Progyny Inc Stock

Good day, ladies and gentlemen, and welcome to the Progyny, Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to your host, James Hart. James, the floor is yours.

Thank you, Tom, and good afternoon, everyone. Welcome to our second quarter conference call. With me today are Pete Anevski, CEO of Progyny and Mark Livingston, CFO.

We will begin with some prepared remarks before we open the call for your questions. Before we begin, I'd like to remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the third quarter and full year 2026 and the assumptions and drivers underlying such guidance, the demand for our solutions our expectations for our selling season for 2027 launches, anticipated employment levels of our clients and the industries that we serve, the timing of client decisions, our expected utilization rates and mix the potential benefits of our solution, our ability to acquire new clients and retain and upsell existing clients our market opportunity and our business strategy, plans, goals and expectations concerning our market position, future operations and other financial and operating information, which are forward-looking statements under the federal securities law.

Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business as well as other important factors. For a discussion of the material risks, uncertainties, assumptions and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our Investor Relations website.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures are available in the press release, which is available at investors.progyny.com.

I would now like to turn the call over to Pete.

Thanks, Jamie, and thanks, everyone, for joining us this afternoon. We're pleased to report a strong second quarter highlighted by solid growth over the prior year period, resulting in record quarterly revenue, gross profit and adjusted EBITDA, as well as further gross margin expansion and the continued generation of significant cash flow.

Fueled by the strength and consistency of this performance, not just in the most recent quarter, but really over the past several years, we've created flexibility both to invest in the business by laying a foundation for future growth through the expansion of our platform while also returning value to shareholders through significant share repurchases. We Mark will take you through the details of both that and the quarter shortly.

But before that, I'd like to give you some color on how our latest sales season is progressing because, as you know, new sales in any year had the largest impact on our growth trajectory. I'm pleased to report our momentum from last quarter has continued, and we enter our most critical time of the year for closing new clients in a favorable position. Strong momentum is driven by an acceleration in both early commitments for new sales as well as retention across our existing book of business, led by our largest clients, which has largely derisked client turnover for 2027 and positioned us for another year of strong retention.

In short, we're seeing meaningful momentum in the market and I think it would be useful to help you understand why we believe our solutions continue to resonate so strongly with employers. It starts with the reality that family building and women's health solutions continue to be a priority for employers of all sizes and across all industries. We're addressing a very real and highly prevalent medical need, and one that can be costly to employers when it's not managed well or not managed at all.

Employers are also experiencing high cost trends in their traditional medical and pharmacy coverage with increases of 10% or more and projecting further increases next year. In response to turn in solutions and benefit managers with a proven record of not only controlling trend, but helping to bend that curve. The buying criteria for employers evaluating options in the market continues to hone in on cost, quality and member satisfaction with a heightened focus on accountability within each area. They want to see a track record in achieving total cost and quality management with a high-quality member experience consistently. And success is measured on the strength of hard ROI savings back to the employer and members yielding short- and long-term trend control.

While the competitive environment remains active as we look across the landscape, we see the other solutions falling short in one or many of these categories. By contrast Progyny on the strength of our detailed transparent reporting remains the only solution in our opinion that has consistently demonstrated the ability to deliver across every one of them. And we've done this over a prolonged period giving buyers confidence that we have the right solution that has been proven to work over the longest period of time. This is why we feel uniquely well positioned to compete and win whether it's a buy with an existing solution or one who is adding coverage for the first time. The result of this enhanced focus from employers has us well positioned across our 3 carriers -- 3 areas for growth, adding new logos, maintaining high client retention and expanding new partners to enhance our position and extend our reach.

Looking a bit deeper within each area. Our new client acquisition early commitments are pacing meaningfully ahead of this time last year. While the sales season won't conclude until November, we have seen a meaningful number of early decisions more than we'd expect at this point in the year. I'm at strength, we are confident we will meet our annual target of adding 1 million or more new lots.

On client retention, based on current conversations and commitments, we believe we've removed the vast majority of retention risk which is also earlier than usual at this point in the year. I think it isn't a coincidence that employers have been able to come to their decisions earlier this year and have chosen Progyny at the point when managing their escalating medical cost trend is a top priority. The wins thus far represent the typical diverse cross-section of the economy, including employers in energy, construction, manufacturing, aerospace, health care, labor, financial services and education.

This includes one of the oldest and most prestigious universities in the country. The early commitments have also been diverse in terms of size, spanning from 1,000 cover lives to the jumbos we see every year.

Turning to retention. In any season, roughly 1/3 of the book is up for renewal. As discussed last quarter, when we described the comprehensive review, one of our longer-standing clients had recently done to measure and validate the efficacy of our program over many years. Existing clients are often in the strongest position to directly see the cost control and sustain savings our solutions deliver. That not only yields positive renewal activity, but also an opportunity for expansions, which is when a client adds more services with us beyond core fertility. And we take that business away from the competitors who have been previously providing some of those services.

For those same reasons, our newest clients are selecting the typical level of coverage that we've historically seen. And we aren't seeing existing clients look to reduce their benefit with us for the next year either. Lastly, we're satisfied with our momentum at this point in the year amongst our traditional self-insured employers. We're also pleased with the progress we're making across a number of other strategic areas, including health plan partnerships, public sector clients and continuing to advance our new fully insured market offering called Progyny Select.

We're seeing good results with our existing partnerships as well as a strong increase in productivity from our health plan partnerships, many of which are now in their second year with us. Additionally, we're pleased with our pipeline of potential new health plan partnerships. We also continue to advance Progyny Select with a focus on building relationships across key distribution areas, like leading general agents and brokers who are focused on the fully insured market.

These partnerships are an important step and no different from other relationships we've built and curated. We expect the first year will focus largely on forging those channel partners versus driving meaningful new volume. As we've said previously, we're not expecting Select to be a meaningful contributor in 2027 and instead view this as an important addition to the portfolio and a significant contributor to our medium and longer-term growth.

To conclude, we're pleased with our strong performance over the first half of the year. And given the momentum we're seeing in the market, we're comfortable that we positioned ourselves exceptionally well to meet our traditional target of adding 1 million or more [indiscernible]

Let me turn the call now over to Mark.

Thank you, Pete, and good afternoon, everyone. Before I begin, please note that the 8-K we filed a short while ago includes our customary slide presentation summarizing the results in the quarter while also highlighting some of the longer-term trends that we believe are important in understanding the health and direction of the business. That material has also been posted on our website.

Rather than repeating what those slides address, my remarks today will focus on the 4 key themes that impacted both the quarter and how we think about the rest of 2026 and beyond. So let's begin with the first thing. Over the first half of the year, member engagement has remained consistent with our long-established ranges. As it relates to the second quarter specifically, engagement was closer to the higher end of expectations reflected in our May guidance. We believe both data points demonstrate how members are continuing to pursue the care and services they need and when the time is right for them to do so.

Likewise, second quarter revenue was also closer to the higher end of our guidance, reflecting a 5.3% increase on a reported basis and 11% when you exclude the contribution from a large former client who is under a transition of care agreement in the second quarter of 2025. I'll remind you that the transition agreement pertaining [indiscernible] client ended on June 30 of last year. Accordingly, the second quarter is the last quarterly period where you have to take that client's contribution into account when looking at our comparative results.

Moving on to our second theme. We continue to maintain healthy margins even as we continue to invest to expand our product platform, enhance features for our members and also lay the foundation to support our future growth. Gross margin expanded 180 basis points from the second quarter last year comparable to the level of expansion we also saw in the first quarter. This is due to the efficiencies we've continued to realize in our care management and service delivery as well as a reduction in stock compensation expense. Adjusted EBITDA margin also expanded from the year ago period though at a lesser rate than we've seen with gross margin as the platform investments we're making are more concentrated within our operating expense lines.

Nonetheless, we're pleased with our ability to consistently maintain a level of overall profitability. As measured on a 12-month -- trailing 12-month basis, adjusted EBITDA margin was 17.2%, consistent with where it's trended throughout this period of increased investment, demonstrating our ability to invest to grow while simultaneously creating efficiencies throughout the business. As it relates to those investments, second quarter CapEx was $6.2 million. This was in line with our first quarter spend as well as a $1 million increase over the prior year period.

Although it's premature to offer detailed commentary beyond this year, we continue to expect that this investment program will begin to taper down starting in 2027.

Turning now to the third theme. Through the ongoing disciplined and prudent management of the business, we've continued to achieve a high conversion of adjusted EBITDA to operating cash flow. This allowed us to once again meet and somewhat exceed our 75% conversion target, both in the second quarter and over the first half of the year. For the fourth time in the last 5 quarters, we generated more than $50 million in operating cash flow. This yielded $201 million on a trailing 12-month basis, and we've now exceeded $200 million in last trailing -- sorry, last trailing months, 12 months, operating cash flow for 6 consecutive quarters.

Through our ongoing focus on managing the revenue to cash process, we drove further improvements in our DSOs, which ended the second quarter more than 7 days lower from where it was in the year ago period. DSO also improved on a sequential basis from March 31 this year, reflecting the typical dynamic we see as the payment flows with our newest clients get up and running.

As of June 30, we had approximately $273 million in total working capital, which includes $237 million in cash, cash equivalents and marketable securities. There were no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. And finally, our fourth theme is how our strong and consistent financial performance has provided us with the flexibility to both invest in the business while simultaneously returning value to our shareholders through ongoing share repurchases.

In late May, we announced our latest share repurchase program to a $200 million authorization, which permits us to acquire shares via open market purchases as well as under structured plans. Under this latest program, which was in effect for a little over a month during the second quarter, we purchased nearly 1.2 million shares by June 30 for $31.5 million.

Including the activity that's happened subsequent to June 30, we have now purchased a cumulative 2 million shares to date under the most recent program and approximately $142.5 million remains available under the existing authorization.

On an aggregate basis, combining this current program as well as our prior $200 million program, which concluded earlier this year, we have now purchased an aggregate 10.8 million shares overall since November. This has reduced our overall shares outstanding by approximately 12.5%.

Turning now to our expectations for the third quarter and the remainder of 2026. As the third quarter begins, encompassing the peak of the summer, a seasonally less active time for members, we've seen a slightly more pronounced seasonal impact and have reflected that in our third quarter guidance. We view this to be the ordinary rhythm of activity and not an indication of a new macro trend or a change in the overall trajectory of engagement.

Although our view into September is inherently limited at this point, we aren't seeing this seasonality extend beyond the summer. Accordingly, we continue to expect that our engagement metrics for the full year will remain consistent with our long-established historical ranges with the low end of our range consistent with our 5-year low for annual utilization.

The table at the back of today's press release outlines our assumptions at both ends of the full year guidance ranges. On the basis of these assumptions, we're projecting revenue in 2026 of between $1.36 billion to $1.385 billion, reflecting growth of between 5.5% to 7.5%. If we exclude the $48.5 million in revenue from the client who is under a transition of care agreement over the first half of 2025, our full year revenue growth is projected to be between 9.7% and to 11.7%.

With respect to profitability, we expect a range of $233 million to $240 million in adjusted EBITDA with net income of $104.8 million to $109.9 million. This equates to $1.26 and $1.32 and earnings per diluted share and $2.04 and $2.10 of adjusted EPS on the basis of approximately 83 million fully diluted shares. As it relates to the third quarter, we expect between $335 million to $345 million in revenue, reflecting growth of 6.9% to 10.1%, with the sequential change in second quarter revenue, reflecting the slightly more pronounced seasonality in activity this year.

On profitability, we expect between $56 million to $59 million in adjusted EBITDA in the quarter along with net income of between $24.5 million to $26.7 million. This equates to $0.30 and $0.33 of earnings per diluted share or $0.50 and $0.52 of adjusted EPS on the basis of approximately 82 million fully diluted shares.

At the midpoints of the ranges for both the quarter and the year, you can see we expect to maintain a consistent EBITDA -- adjusted EBITDA margin even with the investment to grow the business.

And with that, we'd like to open the call for questions. Operator, can you please provide instructions?

[Operator Instructions]

And our first question today is coming from Brian Tanquilut from Jefferies.

Maybe just on the comments on ART cycle seasonality. Just curious if you can expand further on that slowdown that you're seeing this summer. And if you have any thoughts on what drove this increased seasonality? And when do you think this peaks and when do we get back to more normal trends?

I think what's important, Brian, is to also look at what we've done here for the first half of the year, although we've had a good strong Q1 and Q2. We haven't hit the high end of our ranges. And so part of what we're doing here is recalibrating and narrowing the year just in recognition of where we're at here 6 months in.

As far as the third quarter comments around the slightly more pronounced seasonality it's really limited to just this middle part of the summer here. And we do have some visibility as we get into September as the appointment scheduling builds there. So look, we don't see it as anything that is prolonged or any kind of change in trend. And so our guidance reflects really more of a stable utilization and consumption pattern consistent with what we've seen in other years.

Got it. And then when I think about the sequential improvement in fertility revs per cycle, what is driving that? Is that the ancillary? And then maybe another part of that question would just be any comment you can share on pricing both on the PBM side and on the services side?

Yes. So on the -- on fertility pricing, we do have the ability to modestly increase pricing based on -- so on the fertility side, that's something that we've done over the last couple of years. So that contributes. But we're talking low single-digit percentages. And then on the pharmacy side, we've looked to absorb some of the cost increases that we see in order to keep our clients hold.

I think if you're focused on sequential, sequential is impacted by a lower proportion of cycles in the ART cycles in the first quarter and a higher proportion of initial consults but the average is calculated in terms of revenue per cycle. Second quarter seasonally has a bump up in cycles in ART cycles versus the first quarter. And so -- and a lower proportion of initial consults, that's normal every year. So as you talk about sequential revenue per cycle, that's what impacts that.

Your next question is coming from Jailendra Singh from Truist Securities.

So I want to go back to the seasonality point you raised. I know it's only 1 month of data, but given the experience the company has had in the past couple of years back, what additional data points or observations you have, which makes you believe this is really more of a seasonal softness you're seeing outside of being a prudent in your guidance approach. Anything else you're doing proratably to make sure you don't get caught off guard once you get out of this seasonal weak period?

Just to add to your first question, in terms of data points, every year, we see seasonality this -- in the summer, in the middle of the summer. This year is a little bit more pronounced. If you recall, I think, 3 or 4 years ago, we saw the same thing and then exiting the quarter, we saw the same thing in terms of engagement returning to normal levels. of the visibility we have so far for September, that appears to be the case for this year as well. And so that's why we added the color and commentary relative to what we're seeing not only this year, but in periods past, we do see that seasonality as more pronounced in this quarter and then coming back to normal engagement levels in the balance of the year, it's just a little bit more pronounced this year than normal.

Okay. And then my follow-up, and thanks for the color on the selling season, Pete. It's good to see you feel good about meeting or exceeding annual target of 1 million lives. A quick follow-up there. As you look at these type of lives, industries, these lives are coming from expected utilization or number of offerings they might have access to. How do you think about the revenue attached to these lives? Do you think it's similar to this year or better or worse? Any color that would be helpful.

Obviously, I'm not going to quantify it. But I think my commentary spoke to not only the commitments, but the contribution from them, which is what which is sort of what you're alluding to being meaningfully ahead of last year at this point.

Your next question is coming from Michael Cherny from Leerink.

Sorry to harp on the same topic, but this is not the first time, obviously, we've seen summer seasonality as you've alluded to maybe a bit more than before. When you think about the visibility you had at this point last quarter, you talked about utilization improving. But I guess, how much was this on the foresight given that, again, you're seeing already an uptick in September, like as the work you've done over the years to improve your visibility has been significant. Like how did that play out specifically tied to ending the quarter and into the print.

The visibility, Mike, hasn't changed. The algorithms that we use have improved, which is what you're referring to in terms of the work we have done. But the visibility is still the same, right? We have visibility, good visibility into the month ahead and a little less visibility into the month after that.

That's not new. That's generally how far ahead people are scheduling appointments and then we look at a lot of things underlying that data. And so -- and that's what we use when we guide always, and that's what we used last quarter when we reported in May, and that's what we're using now as we report and what we're seeing so far exiting the quarter and then also looking at past history relative to to that being normal in terms of normalizing back to normal levels of engagement for the remainder of the year.

Got it. And just one more additional question. I mean the cash flow build has been very strong. You obviously have select going on. You have some of the other ancillary programs. How do you think about the future usage of capital deployment for both internal, external investments as you continue to broaden your lead in the market?

Well, like I mentioned in my remarks, the good news is we have strong enough cash flow to continue to invest if we need to, the level of investment will come down, as we had mentioned a couple of times in the last couple of calls next year and in the future based on what we have planned.

Our large investments happened over the last 2 years finish out in terms of incremental investments through the end of this year. But as you mentioned, we had the capital to make decisions, whether there are any opportunities around M&A, whether they're tuck-ins or otherwise, whether there's additional repurchases that we're going to do or any other additional investments, we have the cash flow to do all 3.

Your next question is coming from Sarah James from Cantor Fitzgerald.

