Jailendra Singh: Got it. Thank you.
Operator: Thank you. Your next question is coming from Sarah James from Cantor Fitzgerald. Sarah, your line is live. You may go ahead.
Sarah James: Thank you. It sounded like you guys were seeing some difference between red and blue states, so hoping you can clarify. Were you guys also seeing weakness in March in the blue states after the Alabama decision or was it more isolated to the red states? And then how do you get confidence that it was political and psychological as opposed to the number of, like, weak days in the quarter? Because a lot of the providers had a weak March, given the way that Easter and spring break fell? So what gives you confidence that it’s more on the political psychological side versus just the calendar?
Pete Anevski: Well, in our modeling, we take into account the number of days of treatment possibilities in each period. So we’re always adjusting for that. So our comments reflect that sort of universally. In terms of the red/purple/blue states, we did see some modest slowing of utilization even in some blue states or ones you would consider traditionally blue states. It just wasn’t nearly as pronounced as you would – as we saw from states that are red. And that’s just sort of the sum of it. And then as far as the – and again, we’ve mentioned this a few times, we are seeing recovery of that. So again, we don’t – we can’t know for sure what it is, but again, putting those different circumstances together and knowing that those issues, I’m not sure you could say that they’re necessarily fully resolved in terms of the political component of it.
But people have now had an opportunity obviously, legislatively, there’s been some resolution, particularly in Alabama, but people have also had an opportunity to sort of assess what it means for them personally and then to make their decisions, which is why we believe we’re seeing April begin to pick back up again.
Sarah James: Thank you. And also wondering, could you give us a little color on the receivable build in the quarter?
Pete Anevski: So we do typically see a receivable build in Q1. And as we onboard new clients, there’s a little bit longer cycle before cash is ultimately received from the new clients. And in some cases existing clients, if they happen to change their plan is sort of a similar dynamic there. The impact of change was also a factor. There was much slower processing of claims, particularly the latter part of the quarter, as our providers and others sought other means of submitting their claims, including literally manually on paper. So there’s a little bit of that, but nothing that we would consider of concern.
Sarah James: Thank you.
Operator: Thank you. Your next question is coming from Scott Schoenhaus from KeyBanc. Scott, your line is live. Please go ahead.
Scott Schoenhaus: Hey team, thanks for taking my questions. I want to go back to the utilization red blue state dynamic. How are we sure that this was really related to the Alabama regulatory environment? My understanding is the selling season, you had more broad swath of probably states represented diluting kind of the blue states into more red states. If there just lower structural utilization trends that you witnessed, that could be persistent like how are we – how are you absolutely sure that this is a regulatory issue? Thanks.
Pete Anevski: Yes, it’s Pete. Thanks, Scott. We never said we’re absolutely sure. We said it’s coincidence. But hard to ignore the coincidence of the timing of the decision versus the significantly more pronounced impact around right after that decision in those red states versus the blue states. And it’s the same trend reversing. Now we’re seeing more reversal because it was more of a trough in March for those states. So do we know for sure? Absolutely not. Are we surmising it based on the data and the date? We are, and so we don’t know. Regarding – I’m not sure I understand your question regarding the sales season. We’re referring to overall activity for the all of the covered lives, not just the sales season lives. So if I’m not getting that question, you could feel free to repeat.
Mark Livingston: I’d say just from a structural standpoint, it sounded like your question was, is it possible that there’s just a general reduction overall? And I guess we come back to again what we were seeing from all of the activity from January and February, which was again tracking virtually identical to the same pacing we saw last year, which was our record year. So again, I think the base including the new clients have the capability of delivering at a higher level. There’s been some other factor that’s obviously changed that direction here for a short period of time.
Scott Schoenhaus: And just for clarification, did you say that the new cohort in April has seen sort of elevated utilization levels comparable to your legacy cohort?
Pete Anevski: We’re not – we’re making comments around again the entire covered lives, not just the new cohort and where the members are in those states from a utilization perspective and what’s happening within the states and surmising that the impact relative to March that was more pronounced, from a data standpoint, where the trough was deeper in the red states versus the blue states, and where that is turning back in April.
Scott Schoenhaus: Thank you.
