Progyny(PGNY)2024-11-12 22:01Financial Performance - Revenue for the three months ended September 30, 2024, was 280.891 million in the same period in 2023[27] - Net income for the three months ended September 30, 2024, was 15.898 million in the same period in 2023[27] - Gross profit for the nine months ended September 30, 2024, was 181.905 million in the same period in 2023[27] - Net income per diluted share for the nine months ended September 30, 2024, was 0.48 in the same period in 2023[27] - Total comprehensive income for the nine months ended September 30, 2024, was 49.914 million in the same period in 2023[29] - Net income for the nine months ended September 30, 2024, was 48.6 million in the same period in 2023[33] - Net cash provided by operating activities for the nine months ended September 30, 2024, was 151.2 million in 2023[33] - The company's total stockholders' equity at September 30, 2024, was 515.4 million at September 30, 2023[31] - Fertility benefits services revenue for the three months ended September 30, 2024, was 175.1 million in the same period in 2023, representing a 2.1% increase[70] - Pharmacy benefits services revenue for the three months ended September 30, 2024, was 105.8 million in the same period in 2023, representing a 2.0% increase[70] - Total revenue for the three months ended September 30, 2024, was 280.9 million in the same period in 2023, representing a 2.0% increase[70] - Total revenue for the nine months ended September 30, 2024, was 818.7 million in the same period in 2023, representing a 6.1% increase[70] - Net income for the nine months ended September 30, 2024 was 0.48[96] - Diluted net income per share for the nine months ended September 30, 2024 was 5.7 million (2%) for the three months ended September 30, 2024, driven by growth in fertility benefits and Progyny Rx solutions[142] - Cost of services increased by 3.4 million (5%) for the three months ended September 30, 2024, with gross margin declining 160 basis points to 20.7%[144][145] - Sales and marketing expense increased by 0.8 million (3%) for the three months ended September 30, 2024, due to incremental headcount[147] - Interest and other income, net increased by 2.5 million (50%) for the three months ended September 30, 2024, due to reduced tax benefits for equity compensation[149] - Net income for the three months ended September 30, 2024, was 15.9 million in the same period in 2023[141] - Adjusted EBITDA for the three months ended September 30, 2024, was 50.0 million in the same period in 2023[141] - Revenue increased by 868.8 million for the nine months ended September 30, 2024, driven by a 13.0 million (4%) increase in Progyny Rx solution revenue[150] - Cost of services increased by 678.9 million for the nine months ended September 30, 2024, primarily due to higher medical treatment and pharmacy prescription costs, as well as increased personnel-related costs[151] - Gross profit increased by 189.9 million for the nine months ended September 30, 2024, while gross margin decreased by 30 basis points to 21.9% due to higher personnel-related costs[152][153] - Sales and marketing expenses increased by 48.3 million for the nine months ended September 30, 2024, primarily due to higher personnel-related costs and stock-based compensation[155] - Interest and other income, net increased by 13.9 million for the nine months ended September 30, 2024, driven by higher interest income[157] - Provision for income taxes increased by 21.7 million for the nine months ended September 30, 2024, due to higher operating profit and reduced tax benefits for equity compensation[158] - Net cash provided by operating activities was 151.2 million in the same period in 2023, primarily due to changes in accounts receivable and prepaid expenses[162][163] - Net cash provided by investing activities was 129.6 million from marketable securities, partially offset by 253.6 million for the nine months ended September 30, 2024, primarily due to 97.3 million, up from 245.2 million worth of common stock in the nine months ended September 30, 2024[33] - The Company repurchased 9,133,895 shares of common stock under share repurchase programs during the nine months ended September 30, 2024, at an average price per share of 249.8 million[86] - Total stock-based compensation expense for the three months ended September 30, 2024, was 31.3 million in the same period in 2023[87] - Total stock-based compensation expense for the nine months ended September 30, 2024, was 93.8 million in the same period in 2023[87] Marketable Securities and Investments - Purchase of marketable securities in the nine months ended September 30, 2024, was 263.0 million in 2023[33] - Sale of marketable securities in the nine months ended September 30, 2024, was 158.8 million in 2023[33] - Cash and cash equivalents at the end of September 30, 2024, were 158.1 million at the end of September 30, 2023[33] - The Company had 35.2 million as of December 31, 2023[72] - The Company had 273.8 million as of December 31, 2023[72] - Interest income on cash and cash equivalents and marketable securities for the three months ended September 30, 2024, was 10.4 million for the nine months ended September 30, 2024[72] - Unrealized gains on marketable securities for the nine months ended September 30, 2024 were 1.7 million[89] - As of September 30, 2024, the company had 144.2 million in marketable securities, with sufficient liquidity to support operations for at least the next 12 months[159] - Cash and cash equivalents amounted to 144.2 million as of September 30, 2024[182] - A hypothetical 10% change in interest rates would not materially impact the company's consolidated financial statements[182] Business Operations and Strategy - The company's largest clients account for a significant portion of revenue, with a significant number of clients in the technology industry[12] - The company's growth depends on maintaining strategic relationships with third parties, including channel partners and vendors[16] - Progyny operates in one segment, providing fertility benefits solutions and pharmacy benefits solutions[36] - Progyny launched Progyny Rx, a pharmacy benefits solution, effective January 1, 2018, providing members with access to medications needed during fertility