Q3 2020 Progyny Inc Earnings Call
This time all participants have been placed on a listen-only mode and we will open the floor for your questions questions and comments following the prepared remarks. You may enter the Queue at any time by pressing star one on your telephone keypad. You'll hear a brief time indicating you have successfully join the queue should you wish to exit the queue you might press star to it is now my pleasure to turn over to your host vice president of investor relations at progeny and James Hart, sir the 4th.
Thank you Catherine and good afternoon. Everyone Welcome to our third quarter conference call with me today or David schlanger CEO of progeny president and CEO and Mark Livingston CFO. We will begin with some prepared remarks before we open the call for your questions before he can add like to remind you that today's call contains forward-looking statements including statements about our financial outlook for the fourth quarter and full-year 2020 and full-year 2021 Jeep our client and member outlet for 2021 the impact of COVID-19 on our business clients member activity and Industry operations our ability to acquire new clients and retain existing clients are Mark opportunity size and expectation of long-term growth our corporate governance plans business performance industry Outlook Financial Outlook strategy future Investments plans and objectives and other non-historical statements as further described in our press release that was issued this afternoon. These forward-looking statements are subject to certain risks uncertainties and assumptions including those related to project his growth Market opportunities and general Economic and Business conditions wage.
All the statements largely on our own current expectations and projections about future events and financial trends that we believe may affect our business Financial condition and results of operations. Also, we believe these expect a reasonable. We undertake no obligation to revise any statement to reflect changes that occur after this call descriptions of these and other risks that could cause actual results to differ materially from these false statements are discussed in our periodic and current reports filed with the SEC including in the section entitled risk factors and our most recent 10-q during the call. We will also refer to non-gaap financial measures such as adjusted ebitda reconciliations with the most comparable gaap measures are also available in the press release which is available at investors. Progeny. I would now like to turn the call over to David. Thank you, Jamie and thank you everyone for joining us after we hope that each of you and your families continue to be well as we approach the end of twenty twenty a year unlike any we've seen before I'm happy to report the progeny has not just weathered the COVID-19 demek wage.
Flourished we expect to enter 20-21 with approximately 180 total clients and 2.7 million members which are increases of 36% and 29% respectively home from q1 2020 or ability to enter 2021 with 6 positive momentum is the result of two key factors or high rate of retention of our existing clients and the positive results of our summer season. We had a strong selling season which people walk you through in detail in a few moments, but let me first address the retention of our existing client boost. We have previously discussed have our client retention rate of historically been virtually one hundred percent and we are pleased to have been able to maintain this High rate for 20 21 with no clients reducing their coverage and some even choosing to expand their coverage next year either by adopting progeny RX or by adding smart Cycles or other services such as egg freezing.
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Our high client retention rate has always been a significant if somewhat under-appreciated aspect of our business our ability to sustain it this year in particular despite the ongoing uncertainties caused by the macro-economic environment truly validates the value our clients are realizing through the progeny benefit not to mention how important is benefit is to their employees. We are able to continuously reinforced that value and importance by generating and Reporting on among other things. Both our net promoter scores which are routinely in the seventies and eighties a level that is remarkable for any industry but almost unheard of in manage, as well as our industry-leading clinical outcomes, which provide our clients with significant cost savings while also dramatically reducing the p&l volatility associated with high-cost claims due to preterm birth.
Today we are pleased to report a strong third quarter quarter, which Market will take you through in a moment. We are reporting record performance across a number of Financial and operational metrics, including our highest quarterly Revenue adjusted ebitda and operating cash flow in addition to the highest number of quarterly art Cycles as well. These results demonstrate the ongoing recovery in the fertility industry wage. You have to disruptions and Care caused by the COVID-19 pandemic earlier this year.
