relations and provider account management teams.
As a result, a gross margin was negatively impacted slightly in Q2 and came in at 18.5% this quarter versus 20.4% in the second quarter of last year.
Okay and across our operating expenses sales and marketing was 5.6% of revenue in the quarter consistent with the second quarter last year. Despite the impact at the reduced volumes to our revenue.
DNA was 15.7% of revenue this quarter, an increase from 10.6, presenting a year ago quarter, primarily due to the step up in public company costs incurred in the current quarter and our first full year as a public company.
Our adjusted EBITDA of 3 million this quarter was significantly better than our guidance of 1.3 million adjusted EBITDA loss because of the faster than expected recovery in treatment and the higher associated revenues as well as a high rate of margin capture on this incremental revenue.
Our adjusted EBITDA margin of 4.7% this quarter as compared to 8.1% margin in the prior year period reflects the impact of lower revenues due to the impact of lower than normal utilization from Cowen 19, as well as approximately 1.7 million an incremental expense of being a public company and our decision to keep the overall.
Workforce intact.
Our net loss this quarter was 1.8 million a decrease of 3.3 million from the 1.5 billion and net income in the prior year period.
Net loss attributable to common stockholders in the current period was one centsper share on the basis of 85.3 million weighted average shares outstanding.
There were no earnings per share attributable to common stockholders and the prior year period due to the impact of deemed dividends on preferred stock bad debt outstanding at that time.
Turning now to our balance sheet as June Thirtyth, we had 91.4 million of cash and marketable securities compared to our 91.6 million cash balance as of March 31st.
In addition, as at June Thirtyth, we had working capital of approximately Oh did 2 million with no debt.
Despite the impact Tobin had to our volumes in the quarter, we generated positive operating cash flow 2.2 million, what's compared to an operating cash flow a 4.2 million in the prior year period.
The first half the year operating cash flow, a 14.3 million or improved versus a 1.9 billion cash used in the first half 2019th.
This is primarily due to efficiencies in our carrier integration processes as well as some favorable timing items that carried over from the prior year. So the first quarter as we discussed on the Q1 call.
With our substantial cash and securities balance positive cash flow and untapped $15 million credit facility. We continue that full confidence in our ability to manage through any temporary disruption to our business from the over 19 Panda.
As we begin the third quarter men member activity in July has been consistent at approximately 90% of our typical volumes even as covert cases, it's continuing to rise to the highest levels since the pad pandemic began in certain states.
This is the case, even though specific regions of the country Workovers rate had been recently rise.
Believed this demonstrates that so long as members have access to care Mena clinics are open providing their full range of services and people aren't affected by local stay at home orders limiting their day to day movement. Then the significant majority of members who want treatment will pursue care.
And why did the consistent level of utilization we have seen from the end of Q2 through that turns you guys have appointments for the third quarter, we're issuing expectations for both the third and fourth quarter third quarter I'm, sorry in full year guidance ranges, we're issuing today I assume a number of factors, including that member activity stays consists.
Thats approximately 90% of expected utilization, we're experiencing today and that our member base remains intact.
The ranges on the wall and also reflect the potential negative impacts the utilization certainly evs areas of the country that may be more severely affected by cobot 19.
On that basis, we're projecting third quarter revenue between 80 to 95 million reflecting growth of between 44 in 55%. We also expect adjusted EBITDA between 7.2 to 8.8 million and net income between 3.6 to 5.3 million.
For the full year, we're projecting revenue between 323, and 340 million reflecting growth of between 41, 48%.
We expect full year adjusted EBITDA between 24 to 28 million and net income of between 8.9 to 13.1 night [noise].
Let's look at 2021, we believe our growth will be driven by a combination of factors, including one the strength of our installed base, which David addressed earlier [noise].
You are right our high rate of client retention.
We haven't had any accounts raise any concerns about the team with the benefit next year.
Three or opportunities to up sell such as increasing our penetration rate of progeny Rx and for our ability continue to attract new clients. Despite the distractions that many companies are currently working through because of this pandemic.
Our preliminary expectations for 2021 or for a minimum of 525 million in revenue, reflecting an accelerating growth rate of 50% fund the midpoint of our full year 2020 got.
And as David mentioned, we expect to enter the 2021 selling season with a very robust pipeline, providing us with the sustained runway for continued and significant growth well into the future.
With that we'd like to open up the call for your questions. Operator, please provide instructions.
Thank you we will now begin my question answer session. You asked a question you May Press Star then one on your Touchtone phone.
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At this time, well pause momentarily to assemble our roster.
My first question will come from in Samuel with JP Morgan. Please go ahead.