On the improved algorithm that you were talking about, can you give us an idea of what the slope of level of confidence looks like? So how is your confidence in your 2-week out forecast versus 4 versus 6. What does that look like for you now?

Well, given the actual visibility we have and given that it's a consumption model, right? Obviously, any periods further out inherently are going to have less. But again, the algorithms have improved significantly. They've proven to be pretty predictable. But things like more pronounced seasonality than you otherwise didn't have visibility into can't happen, and that's what we're experiencing. And by the way, I mean, overall, it's -- if you look at sort of the midpoint, it's a 1% adjustment.

So we're not talking about a large adjustment and change in consumption. But either way, it's a fair question.

And then you mentioned also the growing pipeline of your broker relationships. Can you talk about how material that channel is now to your business and where you think it could go over time?

Sure. It's not material today. And as I mentioned in my prepared remarks, not expected to be material at all relative to what it's going to contribute in terms of new lives next year. That's consistent with the comments we've been making that -- those channel partners will take time, both in terms of signing up as we've been successful in doing so far. But more importantly, in getting throughput from them relative to the reality of when the renewals happen, the majority of which are for 1/1, the reality of getting through those organizations because many of them are inherently roll up to a lot of small companies, and it's a little bit more of a grassroots effort in terms of getting the message through to all their brokers, et cetera.

And so -- and so we just -- it will -- the relationships we've built so far are positive, and they are inclined to work with us and work with their people to do that. But that's why it's more of a medium to long-term strategy. So I would say it's more important to the medium and long term in terms of being additive as opposed to looking for something for 2027.

Your next question is coming from Scott Schoenhaus from KeyBanc.

Just to drill in a little bit more on the summertime softness here. If I think about it, is there a way to -- is there anything that's glaringly different than you expected in terms of a certain cohort, right? Is it this new cohort that you onboarded from new wins this year that you saw less amount of ag retrials happening into the summer, but now you're starting to see those appointments being booked for those surgeries or you're seeing the medications. -- being ordered now for September into the fall? Was it a regional softness? Any like color on to -- as to explain to why this was more pronounced this year versus other years? And what -- if you're actually seeing from a one-for-one delay in a certain population of employees from a certain employer that delayed in ag retrieval with medication in the summer and now you're seeing that pick up in the fall.

Yes. The short answer is that there isn't anything pronounced in any one of those categories that you described. we certainly take a look at that to see if there's anything that would be different than a seasonality event. It's more across the board really in all those categories that you're describing.

Okay. And then on the selling season, the one comment that I thought was really interesting was that you're seeing the most sort of competitive customer conversations from people that had previously had a competitor's benefit.

Maybe can you drive into more color, Pete, on what exactly they're telling you and why they're coming to you to explore options? Is it ROI? Is it the fact that their employees want a more robust benefit? This is, I think, the first time you've ever commented on on something like this, and I kind of want to hear what the customers are saying when they're coming to you.

Sure. It's important to note that the reason, the only reason why I'm calling it out is because it's more than what we've seen in the past. But we're getting all sorts of opportunities from brownfield and some greenfield as well. When you do get these opportunities, you don't always get the opportunity to understand everything they're unhappy about. They just simply are out there and they're just out there in more volume this year.

And so you compete for them. So you spend more time talking about your solution and you just infer that something isn't right when they're going out to RFP or a lot of them are doing -- many times do market checks. But either way, there isn't a lot of discussion around sort of what not working. There's some anecdotal stuff, but I don't want to comment on anecdotal stuff as opposed to we're hearing sort of something constant and systemic. But I think the more insightful commentary is that it's happening and that we're winning a lot of it.

Yes, Scott, the only thing maybe I'd add to that is Pete's prepared remarks around cost containment and the pressures on employers now, which I think we believe is part of that root cause of why they're coming to us. We obviously have a proven model that helps control costs. And so we believe that's part of what's driving it.

Your next question is coming from Allen Lutz from Bank of America.

One for Peter, Mark here around, I guess, to follow up on the selling season piece here. Is there any way to bifurcate between the engagement you're getting from prospects that are looking at fertility benefits for the first time versus those that are potential competitive conversions. Would love to get a sense if anything changed there with those that currently don't offer for fertility benefit? And then second, we talked about this a little bit in the past, but the conversation around GLP-1 continues to evolve.

Some of the big PBMs are talking about employers just offering that type of benefit less if employers are not offering GLP-1 coverage, are you seeing any increased interest in fertility benefits? Just trying to get a sense of to triangulate, if any of those things are hitting your prospects? Or if it's just too early?

Yes. I'll try and capture the spirit of all the [indiscernible] Allen. The first thing is building on Mark's comment, what we are seeing more of this year is more brownfield than greenfield, we'll start with that. It is from all competitors, not just the VC back competitors, but also those that have a carrier solution today.

So we still view them and always view them as a competitor. Probably the largest competitor still relative to where others are getting a fertility benefit beyond our VC-back competitors. And that's not surprising, given the fact that as we sort of talked about ending last year and coming into this year, medical cost inflation is real. A lot of what's driving that is some of what you're alluding to, which is GLP-1s and other sort of new drugs in the market that are driving higher utilization and overall increase in medical costs.

So it's not surprising that it's those that are looking to contain cost or save money, i.e., in a brownfield situation are the ones that are doing more looking and more committing this year versus the greenfield, right? We're still getting greenfield, but it's more pronounced in the brownfield. And so that's probably the easiest way to answer, I think, most of what you asked.

As it relates specifically to GLP-1s, I don't know that I have enough good information to say, as a result of companies cutting back on GLP-1s, now they feel that they're in a better position to sort of buy fertility or not. I think it's just -- there's an overall reality that they're trying to manage costs overall and that higher utilization from things like GLP-1s and therefore, are adjusting just to keep doing what they can to then that cost curve [indiscernible] for themselves.

Your next question is coming from Peter Warendorf from Barclays.

It looks like clients maybe ticked up slightly in the second quarter, but membership was closer to flat. I mean it's not a huge difference, but I'm just curious if you're seeing any impact from the broader employment trends and maybe a weaker employment environment. And then what you're assuming in guidance over the second half of the year in terms of membership at current clients?

Yes. So just as a reminder, we typically count only those clients that have 1,000 lives or more. We have a number of them that are smaller, but we've always excluded and we include the lives, but not the accounts. So there were a handful of clients that graduated beyond the 1,000 life level, obviously, in and of themselves not going to drive your overall averages. So -- and then as far as lives are, they've been pretty consistent. -- that we've seen some clients go up a little, some go down a little, but it's been relatively stable. And then from a projection standpoint, we're projecting the same.

We have the same level of full year estimate as we've been maintaining for a couple of quarters now. And so yes, we do have a couple of very small clients that are starting here in the second half, not anything meaningful from a revenue contribution or whatnot. So you see a little bit in the coming quarters. But frankly, it's just more rounding than anything.

Great. And then just quickly on the selling season. It's encouraging that you guys reiterated the 1 million target for this year. Just curious how much visibility you guys have into that target for next year at this point? And then maybe what the expectation might be for how many of those lives come from select versus traditional membership?

I'll start by saying our target is always that pretty much every year. We do have a pretty nice pipeline build for the next year's selling season so far. And also, we expect more pipeline to come in from now going forward, most of which will be carryover pipeline into next year. But there is some pretty good activity, particularly from some jumbo opportunities for next year. It's early to comment on whether or not they will or won't get us to 1 million lives. And so I can't reiterate sort of the same kind of clarity around achieving that target, but I can tell you that we're pleased with the overall pipeline build even for next year as well as we sit here now.

And then as it relates to Select, as I said in my previous comments, as soon as we have more clarity into how much and when Select will start to contribute more meaningfully. We'll add that color in our commentary. But as I said before, most of what's going to happen now and over the next I'll call it, 12 to 18 months is going to be us signing up those relationships and then working with those companies and ending to get to as many of their brokers through tactics that we both will do the companies and us in order to get adoption going.

Your next question is coming from John Pinney from Canaccord Genuity.

Good to hear about the selling season. I just provide any commentary about like how -- what gives you the confidence for anyone who hasn't been signed at the [indiscernible] at this point in the season that they're their intent is to sign by the end of the year for next year. I guess it's just like what gives you the confidence they won't turn into not now.

As you might -- we have a lot of tracking and tools and obviously then conversations with our sales force and our sales leaders in particular around the larger opportunities that are in pipeline. But we track a lot of activities, a lot of our criteria is to what we call pipeline is objective in terms of sales progression. And it's a combination of of the commentary from our sales teams. The objective data that we have around the sales activity, what they're looking at, the buying questions, that kind of thing and then our past history around that to estimate where we're going to get to.

Okay. And just as a follow-up -- is there any way you can quantify like how much the investments -- the investments for this year are like factoring into like EBITDA guidance for the year?

Yes. We've never quantified it, but what we've said historically and still the case is that the increase in CapEx that you've seen over from '24 to '25 and now sort of equivalent here in '26. There's about an equivalent amount of OpEx running through the P&L as well.

Related to the investment.

Related to the investments. Yeah.

Our final question this afternoon is coming from David Larson from BTIG.

We spoke recently with the benefits consulting and he said that of his 12 or 13 clients that he supports Progyny was in about 7 of them, which I was positively surprised to hear. It makes me think that you have somewhat of a dominant fertility support position in the market.

So I guess, what are your thoughts in terms of like growing your revenue and what opportunities there are to in-sell additional services into your existing base what products or services may you develop that could drive incremental revenue growth? And then can you also comment on international expansion efforts since you're doing so well in the U.S., I mean, it seems like Europe and the international markets are the next frontier.

As it relates to our existing base, we don't own as much market share in the market as what that said. So that's not representative. Nonetheless, we do -- we are 1 of the larger providers of fertility and family benefits in the country for sure. As it relates to opportunities with existing clients, it's just tough we already do, which is whether it's any of the expanded products that we have and/or whether it's them expanding the fertility benefit with us, most clients start with a 2- to 3-cycle benefit. Not everybody starts with egg freezing. And over time, and we've shown in the past, charts around this. But over time, each sales of your cohort generally buys up a little bit more, whether they add more cycles, whether they add egg freezing, small portion that doesn't buy pharmacy every year, whether they add that, whether they add any of the expanded products or the opportunity to run the existing base. The opportunities for us still, as I mentioned in my prepared remarks, is still around adding new logos all the time. So although others -- although what we're winning this year is more pronounced in brownfield -- that doesn't mean there's a significant opportunity out there for brownfield and greenfield as indicated by our expectations for the sales year so far.

As it relates to opportunities, OUS, the OUS opportunity isn't the same in terms of financial contribution as it is in the U.S. It's more of an opportunity around winning multinational companies, in particular whose parent is in the U.S. and having a solution that will address the need of their global population that's at least similar in terms of what it's addressing even if it's not the same type of solution due to many limitations like regulatory limitations, et cetera, OUS.

So it continues to be an opportunity that we invest in and have invested and we continue to invest in, in order to win as many multinational companies as we continue forward, fueling the overall fertility and family-building business that we have today.

Thank you. This does conclude today's question-and-answer session. I would now like to hand the floor back to James Hart for closing remarks.

Thank you, Tom, and thank you, everyone, for joining us this afternoon. Please feel free to reach out, of course. If you have any follow-up questions, we'll also be attending a conference next week. So perhaps we'll see some of you there in Boston. Otherwise, enjoy the rest of the summer.

Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.

Good afternoon. I'm Pete Anevski, Chief Executive Officer of Progyny and a member of the Board of Directors. I'm very happy to welcome you to the Progyny 2026 Annual Stockholders Meeting.

Before I call the meeting to order, I'd like to welcome our Board members in attendance and introduce the business team members who are with us today. The other officers of Progyny in attendance are David Schlanger, Executive Chairman; Mark Livingston, Chief Financial Officer; and Allison Swartz, General Counsel, who will also be acting as Secretary for today's meeting.

I'd also like to introduce John Valla of Ernst & Young LLP, Progyny's independent auditors, who is available to respond to appropriate questions. We thank all of you for joining us today.

The meeting will now officially come to order. We will proceed with the formal business of the meeting as set forth in your notice of annual meeting and proxy statement. After the formal part of the meeting, we will give you an opportunity to ask questions you may have.

We'll begin the meeting with a brief update on the business. As a reminder, remarks made today and in response to any questions may include forward-looking statements. Forward-looking statements involve risks, uncertainties and other important factors that are described in our SEC filings, including our first quarter Form 10-Q, and our actual results may differ materially from such statements. Any forward-looking statements that we make during the meeting are based on our beliefs and assumptions today, and we have no obligation to update them.

In addition, we may also reference certain non-GAAP financial measures during this meeting. For a reconciliation of each of these measures to the most directly comparable GAAP metric, please refer to our quarterly earnings press releases that are available on our Investor Relations website.

We are holding today's meeting virtually. We believe that a virtual format enables easier access and participation by our stockholders helps increase stockholder attendance and saves the company and its investors time and money. In addition to being an environmentally friendly and sustainable format.

Before we move on to the formal business of today's meeting, I'd like to provide a few highlights of what we accomplished in 2025. We were pleased to report that 2025 was an exceptionally strong year for Progyny. We achieved record highs in revenue and adjusted EBITDA at $1.29 billion and $222 million, respectively, with both of those key metrics increasing by double digits over 2024. We also generated a record $210 million in operating cash flow or a 17% increase over 2024.

Beyond these solid financial results, we're equally pleased with what we achieved operationally in 2025, which we believe will set us up well for continued momentum in 2026 and beyond.

That operational excellence starts with our intense continuing focus on member and client satisfaction. By keeping the needs of our members and clients always at the forefront, we once again achieved a near 100% retention of our existing clients for 2026. And this included all of our largest clients. And we expanded our relationships with a significant number of our clients with 30% of the overall base, adding to their Progyny program in some way for 2026.

A key driver for our continued success with both client retention and expansion lies in our value proposition, which consistently delivers total program management success across all of the critical areas important to our clients as plan sponsors. These include network management, our clinical outcomes, member satisfaction and ultimately, overall cost management.

We're particularly proud of our track record in controlling the cost trend in our categories during a sustained period where medical cost inflation continues to be at record highs. U.S. employers have seen a 27% compounded increase in their overall medical costs since 2022, driven by inflation in high-cost disease categories.

Because of our focus on our overall cost management, that 27% represents a greater than 5x differential versus the compounded change in Progyny rates over that same period.

As fiduciary to our plan sponsor clients, we're extremely proud of this as it provides us with yet another way of differentiating our solution. On outcomes, we once again led the industry in clinical results, helping more members than ever with their family building journeys. Outcomes aren't just numbers on the page. They are healthier pregnancies, fewer rounds of treatment, fewer miscarriages, few NICU events and better support across a range of women's health needs, such as managing the stresses of new parenthood or the symptoms of menopause. These better outcomes not only lead to better health for our members, but equally importantly, to lower overall cost for our employers.

Taking all the components of our solution together across member satisfaction, clinical outcomes and cost trend control, helps explain why employers and members are continuing to turn to Progyny to address their family building and women's health benefit needs.

As 2026 begins, our latest selling and renewal season is off to a good start. The level of activity and overall engagement we're seeing affirms that family building and women's health solutions remain a priority for every type of employee.

As we shared in our most recent earnings call earlier this month, our overall pipeline and the early build of new pipeline is substantially favorable versus the year ago period. We've also meaningfully derisked this year's renewal season by securing early favorable notifications from some of our largest clients whose agreements were up for review this year.

Pipeline strength reflects good traction with our market partners, including our first full season with Cigna. We're also seeing good contribution from our traditional demand generation activities which has yielded a mix of companies looking to add the benefit for the first time as well as those considering a switch from their existing provider.

We're also seeing significantly stronger activity from RFPs, on business that is currently with stand-alone competitors.

In short, we're entering 2026 with considerable momentum and believe we are well positioned for the year ahead. This is informed by our reputation earned over a decade as a premier solution for family building and women's health driving the best clinical outcomes, member experience and total program management and cost containment for our clients.

It's also driven by the investments we've been making and will continue to make across our products, both in the U.S. and around the world, to enhance our platform as well as our use of new technology, including AI to create a better member experience and provide even better service to our clients while driving even more efficiencies.

We believe we couldn't be in a better position as we look to continue our growth into 2026 and beyond. We look forward to updating you on the progress in future quarterly earnings calls.

And with that, we'll now move on to the next portion of today's meeting.

Will the Secretary please report at this time with respect to the list of stockholders of record and the mailing of the notice of the meeting.

I have at this meeting a complete list of the stockholders of record of our common stock on March 27, 2026, the record date for this meeting. This list is available for viewing and has been available for inspection for the past 10 days at 1359 Broadway, second floor, New York, New York.

I also have an affidavit certifying that on April 10, 2026, and A notice of Annual Meeting of Stockholders of Progyny was deposited in the United States mail to stockholders of record at the close of business on March 27, 2026. The affidavit of mailing will be filed with the records of the meeting.