treatment, including care management services and timely delivery through a network of specialty pharmacies[37] - Progyny's fertility benefits solution generates revenue through a per employee per month (PEPM) administration fee and a fixed rate per Smart Cycle, with revenue recognized ratably over the contract term[47] - The pharmacy benefits solution, offered as an add-on to the fertility benefits solution, includes a PEPM administration fee and a fixed fee per fertility drug, with revenue recognized when prescriptions are filled and delivered[53] - Progyny's contracts typically have a three-year term with termination options after the first year, allowing clients to terminate with 30 to 90 days' notice[44] - The company estimates accrued receivables and claims payable based on historical experience, with adjustments made at the time of billing, and these adjustments have not been material[58] - Progyny's revenue recognition follows a five-step model, including identifying contracts, performance obligations, transaction price, allocation, and recognition when obligations are satisfied[43] - The company currently provides coverage to approximately 6.4 million employees and their partners (covered lives)[100] - Progyny's fertility benefits solution has a Net Promoter Score (NPS) of +80 as of December 31, 2023[100] - Live birth rate per attempted retrieval for Progyny members is 44.4%, significantly higher than the national average of 35.5%[101] - Single embryo transfer rate for Progyny members is 93.9%, compared to the national average of 75.5%[101] - IVF multiples rate for Progyny members is 1.9%, significantly lower than the national average of 6.9%[101] - The company currently serves over 465 employers with at least 1,000 covered lives in the United States, representing approximately 6.4 million covered lives[107] - The member base grew from approximately 110,000 members in 2016 to approximately 6.4 million members as of September 30, 2024[115] - The number of Assisted Reproductive Treatment (ART) cycles performed for Progyny members was 14,911 in Q3 2024 and 45,275 for the nine months ended September 30, 2024[118] - The utilization rate for all members was 0.54% in Q3 2024 and 1.10% for the nine months ended September 30, 2024[118] - The average number of members was 6,444,000 in Q3 2024 and 6,381,000 for the nine months ended September 30, 2024[118] - The company's current member base of approximately 6.4 million covered lives represents a mid-single digit percent of the total market opportunity of 106 million potential covered lives[113] - The company served 468 clients as of September 30, 2024, up from 392 clients as of December 31, 2023[113] - The company's revenue has both a utilization-based component and a population-based component, with PEPM fees representing 1% of total revenue for the nine months ended September 30, 2024 and 2023[109] - The company's fertility benefits solution revenue includes amounts received directly from members, such as deductibles, co-insurance, and co-payments associated with treatments[122] - The company's pharmacy benefits solution revenue includes prescription fees negotiated with clients, including the portion collected directly from members[123] - 91% of current clients have adopted the Progyny Rx solution, with approximately 98% of clients signed in 2023 launching the solution[201] - The company currently serves over 465 employers with at least 1,000 covered lives in the United States across more than 40 industries[205] - For the nine months ended September 30, 2024, one client accounted for 12% of total revenue, compared to 13% for the same period in 2023[205] - No other clients accounted for more than 10% of total revenue for the nine months ended September 30, 2024 and 2023[205] - The company was notified in Q3 2024 that the major client elected to terminate its services agreement effective January 1, 2025[205] - Client contracts are generally multi-year in duration, but early termination or failure to renew could negatively impact revenue and growth strategy[205] - A significant portion of revenue is generated from clients in the technology industry, making the company vulnerable to industry changes[205] - Potential risks include workforce reductions, employee attrition, economic changes, mergers, and reduced spending on benefits programs[205] - Clients may renegotiate pricing terms at contract renewal, which could negatively impact revenue[205] Regulatory and Market Risks - The COVID-19 pandemic and similar health epidemics could continue to adversely impact the company's business and operations[13] - The company operates in a highly regulated industry and must comply with complex and evolving legal and regulatory requirements[17] - The healthcare regulatory and political framework is uncertain and evolving, which could adversely impact the company's business[18] - The company faces interest rate risk due to fluctuations influenced by U.S. monetary policies, economic factors, and other uncontrollable variables[181] - Inflation has not had a material effect on the company's business, financial condition, or results of operations, but significant inflationary pressures could harm future performance[183] - The company's market risk exposure primarily stems from fluctuations in interest rates, which could affect interest income and the fair market value of investments[180] - The fertility benefits market is highly competitive, with competitors potentially developing more efficient or appealing solutions, which could harm the company's market position[195] - The company's ability to retain clients and expand services depends on factors such as pricing, outcomes, and the ability to maintain its Center of Excellence network[202] - Consolidation in the healthcare industry could lead to competitors with greater market power, potentially impacting the company's ability to retain clients or grow its client base[197] - Unfavorable global economic conditions, including inflation, interest rate fluctuations, and regulatory changes, could negatively affect the company's growth and results of operations[198] Acquisitions and Expansion - Completed acquisition of Apryl GmbH for €5.1 million ($5.5 million) on June 17, 2024 to expand global fertility benefits offerings[92]