One operating metric that I want to specifically call out is the fact that our average covered lives actually increased by approximately 100,000 members during the quarter to two point two million individuals. We have all seen the pandemic has had a significantly negative impact on a number of businesses particularly those in certain industries such as travel hospitality and brick-and-mortar retailing. Our client base is very diverse representing over 20 different Industries an hour exposure to the industries that have been most severely affected by the pandemic is actually quite limited the sequential increase in Our member account reflects that the significant majority of our clients not only continue to whether the impacts of COVID-19 Tumi without needing to meaningfully reduce their head count, but that a number of our clients including some of our largest clients have continued to expand their Workforce in 2020.
As we look to the Future given the strength of our balance sheet, you should expect that. We will continue to invest in our business and look for opportunities that leverage our assets and expertise and expand our addressable Market add New Jersey services are open up new markets in evaluating. These opportunities will be thoughtful and will apply the same discipline in data-driven analysis that we employ in all other aspects of running the business education as it relates to the future. We want to ensure that we continue to manage the business responsibly both from a corporate governance perspective as well as with respect to the depth of our senior management team. We expect to add to a board member to new members to our board of directors before the end of the year further diversifying the perspectives of the board while also enhancing our insights across Healthcare and Technology with respect to ensuring that we have a deep breath talented senior management team. We have recently enhanced the team by promoting Mark Livingston to Chief Financial Officer many of you have already had the opportunity to work with Mark in his former role as our Executive Vice birth.
A finance, but for those of you who haven't met him yet, you will quickly see why we wanted to expand his responsibilities.
Now, let me turn the call over to Mark to walk you through the quarter following Mark will then provide some insights into the twenty-twenty sales year and also discuss how well progenies positioned as we look to twenty Twenty-One and and Beyond then we'll open up the call for Q&A mark. Thank you David. I'm pleased to be taking on this new role at such an exciting time for the company and I look forward to meeting those of you on the call today either at one of our upcoming conferences or through some other event. I'm sure you'll find that my Approach and communicating with investors is very similar to Pete's David P and I will continue to work very closely with the direction of the business turning to our results this quarter. I'll begin with our utilization since that has the largest impact on the results last quarter once patients were able to return to Cairo we discussed how we saw a member activity rapidly recover even eventually stabilizing at a level that was slightly lower than we would have normally expected to see were it not for the disruption wage.
The pandemic we also discussed how we saw relatively consistent level of activity across the country even in those areas where code infection rates remained high or worsening clearly demonstrated that when clinics are open and providing their full range of services and our members are not otherwise affected by stay-at-home orders that may limit their day-to-day movements the significant majority of our members who need care will pursue it. The desire to have a child is very strong and our members understand the Urgent nature of these treatments.
During the during the third quarter our utilization picked up modestly as compared to the approximately 90% of normal levels that we saw as we exited the second quarter as a result. Our utilization for the third quarter was five 1% for all members and .44% for female utilizers, which was down only slightly from the respect of utilization rates of 5% for all members and .47% for female utilizers in the third quarter last year as of September 30th. We had a hundred and thirty-five clients which Compares with eight clients at the same time last year average members for the third quarter were two point two million, which compared to one point four million in the year-ago. And reflects a sequential increase of approximately $100,000 from Q2.
With the significant growth in Our member base relative to last year. There were 5487 art Cycles in the quarter an increase of 44% as compared to the third quarter of last year given this recovery in our volumes Revenue the quarter grew 62% to 98.9 million from 61.2 million in the third quarter last year. This is a guy is quarterly Revenue ever Medical Revenue increased 46% to 73.1 million this quarter from fifty million a year ago primarily as a result of the increase in our clients and coverage lives.
Pharmacy Revenue
Than doubled during the quarter growing to 25.8 million from 11.2 million in the third quarter last year the growth and Pharmacy Revenue was driven by the increasing covered lives as well as an increase in the number of clients who have the progeny RX benefit as compared to a year ago, approximately 70% of clients today have progeny RX which compares to about 60% in the year ago.