At this time, I'd like to introduce Kayla Walsh of Computershare, who has been appointed to act as Inspector of Election at this meeting. Ms. Walsh has taken and subscribed the customary oath of office to execute her duties with strict impartiality. We will file this oath with the records of the meeting.

Her function is to decide upon the qualifications of voters, accept their votes and when balloting on all matters is completed to tally the final votes.

Will the Secretary please report at this time with respect to the existence of a quorum?

I have been informed by the Inspector of Election that proxies have been received for approximately 91% of the outstanding shares of common stock entitled to vote at this meeting. This constitutes a quorum for the meeting today, and we may now carry out the official business of the meeting.

We will now proceed with the formal business of the meeting. There are five proposals to be considered by the stockholders at this meeting.

The time is now 3:13 p.m. on Thursday, May 21, 2026, and the polls are now open for voting on all matters to be presented. The polls will be closed to voting after we go through the matters to be voted on. We will address questions during the Q&A portion of the meeting. If you have a question, please submit it by e-mailing [email protected].

The first item of business is the election of three Class I directors to serve until the 2029 Annual Meeting of Stockholders and until their successors are duly elected. The nominees for Class I directors are Lloyd Dean, Kevin Gordon and Cheryl Scott. No other persons have been nominated in accordance with the company's bylaws. The nominations are now closed.

The second item of business today is the ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as Progyny's independent registered public accounting firm for the fiscal year ending December 31, 2026.

The third item of business today is the approval on an advisory and nonbinding basis of the compensation of the company's named executive officers.

The fourth item of business today is the approval of the amendment to the company's certificate of incorporation to eliminate certain supermajority voting requirements.

The fifth item of business today is the approval of the amendment to the company's certificate incorporation to eliminate the default supermajority voting requirement concerning certain business combinations.

That was the final proposal for today's meeting. The Secretary will now describe the voting procedures.

If you have already voted, there is no need to vote now unless you would like to change your vote. If you have not voted and you would like to vote now or if you'd like to change your vote, please go to www.investorvote.com/pgny, enter your control number from the notice and vote your shares.

We'll pause for a moment to give anyone hasn't yet voted a chance to vote. Each share of common stock is entitled to 1 vote. Please note, this is the last call for votes.

[Voting]

The time is 3:16 p.m. and the polls are now closed for voting. The preliminary report of the Inspector of Election covering the proposals presented at this meeting is as follows: The proposal to elect each of Lloyd Dean, Kevin Gordon and Cheryl Scott as a Class I Director of the company is approved.

The selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026, is ratified.

The compensation of the company's named executive officers on an advisory and nonbinding basis is approved.

The proposal to amend the company's certificate of incorporation to eliminate certain supermajority voting requirements is approved.

The proposal to amend the company's certificate of incorporation to eliminate the default supermajority voting requirement concerning certain business combinations is approved.

We expect to report our final voting results on a current report on Form 8-K to be filed with the SEC within 4 business days of the conclusion of this meeting.

The preliminary Inspector certificate of the votes cast is accepted as presented. We thank all of the stockholders for their participation. The formal portion of this meeting is now adjourned.

This concludes the formal portion of today's meeting. We will now answer questions from stockholders.

There is one question from a stockholder which is as follows: would the Compensation Committee consider using GAAP net income in the financial component of the at-risk compensation targets from 2027 onwards instead of adjusted EBITDA as this would capture dilution from stock compensation as well as the cost from any future capital expenditures and/or interest expense?

Thank you, James. Our Executive Chairman, David Schlanger, is on the call. David, would you like to answer that question?

Sure. No problem. Pete. First, I'd like to thank the shareholder for their thoughtful question. We value input and the perspective of our shareholders, and you can see an example of that in this year's proxy statement with respect to feedback we solicited and incorporated into our most recent executive compensation program.

As Chairman of the Board, I can assure the shareholders that the full text of their suggestion, not just the shortened version that was read today, will be forwarded to the Compensation Committee, and will be given careful consideration.

Thank you, David. We have time for any other questions?

I'm showing no further questions.

Okay. That will complete the Q&A portion of the meeting. There being no further business, the meeting is now adjourned. Thank you all for attending Progyny's 2026 Annual Meeting and for your continued support.

All right. Good morning, everyone. My name is Allen Lutz, health care tech and distribution analyst here at BofA. We are delighted to have the Progyny team here with us. We have CEO, Peter Anevski; and CFO, Mark Livingston. Thank you both for joining us. Really appreciate it.

Peter, I'll start with you. On the last earnings call, at least I felt this way, you sounded notably more constructive on the selling season and some of the momentum that you're seeing in the business around the new pipeline was building substantially favorable versus a year ago. Just overall, it seemed like a very constructive call.

And so to kick things off here, I would love to get a sense, just maybe taking a step back, what's informing, at least from our perspective, what seems like a little bit of increased confidence or some of the positive things you're seeing in the business so far in 2026?

Sure. Good morning, by the way. Thanks for joining us. A couple of things, right? We talked about -- and everything when we talk about it, we talk about it relative to this point last year. Our pipeline builds throughout the year. Our selling season culminates in commitments materially during middle of August through October. And so what we talked about was the progress that we're making in pipeline and pipeline build versus a year ago and also early commitments. And that's not only for both of those, not only overall pipeline, but also average size of deal favorable versus prior year.

It's my first time using a mic here. So as we talk about the RFP activity that you're seeing, you mentioned a comment on the call, just RFP activity from some of your stand-alone competitors has already outpaced what you saw across all of last year. Can you unpack that a little bit? What are you seeing there in the RFP activity? Is there something going on in the broader competitive landscape? Just high level, what are you seeing there from an RFP standpoint?

I'm not trying to speculate as to what may be going on relative to our stand-alone competitors. I just wanted to make the observation around the increased RFP activity. And again, vis-a-vis last year or prior year is even much higher.

I think if you look at our solution and look at the sustainability of our solution and the demonstration of our solution in client satisfaction that manifests itself in the form of 99% retention in our 10-year history, that's really positive. And I think we also talked about in the call is a good example of that. We had a large client present with us and discuss their third-party consultant that they hired analyzing their claims data and their claims data warehouse and over an 8-year period, showed significant favorable results relative to doubling their pregnancy rate with IVF, relative to reducing their preterm birth and NICU rate and a bunch of other really important stats vis-a-vis the favorable outcomes that we experienced.

And I think they said it the best when they said they wish they could talk about all their benefits this way. It's the perfect trifecta of better member experience, significant cost avoidance and increased clinical outcomes, and that's exactly what they're looking for, for all their benefits.

And that makes a lot of sense. You talked about 99% client retention, and you mentioned all the differentiators right there. If we take a step back and we look at not really the competitive landscape, but maybe the demand for fertility solutions over the past couple of years, clearly, the trajectory of the market opportunity has evolved. But would love to get a sense from your perspective, how fast do you think the fertility addressable market is growing and how to think about how that's changed over maybe the past 2 or 3 years?

I think the market continues to grow, driven by the macro trend that we see where both fertility rates are declining overall as well as the number of people giving birth in the U.S. are a higher proportion now that are over 30 versus under. So 53% of women that gave birth based on the latest CDC data were over 30 versus under 30. And then within that, even greater is the 35 and over. So the average age of women going through IVF is 36 years old and 35 and over continues to grow at a compounded rate of above 2.5% over the last 10 or 11 years, right?

So on an overall basis, the demand driven by the macro trend is increasing. The overall industry continues to grow at a roughly 9%, 10% compounded rate per year. And we'll continue to do so and continue to do so, I think, even more given the fact that the trend of people waiting longer in life to start building their family hasn't stopped and is more pronounced. And as it keeps being more pronounced, it's going to drive that need even greater and greater.

That's great. And so the industry growing 9%, 10%. And also, your revenue is starting to diversify in a few different ways. You talked about the Cigna partnership. As one example on the last earnings call, you have a more mature Blues relationship as well. Can you talk about how material a contribution the health plan partners are today? And is it fair to assume what's the relative growth rate of health plan contributions relative to direct? Is it materially different? Just trying to get a sense of the trajectory of both of those parts of your business.

Here's the way to think about it. The distribution partners that we're signing up and doing business with are a continuing contributor to our overall growth. We historically have added around 1 million lives a year to our business, and that's not small. It's about 1% of the addressable market for us and not insignificant.

The relationships are now getting deeper and stronger, and that's sort of the part of what we called out with our Cigna partnership. And as a result, we're starting to get, which is our first full year with that partnership in terms of a sales year coming up right now. And we're seeing more traction with that. And I believe that, that will add incremental value in the form of pull-through and overall lives added, but we'll see how that plays out.

It's those types of relationships that we're going to continue to deepen with the payers around the country, the Blues, regional payers, et cetera, and start to repeat that level of engagement with those partners to be able to help accelerate incremental lives. It will also help as we continue to roll out only the first few months of go-to-market in our Progyny Select product, and those relationships will help in that area as well.

I'll get to the Progyny Select in a couple of questions. I guess before we get there, though, one of the things I thought was most interesting about the call is you talked about the selling season and how strong it was, more RFP activity relative to a year ago. But then also 2 of your largest clients up for renewal have already committed to renew.

So you're seeing at least from our perspective, the market seems to be coming more toward Progyny and then your current customers also aren't looking elsewhere. And so there seems to be a confluence of tailwinds there that are really, really positive. When it comes to those 2 large clients that are up for renewal, I guess, first, they've already committed to renew. I just want to verify that. And then can you talk about what industry those clients are in? And then is there a typical time line for when larger clients indicate their intent to renew during the year?

Yes, I'll try and hit on all of those, if I miss one, just let me know. I'll do the time line first.

Generally speaking, if they're going to go through an RFP process or a market check, it begins about now, maybe 30 days ago. And last, different periods, but through the summer, if you will, middle of the summer, sometimes later in the summer by the time they finalize their decision. So it's as long as an RFP that we were going through with a new prospective client as it is with an existing client. It's just generally how long RFPs take. They're iterative in terms of their steps and the number of people they have involved, et cetera.

As it relates to these 2 clients, yes, they notified us, they were scheduled. We had an indication from them that they were going to do a market check this year. And they came to us already and let us know they're not going to do that, and they're continuing on with us, which is very positive. And we're also having positive conversations with them around some expanded products that they don't have with us today. So that's really positive.

I forgot what the other question was.

The typical time line for when...

Yes. It's sort of like I said, it starts about now maybe 30 days ago. So let's call it, beginning of April and it stretches out until July, August, sometimes September is probably late depending on if they're larger, but by August, they would have made a decision.

Got it. And then as it relates to -- again, it seems like there's more RFP activity, but these 2 clients are staying. You mentioned a lot of different reasons why maybe that is the case around just sort of the benefits of Progyny and some of the outperformance versus traditional fertility services.

Is there anything -- and then also you're expanding the products that you're offering as well. As it comes to these 2 customers, is there anything specific you could point to other than them just being satisfied customers?

So they've done last year in different ways, they've done a form of a market check already, even if it wasn't a formal RFP. One of them explicitly said that to us that that's why they're not. The other one just said they sort of related to the review they've done, they didn't feel the need to do a market check.

Got it.

Look, I think just adding to it, I think one of the things that you have to remember is we are in constant sort of contact with all of our customers on a quarterly basis. And I think we give a tremendous amount of reporting to them about what's happening within their program, including cost as well as value. And I think so reinforcing that value message on a regular basis helps get them comfortable with the program that they have and I think helps obviously obviate the need to go out and do market checks when they already understand it quite clearly.

That makes sense. And then going back to the Progyny Select, really exciting market expansion for Progyny Select. Would love to get a sense of what you're seeing initially when we should get kind of more -- I think the SMID businesses typically follow up in the fall or late summer, you correct me if I'm wrong there.

And then talk about the competitive landscape or lack of competitive landscape in that space. And so what are you seeing there and talk about the competitive landscape?

Sure. So relative to progress, we'll start there. We've been signing up distribution partners and are now in the process of what I call pull-through, but essentially working with them, their producers and ultimately, the brokers that are in their network that ultimately interact with these small businesses.

These small businesses generally materially are January 1 plan years and generally go through their renewal process. It's a shorter cycle and they go through the renewal process for their medical plan in the -- I'll call it, middle to back half of the fourth quarter in terms of commitment. So we won't see the actual pull-through in any meaningful way until then. But the progress around the partners that we're signing up and the effort that they're putting in to educate their network and their folks is positive to date. And so relative to where we are early in Progyny Select's go-to-market life cycle, if you will, I'm pleased with the progress we're seeing so far.

Relative to competition, there's no other plan out there that's filed from an insurance perspective, the ability to have a supplemental plan in the country as far as we can see, the attorneys go through, as you might imagine, the searches. So unless you're in a mandated state and your health plan for your fully insured population is offering you something relative to that mandate, there isn't stand-alone supplemental plan competition for Progyny Select.

And then shifting gears a little bit. As you think about the current state of the self-insured employer in general, utilization across both medical and pharmacy is high and maybe a little bit higher than it's been historically.

As we think about the white space here and getting the not nows over the finish line, can you talk about how the conversation has evolved over the past couple of years? And what is the appetite in the current selling season for the white space? How does that compare to maybe the past couple of years?

Under utilization, burst?

Yes. Look, the one thing I'm just addressing on utilization. So a good healthy quarter this quarter, generally in line with what we were expecting. We obviously came in close to the high end of our guide. So our expectations all sort of ran with that.

But again, within the range of expectation over the last several years, anywhere from 0.45 to 0.49, we were at slightly towards the higher end of that. So we're pleased that utilization and consumption has remained relatively consistent, certainly over the last 5 quarters or so, helps us provide a good foundation for our guidance and what we're seeing currently and for the balance of the year. And I think from white space, obviously, you can talk more about it. Pete, we talked a little bit about greenfield, brownfield and Pete's earlier comments around the sales pipeline, but you can.

Yes. So demand continues to be positive for both white space and for both brownfield and greenfield in terms of the space. There's still a significant amount of companies and across a broad spectrum of industries that don't offer the benefit at all. But even the brown space is a huge opportunity because a lot of those are limited in terms of what they're covering versus a comprehensive covered benefit like what you would do with Progyny, right? So both are huge opportunities for us and continue to be positive conversations.

Sometimes even with the awareness that we've created now for the need for a fertility benefit over the last 10 years, sometimes there's still a little bit more of a conversation as to why you should be doing this when you hear noise in your employee base for not having it, and we still have to do a little bit more education there, but it's not as much as it was in the past, but still a positive.

And here's the reality, the companies that aren't covering it with the trend -- the macro trend that I talked about before, you're going to only be able to ignore it for so long. The range of folks that we engage with our benefit are 30 to 42 years old. They're your millennial population. They're a large portion of your employee base, a really important portion of your employee base, and they have this need.

And so to continue to ignore it, I think, is not possible. It's just a matter of when you're going to add the benefit yourself and also get educated on the reality that you're already paying for it in some way or a portion of it. So there's a lot of cost avoidance on top of it that you're going to be able to do and redistribute your money across more people needing the benefit versus paying for high-cost claimants in the form of premature births or NICU births and that kind of thing.

That's really helpful. And then one of the things we've talked about in the past is GLP-1s and how that may impact how employers that currently don't provide fertility benefits might be thinking about expanding the benefits.

So just to level set here, over the past 3 years, spending on GLP-1s from a self-insured employer perspective has exploded. I don't think anyone would dispute that. But what we've seen -- and so expectations in '24 build into '25. And I think in 2026, expectations for GLP-1 spend have been really high. But what we've observed in the early part of 2026 is that a lot of that volume for GLP-1s is actually flowing outside of the employer benefit toward direct-to-consumer. So it's possible that employers are seeing a lower trend, at least in the beginning of the year relative to their expectations.

As you think about the 2027 selling season, clearly, something is going on that's positive in terms of demand for fertility benefits. My question to you is, are you seeing some of these not nows or some of these employers who may be -- are they telling you that, hey, our GLP-1 spend is falling below trend. So we're actually now able to commit to a fertility benefit, whereas we hadn't in the past. I'm curious if that is something that's coming up in your conversations? Just any type of context around that would be helpful.

Yes. Unfortunately, it's not as explicit as that. I wish it was. But there's -- feels like a little less mind share around GLP-1s, a lot more focused on sort of how to contain that cost and different types of ways to implement your benefit in order to contain that. And I think you're right, the proliferation of DTC in GLP-1s is going to cause more companies to decide whether or not how much of GLP-1s are they going to cover or not because now they're affordable for people on a DTC basis and will address other areas.

So although nobody is saying last year or the year before, because of GLP-1s, we were holding off on fertility, the fact that there's less conversation just in general around that suggests there's a less mind share vis-a-vis what it was recently and possibly could be one of the reasons why there's more activity.

I think part of it, too, is the ROI, right? So on the GLP-1, there's down the line ROI that you have to sort of buy into. And I think we do a really good job of demonstrating like current ROI on your spend. Pete's already kind of referenced it in some of his comments, the leakage that employers already have, whether they're paying for portions of the fertility procedures masked as something else in their current plan, even if they're not offering it or certainly the costs on the back end with preterm birth costs, NICU, et cetera. I think we come in with a really clean story around ROI. And I think by comparison, it's sort of buy the future or buy the today. I think if you're looking at a fertility benefit that can help control costs today, I think that's where we're resonating.