Hi, guys congrats on a nice quarter.
Oh, that's any exactly.
I think about the 58% growth in 2021, what kind of utilization are you assuming you never used to me that that gets back to normal or what kind of cadence should we be thinking about.
We are right now we're assuming the same cadence that we're seeing today in that we've been seeing for the last let's call. It a month and a half two months so.
Because there's no ability to understand what's going to happen with coven, 19, and whether or not there will be it a vaccine and when and then when when you know when that baskin it'll be widespread et cetera, we think it's prudent to continue to assume that 90%.
Yeah.
That's really helpful. And then I guess you know for those cycles that were delayed earlier in this year and you know you're still going about a 90% rate do you expect that pent up demand cat ever return or are you thinking about those justice as last cycles.
Some portion of those are lost cycles. Unfortunately, those are coming back already.
A portion of those we'll never know because as we mentioned in the past not everybody, who paused called us and told US They were pausing. They just never scheduled an appointment in the first place. So we only have visibility into a portion of those that schedule than cancelled and then what what they're doing and so I think it's a combination of of things. So it's hard to say.
To pinpoint exactly when and what portion will return well, yes. The only thing I'd add any is that a lot of factors go into the decision, making as to when you're ready to have a child, it's not simply to covert situation. It's the economic situation you know what your job security is et cetera are you living in the place it used to.
Dividend. So it's really hard to know what you know number one why people paused and it's also hard to know number two why and when they will come back precisely because all of those factors kind of have to triangulate to make it the right time for someone to pursue having a child.
That's really helpful. Thanks, guys.
Our next question comes from Stephen Todd I'll, let it be B. Riley. Please like please go ahead.
Great. Thanks for the question really helpful update guys. Thank you for that I guess I'm just following up on his question I'm thinking about the guidance for next year can you give us a sense for what that assumes for new member add that how you're thinking about that new clients first average client size just some context there would be helpful.
It as David mentioned, it's early in the selling season to sort of start framing.
No one of the variables that contribute to next year's revenue, which is new client adds size of clients et cetera versus all the variables that went into coming up with the you know the 525.
Experts minimum expectation that we have for for next year I think it just early to start putting out numbers like that we're certainly going to be prepared to do that when we finish this quarter and the selling season and report Q3, but I think it's premature to star framing that yeah look I think when the 525 next year looks at a bunch of factors, including as we.
As we mentioned with Andy's question before an assumed utilization rate for existing members. It also looks at what we've sold to date, what's happening from unemployment perspective, with our customers and also look at the at the remaining pipeline and make and makes a reasonable assumptions about how much of that remaining pipeline, we expect to bring onboard and also the.
Total upsells. So it's triangulating a lot of factors to get to that number. So you have to take all of them into account.
Yeah, that's there and I appreciate that it's early and won't will sit tight for that I guess, maybe a higher level question, though that sort of similar point.
Maybe if you give us a plane or for what what kind of key drivers of upside could be right, where the big swing factors as either I think utilization at 90% as one that I'd spike out but is there anything else you'd call out in that regard, where you could you could end up doing better or worse anything that could appreciate the swing well look I think you know as as we mentioned in the room.
Marks we have a robust pipeline of accounts that are just distracted right now with coated.
If the covert situation.
As always itself in a bit in a quicker you know more you know satisfactory way to most people.
We believe that many of those accounts could potentially.
You know pick up the mid year implementations next year, we're not you know that that's a potential potential of draw you know upside to to what we're talking about but again.
Given the situation now very difficult to predict what's going to happen three or four months from now.
Great that's helpful and maybe one more for me and I'll yield just.
You guys had commented on the conversations you're having with existing clients to your cobot in pre IPO I know at least I was concerned about the some degree about the potential for called corporates, the dial back fertility benefits or even pulled them altogether I know in April you said, you hadn't seen any activity like that beat it sounds like that's still the case is that right and is there any.
Okay. Thank you can give us around those conversations and what you guys. Maybe learned here as the you know head into what month, three or more than five actually have a recession there.
Yeah. So you have a correct relative to we haven't heard of any concern with our existing client base and we have.
You know a nice size account management team to talk to all of them.
Regularly and so there hasn't been concern expressed to to us from our base. So that's a very positive.
Update the second piece of that is there has been positive conversations contemplated in sort of you know amongst the factors that went into the 525 to has the positive conversations around upsell opportunities, which is good and so it's another strong sign that not only are they not considering cutting where where it makes sense for them.
Or they are considering sort of expanding and so that's positive.
So overall the base.
You know, we talk about sort of exiting year with the base intact.