Turning out a profitability our gross profit of 20.8 million this quarter increased 69% from the prior year. The increase in gross profit as a percentage of Revenue discourse reflects the option of Leverage in our model. Now that utilization levels have largely recovered with the higher Revenue. We are benefiting from favorable contractual terms with our Pharmacy dispensing and Manufacturing partners and are able to continue to yield economies of scale across our Care Management functions as a result gross margin of 21.1% This quarter increased a hundred basis points from the 20.1% reported in the prior-year. Typically. Our third quarter margins are higher than what we see in the fourth quarter given that in Q4 we generally on board the resources that are necessary to successfully manage the significant Step Up In Our member base when our newest clients go live with their programs on January 1st.
We expect a sequential drop in Q4. Margin. This year will be modest giving the timing of new hires that were brought on on board during Q3.
Looking across our operating expenses sales and marketing. This quarter was 3.4% of Revenue a 180 basis point improvement from the 5.2% We reported in the third quarter last year.
Given are virtually one hundred percent client retention and the persistency in utilization that we see within each client year-to-year our model provides for what is effectively a recurring Revenue stream as a result. We've been we benefit from significant operating leverage in our sales and marketing functions as the majority of our variable sales compensation for new client acquisition is incurred in the first year off client launches their benefits.
GNA was 12.3% of Revenue this quarter as compared to 9.9% of Revenue reported in the year-ago. And includes a one-time step up of two point 1 million in incremental expenses inclusive of the related stock compensation expenses in connection with our first full year of being a public company as well as a one point four million increase in legal costs associated with a vendor arbitration given the operating efficiencies realized across the business adjusted ebitda for the quarter nearly doubled from the prior-year to 10.6 million and our adjusted ebitda margin of 10.7% reflects an increase of 170 basis points over the prior year. As with Revenue adjusted ebitda. This quarter exceeded the upper end of our guidance and was due primarily to our high rate of margin capture on the higher revenues adjusted ebitda. Margin on incremental Revenue was 18.5% after giving effect wage.
3.9 million 1 * 2
Up up an incremental expenses related to our first full year as a public company. We believe this margin on incremental revenue is useful as a forward indicator for the business is capable of moving off that didn't come with five point four million in the quarter reflecting a significant improvement from the eight point two million loss reported in the prior year. The higher net income is due to the absence in the office. Of Warrant valuation adjustment expense related to convertible preferred stock warrants that were converted in connection with the IPO as well as improved operating efficiencies that I previously discussed.
Net income attributable to Common stockholders in the. Was five cents per diluted share on the basis of $99 million weighted average shares outstanding this compared to a loss of a dollar ten per basic and diluted share in the prior year.
Turning now to our balance sheet and cash flow as of September 30th. We had a hundred and five million of cash and marketable marketable securities and increase of 13.6 million from our cash balance as of June 13th. In addition. As of September 30th are working capital was a hundred and ten point four million an increase of 8.4 million from June 30th, and we have no debt.
The increase in our cash position reflects positive quarterly operating cash flow of 15.3 million, which is the most we've ever generated in a quarter and compares to 5.9 million in the prior year. With the substantial amount of cash and securities on hand as well. As our as well as our positive cash flow. We continue to have full confidence in our ability to manage through a temporary disruption disruptions that could result from the ongoing COVID-19 pandemic.
Turning now to our expectations for the fourth quarter and full-year twenty-twenty. The guidance assumes that member activities stays generally consistent with how we exited the third quarter on that basis. We are projecting fourth-quarter revenue of between 95.4 million to 100.4 million reflecting growth of between 47 and 54% for adjusted ebitda. We expect between 9 million to 10.3 million along with net income of 5.1 million to 6.6 million.
Looking at the full year twenty-twenty our Revenue guidance increases then to a range of 340 million to $345 million representing growth of between 48 and 50% off for adjusted ebitda. We expect between 29.7 to 31 million and that full year net income will be between 12.7 million to 14.2 million.
Let me now turn the call over to Pete. Thanks. Mark is David mentioned the opportunities available to progeny are significant and we are well-positioned to continue project these rapid growth. Shall Begin by addressing some of the specific factors driving growth in 2021. And Beyond or selling season for new clients is now largely complete and we are pleased to have received commitments from 45 new client representing a possibly four hundred thousand new covered lives. These newest clients selected robust coverage levels for their employees with the typical client opting to provide two or three smart cycles. And we continue to see an uptick in the rate of adoption for progeny RX with 83% of our newest clients taking the pharmacy benefit which compares to 75% of the new clients last year. In addition. We also saw a slightly higher percentage new clients were adding facility coverage for the first time. These results are consistent with what we expect and when we discuss the status for selling season with you last quarter as a reminder, we also told you last quarter that we generated a very healthy.