And to kind of piggyback off that, you've expanded into new products, menopause, postpartum and leave, benefit navigation. I think 20% of your current customers have added a new benefit and 40% of new have added. Can you talk about the momentum or what you're most excited about when it comes to your new offerings that are now more than a year old?

Yes. I think it's important to have solutions that address a larger proportion of your employers' population, right, and address specific needs that they're concerned with. And in the case of a lot of these benefits, they're either addressing areas where you could help bend the cost curve and some of the trends that they're seeing or just filling a need in terms of a gap relative to access to care.

In the case of leave and benefit navigation, amplifying many good things that you're already doing for your employees, but then not realizing it with sort of more traditional tools and utilizing tools that could help them better understand, better appreciate and better use all the things that you're offering to them. All have different features that are positive for the overall experience of the employee and the good that the benefit managers are trying to do for those employees.

And so I think the general excitement that they are all touching and addressing parts of family building and overall women's health is also really positive. So they've been resonating really well. We have a lot of really good healthy conversations with our existing clients and continue to talk about what we're doing, whether they have the benefit or not and what's on our road map for those products or whether or not they're looking to add them, but all really positive conversations vis-a-vis their road map in terms of what they want to do for their benefits and what we have to offer.

Going back to utilization for a minute. Mark, given 1Q came in so strong, can you talk about the key variables to get to the high end? And then what would need to happen to get to the low end? Just what's embedded in each as far as your guidance is concerned around utilization?

Yes. So we're following a very similar guidance philosophy that we've been using here for the last 5 or 6 quarters or so. So we anchor what we're seeing today, the activity, how we're seeing clients and their journeys progress from Q1 to Q2. That's embedded within our Q2 guide closer towards the higher end of our guide. And therefore, that projects on to the higher end of the guide for the balance of the year.

The lower end reflects incremental variability at a level that considers some of the variability that we had a couple of years ago. So that way, we've got a range that sort of incorporates some of the changes in human behavior and patterns that could happen through the year. But again, what we're seeing today and the activity that we're seeing today would skew you a little bit closer towards the high end of the range than the lower end.

Okay. That's great. And then to move on to margins, you talked about planned investments to expand the platform's capabilities, member experience, et cetera. Can you just provide some examples of where these investments are going and how to think about either the ROI or the improved member experience?

Sure. So it's everything from the back-end platform to be a more efficient company that's today multiproduct where we started out as a single product company, right? So everything we built originally was built on the back of a single product platform, and that creates some level of both tech debt as well as difficulty in adding capabilities from a timing perspective for engineering, right? So that back-end platform investment is huge and will give us the ability to add capabilities and/or new products and get them to market a lot faster. That's one.

Two is that platform is built with both interoperability as well as with the ability to leverage AI, so that we can augment what all the care management folks are doing, whether they're on the provider side as they do provider account management and interface with the network or whether they're on the member side as they're engaging the Progyny Care Advocates engaging or the clinical educators engaging with the patients, they're going to be able to do that in a much more efficient way and spend a lot more time on their medical journey and sort of what they're talking about there versus sort of like everything, removing administrative sort of tasks, I like to call it homework from the member's plate so that they can get through the journey a lot faster and a lot easier, right? So those are the positive things.

There's also a lot of investment in the digital assets that we're doing. And then finally, adding a suite of products to our global offering that address all the same areas that we do in the U.S. in order to make sure that for our customers that are global, multinational customers, that they can, if they want to have the same type of offerings that address the same type of areas as they do in the U.S. because that's a lot of times the complaint that they hear from their colleagues around the world.

And from an ROI perspective, like our strategy is not to replace the level of human interaction that, in particular, our Care Advocates are having with our members. I think we see that as part of the value that we're providing. But it's about empowering them and making them more efficient in their day-to-day jobs. So for us, it's -- to put it in sort of cold financial terms, it's about avoiding future hiring as we grow as opposed to seeing some kind of step march change in how we're currently supporting our clients.

And as a good pivot to the next question around capital deployment. As you think about the income statement and then the cash flow profile of the business, obviously, you generate a lot of cash. How do you think about the opportunity for M&A? Historically, you've done very small deals. Are there opportunities to do something larger? Or are you kind of more committed to very, very small deals and buying back shares? Just curious if the thinking around there has evolved at all.

Thinking hasn't evolved. The thinking is always around maximizing shareholder value. You're right, the acquisitions we've done are what I'll call smaller tuck-in acquisitions, meaningful and adding value already despite their dollar size, if you will.

We haven't identified anything of size that makes sense. Valuations continue to be nutty in certain areas, and so we wouldn't do an irrational acquisition for the sake of doing it. We'll build de novo and we're perfectly fine with that. But if something presents itself, we'll take a look at it. If we believe it's going to add shareholder value, we believe it's either accretive or a clear path to being accretive, we'll look at it, but nothing has presented itself to date relative to that type of stuff.

So we'll continue to do what we do, which is maximize shareholder value. And if that means returning value to shareholders through things like buyback programs, that's what we'll do in the interim with the excess cash that we're generating.

So with the last minute or so, as we talk about your business, 99% retention rate, the industry is growing high single digits. Your selling season is going well, yet the public market valuation, at least from our perspective, seems pretty disconnected with the growth that you've been putting up. I guess what do you think investors are missing the most about the Progyny story here?

I think, honestly, they're missing the big picture opportunity that Progyny has. The macro trends that continue to drive our business are growing, not declining. The opportunity relative to all the different areas that we're addressing is still in its early stages. We couldn't be better well positioned both from a technology standpoint, from a network and relationship standpoint and continue to increase the size of the moat vis-a-vis competitors in terms with all of our investments.

And on top of that, we are adding new products that are continuing to increase our TAM. I think all of those things are really positive, and I couldn't feel better about where we are.

Sounds great. It looks like we are out of time. Pete, Mark, thank you so much for the time, and thank you, everyone, for joining us.

Thank you.

Thanks for having us.

Good day, everyone, and welcome to the Progyny Inc. Earnings Conference Call.

[Operator Instructions]

It is now my pleasure to hand the floor over to your host, James Hart. Sir, the floor is yours.

Thank you, Matt, and good afternoon, everyone. Welcome to our first quarter conference call. With me today are Pete Anevski, CEO of Progyny; and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions.

Before we begin, I'd like to remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the second quarter and full year 2026 and the assumptions and drivers underlying such guidance; the demand for our solutions, our expectations for our selling season for 2027 launches; anticipated employment levels of our clients in the industries that we serve, the timing of client decisions, our expected utilization rate and mix, the potential benefits of our solutions, our ability to acquire new clients and retain and upsell existing clients, our market opportunity and our business strategy, plans, goals and expectations concerning our market position, future operations and other financial and operating information, which are forward-looking statements under the federal securities law.

Actual risks may differ materially from those contained in or implied by these forward-looking statements. due to risks and uncertainties associated with our business as well as other important factors. For a discussion of the material risks, uncertainties, assumptions and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our Investor Relations website. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures are available in the press release, which is available at investors.progyny.com.

I would now like to turn the call over to Pete.

Thanks, Jamie. Thank you, everyone, for joining us today. We're pleased to report that we've had a good start to the year with record first quarter revenue coming in at the higher end of our expectations. And net income, earnings per share and adjusted EBITDA all above our guidance ranges. These results reflect that we continue to see healthy member engagement during the quarter with utilization trending to the higher end of our historical range and our continued discipline in managing the business, which yielded strong margins overall as well as healthy cash flow. In addition, we also made meaningful progress during the quarter in laying the foundation for future growth through our planned investments to expand the capabilities of the platform, enhance our already industry-leading member experience and extend our position as the solution of choice in women's health and family building.

As the second quarter begins, engagement is pacing consistent with the typical seasonal patterns following the start of the year. Mark will take you through the guidance shortly, but we're pleased to issue ranges for Q2 that reflect sequential increases from Q1 across all the key results. We're also raising our full year expectations for adjusted EBITDA, net income and EPS as well. In short, we've begun 2026 on a strong positive note and are excited for the rest of the year ahead. Contributing to our excitement is the level of activity and energy we're seeing in the market. One example is at the recent Business Group on Health Conference, which is one of the most impactful events for the benefits industry, we had the honor of sharing the stage with one of our largest clients. During this joint session, our client discussed the results of a study they commissioned using a third party to analyze their claims data warehouse, which included all claims, not just family building from Progyny measuring the impact of our program over an 8-year period versus what they experienced prior to Progyny.

The findings reaffirm what we've been reporting to this client regarding outcomes and value that we've been delivering since program inception. They showed that we increased the number of fertility-related pregnancies per year, doubled the pregnancy effectiveness of each treatment, decreased the multiples rate, lowered the miscarriage rate and more than half the preterm delivery rate. These results, in turn, lower the average cost across fertility and related pregnancies, cost per baby and their NICU costs.

Clients put it best when they said, this is the kind of story they feel needs to be told as it achieves the trifecta of member experience, improved health outcomes and cost avoidance, all of which delivers hard ROI. As an aside, this type of analysis has also been performed by a handful of our other jumbo clients, independently analyzing their respective claims data warehouses, and they've all come to similar conclusions. Strong leadership in events like this, where HR leaders and decision-makers come together to share their experiences and help determine their priorities for the year ahead are just one aspect of our selling season calendar. This activity, amongst others, has the 2026 selling and renewal season off to a good start with the level of activity and overall engagement that we're seeing affirming how family building and women's health solutions remain a priority for every type of employer.

Overall pipeline and the early build of new pipeline is substantially favorable versus a year ago, and early commitments are pacing ahead of this time last year. Additionally, on the renewal side, we've meaningfully derisked the season by securing early favorable notifications from some of our largest clients whose agreements were up for review this year. Consequently, the remaining renewal exposure measured in dollars on the book of business yet to be secured is at its lowest level at this point relative to prior years.

Separately, regarding pipeline, we're encouraged by the activity with aggregators and other distribution partners for our Progyny Select offering. While the timing for its incremental contribution to pipeline will be later in the year due to normal buying patterns for these groups, we're pleased with the progress so far relative to our first year expectations around Select.

Taking all of our pipeline activity together, we believe this once again demonstrates not only how important family building and women's health are to employers, but also highlights the market's recognition that our evidence-based solutions drive measurable value to employers through proven cost containment.

Let me spend a few minutes walking you through the drivers of pipeline and overall activity. First, we're seeing good traction across our health plan partners overall and with Cigna in particular. You'll recall this is our first full season with Cigna as a partner. And as expected, we're seeing a good inflow of opportunities from that channel. Second, we're seeing a good contribution to our traditional demand generation activities where our opportunities remain distributed across greenfields and brownfields, companies looking to add the benefit for the first time or considering to switch from their existing provider, respectively.

And lastly, we're seeing significant stronger activity from RFPs on business that's currently with stand-alone competitors. In fact, the activity there has thus far already outpaced what we saw across all of last year. Conversely, we're seeing fewer RFPs than we normally expect from our existing client base. And as previously mentioned, 2 of our largest clients who were up for review this year have already indicated their intention to continue with us. In short, we believe we are well positioned for the season ahead. We are excited about the activity we're seeing, and we look forward to reporting our progress in the coming quarters. We believe one of the reasons for this positive market activity is that employers are increasingly looking for cost-effective solutions that can address the large and growing portion of their workforce being impacted by infertility and who are in need of coverage and support in order to realize their family building and overall health and well-being goals.

CDC recently reported that the number of births in the U.S. and the overall fertility rate have continued to decline, reaching record lows and extending the trends that began nearly 2 decades ago. Fortunately, if we peel back the layers of this data, we see something more insightful and certainly highly actionable. While the overall birth rate is declining, it's being driven entirely by women aged 29 and younger. On the other hand, birth rates amongst women aged 30 and over have continued to increase, such that women 30 and over now comprise nearly 53% of all births. This is the highest proportion ever for that age group. And I'll remind you that the population we serve in our family building solution is generally 30 to 42 years old with the average age of a woman going through IVF at 36.

While all this data tells us is that society has increasingly chosen to defer family building to later in life. And while that may be the preferred path to parenthood for the clear majority of people today, there is a biological reality in that conception without the use of assisted reproductive technologies often becomes more difficult as we age and for many unaffordable. We believe this is a macro trend that employers simply can't afford to ignore. This is no less true even given the heightened focus on the state of the labor market, particularly as it relates to the potential for disruption from AI.

As just one data point on that topic, the Wall Street Journal recently reported on a survey of 750 CFOs who concluded that the impact of AI is only expected to reduce their company's headcount by just 0.4% as compared to what it otherwise would have been for 2026. And that impact is largely expected at entry-level roles or clerical and administrative functions where the tax are more easily automated. This is all the more reason why having family building benefits in the company's overall benefit offering is critical.

We recognize that investors are pricing into our valuation for potential for a negative impact on member engagement or on employer demand for our services. To be clear, we aren't seeing any signs of either. As we see it, these concerns are more rooted in what we've called headline risk as opposed to accurately reflecting a shift in market dynamics, which we don't believe will adversely impact our business.

Before I turn things over to Mark, let me conclude by saying that we believe our results and outlook reflect that we are as well positioned as we've ever been for this opportunity. This is highlighted by 5 key areas: early sales commitments, our overall pipeline, the progress we're making with our channel partners, our derisking of the renewal season through the favorable notifications we've already received and the traction we're seeing with Progyny Select. We view all of this as evidence of the continuing macro tailwinds, and we believe we're in the best position ever to take advantage of those.

Although some headwinds always exist, the outsized emphasis of what is seemingly anticipated in our current valuation runs contrary to what we see. We've seen this play out before throughout our history. When in past years, there were concerns at varying times regarding high inflation or tariffs or potential looming recession, general macro uncertainty and the loss of our largest client 2 years ago. Yet we continue to grow through all of the above, and we expect to continue to do so in the future.

We recently completed our $200 million share repurchase program, and Mark will take you through those details shortly. Our Board is currently evaluating potential options for a new share repurchase program. We anticipate a decision around the end of May, and we expect to make an announcement at that time.

Let me now turn the call over to Mark to walk you through the quarter. Mark?

Thank you, Pete, and good afternoon, everyone. Before I begin, I'll note that the 8-K we filed a short while ago includes our usual slide presentation, which summarizes both the results in the quarter and highlights some of the longer-term trends that we believe are important in understanding the health and direction of the business. We've also posted that on our website. Rather than repeating what's covered by that material, I'll focus on the key themes that impacted both the quarter and how we think about the rest of 2026 and beyond. So let's begin. The first theme is that this quarter's results reflect once again that member engagement has remained healthy and at levels that were consistent with what we were seeing when we issued the guidance in February. The consistency we're seeing in overall engagement continues to demonstrate that members are pursuing the care and services they need in order to achieve their family building and overall well-being goals.

As a result, first quarter revenue came in closer to the high end of our guidance range, reflecting an increase of 1.4% on a reported basis and more than 12% when excluding the contribution from a large former client who is under a transition of care agreement in the first quarter of 2025. As a reminder, the transition agreement pertaining to this client ended as of June 30, 2025. Accordingly, the second quarter that is now underway will be the last quarterly period where you have to take that into account when looking at our comparative results.

The second theme is that we continue to maintain healthy margin performance even as we continue to invest to expand our product platform, enhance features for our members and lay the foundation for future growth. Gross margin expanded efficiencies we continue to realize in care management and service delivery as well as the anticipated reduction in stock compensation expense. And while adjusted EBITDA [Audio Gap] investments, our longer-term adjusted EBITDA margin measured on a [Audio Gap] even at a higher level of investment. Our first quarter CapEx was $6.3 million, reflecting a $3.5 million increase over the prior year period. I'll remind you that we were still ramping this investment program over the early part of 2025.

And our third theme through our [Audio Gap] the flexibility to both invest in the business while also returning value to our shareholders. We generated approximately $46 million in operating cash flow, yielding over $200 million on a trailing 12-month basis, a level we've maintained for 5 consecutive quarters now. Through our ongoing focus on process improvement in revenue to cash management, we also continue to drive further improvements in DSO, which was 11 lower than the first quarter a year ago. This improvement occurred even with the customary build in DSO on a sequential basis from Q4 as we work to establish the payment flows with our newest clients who launched on January 1.

As of March 31, we had total working capital of approximately $266 million, which includes $225 million in cash, cash equivalents and marketable securities. There are no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. And the fourth and final theme is that during the quarter, we repurchased more than 5.5 million shares for approximately $160 million under our most recent share repurchase program, which began in November and provides us with up to $200 million overall. We've now completed that program through the repurchase of approximately 8.8 million shares in aggregate.

