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Progyny(PGNY) - 2025 Q4 - Earnings Call Transcript

2026-02-26 22:45

Financial Data and Key Metrics Changes - Progyny reported record highs in revenue and adjusted EBITDA for 2025, with revenue reaching $1.29 billion and adjusted EBITDA at $222 million, representing increases of nearly $90 million and $28 million respectively over the midpoint of original guidance [6][19] - Operating cash flow for 2025 was a record $210 million, an increase of 17% compared to 2024 [6][21] - The company achieved a nearly 200 basis point expansion in full-year gross margin versus 2024, reflecting efficiencies in care management and service delivery [19] Business Line Data and Key Metrics Changes - Member engagement remained healthy, with utilization and consumption of ART cycles per unique utilizer pacing favorably against guidance [18] - 30% of the client base expanded their benefits with Progyny for 2026 through upsells and service enhancements, providing access to new services for over 2.7 million members [10] Market Data and Key Metrics Changes - The self-insured market is expected to continue comprising the majority of new lives added, with opportunities to broaden the target market to smaller employers [12] - The healthcare industry, as the largest sector for Progyny, has shown resilience against macro uncertainties over the past five years [11] Company Strategy and Development Direction - Progyny is focusing on member and client satisfaction, which has led to nearly 100% client retention, including all largest employers [7] - The company is launching Progyny Select to address the needs of smaller employers, providing a fixed premium product that minimizes financial risk [13][14] - Investments in technology, including AI, are aimed at enhancing member experience and driving efficiencies [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with considerable momentum, driven by strong demand for family building and women's health services [11] - The guidance for 2026 anticipates 7.2 million covered lives, reflecting a net reduction due to administrative updates rather than workforce reductions [23] - The company expects revenue growth of 5.1% to 9% for 2026, with adjusted EBITDA projected between $224 million and $239 million [29][30] Other Important Information - The departure of the President at the end of 2025 resulted in an incremental $7.7 million in stock-based compensation expense [25] - The company repurchased over 3.3 million shares for nearly $84 million under its share repurchase program [22] Q&A Session Summary Question: Clarification on membership outlook for 2026 - Management clarified that the changes in membership figures relate to existing clients and are due to administrative updates rather than new client issues [33][34] Question: Discussion on Progyny Rx model and economics - Management noted no pushback from employers regarding the Progyny Rx model and emphasized the value delivered through integrated programs [36][37] Question: Strategy and pricing for Progyny Select - Management explained that pricing for Progyny Select is based on experience data from smaller clients, with guardrails in place to manage risk [41][44] Question: Contribution from maternal health services - Management indicated that while maternal health services are growing, they are not yet material but serve as a value add [55] Question: Expectations for CapEx and cash flow conversion - Management anticipates a step-up in CapEx for 2026 but not a doubling, with a cash flow conversion rate of approximately 75% from adjusted EBITDA [82][84]