Sales activity, but that meaningful number.
His prospects in our pipeline ultimately determined this wasn't the right time for them to make any benefit changes given that the code response plans needs to be the highest priority. The majority of these prospects wage in our pipeline is not now deferred accounts historically deferred accounts have been an important source of new business for us in subsequent years. And we expect that to be the case again in 2021 selling season. In fact, the number of not now accounts from past selling Seasons that we've done through one has been increasing every year and the 2027 season with no exceptions this year the former not announce that we converted into wins represented. The largest portion that has ever been relative to our overall new client wins as we've seen in past selling Seasons our newest clients continue to represent a diverse set of over 20 different Industries, including Financial Services Business Services consumer products Pharmaceuticals technology and transportation this demonstrates that facility is a universal concern for all employers and not specific to certain Ninja
We're still pursuing a handful of additional opportunities for 20 21 launches and we will report our final results of the sales season to you next quarter. The majority of our new clients will go live with benefits on January 1st, 2021, and we remain comfortable with our expectation for a minimum of $525 million in Revenue next year, which at the midpoint of our 2020 guidance were flexing accelerating growth rate is 53%
Typically the utilization that we see in the initial. Following a new clients launch provides us with significant insight as to what that client utilization could look like for the full year as a result. We expect to be in a position to provide you with the revenue range for 20 21 as well as profitability guidance, when we report our year-end results. We also expect to enter the 2021 selling season with a very robust pipeline well-developed prospects for a January twenty to start date.
Looking at our broader Market opportunities. We continue to believe that all the macro forces that have been driving our success remain intact while some recent research has shown that COVID-19 cause a slight dip in overall. Birth rates are utilization shows that facility patients and approximately members in particular remain focused on realizing their dreams of Parenthood.
Prior to the pandemic a clear shift was already underway. We're more and more people each year were waiting until 2:30 to have children. If the pandemic causes even more people to consider delaying their family building time in their lives that increases the long-term relevance of the facility industry given the biological reality that fertility declines with age and people in their thirties are more likely to need assistance to get pregnant.
We also believe that employers increasingly recognize their need to provide fertility coverage in order to remain relevant to their targeted Workforce because employees rank family building benefits highest on the edge of what's important to them. In fact research released earlier this year. We build that significantly significantly more companies are looking to have fertility to their benefit programs over the next two to five years, which will expand the opportunities even for David said earlier. We expect to have a hundred eighty clients in 20 21 reflecting approximately 2.7 million covered lives. This indicates. We have only penetration a very low single-digit percentage of the approximately 8000 employers or sixty nine million covered lives in our target market affording a significant room for ongoing organic growth. Well into the foreseeable future months.
Before we open up the call.
I wanted to close by noting that has been a little more than a year since our IPO f
and it's incredible to see how much our business has grown during that time both in size as well as in the depth and quality of our team all lost successfully managing through unprecedented conditions this past year. We've strengthened our relationship with our clients by continuing to provide better ways to manage their costs as well as greater visibility as to what their spend is accomplishing by way of our Superior outcomes wage. I remember satisfaction and improved employee retention. We did this while also acting as a vital resource to their employees during a very uncertain time which helps explain the ongoing Highway of client retention.
We've also include improved upon the already industry-leading levels of services. We provide to our members are are increased to seventy eight and three from 72 to start off a fertility journey is uniquely stressful enough for many patients. And this past year. We have supported our members by helping them man is the added stress and uncertainty caused by the pandemic while navigating their facility Jersey. We've also deepened our relationships with the clinics in our Network by helping them understand the best practices that are in place across the industry as well as the ways in which they can improve their patient experience to provide better care home. And finally, it's even more encouraging to see how over this past year. Our Market opportunities have only continued to expand which we believe provides Prosecuting with the runway for sustainable long-term growth.