Turning now to our expectations for the second quarter and the remainder of 2026. As the second quarter begins, member engagement is pacing consistently with the typical seasonal patterns following the start of the year. Although the unexpected variability in engagement that we previously experienced hasn't recurred since 2024, the assumptions we're making today, particularly at the low end of the ranges reflect the potential that further variability in activity and treatments could occur. To be clear, this is the same approach we've been for more than a year when setting our guidance ranges. The table at the back of today's press release also outlines our assumptions at both ends of the ranges.

In terms of utilization, we're maintaining our full year assumption of 1.04% to 1.05%, which is consistent with our long-term historical ranges. We're also maintaining our assumption for ART cycle consumption per female unique at 0.93 at the low end of the range and 0.95 at the high end. For the second quarter, we're assuming the customary sequential increase, reflecting the ramping of member journeys. On the basis of these assumptions, we're projecting revenue of between $1.365 billion to $1.405 billion, reflecting growth of between 5.9% to 9%. If we exclude the $48.5 million in revenue from the client who is under a transition of care agreement over the first half of 2025, our full year revenue growth is projected to be between 10.1% to 13.3%. At these levels, we expect 2026 to be our eighth straight year of double-digit top line growth since we became a public company.

With respect to profitability, we're increasing our full year adjusted EBITDA, net income and EPS expectations. For adjusted EBITDA, we expect a range of $232 million to $244 million with net income of $103.7 million to $112.3 million. This equates to $1.23 and $1.34 in earnings per diluted share and $1.98 and $2.09 of adjusted EPS on the basis of approximately 84 million fully diluted shares. As it relates to the second quarter, we expect between $342 million to $355 million in revenue, reflecting growth of 2.7% to 6.6%. Again, if we exclude the $17.2 million in revenue from the client under the transition agreement in the year ago quarter, our second quarter guidance reflects growth of 8.3% to 12.4%. On profitability, we expect between $58 million to $62 million in adjusted EBITDA in the quarter, along with net income of between $25.8 million to $28.7 million. This equates to $0.31 and $0.35 of earnings per diluted share or $0.50 and $0.53 of adjusted EPS on the basis of approximately 83 million fully diluted shares.

At the midpoints of the ranges for both the quarter and the year, you can see that we are expecting a consistent adjusted EBITDA margin throughout the year at a level that is also consistent with our full year result from 2025, even with the investments we're making to grow the business.

With that, we'd like to now open the call for questions. Operator, can you please provide the instructions?

[Operator Instructions]

Your first question is coming from Jailendra Singh from Truist Securities.

On a strong quarter. My first question is on the early sales activity commentary, very encouraging comments there. A few follow-ups. First, how are these early commitments split between not nows from last year who might have delayed versus employers looking at this benefit for the first time?

And then you also called out, Pete, that you're seeing more RFPs from employers who are currently with their competitors. Are there 1 or 2 consistent themes that you're hearing from these employers that they are actually evaluating options and it is driving more pickup in this RFP activity from competitor clients?

Regarding your first question, as always, early commitments, a higher proportion of them do come from not nows. But either way, it's positive overall activity and commitments to date versus last year, as we mentioned.

And it relates to your second question, nothing really constructive that I can share relative to what we're hearing, normal sort of general reviews and general comments, but none that are constructive to share here. But I think the bigger, more important data point is the level of activity that we're seeing versus last year and really any other year relative to potential opportunities around solutions that are with current competitors.

Okay. And then my quick follow-up. Last quarter, you called out membership changes because of administrative changes. I know the number of eligible lives is less important metric for you guys to focus on. But given your experience last quarter, have you guys made any changes in the process over the last 2 to 3 months to make sure you get more regular updates from your clients and we don't get any more surprises like what we saw last quarter?

Yes. We're getting regular updates. But what we're also doing is we're in the process of getting full eligibility files as opposed to just updates relative to numeric headcounts from our clients. We've already increased the level of eligibility files that we're getting from our clients over -- since year-end and expect to continue to do so throughout the year. And by year-end, we expect to have eligibility files from the significant majority of our clients. And so throughout the year, a combination of the periodic updates and having full eligibility files will help mitigate events like that again.

Your next question is coming from Brian Tanquilut from Jefferies.

On the quarter. This is Cameron on for Brian. I was just wondering if you could give me some more color on the increase you saw in revenues per ART Cycle. Can you walk us through kind of the moving pieces of this? Was this ancillary uptake rate? And do you expect this to persist throughout the year?

Sure, Cameron. This is Mark. So typically, in the beginning of the year, you'll see a slightly higher rate of revenue -- overall revenue per ART Cycle because you have a higher proportion of clients, particularly for the new ones that are starting their journey. So they're in initial consultation phase. So there's revenue associated, but not ART Cycles. That was a little less evident last year because the revenue that was contributed from that large client that was under a transition of care program was more skewed towards ART Cycle activity just by the definition of how that transition of care program worked. And so what I would say is more instructive is looking back maybe a couple of few years to seeing how that sort of progresses through the year.

Your next question is coming from Michael Cherny from Leerink.

This is Ahmed Muhammad on for Mike Cherny. Congrats on the great results. As we think about the investments that you're making in future growth, can you give us an update on what's sort of in the pipeline in terms of new products and maybe even some timing on that as well? And could you also give some color on what you're seeing and expecting in terms of upsells of new products, both this quarter and this year?

Regarding your second question, it's a little early to comment on upsells, but simply to say that upsell activity is also positive. Other than that, it's early relative to any more color than that. As it relates to expectations around new products, the investments and capabilities are not necessarily new products, but additional capabilities for the existing products and/or expanded products that address the same areas for our global population.

Great. And just as a follow-up, what are you -- what's embedded in the guide in terms of expectations for upselling of new products for the rest of the year?

The guidance -- everything in guidance is what's already committed. There are not -- we don't generally put in expectations of any material kind relative to upselling or new activity is how you should think about it. The upsell activity impact materially the following year.

Your next question is coming from Scott Schoenhaus from KeyBanc.

Congrats on the quarter, the guidance. It seems like you're managing as best as you can the renewal process and seeing a great start to the selling season. So congrats on all fronts. My question is on utilization and your previous comments when you said this last selling season this year produced higher utilizing clients. I guess you're still seeing that, but what drove that utilization towards the higher end? Was it this new cohort? How are they progressing in April? I mean -- and so far in May, your comments were in line with seasonal activity. Is the new cohort seeing elevated utilization through the first 1.5 months -- month and 7 days of the quarter? And then I have a follow-up for Mark. I guess that's more of a question for Pete.

Thanks, by the way, for the comment. So if you recall, when we talked about it, it's not -- it is the new cohort having higher than normal utilization as a cohort, but it's because of the fact that the sales in the cohort this year were weighted more towards higher contribution of certain industries, right? But overall, it's generally performing as expected. I wouldn't say it's higher or better or anything else like that, but as expected and as we've talked about.

Okay. Great. And my follow-up for Mark is, clearly, you beat on the bottom line here despite the investments. Maybe you can walk us through what further investments are needed throughout the rest of the year? And where you could potentially see upside to the margin guidance throughout the rest of the year because you did such a solid job on the first quarter.

Yes. Look, I would say that we've contemplated -- even since February, we've contemplated the investments and phased them throughout the year. So I think they're already well factored in. Look, we had a good quarter, and we've had some puts and takes. Nothing that I'd sort of call out specifically. But obviously, the things that we felt were recurring, we've already now baked into the full year guide. We -- as you know, we've left -- we brought up the low end of the range a little bit. We've kept the high end of the range the same on the top line, but we've increased the EBITDA. And that's really just reflective of some of the efficiencies that we were able to gain in Q1 that we see recurring through the rest of the year.

Your next question is coming from Sarah James from Cantor Fitzgerald.

I'm wondering if a larger portion of this year's early pipeline sales are coming from clients that were not nows in past years, so people that you've been talking to for a while? And if so, why the uptick this year in the decision process to start benefits?

So in general, always early commitments, a higher proportion of them come from not nows. This is no different. If you recall, some of the things we talked about last year was the pipeline build was later than normal. And as a result, that could be part of the contribution to early commitments. But either way, the early commitments are just one indication of the selling season. The overall positive activity and all the things I already mentioned that are driving it are, I think, how I look at the overall activity for the selling season, including the early commitments.

Got it. And one more just on the general market. How do you see the mix of client demand between case rate versus back-end savings? Is the market trending in one direction? And would you ever consider a product model that has back-end savings?

You talking about some sort of value-based care model and risk. Here's the way I think about it. We haven't needed to do that to win business. And the back-end savings are part of what drives our success in client retention. And so the current model, I think, has served us well, and we're not getting real pushback on it in terms of the current model versus a back-end savings sort of with risk and upside, et cetera, in it. So I don't have any plans to modify it.

Yes. I'd just point out that in Pete's prepared comments, he highlighted the third-party study that was done by one of our largest long-standing clients. I think that was sort of the major takeaway of it is the savings are demonstrated by our current model.

Your next question is coming from David Larsen from BTIG.

Congratulations on the good quarter. Can you just remind me what the revenue growth would have been in 1Q, excluding that one major client from the year ago period, please?

Yes, 12%. It's a little bit more than 12%.

Okay. And then with regards to like growth in your existing clients, it's my sense that the cost of oil kind of affects everything. The stock market, broadly speaking, had pulled back significantly a couple of months ago at the end of last year, first quarter, it's now rallied back up. Are you seeing sort of positive signs from your existing client base in terms of adding employees, which would obviously potentially add to your life count in maybe the back half of '26 or into '27. Basically, did this Iran war cause the 400,000 lower count at the start of the year? And could it come back up now that things seem to be getting resolved?

The Iran war, I don't believe has anything to do with the true-ups we reported before. And in general, we're seeing our existing client base from a lives perspective, stay relatively flat. And the good news is, as it relates to sort of everything costing more, as you said, we're not seeing any impact, including what we've seen so far in Q2. And as we all know, the war has been going on now for a couple of months, give or take. We're not seeing any impact on engagement or anything else like that as well.

Okay. And then just any comments on Select? What's the market reception to Select?

Sure. The market reception is positive. We are signing up aggregators and distributors. Reaction is positive. And we don't expect pull-through -- to be able to see pull-through on that until really end of the year when normally smaller employers make their buying decisions and their renewal period is. But nonetheless, so far, we're pleased with the activity and the reception.

Your next question is coming from Allen Lutz from Bank of America.

This is [ Dev ] on for Allen. I just wanted to touch on kind of the market growth for ART Cycles. I think the latest data CDC put out, I'm not even sure if it's available since that team was maybe cannibalized, but it was about 10% CAGR for ART Cycles. Progyny is now moving kind of closer to that range, but obviously still appears to be taking share. I just would love to kind of get your view on what you think kind of the ART Cycle growth is for the market and how we should think about that over the medium term? And I have one follow-up.

Yes. There's no data I've gotten that suggests that the growth rate has changed relative to what we saw over the last 10 years based on the most recent data that's available. So that's really all I can share is I'm not -- I don't have any other data besides what you're describing relative to growth. Some of the pharma manufacturers are reporting growth. They're not giving me exact percentages, but they're reporting growth. And so it continues to grow, but I can't comment by how much.

Okay. Great. No problem. And then start to harp on this, true-ups on the administrative side. But just curious what that came in like this quarter from what I understand is a quarterly process. Was that a positive this quarter? Just commentary and from what you're hearing from your employer clients around their -- the health of the employees and retention there?

Yes. Look, we're basically at the same level like we've seen in most typical quarters, there's some that are up a little. There's some that are down a little, they've largely offset. And as I think Pete highlighted on an earlier question, we're doing a lot of work to gain actual eligibility files on a recurring basis from these clients, which should help us refine and avoid adjustments like that in the future. We've already have some coming in, so we have available to us. And as you said, we expect to have a majority of our clients providing eligibility funds on a regular basis by the end of this year. So all of that should go to helping. Just the last thing I'd point out is like the revenue growth is exactly what we expected. So I think as we've tried to highlight, I think, on our last call and since is that it's really not a driver per se of activity, but an indicator around it. And those adjustments haven't seemed to had any effect on our expectations around revenue.

And our final question comes from Richard Close from Canaccord Genuity.

John Pinney on for Richard Close. Congrats on the quarter. So first, good to hear on the business group on health study. I guess I know it's early in the selling season, but just like qualitatively, is there anything about like the value proposition of your services that's like resonating more like this selling season or anything different than past selling seasons that you would comment on?

I would say no. I would say I spoke more to the demand, even though the pacing of commitments is ahead also. It's more about demand than the pipeline. We're now in the normal process of articulating our capabilities, differentiating ourselves and also articulating the value that we deliver. So I would say nothing substantially different, but just emphasizing, as we always do, we not only manage for each individual member on a sponsor's behalf that goes through the program, good outcomes and favorable outcomes, but we also manage overall program cost containment, which is really important for sponsors as they review their alternatives.

All right. Just as one follow-up. non-GAAP gross profit or gross profit margin, very strong in the quarter. Anything particularly that's driving that? Is this level sustainable? Or is there going to be some coming back here the rest of the year?

So a couple of key things. We've been highlighting that stock compensation expense will be coming down as some of the recognition period for older grants begins to expire. It really started last year in the middle of the fourth quarter. So that's a significant piece of that savings. But there is just recurring regular efficiency that we've been able to gain, which will recur. So both are recurring throughout the balance of the year. It's part of what's contributing to the improvement in adjusted EBITDA that we have now included in the guidance versus what we did a couple of months ago.

Thank you. That concludes our Q&A session. I'll now hand the conference back to James Hart for closing remarks. Please go ahead.

Thank you, Matt, and thank you, everyone, for joining us this afternoon. We know it's a busy day for those we won't see next week at the conference. Please feel free to reach out to me at any time for any follow-ups. Thank you again.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

All right. Thanks, everybody, for joining us today. We're happy to be hosting Progyny. And to my right, I have Pete Anevski, the CEO. For anyone that doesn't know me, my name is Peter Warendorf. I cover Progyny here at Barclays as well as some of the other tech and distribution names.

So Pete, maybe to kick off the conversation, so there was strength in 4Q. It seems like you guys came in ahead of guidance, maybe utilization was more stable. Can you give us a quick recap of the quarter and any highlights you think are worth mentioning? I know there was some nuance around membership that we'll dive into in a minute. And there was growth of around 20% in 2025 ex the one customer. How would you characterize where the business is at more generally?

Sure. Hello, everybody, by the way, thank you for joining us. So the business is in really good shape. As you mentioned, Peter, we exited the year with 4 strong quarters of utilization as well as growth. We're positioned well for 2026. We ended the year with another year of 99% client retention, which is really important. Roughly 30% of our clients added or expanded to their benefit in some way or another of the existing base. We had a strong sales year that we were pleased with. And overall, we feel good about with the investments that we've made in '25 and the investments we're making in '26, we feel well positioned for the future.

Great. So maybe to start on the membership side, I feel like that's a question that you guys and we probably get the most right now. You recently revised the estimated number of lives in '26 to 7.2 million, down slightly, citing some administrative-type updates rather than any kind of like layoffs or macro. Can you just give us a little bit of color around what happened? Why that happened now and maybe whether or not there was any industry or specific customer concentration there?

Yes. So a couple of things around that. One is there's no concentration in terms of industry or specific customers, where the adjustments were, they were generally lower utilizing clients. The way we sort of view it is, at the end of the day, the top line reported employment number isn't that important for us in terms of number of lives enrolled. It's an output as opposed to an input for us.

What we look at is, we look at the utilization trends. We look at the number of members utilizing the benefit. We look at it on a monthly and sequential basis and are constantly monitoring that. We are not seeing an impact relative to the reported lives versus the actual utilization. So for us, it's sort of a nonevent, if you will, and more of a, I'll call it, reporting true-up than anything else.

Got it. And then I guess, I know you just said that those lives are utilizing at a little bit lower rate than the overall population. I mean, what gives you confidence that you may not see that with other clients? I'm just trying to get a sense for whether or not there could be more of those kind of updates that come throughout the year. And then what does your guidance assume going forward for member growth within the year at your existing clients?

I'll take the second part first. We don't assume, in our guidance, we don't assume member growth during the year beyond whatever we've sold and what's planned to launch throughout the year. And the majority of clients that we sold, launched already in Q1.

The second thing is, in terms of confidence, again, what we look at is relative to where we saw adjustments, are there any public announcements out there relative to layoffs or anything like that? The answer is no. And so our expectation is that we don't expect to see that. The unique thing that happened this reporting period versus other reporting periods is that we had, on a net basis, a reduction. Usually, we always have true-ups, but they're positive and negative and they sorted that out. We just had a net reduction. That's an anomaly for us in all the quarters that we did report it.

Got it. Okay. And maybe we'll flip over to kind of more broad utilization and the trends you're seeing there. I know the guidance range this year assumes that you're at kind of the low- to middle of your historical utilization range. Can you just remind us what happened in 2025? What kind of utilization you were seeing? Maybe what you saw in fourth quarter? And then if you can give us any kind of update on what you've seen so far in 1Q?