You know, it's really in line with with all of those conversations and so far not hearing any trepidation from our base declines around.
You know the benefit in offering the benefit and in any way considering you know stopping the benefit because of some concern around cost cutting now as David mentioned, we were fortunate we have based clients that overall, because you know views the indicator of the employee base itself and the fact that they haven't announced and some of them having you even in that.
Hiring they haven't announced any meaningful.
Reductions and workforce or furloughs I think it says a lot about sort of the uniqueness of the client base there hasn't been impact you know as as we talked about from kind of the very beginning when we took the company public you know fertility benefits or or or a situation, where the employer is a green to provide coverage for health condition.
Once they provide that it's a very sticky benefit they tend not to dial that back. This isn't you know some kind of digital tool that's easy to get rid of it becomes kind of underpass fundamental part of their medical coverage and as we as we suspect that even in a refer economic environment companies are not dialing back on the level of medical coverage.
Great there. Thank you guys.
Our next question comes from their James Paper Sandler. Please go ahead.
Thank you.
Important to distinguish in your new sales conversations.
Yes, I quite telling you it not now because the kind of it it's not a budget related where capacity of HR professionals were prioritizing returned to work related comment yes, no. It's not those conversations have purely been a distraction factor that they are managing through issues and.
Situations with their workforce, they've never had to deal with before so it starts with having a remote workforce managing who is coming back where all the issues of managing remote workforce. I mean, you see announcements everyday from companies about what they're doing what their workforce. So it is truly been doesn't distraction factor. It has not been a bunch of factor and that's why they are saying.
Hi, I'm once we get passed this in figuring out what our long term kind of plan is with respect to where employees work. They want to have a conversation with us because again remember the companies were speaking to.
Our our are relatively well position given the impacts of coded so so for them. It has not been a budget issue.
Great and Hudson needle moved on the pipeline at all as far as she third.
That customers being companies that have already had fertility insurance in the past tracing that mix change at all.
Or early into the selling season, Sarah So there's not the number of sales wins is you know is still small relative to where we end up the year. So I actually haven't even having looked at it with respect and sales wins, we have to date, but you know we still are going after both both accounts that have had coverage before and those that have.
And are having success in both in both of those areas. Yes. The focus if you recall, it's more the industries that make no sense relative to lease the impact from Tobey.
As sort of the largest overlay yeah.
Okay and last question then I'll yield can you talk about the shift to virtual sales can we run rate the step down in sales and marketing expense for the rest of the pandemic and has a this shift in not that had any impact on your closing rate by selling patchouli.
Well the the level of cost relative to being you know its cost savings relative to being virtual versus traveling is nominal versus the the cost of the staff or in terms of client acquisition.
So it's not a significant savings it incorporated in the guidance that we have but as you know I wouldn't call. It significant the bigger dollars I really around the people and the relationships that we have externally around client acquisition more so than a.
T any kind of kinda costs.
On the second part of your question you know we are every year, we get better managing the pipeline understanding the quality of the pipeline and and kind of actively actively managing the pipeline and making sure that were working accounts that are real prospects. So we continue to do that obviously close rates will be determined at the end of the year, but again, we you know as as I said in it.
Prepared remarks.
We are we're happy with the quality of pipeline we have.
Thank you.
Our next question comes from Glenn.
Since the end Hello with Guggenheim. Please go ahead.
Hi, Thanks for taking my question.
Just wanted to follow a David on some of the commentary around June and July.
Sam or maybe what you seen geographically and I'm I'm kind of curious if.
Look at the Southern States you look at some of the hot spots like the West Coast.
The issue really elastic to the level of concern.
Well, what do you see.
The region by region basis, well, so what we're seeing is that the most important thing for people getting back into care is that the clinics are open for the full range of services and prepare to treat patients.
So that is the most important thing and we haven't seen any correlation between the the state you see on the news as being kind of hot spots and having high levels of care a high levels of covidien growing levels of coated with utilization. So once SRM change the guidelines and the clinics adjusted their practice behaviors to.
Take into account new safety protocols patient went back into care and that's been pretty consistent regardless of geography, Oh, yes. So I'll just add to that so literally down to the state of the state that you've heard about the most diluted Tuesdays for us that there's a tiny little impact that they're not importantly was relative to size, which is.
Florida, and Georgia, but the other ones you've been here to that like Texas, California, which are largest states were asked a more important we have not seen issue. When we look at activity all sorts of activity from the you know beginning of June through today, we have not seen impact even though the those dates.