With that we like to open up the call for your questions operator. Can you please provide instructions?
Certainly, ladies and gentlemen, the floor is now open for questions. If you would like to ask a question at this time, please press star one on your telephone keypad. You will hear a brief tone to indicate you have successfully entered the issue. Should you wish to exit the queue you may press star to if listing on speakerphone we ask that you pick up your handset to provide Optimum sound quality, please hold a moment for questions.
Your first question is coming from Steven Tennille from SUV. Lyric your line is live.
Afternoon guys, thanks for the question. I guess I just wanted to start off by just making sure I get the Dynamics right? So covered lives. I believe you're you're referring to members. And and if so Thursday the 400,000 view across 45 new clients implies about eight point nine $49,000 per client obviously below the overall average of three Q end but we've been using something a bit higher. So I guess the first question I have is just any discernible Dynamic that drove the mix shift toward smaller employers and how would you tell us to think about the right number to be using kind of on a go-forward basis?
Yeah, I think I think that the the commentary on the average lives is simply that is what we saw on mentioned in his remarks is that there were you know, a meaningful number of perspective club that told us not now a higher percentage of those not now is were from the the, you know, the largest employers which the most which had the most complex kind of employee Footprints. If you dwell with locations across the country and given kind of this size and complexity of their Workforce, they really at a higher percentage determined to make no changes to their benefits this year's and deal with employee related issues, you know companies that were somewhat smaller that again had less complex work forces were actually able to make decisions and I think that was that's the primary factor driving the lounge average number of lives per customer and we talked about the pipeline we go into next year that pipeline includes, you know, many of those extremely large employers that wage.
You know, we would typically see in a year. Um, but you know again, um
You know, it's it was an unusual Year from a selling perspective. But you know, those factors didn't apply to all to all employers, you know, just recently we we landed at 40,000 light group. So, you know, I I would say in you know in general it was more difficult for larger employers to make benefits decisions and that was driving it but I wouldn't say it was the universal case. I know if you have any doubts that p no no in terms of going forward, you know, what what we've been able to achieve the past is what I would continue to assume I would review this sales years and anomaly for the reason that we already said
Got it. I don't make sense to me. Yeah, and I mean 45-minute new client is obviously a pretty decent outcome considering. Okay. So I guess then the the more important question is certain some wage would just be about twenty-two now, you know, you sort of cold it a very robust pipeline. We've talked a lot about not now as in the last few months. I know it's obviously very early, but are are you guys off of setting up for a meaningful way better selling season in 22? Like how are you thinking about that? And where would you want our expectations to be said at this stage? That's how we're thinking. Yeah, the shortness short answer is yes, Um, uh, and and the hope is that the the pandemic at least related to treatments and hopefully even vaccines will be you know, much more under control, you know by this spring and what will be a factor in the US but not as much of a factor as it is now in terms of decision-making and and therefore will, you know won't impact the selling season like it did this year off.
The only other comment I tell you is that again as we said in the preparer in the prepared remarks, we're still we're still pursuing a number of opportunities. We're also pursuing a number of opportunities or ready for 2012-13 to launches because some of those not now's that actually we we heard earlier in the year have already come back and actually want to engage in a dialogue. So, you know, once they got past the kind of the month, you know, once these companies get past the kind of the confusion and all the you know, um things that they had to do to put in place to to actually get through this and deal with the remote Workforce. They can get back to kind of normal business which is optimizing their benefit plans. So we're already starting to see that so if pizza right when you ask the question, we do expect a meaningfully better sales year next year.
And I'm sorry meaningfully better versus this year for sure. But but sort of versus prior expectations or normal expectations kind of get that at least back to normal. You know, I love that considering, you know the impact of this year.
Okay, great. That's really helpful. Thank you guys, which is the car?
Your next question is coming from Ralph Giacobbe from City Line is 5.