Sure. So I'll start with the historical range of utilization. We've been in the tight range of 1.03% to 1.09% as a range over many years. We ended last year at a 1.04% utilization rate for the full year. The quarters were more consistent, and when we do utilization, it's on a unique basis. And so it's de-duplication of utilizers within the quarter. So again, it's the same overall, whether the utilization rate ends up at 1.04% or 1.05%, it's really about who's utilizing what throughout the quarters. And as you have somebody utilizing in one quarter and they spill-over and are doing multiple treatments in the second quarter, they only counted once for the full year as an example, right? What we're seeing now is what we guided with, right?

So the utilization rate that we're seeing when we look at the first 6-weeks of utilization in the year, we look at that versus past patterns, in particular, from existing clients, but also for new clients. And we use that to predict utilization not only for the remainder of the quarter, but for the full year. And so what we're seeing is that, we're seeing what we guided to, and then we build in the variability in utilization on the low-end. And so the low-end of the range for the full year, both from an overall utilization rate as well as from a cycles for utilizers is what we factor into in terms of the variability that we've seen in the past that could happen during the year for utilization.

Great. And then within that historical range, I mean, how much does the broader macro environment impacts that? Trying to get a sense for sometimes we get questions like there's expected to be bigger tax refunds this year. Does that have any impact on what kind of utilization you're seeing or any of the broader macro concerns that are happening right now?

Sure. So I'll touch on the just the tax refund comment as an example. Our utilization isn't impacted by whether or not somebody may or may not get a quick unexpected cash flow like a tax refund or something, right? The member responsibility on average for us is around $1,500 a year. It's mostly a covered benefit and the majority of it is generally covered for most people.

What drives utilization for us is people's primordial need to have a baby. And when they get to a point in life where they're trying to have a baby and then realize that they need, may need to help with the assistive reproductive technology, they'll utilize the benefit. That will overcome any sort of things that are going on for most people, a significant majority of people, whether it's anything happening in the macroeconomic environment, in the political environment, et cetera, because once you -- average age of a person moving on to IVF is 36 years old. Her ovarian reserves are already on the way down. The biological clock as I like to say, is real. And once they get to a point where they realize that they may need IVF, what then happens is they realize that the longer they wait, you wait another year, your odds of having the baby even with IVF services go down dramatically. And each year after that, go down dramatically.

So if they want to build a family and they realize that they're infertile and need the help. And then when they go through a medical assessment with their doctor, and that's what they recommend, they also realize that they're taking a risk if they wait, let's say, they are concerned with the macroeconomic environment. And so what generally happens and the best example of that is the global pandemic with COVID, right?

When COVID happened and the country shut down in terms of health care services, but for necessary services, when it reopened, fertility came back the fastest vis-a-vis many other areas of health care because, again, the biological need of building your family is so important. And we realize that, time is not your friend. You're going to go through and use the benefit when you need it.

Great. And maybe we can segue then to the competitive landscape. We get a lot of questions here. And I know Progyny has done a lot to diversify away from any single industry or client, and you guys had a pretty high win rate over the last selling season. But are you guys seeing anything different there in terms of your win rate, maybe what you're seeing on the pricing side or if you're seeing anybody become maybe more or less active?

Yes. So one thing -- I think part of what you're referring to, Peter, is the stand-alone competitors. But just as a reminder to everybody, we compete more with all the payers in this country who have a fertility benefit than we do those stand-alone competitors, right? So collectively, all the MCOs out there have a fertility coverage of some sort. That's been the case since our first day. That's the case through today.

The stand-alone competitors are out there. There's no sort of difference in a competitive -- from a competitive perspective for the stand-alone competitors. They've been around, some of them longer than we've been around. So that's really not a changing dynamic. They've been out there. They'll be out there, but we continue to be differentiated versus them. And so no issues whether it's from a pricing perspective or just from an overall, we continue to win, each and every year when a client makes a decision to add this benefit or not versus everybody else combined versus all the payers and versus all the competitors combined, we win the majority of the time on a deal when the client makes a decision one way or another to do this benefit.

Got it. And it sounds like then -- so the MCOs are -- they're not getting any more aggressive necessarily in the space. Like do you feel like -- we get some questions around people are surprised they haven't made more of an effort maybe in fertility. Like what do you feel like your competitive moat is there? And why have they maybe not gotten more in the space?

Yes, it's a great question. We get it all the time as well. So the MCOs don't make a penny more or less if they -- if the client takes this benefit. When you think about a 1% utilization rate, it's not a lot. They already have the network set up. Whether they turn the diagnostics on or off, doesn't really matter. They're not doing what we do relative to the solution, relative to having care navigators, relative to the program management and the network management that we do, they're just not doing it.

The reality is that they have many other conditions to manage in health care. And this is not one they're focused on because there's no financial incentive based on their model to charge more and do a bigger solution, they're just not doing it. And that's why they haven't -- not one of them has to-date. A few of them over the years have tried to wrap a marketing wraparound in terms of what they're doing, but not really changing fundamentally what they're doing underneath, but that hasn't proven to be competitive for us. So overall, it's just not within their priorities.

Got it. And then maybe we'll jump to some of the other opportunities in the business. I know you guys talked about 30% of the customers added to their offering in the last selling season. Can you maybe give us a sense for how much of that's coming from additional cycles? What's coming from new products like menopause, postpartum? And then in terms of clients that are adding those new offerings and what the response has been? And where are you seeing the most interest in terms of conversations for next year?

Yes. So it's hard to break down the 30% because many clients will do more than one thing in terms of expanding the benefit. They'll add a cycle. They'll also add, for example, menopause or they'll add pregnancy postpartum, et cetera. But in general, clients are responding well to the overall benefit and then adding to it, that's been happening since the first year of sales, we're now coming on to our 10-year anniversary. Since the first year over time, each sales year cohort, generally adds something as time progresses, and as they have a good experience of the benefit, they'll add, for example, initially, they may have only gotten a 2-cycle benefit, they'll add a third-cycle. They maybe didn't cover fertility preservation in the form of egg freezing, they'll add that. Maybe they didn't do adoption and service, they'll have that. And now with the expanded products, they want to address a larger portion of their population. So they'll add the menopause offering or they'll add the maternity support, et cetera.

So all of these are areas that, based on the last 2 years, where we've had success in selling these -- the expanded offering and expect that to continue for the future because these are areas that are important. They're adjacent to what we're doing already and are important to clients in terms of having one vendor manage multiple solutions and cover a larger portion of their overall population.

Great. And then in a similar vein, we'll jump to Progyny Select. And you guys obviously expanded the market there, your potential TAM there by looking at the fully insured market. I mean what specific feedback from employers did you get that kind of pushed you in that direction? And then in terms of the sales cycle, is there any difference from the traditional sales cycle that you guys see?

Yes. So I'll take the first part first. So, infertility in the instance of prevalence of infertility is 1 in 5 in the U.S. It doesn't matter whether you work in a small employer or a large employer, that need is a human need, right? Small employers who generally buy in the fully insured market, generally don't have access to this type of benefit. The demand is from those that serve those employers, so the general agents and PEOs, et cetera, that are out there, love the idea of having a product that they could sell to their small employer groups, so that they could then be viewed by their employees as acting like a big company kind of thing, right?

And then it's a very real need. It's a human need. It's 1 in 5 again in the U.S., right? So on top of that, when we talk about our history around client retention, that's also really attractive to them because in the broker world, turnover of small group employers is pretty high every year. And so the idea of having a benefit that's unique and uniquely offered by that broker or that general agent to those employers, that is as sticky as it is for us in the self-insured market would also help them overall in terms of turnover. And so from those -- from that perspective, it's an attractive product because it fills a very real need. We're able to offer it in a way that gives predictability in terms of cost of the smaller employer and gives -- and has an attractive product in terms of a differentiator for those that launch with us first in market.

And then in terms of the sales here, they're not unlike in terms of when fully insured buyers buy. The significant majority of them are 1/1 calendar year companies. And so they'll renew and the renewal period is generally in the fourth quarter, a lot of times later in the fourth quarter. And so it will be the same cycle roughly, maybe a little more towards the back of the half of the fourth quarter in terms of actual commitment than what we normally see with our ASO population, which generally are making decisions around their benefits in the middle of August through October time period.

Okay. That makes sense. And then when you guys think about the risk of that associated with that model, obviously, these are smaller customers. I think you've talked about it being on a PM/PM basis. I mean, just curious how you think about that risk? Maybe what kind of contract duration you have with these employers? And then what kind of capability you have to reprice as maybe utilization ebbs and flows a little bit?

Sure. So I'll hit that last part first. So fully insured buyers buy on an annual basis. And so they're 1-year contracts. And so each year, you set premiums based on experience that you see. So if our underwriting group is off by a little bit and we have to adjust premiums in year-2, we can easily do that because that's how they buy each and every year. No different than how they buy their medical insurance each and every year. They get premiums at the beginning of the year for the full year and each year, those premiums change, right?

As it relates to risk, in the early days when the populations are smaller, there's a little bit of utilization risk that we're going to take. But if you think about it, we've been managing -- we have more data than anybody relative to managing this benefit for a large self-insured population. We manage the benefit on behalf of our employers that have been doing it successfully with over 7 million lives, doing it successfully for 10 years now. And we're just going to do the same for ourselves. So once the risk pool gets big enough, doesn't have to be that big, then it's going to be no different than us having a large self-insured employer to manage the benefit overall and that utilization risk will be mitigated based on the size of the risk pool.

Got it. And it sounds like you've obviously stated there won't be much financial contribution until 2027. But are you having some initial conversations around the product? Like what's the initial feedback been?

There won't be any contribution, just to be clear, until 2027. But we've been having a lot of conversations and have been signing distribution deals with those that serve the fully-insured market. The conversations have been real positive, relative to response to the product, viewed as unique, game changer quotes that I've heard, but super positive when we talking to a lot of folks, whether they're orderly down to the broker level, all the way up to the general agents and those that run the PEOs, et cetera, across the board, all really positive conversations that are progressing this early in the sales season.

Great. And it's now that we only have a few minutes left, I mean, I want to hit on some of the financials before we call it. But you've guided for revenue to be about 7% growth this year, which is kind of in line with membership. I know you have some of the single customer headwinds in the first half of this year still, but curious what can push you kind of the high versus the low end of that guidance range you have?

Yes. The biggest thing that can do that is always utilization overall, but within it, consumption in terms of cycles per utilizer. That's always the biggest factor that's going to meaningfully swing one way or another, revenue versus expectations.

Got it. And we get some questions around this. I mean I think the 1Q versus full year guide implies maybe there's some utilization ramp throughout the year. And we get questions around like why shouldn't we extrapolate that 1Q, which is a little bit lower to the full year? And I think you've talked about this in the past, but just wanted to let you clarify that and what gives you confidence in that ramp?

Yes. So every year, the seasonality in terms of consumption of the benefit is that the higher proportion of members are in the first quarter going to do consults versus doing actual treatments as a percent of total utilizers, right? That then grows in terms of those being cycled utilizers versus just doing the early initial consults and diagnostics as the year progresses in quarters 2, 3 and 4. That's not different this year. That's been the case since I've been running the company in 2017.

Yes. All right. And moving on to the margin side of things. I mean, I think you guys improved gross margins by like 200 basis points last year. EBITDA was maybe a little bit more modest. The guidance seems to suggest some incremental EBITDA margin headwinds this year as you make some of those investments. I mean, longer term, where do you see the biggest opportunity on the margin side? How do we -- how should we weigh maybe gross margins versus EBITDA margins? And how should we think about that?

Sure. So the overall opportunity for us beyond '26 to expand margins is a couple of things. One is the tapering off of the investments that we're making. We don't expect that to go significantly beyond 2026, and so those are incremental investments that started in 2025 are continuing in 2026 and won't continue at that level going into the out years, right? So that's the first thing. So that's -- a lot of those dollars are embedded in the P&L. A higher proportion of that spend, although on an overall basis is roughly the same, is hitting the P&L this year versus last year, right? That's the first thing.

The second thing is, as we continue to be efficient, continue the investment in the platform itself is set up to make all the care management services and everything that we do that could impact the gross margin line more efficient, but also just overall, the business is going to create efficiency. And then on top of that, as we make our investments in AI and augment the ability for every employee to be able to serve their respective customers, whether they're internal customers or external customers, that will create efficiency down the road as well.

Got it. And I know you talked a little bit about the early selling season results on the last call. Just wanted to ask you, I mean, how does the current pipeline for prospective lives compare to this time last year? And maybe are you seeing more -- any more first-time buyers versus people that pushed at the end of the last selling season? How does that look?

Yes. The majority of commitments so far are carryover pipeline. That's no different than every other year. We're pleased with the pipeline in terms of where we're at and how we're set up for the upcoming sales season. And we look forward to a good year and taking advantage of how we're positioned.

Great. And then to wrap it up, I know we only have about a minute left here. Can you just remind everybody what the expectation is for each selling season in terms of how many members you expect -- or lives you expect to add? And then anything you think that people are missing or anything you want to touch on to wrap this up?

Sure. So we generally expect about 1 million lives. We're also hopeful that Select will add incrementally to that. And in terms of just where we're set up, where we're at, how we're positioned, how we continue to expand our addressable markets. We're well positioned. We continue to expand our moat vis-a-vis stand-alone competitors or the MCOs that are out there. And our opportunity is significantly ahead of us, and we look forward to continue to deliver.

Great. With that, I think our time is up. So thanks, Pete. Really appreciate the time today.

Good seeing you, Peter.

Good to see you too.

Good day, and welcome to the Progyny Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.

Thank you, Paul, and good afternoon, everyone. Welcome to our fourth quarter conference call. With me today are Pete Anevski, CEO of Progeny and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions. .

Before we begin, I'd like to remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the first quarter and full year 2026 and and the assumptions and drivers underlying such guidance, our anticipated number of clients in covered lives for 2026, the demand for our solutions, anticipated employment levels of our clients and the industries that we serve are expected utilization rates and mix the potential benefits of our solution, our ability to acquire new clients and retain and upsell existing clients our market opportunity and our business strategy, plans, goals and expectations concerning our market position, future operations and other financial and operating information, which are forward-looking statements under the federal securities law.

Actual results may differ materially from those contained in or implied by these forward-looking statements. due to risks and uncertainties associated with our business as well as other important factors.

For a discussion of the material risks, uncertainties, assumptions and other important factors that could impact our actual results -- please refer to our SEC filings and today's press release, both of which can be found on our Investor Relations website. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin on incremental revenue. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures are included in the press release, which is available at investors.progyny.com.

I would now like to turn the call over to Pete.

Thank you, Jamie. Thanks, everyone, for joining us this afternoon. We're pleased to report that 2025 was an exceptionally strong year for Progyny where we achieved record highs in revenue and adjusted EBITDA, with both metrics increasing double digits over 2024. We also generated a record $210 million in operating cash flow, an increase of 17% over 2024. We're pleased that the strong finish to 2025, completing the fourth consecutive quarter where both revenue and adjusted EBITDA exceeded our expectations. .

Our $1.29 billion in revenue and $222 million in adjusted EBITDA in 2025 was nearly $90 million and $28 million, respectively, above the midpoint of our original guidance range for the year. Additionally, the operational execution we achieved this past year sets us up for continued momentum in 2026.

As always, this starts with our focus on member and client satisfaction. And this constant focus along with the value we deliver to our plan sponsors has once again yielded a near 100% retention of our clients, including all of our largest employers. Progyny's value proposition entails total program management in all the areas that are critical to the health of our members as well as to the employers that provide their benefits.

This includes execution across member satisfaction, clinical quality and outcomes and overall cost management. We've been able to hold costs and trends far below what employers have experienced in health care over the last several years, even against the backdrop of record medical cost inflation in the U.S. over that same period.

For quality and outcomes, we once again led the industry in clinical results translating into successful family building, healthier pregnancies and better support for menopause symptoms. Those outcomes also translate into the elimination of unnecessary treatments, reducing the rate of high-risk pregnancies, eliminating waste with fewer medication dispensed and fewer NICU events.

These better outcomes not only lead to better health for our members, but equally important, lower cost for our employers. This is enabled by our plan design and overall program management success built off of our unparalleled partnership with our network clinics and supported by our growth and industry-leading scale.

In fact, when you put -- all these aspects together across member satisfaction, critical outcomes and cost and train control, even in the face of challenging economic pressures, employers and members continue to turn to Progyny for solutions for their family building and women's health benefit needs.

It also contributed to expanding relationships with many of our clients with 30% of our base expanding their benefits with Progyny for 2026 through upsells and service enhancements. With these expansions, more than 2.7 million members will now have access to 1 or more of our newest services in pregnancy postpartum and menopause in 2026.

Lastly, our growth has also enabled a further diversification of our base, both in terms of client and industry concentration. With the addition of our newest cohort of clients and lives, we are also entering 2026 with no single client accounting for more than a single-digit percent of revenue and no industry comprising more than 15% of lives.

And to that, I'd also add that our largest industry, health care, has proven to be amongst the most highly resilient to the macro uncertainties over the past 5 years. In short, we're entering 2026 with considerable momentum. This momentum and general broad acknowledgment for the very real need of family building and women's health services remains stronger than ever.