Operator: Thank you. Your next question is coming from Stephanie Davis of Barclays. Stephanie, your line is live. Please go ahead.
Stephanie Davis: Hey guys, thank you for taking my questions. I was hoping we could dig in a little bit in a backwards looking metric and talk about utilization from last year. Is there any analysis you’ve done around if there was maybe a benefit from some post-pandemic dynamics or if they benefit from the prior year’s broad-based expansion fertility benefits that would make that more of a peak utilization rate versus something we should think of going forward?
Pete Anevski: Well, if you think about all of our comments, when the pandemic happened, it was utilization levels returning back to normal through 2020, and by 2021, they were effectively back to normal. So I don’t know that there’s in 2023 sort of a pandemic overhang or any way for us to know that, but we don’t believe that was the case. What was the second part of your question? Sorry.
Stephanie Davis: Just if also not just the pandemic, but maybe the expansion of fertility benefits in the prior year, if that cohort could have maybe had a higher level of utilization as they were most likely to use it during the pandemic.
Pete Anevski: Well, the expansion of the benefits that occurred in every year remain there in the – at each employer that’s the upsells that we refer to. It’s not like they expanded and retracted. We talk about it all the time that we have upsell activity and no clients that are reducing the benefit. So those expansions have existed. If they existed in 2023 and we have a nearly 100% client retention rate. They’re here also in 2024.
Stephanie Davis: Okay. That’s somewhat helpful. Thinking about the Rx benefit, I know we’re going to see less of a serve that growth clip just given you’ve seen a very high pacing as you had better capture rates. But when we think about the go forward growth rate, is it more in line with the single digits that we saw in this quarter or is there any one-offs that would be impacting it on a one-off basis.
Pete Anevski: For Q1, as Mark referenced, there was outsized impact related to the shipment [ph] that we had talked about early in the quarter for pharmacy because those treatments that we saw lesser of are much more – a much higher level of medication utilized during the treatment. Therefore, there was a larger impact, if you will, on the growth rate in Q1 relative to pharmacy. For the out quarters, Mark, if you want to comment in terms of – we really don’t, but…
Mark Livingston: Yes, we don’t typically comment looking forward. I think again I’d – maybe I’d stick with what I said earlier, which is over time, you’re going to see those growth rates begin to continue to sort of diver or converge with medical.
Stephanie Davis: Okay, just give a quick, can you expand on that a little bit how there’s going to be the mix impacting the level of utilization for the Rx just given? I believe for a fresh transfer and for an egg freeze, you’re still doing the same amount of drugs for it.
Pete Anevski: If you’re doing a transfer, there’s way less drugs in the transfer than there is in a retrieval, right? If you’re doing a retrieval only as opposed to a full cycle, which is a retrieval and transfer, again, there’s less drugs. So that whole waterfall…
Stephanie Davis: [Indiscernible]
Pete Anevski: Yes. I mean you use drugs when you transfer. You use drugs when you retrieve, right? There’s a full suite of drugs that you’re using throughout the whole thing. The point is, overall, to the extent that the mix was impacted and the transfer alone would be the best example is significantly less drugs than a retrieval, any retrieval.
Stephanie Davis: Okay. Thank you.
Operator: Thank you. Your next question is coming from Richard Close from Canaccord Genuity. Richard, your line is live. Please go ahead.
Richard Close: Great. Thanks for the question. I’m interested in how you’re thinking about potential reaction related to the upcoming federal election. Do you factor that all into your, one, utilization guidance that you just provided for the rest of the year? And two, how do you think it could potentially affect the selling season?
Pete Anevski: It’s not really factored in because there does appear to be bipartisan support, including from the presumptive nominee on the Republican side relative to supporting reproductive health. And so I don’t – we’re not predicting sort of a reaction one way or another relative to the federal election coming up, everything that we talked about that we contemplated in our guidance, I would refer back to Mark’s comments, but there wasn’t anything that we had contemplated around the election.
Richard Close: Okay. And then as a follow-up, I think I saw an industry survey recently that was taken after everything that happened in Alabama, and it seemed to insinuate that there was an uptick in interest in either beginning to offer fertility benefits or if I already had fertility benefits, expand them. From the employer perspective, did you see any impact, I guess in March and here through April of higher interest.