Thanks, good afternoon. You know, I know the 20 21 of that at least five twenty-five is just a baseline but you know, you post it upside and raise the guidance 4022 the implied growth actually comes down a bit for 20 21. Just trying to get a sense of sort of conservatism or if you can help with just the underlying assumptions that you have at this point and and see if they've changed it all thanks. Yeah, I wouldn't be a wait at all as conservatives remember. It's just a it's a minimum and we put it out there in Q2 because we were getting a lot of questions around what kind of progress we were making the selling suggestion what the impact of code was at cetera, and we wanted to give some clarity of that. It wasn't as a throwaway Year from a sales perspective. And since we're not in a position to put out a range of guidance or full guidance for the Thursday. We said that that you know utilization levels early in the year are very instructive. We didn't think it it was meaningfully beneficial to you know change that number do anything with that number.
Without being able to put a a full range out. So so we will be in a position to do that come here and but but I wouldn't view it as anything but you know a floor that we put out there. You too and a floor that we're still comfortable with, uh, you know, in terms of a minimum that that means nothing.
You know based on where we're going to what we think we can get to.
Okay, all right fair enough make sense. And then you know wanted to talk about margin expansion impressive certainly in the quarter and you talked about some natural leverage on the better top-line you did. Well the manage cost last quarter as well and we're certainly an uncertain time. So I guess the question is is some of the benefit tighter cost management that may not be sustainable. And you know, I know your implied sort of four Q comes down and you mentioned I think onboarding cost, you know, just any more sort of clarity around sort of the margin profile and maybe expectation of of continuation. Thanks. Yeah, I think thanks for that. The again typically we see it dropped more. We we brought on people that we might have in previous years, you know bring on, you know throughout the fourth quarter. So so we're sort of already at the place that we're going to be. I think what's really driving the Improvement this quarter is around our relationship.
Just with our Pharmacy and Manufacturing Partners. The higher volumes that were driving in in prescription volumes is what's triggering, you know, improved rates throughout our contracts. So as not continue to grow whether it's next quarter or throughout next year will continue to enjoy those those lower pricing on on costs. So so it is a sustainable margin expansion pack and you know, and we'll go from there right the other the other piece just to add to it marks that is related to the you know, the the positive result versus what we put out from the guidance perspective. They're worth of dollars that we had in case we needed any money for physical open enrollment events. Should anybody choose to do that? None of those occurred? Everybody stayed completely virtual and and is planning to do the same thing for Q4. So where we would also have some spending to 3 in advance of Q4 open enrollments that didn't occur either so it wasn't necessarily A cost-containment. It was more, you know, a lengthy.
Events that we plan just in case it didn't happen.
Okay, that's helpful. Thank you.
Your next question is coming from James from Piper Sandler. Your line is live.
Thank you. I'm trying to bridge the guidance for 21 on lives to revenue guidance. Can you give us some insight on Revenue per cycle utilization assumptions baked in? Are you assuming any kind of growth on either of those?
Right now both are relatively flat and sort of the simple way to think about the the five twenty-five minimum that we put out there wage is if you if you look at sort of the you know, if you looked at run-rate like take two for Runway as a simple example take you for a run rate and your lies that grow it based on the fact based on the lives growth that alone will get you there. If you sort of add to it the fact that higher higher up take in Pharmacy that gives you a little upside down off of that. If you add to that up cells that we had that gives you a little upside to that. So so that's sort of a simple way to do it, but the overall assumptions aren't any change in Revenue per cycle. And right now we're assuming you know and it and it worked out not that that not that you know, we just do a simple assumption. We do a company by company in terms of who we sell but the utilization we're expecting from the dead.
client is about what we're experiencing in our business now, give or take take care of conservatism big didn't and
I'm just wanted to understand your earlier comments, you know, you talked about four this year a good amount of your new sales came from people that were previously saying not now off to a little bit more detail. So generally how much of your forward years pipeline comes from that not now group or how much visibility do you have?
