Progyny(US:PGNY)2024-11-12 22:01Financial Performance - Revenue for the three months ended September 30, 2024, was $286.625 million, compared to $280.891 million in the same period in 2023[27] - Net income for the three months ended September 30, 2024, was $10.421 million, down from $15.898 million in the same period in 2023[27] - Gross profit for the nine months ended September 30, 2024, was $189.931 million, compared to $181.905 million in the same period in 2023[27] - Net income per diluted share for the nine months ended September 30, 2024, was $0.46, compared to $0.48 in the same period in 2023[27] - Total comprehensive income for the nine months ended September 30, 2024, was $41.315 million, compared to $49.914 million in the same period in 2023[29] - Net income for the nine months ended September 30, 2024, was $43.8 million, compared to $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 $126.9 million, down from $151.2 million in 2023[33] - The company's total stockholders' equity at September 30, 2024, was $434.9 million, compared to $515.4 million at September 30, 2023[31] - Fertility benefits services revenue for the three months ended September 30, 2024, was $178.8 million, compared to $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 $107.9 million, compared to $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 $286.6 million, compared to $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 $868.8 million, compared to $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 $43.8 million, with basic net income per share of $0.48[96] - Diluted net income per share for the nine months ended September 30, 2024 was $0.46, calculated using 95.8 million weighted-average shares[96] - Revenue increased by $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 $9.1 million (4%) for the three months ended September 30, 2024, primarily due to higher medical treatment and pharmacy prescription costs[143] - Gross profit decreased 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 $1.5 million (10%) for the three months ended September 30, 2024, driven by higher personnel-related costs[146] - General and administrative 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 $2.8 million (101%) for the three months ended September 30, 2024, primarily due to higher interest income[148] - Provision for income taxes 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 $10.4 million, compared to $15.9 million in the same period in 2023[141] - Adjusted EBITDA for the three months ended September 30, 2024, was $46.5 million, compared to $50.0 million in the same period in 2023[141] - Revenue increased by $50.1 million, or 6%, to $868.8 million for the nine months ended September 30, 2024, driven by a $37.1 million (7%) increase in fertility benefits solution revenue and a $13.0 million (4%) increase in Progyny Rx solution revenue[150] - Cost of services increased by $42.1 million, or 7%, to $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 $8.0 million, or 4%, to $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 $3.8 million, or 8%, to $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 $7.8 million, or 130%, to $13.9 million for the nine months ended September 30, 2024, driven by higher interest income[157] - Provision for income taxes increased by $15.9 million, or 271%, to $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 $126.9 million for the nine months ended September 30, 2024, compared to $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 $120.8 million for the nine months ended September 30, 2024, primarily from net proceeds of $129.6 million from marketable securities, partially offset by $5.3 million used for a business acquisition[167] - Net cash used in financing activities was $253.6 million for the nine months ended September 30, 2024, primarily due to $245.2 million in share repurchases under the February, May, and August 2024 share repurchase programs[168] Stock and Compensation - Stock-based compensation expense for the nine months ended September 30, 2024, was $97.3 million, up from $93.8 million in 2023[33] - The company repurchased $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 $27.09 and a total cost of $249.8 million[86] - Total stock-based compensation expense for the three months ended September 30, 2024, was $33.2 million, compared to $31.3 million in the same period in 2023[87] - Total stock-based compensation expense for the nine months ended September 30, 2024, was $97.3 million, compared to $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 $170.3 million, compared to $263.0 million in 2023[33] - Sale of marketable securities in the nine months ended September 30, 2024, was $300.0 million, up from $158.8 million in 2023[33] - Cash and cash equivalents at the end of September 30, 2024, were $91.5 million, down from $158.1 million at the end of September 30, 2023[33] - The Company had $95.0 million in financial assets held in money market accounts as of September 30, 2024, compared to $35.2 million as of December 31, 2023[72] - The Company had $144.2 million in marketable securities, including U.S. treasury bills, as of September 30, 2024, compared to $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 $8.9 million, compared to $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 $4.6 million, net of tax expense of $1.7 million[89] - As of September 30, 2024, the company had $91.5 million in cash and cash equivalents and $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 $91.5 million, and marketable securities totaled $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]