And while our selling season is only just getting underway, we're pleased with where we're starting off with both closed deals and overall pipeline, including the size and quality of the opportunities from last season that are carrying over to this year.

And while we expect the self-insured market to continue to comprise the significant majority of new lives to be added in this upcoming sales season, we are excited about our opportunities to broaden our target market by making our industry-leading services available to smaller employers who previously have not had access to this type of benefit.

When we launched our solution a decade ago, we focused exclusively on large self-insured employers. Over time, we expanded that to include universities and school systems, then labor populations and government as those were compelling additions to our TAM.

In that same vein, we now see a highly compelling opportunity to profitably bring our solution to the 50 million lives in the U.S. under fully insured plans. Progyny Select is our solution to address the needs of the smaller employer who is more sensitive to variability of costs and prefers a model that minimizes their financial risk.

Because Progyny has access to the most comprehensive experience data for employers of all sizes, we believe we're exceptionally well positioned to deliver what this market needs, but has never had access to. A fixed premium product that gives employers the cost predictability they need by becoming part of a larger pool while also allowing their employees access to the comprehensive coverage and support that the self-insured market has all enjoyed.

We already have the operational infrastructure in place to go to market for efficient distribution through brokers and other third-party distribution partners as well as by structuring the program in a way that provides real benefit, while containing its risk through simple structures like CAF benefits and removing options for opt-out at the individual member level.

An additional mitigator is that the premium applies to the full population covered under the employer's plan. As 2026 will be our first year in market with Select, we're anticipating any contribution to our financial results until 2027. We are anticipating on it. Hopefully, my remarks today have helped you understand why we're pleased with our performance in 2025.

With our reputation in market, earned over a decade as a premier solution for family building and women's health driving the best critical outcomes, member experience and total program management and cost containment for our clients with the investments we've been making and we'll continue to make across our products, both in the U.S. and around the world to enhance our platform and with our use of technology, including AI, to augment our capabilities to create a better member experience and provide even better service to our clients, while driving even more efficiencies, we believe we couldn't be in a better position as we begin 2026 to continue our growth into this year and beyond.

With that, I'll turn the call over to Mark.

Thank you, Pete, and good afternoon, everyone. Based on the positive feedback we received following the last quarter's call, we're continuing with the format we introduced in November. The 8-K we filed this evening includes a set of summary slides providing highlights on the quarter and illustrating some of the longer-term trends that we believe are important in understanding the health and direction of the business. .

So rather than repeating what's addressed in that material, I'll use my time today to focus on the key takeaways coming out of the quarter, particularly with respect to the lasting trends that are impacting how we think about 2026 and beyond. So first, we continue to see good revenue growth overall, 7% on an as-reported basis in the quarter or 21% when excluding the impact of a large former client in the fourth quarter of 2024.

As a reminder, the transition of care agreement pertaining to this large client ended as of June 30, 2025. So our results for the fourth quarter and the second half of 2025 don't include any contribution from this client. For the full year, revenue grew 10% on an as-reported basis or 20% when excluding the impact of the former client in both periods. Second, member engagement, both in terms of utilization as well as consumption of art cycles per unique utilizer remain healthy and overall member activity pace favorably versus what was assumed in our guidance.

Accordingly, fourth quarter revenue exceeded the top end of our range by nearly $11 million. As Pete noted earlier, our results have exceeded our expectations throughout the past year, reflecting how members have continued to prioritize their pursuit of the care they need in order to realize their family building and overall health goals.

Third, we continue to achieve healthy profitability and overall margin expansion in both the quarter and for the full year. The nearly 200 basis point expansion in full year gross margin versus 2024 reflects both the efficiencies we continue to realize in care management and service delivery as well as the leverage we're creating with third-party partners through our economies of scale.

Both dynamics have allowed us to continue delivering total cost containment for our clients. Going a bit deeper on what Pete described earlier. At the recent JPMorgan conference, we highlighted how U.S. employers have seen a 27% compounded increase in their overall medical costs since 2022, driven by inflation and high-cost disease categories. That 27% represents a greater than 5x differential versus the compounded change in Progyny rates over that same time period.

We're extremely proud of this accomplishment as it provides us with yet another way of differentiating our solution, particularly against the traditional health plans. We also achieved a modest increase in our adjusted EBITDA margins in both the quarter and the year, even as we've continued to invest to expand our product platform and lay the foundation for future growth.

We're pleased that the model we've built provides us with this type of flexibility. Because of those investments, our fourth quarter CapEx was approximately $5.5 million, reflecting a $3.5 million increase over the prior year period. For the year, CapEx was $18.4 million as compared to $5.4 million in 2024.

Fourth, through our disciplined prudent management of the business, we continue to achieve a high conversion rate of adjusted EBITDA to cash, which gives us the flexibility to both invest in the business while also returning value to our shareholders. And for the third consecutive quarter, we generated more than $50 million in operating cash flow. This contributed to a record $210 million in operating cash flow in 2025, a $31 million increase over fiscal 2024. As of December 31, we had total working capital of approximately $350 million, which includes $310 million in cash, cash equivalents and marketable securities.

There are no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for that facility at this time. During the quarter, we repurchased more than 3.3 million shares for nearly $84 million under our most recent share repurchase program, which began in November and provides us with up to $200 million overall.

To date, including the activity that has taken place since January 1, we have now repurchased approximately 6.5 million shares in total with more than $40 million remaining available under the authorization. Before discussing our outlook for the year ahead, I'd like to highlight a couple of items that will be helpful to you in understanding our expectations for 2026.

First, as outlined in our guidance assumptions, we are expecting 7.2 million covered lives in 2026. This is lower than what we had originally estimated due to a net reduction in lives in the latest counts we've received. We rely on our clients to provide member counts throughout the year and especially following open enrollment. These updates are typically driven by hiring, acquisitions and dispositions, but also include true-ups to the previously submitted figures.

When looking at the client level detail of these updates, none of these coincided with the announcements of any workforce reduction, leading us to believe that these are more likely to be administrative type updates. As we've said previously, our guidance for the coming year is based off the actual utilization that we were seeing as of the start of this year and doesn't rely on total population counts.

As a result, we aren't seeing or expecting a negative impact to the total number of utilizers for this year as these updates came principally from clients who are at lower than average utilization rates.

Second, as previously disclosed, Michael Sturmer departed his role as Progyny's President at the end of 2025. His departure accelerated the vesting of certain previously issued equity awards that were otherwise do divest throughout 2026. We -- this resulted in an incremental $7.7 million in stock-based compensation expense to our fourth quarter and full year P&L.

And this accelerated expense was not contemplated at the time we issued our guidance for stock compensation or net income in November. As indicated in our January press release ahead of the JPMorgan conference, but for the impacts of this stock compensation acceleration, our fourth quarter results for net income and earnings per diluted share would have also exceeded the high end of our guidance ranges.

So turning now to our expectations for 2026. With the first quarter well underway, we've continued to see that member engagement has been healthy, including that from our newest cohort that launched in Q1. Although the unexpected variability we previously experienced hasn't recurred since 2024, the assumptions we're making today, particularly at the low end of the ranges reflect the potential that further variability in activity in treatments could occur.

To be clear, this is the same approach we've been following for more than a year when setting our guidance ranges. The table at the back of today's press release also outlines our assumptions at both ends of the ranges for member engagement. In terms of utilization, the low end of the range assumes 1.04% which is at the lower end of our historical ranges, while the high is closer to the midpoint of that range.

In terms of consumption, we're assuming art cycles per unique utilizer for the first quarter to be at 0.48 at the low end of the range and 0.49 at the high, which is a jumping off point that's lower than what we've seen over the past 3 years.

For the year, consumption at the midpoint is assumed to be consistent with that we've seen over the last 2 years, which itself is at the low end of the multiyear average. On the basis of these assumptions, we're projecting revenue of between $1.355 billion to $1.405 billion reflecting growth of between 5.1% to 9%. If we exclude the $48.5 million of revenue from the client who is under a transition of care agreement for the first half of 2025, our full year revenue growth is projected to be between 9.3% to 13.3%.

With respect to profitability, I'll highlight that as previously committed, we expect to see a significant reduction in our stock-based compensation expense in 2026, down approximately 35% from 2025 as prior large brands have now fully vested.

We now expect stock-based compensation to be approximately 6% of 2026 revenue at the midpoint as compared to the 10-plus percent that it was in 2025. We expect $224 million to $239 million in full year adjusted EBITDA with net income of between $95.4 million to $106.1 million. This equates to $1.19 and $1.22 in earnings per diluted share $1.83 and $1.95 of adjusted EPS on the basis of approximately 87 million fully diluted shares.

Please note that our assumptions do not consider the impacts of any further activity under the repurchase program beyond what has already occurred given the unpredictability and the timing of any additional activity. As it relates to the first quarter, we expect between $319 million to $332 million in first quarter revenue, reflecting growth of negative 1.6% to positive 2.5%.

If we exclude the $31.3 million in revenue from the client under a transition agreement in the year ago quarter, our first quarter guidance reflects growth of 9% to 13.4%. The supplemental materials we published today also include a chart showing the distribution of full year revenue by quarter for the past 3 years, revealing what we typically see 23% to 24% of our full year revenue in the first quarter of the year.

Our first quarter guidance for 2026 is likewise consistent with that. We felt it was worth highlighting this dynamic given that 2025 on a reported basis, unfolded somewhat differently due to the additional contribution in the first half of the year from the transition client.

As that contribution does not reoccur, we would expect to revert to the more customary cadence at the start of the year. On profitability, we expect between $51 million to $55 million in adjusted EBITDA in the quarter, along with net income of between $20.8 million to $23.7 million. This equates to $0.24 and $0.27 of earnings per diluted share or $0.42 and $0.45 of adjusted EPS, a on the basis of 87 million fully diluted shares.

With that, we'd like to now open the call for questions. Operator, can you please provide the instructions?

[Operator Instructions] And the first question today is coming from Jailendra Singh from Truist Securities. .

I just want to go back to your explanation on this change in membership outlook for 2026. Were those mismatches you called out just at new clients or at existing clients, the 400,000 delta seems like a pretty big number to be explained by just administrative issues. And does that mean that 2025 membership figure might have been overstated as well? Just help us clarify that? .

Yes. So it does relate to the previously existing clients. It's not related to the new cohort. Again, as I said in the prepared comments, we do receive updates throughout the year. That's the basis upon which we provide numbers for lives throughout the year. At the end of the year, it tends to be more significant in changes given enrollment changes, et cetera.

But -- but this just happened to be a bit more significant in terms of these administrative changes than we've seen in prior years. Although, again, as we get bigger, proportionately, you'd expect those numbers to be to be out there. The truth and the reality is, is that we're reliant on clients and their processes to give us these numbers, and they're not perfect. And so again, I think what I tried to stress in the prepared comments, which is important is our models, our guidance and how we run the business isn't driven by those population counts, it's on the actual utilization that we're seeing from those clients. .

Got it. And then a quick follow-up around Progyny RX. There has been some confusion among the investor community about the Progyny RX model and economics given all the developments around February bill, which requires 100% rebate paths 2028 and also some fertility medications at a much lower cash on Trump ads -- maybe talk about just the value of report.

Have you seen any employers bringing this up in terms of what's happening in the marketplace? Do you see any pushback from the employers? Do you see that model evolving in any way that economics don't change much for you, but you still kind of check the box on what your employees are looking for? .

Sure. So we haven't seen any pushback as you're describing it. our employers raising concerns about what's out there. Whether or not the -- our model, I'll remind everybody includes rebates at point of sale. We've been doing that since we introduced our pharmacy product, back in I think 2018, it was. And whether or not the model itself in terms of how we charge fees, changes in that remains to be seen, but I think the net economics based on the value that we deliver for both on the medical side as well as the pharmacy side and the overall integrated program and how that's key to drive the member experience and the outcomes. And that value is important. So I don't expect the net economics to change, but the structure of it is certainly possible in the future. .

Next question is coming from Brian Tanquilut from Jefferies. .

Maybe I'll hit on Progyny Select first. How do we think about the strategy on pricing project Select and how you're thinking through the risk or whether or not there is risk associated with that strategy in terms of undertaking a PMPM model? And any other KPIs that you can share with us in terms of how you're thinking about like utilization per member base or anything along those lines? .

Sure, sure. So I'll start with the fact that although in our client counsel when we talk about them, we talk about employers 1,000 lives or more, we have a number of clients and the overall lives are included the smaller clients. We have many, many smaller clients that we use to underwrite the product. And that experience is what we use as a starting point relative to pricing the product.

As you might imagine, we manage our book of business on behalf of our clients that are ASO clients and self-insured clients, and we can do the same thing for ourselves -- and that's how we priced it. We put in guardrails around some of that risk to ensure that there isn't a significant variability in terms of utilization versus our current book of business.

And that's part of the structure of the product. Some of those guardrails include the offering and not being able to be selected at the individual level and so no opt outs being loud, but that when even the smaller importer clients take the benefit, they take it for all of their lives.

And then overall, there are other types of caps and bar rails, including caps for high-cost claimants, et cetera, that are within the product. But overall, the way we see it is as the pool grows, right, it's going to perform no different than what we see with the long tail of smaller clients that we have today that are not inconsistent with our overall utilization. Once the pool was big enough, our expectation is that there shouldn't be a lot of variability and therefore, we price it that way. We did obviously put in a risk premium, and we price it that way off of that experience.

Okay. That makes sense. And then my follow-up. Just as I think about the guidance and the commentary you made in Q1, just to clarify, I mean, first, should we think of this as there's ample conservatism just because we're early in the year? Or with you pointing to kind of like the low end to midpoint of historical ranges, is that just basically factoring in what you're seeing quarter to date -- and then maybe last part here on this question is when I think of the margin compression that implied in the guide, I mean, what are the factors there other than kind of like the revenue outlook being what it is? .

Yes. So our guide is always based on the activity that we're seeing in any period. So -- and for the benefit of the first quarter because our call is a little bit later, we do get the benefit of being able to see a little bit more data as we set our guidance. although I'll also add to that, that new clients who are just coming on board, they are ramping up.

And so there's good news there and maybe a little bit less data as you're looking at the newer clients. But it is all based on what we're seeing. So I'll start with that. And then as far as margin compression goes, we typically see in the first quarter as we've ramped up the entire business. There is a step-up typically. Again, our revenue for this quarter is only just a little bit north of 23% for the full year.

So we are prepared to handle the business throughout the year. So there's a little bit of compression there. And I think there's also some timing around the platform investments and the product expansions that we talked about, that ramped up through the course of the first part of last year. And so it wasn't as much a contributor to expense in Q1 of 25%.

And the next question will be from Michael Cherny from Leerink.

Maybe to build on Brian's a little bit. if my math is correct versus the starting point of the midpoint for your initial '25 guidance, you ended up coming in a little over 7% better than the initial midpoint on revenue, a little more than 14% on the initial midpoint on EBITDA.

I fully respect the formulation you have on guidance and what you're seeing now. But as you think through what's embedded in the guidance, in the view, how do you think about the swing factors that get you to the bottom end of the range versus the top end of the range? And then has anything changed relative to the visibility that you think you have into those different metrics?

So when you think about -- and again, this has been the similar philosophy we've been using now for a good several quarters. So what we're seeing and the data that we have to make our predictions for the quarter and the year. I would say our -- and have you seen, are closer to the higher end of the range than the lower, the low factors in incremental variability of various sorts, whether it's lower number of cycles per utilizer, lowered utilization rate, et cetera.

Although at this stage, that's not what we're seeing. And I think as far as factors and drivers that can influence the year as we go forward. So faster pace of treatments, improved mix of treatments in terms of revenue per overall cycle, improved utilization as we go through the year, like those are all many of the key factors.

We don't include revenue from any sales that we make that we have not already had full commitments to and largely all of the clients that we've sold have already launched. So -- and so to the extent that we have midyear starts or third quarter starts or fourth quarter starts, like those are all potential contributors as they have been in any year.

Helpful, Mark. If I could just touch on 1 other. How should we think about the contribution in the year from some of the other maternal health services that menopause, et cetera. Is it material at this point in time? Or is this still something that's more a value-add relationship builder, -- just curious on the financial impact. .

Yes, it's growing, but it's not yet material. And it's definitely a value add, as you described it relative to the overall services that we performed with our clients. When it becomes material enough to break it out, we will, but it's growing. .

The next question will be from Scott Schoenhaus from KeyBanc. .

In my counterparts here, so we know that you've reduced your expectations our clients have reduced our expectations on lives, but you said that those were all from lower-yielding live. So the implied utilization is actually better for this year based on the revenue ranges. I guess the utilization -- sorry, the revenue ranges in the first quarter and the implied utilization there would suggest to me that from this new cohort, which we backed into is the high utilizing cohort so far, maybe as you do IVF, you have your initial consult.