Is it a couple things right and I'll go back to you all the time. I don't know that I would call conservatism again. We have them put out a full range. We're simply just talking about the floor that we put out from the minimum Revenue perspective when we put out the full range, you know year-round we can sort of go through the, you know more details than regarding. Do not now. I'm sorry go ahead and not now phone number of accounts that have come from not now is this year is the highest it's been as a percentage of total sales and grew versus last year last year's same thing was higher than the year before and and the year before that was the same thing. And so the number of accounts now that came from from wage. No not now is this year was was about a quarter of them right last year was something in the 12 14% range right just to give you an idea. I forget the exact number, but but sort of yule log.
Seems as a percent of overall the 57. I think it was clients that we had a last year versus versus this year was almost 25% So so the point is that we that it's it's growing it's growing more maybe like I said, it's growing more and the visibility we have is is you know, we keep in contact with them as you might imagine and one in particular David mentioned the 40,000 life account. They had started we started engaging with them in 2017. And so sometimes not now is what we take that long and again not for any reason that it took that long for them to realize and appreciate that. The benefit is an important fact that their members would find you know, and there might be a a need it's more so that again they always have other priorities that have to deal with and this is the year they chose to they chose to take on the benefit package. So the visibility is never perfect. There isn't enough history around when they convert different percentages of them convert in the next year versus two years later in each month.
There's not enough volume for us to save that predictable. But you know, all we could say is is you know, we continue to engage with them and they continue to come back and more and more them come back each year in this in this year's a new category of not males. And these were COVID-19 now is what you've never had those before so obviously no no history to know how they'll they'll convert, but this was a new category for this year.
Thank you.
Your next question is coming from Michael Cherney.
Your line is live. Great. Thanks so much. One more wrap up on on this client number and then pops another question. The four hundred thousand lives. Are we supposed to soon least for modeling purposes? That's just from the new members and then there's another assumption that you'll make in terms of potential new ads within your existing book or is the 400 the starting point that you have or from the Baseline for the end of this year. It's your your it is four hundred thousand from the new clients that we added this year. I mean if you just sort of do the math in terms of what we had this quarter on average and add the $400, but we're sending when you start to hear with 2.7. There's a hundred already in their relative to you know, when we exit the year versus using an average during the during the month order that's going to be there and the the base of you know, the lives as they did this year in our in our book of business the base book if you will will grow what about a little all year long. So there'll be some growth through Thursday.
Here beyond that two points.
And some of the upselling we do also includes adding new populations within an employer. So it's not a new sale, but there may be additional lives added to the coverage.
Tank that's that's helpful color to build off of the initial number. And then I guess just one other question, you know, you've talked about this in the past, but especially the cash balance continues to build wage, especially as we went through the selling season and continue to pitch the where's and especially continue to pitch and you just talk about successfully some of the upsell you had a particular on Pharmacy. How does that factor into all the leg and developments the next couple of years in terms of other opportunities, you have to continue to drive that up cell potential and and what that could mean terms of, you know, it continued revisiting home evaluation, whatever you want to call it a potential bolt on m&a.
Yeah, I mean I think as we probably talked about on the last call, you know, now that we've kind of, you know, gotten the business back on, you know, it's it's it's more normal trajectory after you know kind of the Cove it interruptions wage. And we're we're actually spending some time together as a senior management team. Uh, you know, we're we're we've definitely, you know, redoubled our focus on some of those more strategic opportunities that down correctly point out. We now have the capital resources to go pursue. So, you know those discussions are are are are are certainly underway and the analysis is certainly underway. And when we have something definitive to talk about with the street, we will do that. But you know right now I think what you all need to know is that we are certainly working on opportunities to expand our footprint if you will and that could be additional services or or additional markets.
Great. Thank you.
Your next question is coming from Glen santangelo from Guggenheim Securities. Oh, yeah. Thanks for taking my question back on for you guys. I mean it seems like you had a pretty good quarter in in in three q and if you look at sort of the accelerating Kobe case growth is that having any impact on the way you're thinking about, you know, I was kind of curious if you could maybe comment on October and what you're seeing in terms of exit rates in October if there's anything to assess because the way towards you modeled is you have the the revenue agent model down sequentially, and that's a little surprising. Thanks.