There are hot spots in some of them getting worse some of them a bit higher and remain flat et cetera. So on a region by region state by state basis, especially where it's important to US. We don't we don't see a concern relative to the to the hot spots that are out there in the country and it just confirms what we what we say consistently is that members.
Understand the fertility treatments have a level of time sensitivity to them and that you can't delay care for too long, but without before you start compromising youre I'm likelihood of success soap members understand that and if they if once they see doctors are open in can safely treat them then we're going into care.
Maybe you could I just asked one more quick follow up question on the sowing season, I'm kind of curious in your conversation if you're seeing any changes in the competitive landscape in banana them kind of curious if you've seen any of the managed care companies, maybe pricing their benefit a little bit differently than what they had the path any sort of changes in that.
Regarding the worth calling out.
Oh no. We're not in fact, you know as I mentioned the main difference is the distraction and coated and companies telling us that they're not really changing making any benefits changes this year because of their you know all hands on Dec dealing with cobot issues remote workforce issues. So that we're not hearing that were we're not being awarded this.
That's because it's going to a competitor so I'd say competitive environment feels largely the same.
Okay. Thank you.
Our next question comes from Michael Cherny with Bank of America. Please go ahead.
Good afternoon, thanks for all the colors so far.
I'm guessing as you work with your cost of organization to Retrench. During Cobra you learned a lot of things about both the services you're running your customers as well as how you provide them you kind of a separate question from the remote sales process, but David you've talked in the past about potential to bolt on additional services and capabilities to your business to grow.
Further enhance your offering above and beyond the strong after till the benefits you have has anything regarding the recent co bid.
Disruption open up your eyes to other potential avenues or things that might move further up the pecking order that you might want to pursue that you realize your clients need from you in this day in age.
I mean, I still think that we're looking in the areas that we looked at before you know we <unk>. The one the one the one changes that I think we as an organization have worked through our own covert distractions and now can kinda refocus on those areas, which we've been doing over the last short period of time. So so again, it's still the things.
That make the most sense for us that we've talked about in the past so that really hasn't changed really hasn't changed.
You know so.
I think we've talked about you know expanding mental health benefits I'm looking at adjacent areas and women's reproductive health some of the some of the vertical areas. We talked about these are all things that we are now you know more actively discussing and ER and thinking about.
And and tying back to the 90% utilization that you've seen in recent trends in the last couple of months I guess can you give us a little more sense of the range of what you're seeing you noted that it wasn't necessarily tied to states are having had the outbreaks, but are you starting to see some of the fertility specialists go back up to about 100% capacity and I guess how rap.
How far can they stress that.
Yes, there that it is interesting there are certain clinics that that did go above 100%. There are some that are still at 70%. So it was surprising honestly because I did comparisons of clinics in the same area. So as an example, you know in the Bay area that were put.
Any dramatic differences in what clinics, we do not doesn't mean that they were.
Necessarily that much for their overall business before us in certain areas. Some are hiring some are lower so there is variability, but its netting out to you know the 90%.
What we would normally would've expected based on early volumes you know the beginning the year, which which historically has been very instructive for us in terms of predictability.
So, but it but it's varied significantly within you know a you know areas that are the same markets and you know the variability of those clinics.
To our business you know is very different.
Again, if you'd like to ask a question. Please press Star then one.
Our next question comes from Ralph God, though.
Please go ahead.
Thanks, Thanks, Good afternoon, and saying you mentioned, the 90% assumption, which does seem reasonable if not conservative, but and have you made any assumptions around the implant backdrop softening or did you keep that consistent with current trends as well.
We we kept the concern is consistent with current trends I'm, particularly around our client or existing base as we talked about we haven't heard any any haven't heard or seen any announcements around you know either layoffs furloughs with those and are we haven't made any.
The other changes to our assumptions relative to new sales expectations around the employment backdrop.
Okay Fair enough and then just a follow up you have a clinician base that obviously hasn't seen patients and it's taken a little bit it hit on their earnings any upward pressure on their charges and maybe just to remind us how that contract with works. Thanks.
Yeah. The contracts are fits their generally two year terms, they all or two years based on when the answer the network.
And so there are fixed for the duration of the term.
Literally only one clinic in our entire network asked the question, but didn't push on the issue at all relative to you know are we considering any sort of price adjustment you know during this period and ER and other than that I only got other than getting one question from one clinic.
Nobody else even raise the issue I think everybody sort of feels like you know just a burden to bear if you will you know during this or unprecedented.
Pandemic and so nobody else ask question. So we're not feeling any pressure what related Bryce.
Okay fair enough. Thank you.
This concludes our question and that empty fashion and the conference is also now concluded thank.
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Thank you everybody everybody.