Yeah, so the guidance range that we've provided does contemplate what we've seen through the end of Q3, but also what we've seen to date now through October and if we have a good visibility throughout the rest of this month of November and actually into December, you know, one of the things that we take into consideration is that you know, the latter part of December, you know, usually there's a bit of a trail off now what we don't know is you know is part of the you know, the ongoing strength that we're seeing related to people who are accelerating treatments wage because they wanted to get started and get under way before things put rapid decline from a pandemic standpoint. We we don't know that so, you know, the the lower end of our guidance range contemplates that if that is the case or if things continue to degrade and that there are some, you know, perhaps Regional stay-at-home workers, you know, we we met
closer to the lower end of the range
But based on what we're seeing today and and through October and early November, you know, we're sort of right at that, you know, right within the range and perhaps shading towards the higher what we've provided. The one thing is, we're not we're not expecting an industry-wide shut down. Like we saw in March, um, the fertility industry is practicing with, you know, safety protocols now and off despite the fact that the viruses had kind of the highest levels. It's been since the pandemic is started in many geographies. The local Health officials are not we've not seen any any movement to limit access to facility treatments like they were doing in March and that was largely driven by Hospital capacity availability of cetera. So so I'm not one of the concerns we don't currently have is that they will be that kind of industry-wide shut down, but given how severe of the outbreak is there could be some some some level.
Asian activity that patients are are more reticent to get into treatment and as Mark said that that's what the lower end of the range contemplates.
Okay, maybe they just has one follow-up on the phone here prepared remarks you you suggested that there was about an 85% uptake rate on progeny RX with a $45 added versus home in the selling season last year. Could you give us the number as to what percentage of your total book right now is is using progeny RX and help us think about the economic Revenue per client how much it grows when they when they add that service? Yep, the car, you know car level clients that have prize me Rx is 70% off was 83% by the way, uh in the selling season vs. 75 last year and generally speaking and and it varies slightly based on, you know education of of members in in certain parts of the country because rates differ, but in general it's about forty-five to fifty percent of the Medical Revenue when you add RX
Okay, and and I'm sorry, maybe just one last one in that assumption around the $525 that everyone's focusing on do you have any sort of contemplating that number or is that just based off business you have now, there's a few less than there were last year. So I think there's three. I believe out of the 45 and they're not mid-year well with a year and two of them are are sort of you know, you know during the first quarter, I believe and last year there was a higher proportion starting in q1 and Q2 of the you know off of the clients that we sold last year.
Okay. Thank you very much.
Your next question is coming from and Samuel from JP Morgan. Your line is live. Hey guys congrats on the nice quarter. Thank you. I was hoping if you provide a little off-color you spoke to existing clients adding more benefits. You know, how broad-based is that? What are they adding? And then you know or some of the new clients that you're seeing coming on providing more generous benefits versus wage. You know, what you've seen in in the clients the I'm sorry second question first generally speaking clients, you know, the biggest the biggest dollars on the medical side clients generally doing a typical 223 cycle benefit and then they typically also do egg freezing that's been relatively consistent. I would say not materially different the RX just mentioned already in slightly higher than it was last year and then in terms of upsells clients are adding, you know, those things though either a disciple they'll add birth.
RX Bill add, you know, they may add a couple of lives as David mentioned where they maybe had a you know a small group. That wasn't
Part of the benefit and the added it, you know those kind of things.
Thank you. Yeah, I think I think any of the more interesting thing is even in a tough year where there's you know, a lot of companies are experiencing experiencing p&l pressure across our book of business. We didn't have one customer that I'm too skinny down their benefit.
Great, just the opposite they were you know, those those wanted to make a change. We're making a change and it making the benefit more robust.
There are no further questions from the lines at this time.
Thanks operator. That's a nice weekend. We can close out the call for joining us today. We'll talk to you by.
Thank you. Ladies and gentlemen. This does conclude progenies Incorporated third-quarter earnings conference call. Thank you for your participation. You may notice connect your phone lines and have a wonderful day.