The earliest you could ever do that would be January. We take a month to do to get on your -- depending on your cycle to get on to use fertility medications and then another month earliest to do the retrieval. So my question here is that -- you've obviously seen this new home cohort do the initial consults pretty nicely here. Should we assume that there's a nice tailwind here coming through the next several months of potential retrievals based on what you're seeing today in this new cohort of high utilizing clients?

Yes. I think look, the way that our guidance is laid out, especially, again, you can just see it in the revenue mix, being less than 1/4 of the year. So implied there is a step-up as we go through the year. We gave you a range around art cycles per female utilizer. And if you sort of try to do the math of what's the balance of the year to get to the annual numbers that we've also provided, it does imply that there's step-up that we would normally see throughout the year. So again, it's been a good start to the year, and it would seem that the phasing and profiling of it is as we would normally expect. .

Great. And then, Pete, this is a follow-up for you. You had some nice -- I don't think you've ever given us early selling season commentary this early. But could we contemplate some of these wins coming in throughout the end of this year like we experienced, I don't know, was it 2 or 3 years ago? And are these large employers. Can you give us more color on that commentary? I thought it was interesting. .

Sure. So they're not large employers in terms of an individual employer -- but we've had a good number of wins that we're pleased about, especially this early in the selling season. A lot of times throughout the year, there are clients that we sell and then go live during the year. That's normal every year. As you recall, a couple of years back, I forgot if it was 23 or 24. I think it was 23. There were really large clients that we sold that went live during the year. This isn't the case yet. Who knows what we'll see.

We don't ever plan for that. But nonetheless, a small amount of activity does happen, where we sell and they go live during the year. Last year, that was the case. And every year, that's the case, but it's usually a longer tail of smaller clients that do that. .

Next question will be from Peter Warendorf from Barclays. .

If I'm doing my math right, it sounds like membership is probably up kind of in the mid- to high single digits range this year, and revenue growth is maybe closer to low double digits, low teens. Can you just help us think about how to bridge that gap? And maybe what's coming from utilization versus upsell versus any kind of contribution from the new products? .

Yes. Look, I think when you look at the midpoint for the year, again, excluding the impact of that other client, we're projecting like 11% growth at the midpoint. And so with your lives growth, which is -- and ultimately, the utilizers, if you do the math and even art cycles, all of those are contributing a significant part to that 11%, but we also do -- again, we're proud of the cost control our level of cost control on behalf of our clients.

But we do have an element of rate that's also included, which helps bridge that gap. So those are kind of the key pieces.

If you think about Mark's comments before, think about it as lower utilizing lives being replaced by higher utilizing lines, which are part of that. So the straight math of just the increase in lives misses that little piece. .

Yes, good point. .

Great. That's helpful. And then maybe with a little bit of macro uncertainty out there, is there anything on the treatment mix side that you might think is worth calling out here? .

No, nothing unusual.

The next question will be from Sarah James from Cantor Fitzgerald.

You talked about Select Group becoming more predictable as it scales -- how do you think about what a critical mass is for predictability. Are you already there now given your exposure to small group on the ASO product? Or how long could it take to hit that critical mass level? .

Yes. Well, we're not there now, as I mentioned in my comments, right now, what we're doing is going to market with the distributors and broker partners, et cetera, that we'll through there sales force be selling select, right? For those, they won't go live until 2027. So there is no -- there's nothing to refer to now in terms of what we're seeing today for that pool. .

The pool doesn't have to get that big to start to become predictable. You're talking in a couple of hundred thousand lives range or thereabout is by prediction based on the data that we have until it starts to become predictable and act more closer to the the book of the business assuming no weird anomaly in terms of sort of 1 industry versus another being heavily weighted in that population, which we don't expect. And so that sort of -- and until that happens, there may be a little bit of variability, but relative to the overall number of lives that we have, it won't actually have any noticeable impact, if you will, on margins overall or our EBITDA margin and/or our gross margins to speak of. But once it gets to enough of a pool across a long tail of smaller clients, it should become predictable not unlike the book of business. .

And just to put a fine point on it, so Pete mentioned a couple of minutes ago, how we do have clients that are of that size now. So we obviously have that data. But we also looked at our smaller-sized clients with a similar structure of benefit and whatnot. So we do have a tremendous amount, 10 years plus of data that we can use to help refine what we expect those pools to deliver when they get to some level of scale .

And we do have actuaries just to be clear, we did -- and all this was underwritten with those experts. .

That makes sense. And just 1 follow-up, if I can. When you talked about the high-cost guardrails, how are they structured? Are you talking about reinsurance? Or are you talking about claims reverting to the employer at a certain attachment point? And what is the average attachment point .

Well, the simplest, there's a couple of arrows again, we're not getting into all the details of the product. But the simplest guardwill is a maximum dollar amount for high-cost claimants, right, a lifetime maximum, right? And then at that point, it's not going to revert back to the employer. It's just the employee then becomes effectively self-insured again or cash pay. Is the simplest example of 1 of the guardrails that are out there. .

The next question will be from Constantine Davides from Citizens.

Maybe first question for Mark. You obviously had a big step up in CapEx in '25. And just wondering if you can give us a little flavor for your expectations for 2026, if we see another step up or maybe a drop-off and then I guess, whatever color you can provide around operating cash flow conversion for '26 as well. .

Yes, sure. So as I said a couple of minutes ago, so a lot of the effort that we've put into improving and expanding our platform as well as investments as we've been expanding the number of products and really getting them launched. That really ramped up, let's call it, over the first half of 2025. And so as we come into 2026 and sort of lap that, we do anticipate for the full year that there'll be a step up, but not a doubling.

I think if you think about it in terms of a full year impact of those levels of increase is probably the right way to think about it. And then from a cash flow conversion standpoint, and it's in our materials, you'll note that we've made a significant reduction in our outstanding DSOs credit to our teams and the work that they've done to make that happen.

But there is a limit on how much we can continue to sort of reduce that. There is a structure of how the cash will work. So I think going forward, although we've been beating it for a couple of years now, the 75% conversion rate from adjusted EBITDA to cash flow is probably a better metric than what we've been able to achieve and beat that metric over the last couple of years. .

Got it. And I guess just 1 follow-up on the newer solutions. I know you said those won't really impact 26. But I guess you talked about having 2.7 million eligible members now with access to those programs. What are you kind of learning about targeting and marketing those programs to the members. And I guess, again, I know it's early, but where are you seeing the most success in terms of those newer solutions to date? .

Yes. It's not the traditional way we do it today where we're doing the individual marketing to the end clients. It's leveraging distribution partners and their sales force, i.e., brokers that generally today, sell overall .

Asking about menopause and .

I'm sorry. I apologize. The differences in the selling motion for. The when we sell the expanded products with the fertility benefit, the sales force is generally trained to sell those products we market to our clients relative to those overall solutions. And then we have subject matter experts, as you might imagine, that are broad in some of those areas. .

And we also, on top of it, then once they're live market to the individual members in conjunction with our client partners.

And the next question will be from Allen Lutz from Bank of America.

This is Deb on for Allen. I appreciate the color on the member base and some of the drivers there. Just curious if there's any particular industries where you saw the elevated administrative changes -- and then it sounds like you're pretty constructive on the pipeline despite some of these higher administrative churn. How are -- how have your conversations with clients over the last month or 2 change, if at all, around the labor market -- just any color there, additional color would be helpful. .

To the second part of your question, conversations have not really changed. The current pipeline and the early season wins that I referred to are generally coming from the carryover pipeline from 2025. and the selling season for 2026 and continuing to add to that pipeline is very underway. But I would say, generally, no different conversations relative to the labor force and what we've been having. .

Got it. And then any particular industries that you saw the elevated administrative changes? .

No. It's across a bunch of industries. I think the only common theme in it is, again, the apparent utilization rate that we're seeing from them were lower than the book. .

There were no other questions from the lines at this time. .

Well, thank you, Paul. Thank you, everyone, for joining us this afternoon. Please, of course, as always, feel free to reach out to me on a follow-up with any additional questions. Otherwise, we look forward to seeing you at some of the upcoming conferences or in the first quarter with our call in -- I guess that would be May. Thank you all again. .

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

Great. Good morning. First and foremost, thank you for all of you joining us here in person and for those joining us via the webcast. My name is Ben Rossi and I'm the health care facilities analyst here at JPMorgan. We're excited to welcome Progyny to the stage.

With us here today, we have CEO, Pete Anevski; CFO, Mark Livingston; Chief Commercial Officer, Katie Higgins; and COO, Melissa Cummings. Thank you all for being here.

Thanks, Ben. Thanks for having us. For those of you on the webcast, you can put the voice with the name. My name is Mark Livingston. I'm the CFO for Progyny. And with me here on the stage, as Ben said, is CEO, Pete Anevski, who many of you know. We also have Melissa Cummings, our COO. Melissa joined us earlier last year from Blue Cross Blue Shield of Rhode Island, where she led record growth, retention and brand recognition across both their commercial and government sectors as well as Katie Higgins our Chief Commercial Officer. Katie has been leading our go-to-market sales and client success teams actually for the last 2 years.

So I'll take a moment here to allow you to take in our safe harbor statement covering comments that we're going to make here today. Over the next few minutes, we're going to go through a fireside format Q&A to try to address those questions and things that we think are top of mind for investors, we often get a lot of that kind of interest. And so hopefully, we're going to cover some of the things that you're most interested in hearing this morning.

But before we do that, I just wanted to give a brief overview about Progyny, for those of you who may not be as familiar with our story, we provide comprehensive women's health and family building benefits for a global workforce. And today, our solutions include trying to conceive and preconception, fertility adoption and surrogacy, pregnancy, postpartum and return to work, parent and child well-being as well as menopause and midlife.

And so for our members, we provide expert care and support to help them navigate through these -- some of these difficult life events. And for our clients, we provide real value through outstanding clinical outcomes and helping them control their overall benefits costs. And then from a financial standpoint, what that's led to is significant revenue growth, significant profitability in operating cash flow since our IPO back in 2019.

And so let's just take -- let's just jump right into it. So Pete, often, we're hearing from investor, I think, probably most common, trying to get an understanding of our clients and what's on their minds, what they're thinking about is they're approaching their benefits. So why do they prioritize these types of services? And why do they choose Progyny?

Good morning, everybody. So look, it starts with the employers focus on the needs of their employees and making sure their benefits cover those needs. The incidents and prevalence of infertility is 1 in 5 for the CDC higher than even diabetes. So this is a very real need for employees.

And when you add to it, the complexity of treating infertility, the combination of the medical treatment and specialty medication properly this can prove to be a costly benefit. And when employers are now more than ever focused on medical cost trends, while balancing the need of their employees, we've demonstrated over 10 years, total program management, containing overall unit costs, average cost per utilizing member and significant cost savings driven by significantly favorable medical outcomes, not to mention a way better member experience.

This resonates with the employers desire to cover the benefits that matter while at the same time, being cognitive of medical cost trends that they deal with each and every year. Let me give you a couple of data points to reinforce our impact on cost management and medical cost trends.

In the slide on the left, it compares medical cost trends in the U.S. based on the study by PwC versus the trend with Progyny in just over the last 3 years. And it shows over a 3-year period, there's only a 5% compounded increase in costs across Progyny's medical book of business for both the medication and the medical treatment as compared to 27% over the same period. That's a difference of 5x an increase over the last 3 years.

And on the right side, it demonstrates, based on our clinical outcomes across the board, 30% overall savings on top of our ability to manage overall unit costs and utilization for our sponsors. And these are key points that matter when plan sponsors choose a, whether they're going to cover the benefit; and b, who they cover it with.

Thanks, Pete. So let's click down to the current here for a second. So Katie, as somebody who talks to prospective clients and clients pretty much every day, what insights did we glean from this last selling season? What's on people's minds?

It's a good question. It's nice to be with you all here today. Before I answer your question, Mark, let me just pause to say that we are so proud of our results from the 2025 selling season. The team added an additional 900,000 lives across diversified list of clients. The team also achieved close to 100% client retention. And we are now very closely partnering and integrated into over 600 clients across that diversified list that I mentioned earlier.

And I've been leading go-to-market teams in this industry for over 25 years. Know that I really can't remember a time I've been this proud of the passion, the energy, the persistence that this team demonstrated in market, and it definitely paid off with these results.

But to go to Mark's questions in terms of when I think back to this past selling season, what did we learn, what do we hear? The first thing is that we're hearing from benefit leaders and from benefit consultants that benefits related to conditions that impact women's health and family building are really an expectation of employees, not a nice to have. And this has further reinforced when we talk to the benefit consultants in our industry, most of whom the larger firms have teams that are focused on family building benefits, those teams have never been busier. So that's a great sign of the interest, the activity and the demand in the market.

The second thing I would comment on, and it goes a little bit to some of Pete's comments, is that we're entering a third year of escalating medical trend. And for a benefit leader, I don't know of a single client or prospective client I've talked to where those benefit leaders are not hard pressed to make sure that they can demonstrate that for every dollar they spend that they can link that dollar back high quality care that's linked to outcomes at a competitive and affordable price. And they're looking to their benefit partners like Progyny to sign up for that accountability of managing costs and outcomes with them.

The other thing they're looking toward is for those partners to address more than one condition with the ambition that they can reduce the number of partners that they're working with across their ecosystem. So those are very important points. And when I think back to our success in this past selling season as well as the subsequent selling seasons, it gives me confidence that Progyny is leading the industry in terms of providing this exact value proposition.

Earlier this fall, we had the opportunity to meet with a group of well-respected benefit consultants. And the thing that I heard from that group resoundingly is that finding benefit solution partners that can provide the level of data, insights and patient-level outcomes the way Progyny does is uncommon and it reinforces the fact that when you can show that transparency at value, it makes partnering with progeny a no-brainer.

As I look forward to 2026, we feel enthusiastic about our opportunity ahead of us. Already, we have great traction with our partners across health plans, consultants, our channel resellers. The team did really a fantastic job generating pipeline in the back half of 2025 that carries over to '26. And we're already having very promising conversations with employers today for this year. I don't know, Pete, if you would add anything from your perspective?

Yes. Let me connect the dots a little bit relative to some of what I said on some of what you're saying. What emphasizes to me the importance of this benefit of plan sponsors is not only you and your team, adding 100 -- 900,000 lives in terms of new clients and growth. But when we achieve near 100% retention, again, now 10 years. And when not only is that retention there, but those clients aren't cutting back the benefit and every year they choose their plan design and can do that. But they're also adding to the benefit in some way.

So of our book of business added to the benefit, whether they added Smart Cycles, whether they added egg freezing, whether they added pharmacy where they added some of our expanded products. They added to the benefit and all of those are huge indicators in a world and an environment where medical cost trends are at record highs now 3 years in a row.

It's a good point.

So let's talk a bit about the base itself. Obviously, earlier and on existence, we were much more significantly concentrated around tech clients. They were our founding clients. And we've gotten a lot of questions from investors over the years around individual client risk, individual industry concentration risk. And obviously -- and again, given the off the back of this last selling season and these last several years, we've talked a lot about diversification. But Pete, maybe you could tell us a little bit more about where we stand now entering into 2026.

Sure. So a really nice byproduct of our ability to continue to grow and add lives, significant lives each and every year is not only obviously the financial contribution, but helps mitigate and reduce those risks, right? So early on in Progyny's business, we were primarily tech industry clients.

And that created exposure, obviously, to the extent that whatever reason tech gets hit and the number of employees that they employ gets reduced, right? Just in the last couple of years, we've reduced that risk. We're, in '24 our largest industry from a lives perspective, was 18%. We're now down to 15% in just 2 years.

And then as it relates to concentration of risk relative to any individual client just a few years ago, we had 3 clients that were over 10% in terms of revenue. And our projection for this year in '26 is our largest client will only be a mid-single-digit client. So from my perspective, we've gotten pass and grown past sort of those 2 areas of risk that people have been turned about in the past. And the continued success continues to mitigate that risk even going forward.

So that's a good sort of overview of where we stand today. Let's like to turn it -- start to look forward. On our last earnings call, we talked about new plans to address the small and middle market sized employer. Can you talk a little bit about this, Pete, on this market, how it compares to the market that we've been servicing now for 10 years? Maybe some of the things are the same. And I think importantly, what's different about it?

Sure. So let me talk about a new solution that we created to address this market, all Progyny Select. Progyny Select is our solution to address the needs of small employers that generally buy their coverage on a fully insured basis. As I mentioned before, infertility is a high prevalent condition relevant to all humans regardless of the industry you work in or the size of the company that you work for. The market we're going after is employers now down to a small as 100-plus employers.

Before this, we went down to 1,000-plus employees. And these smaller importers are generally used to buying their medical and pharmacy on a fully insured basis. Infertility today is generally not part of full use of our medical plans in most states. The only way that these insurers would have been able to cover infertility is by doing it on a self-insured basis, and they're too small to take the risk around utilization to do that. This overall market is 50 million additional covered lives as an addressable market for us. It's a market today, as I mentioned before, we don't sell to.

So Melissa, let me come to you. Can you tell us a little bit more about exactly what Progyny Select is and maybe a bit about why we believe Progyny is so uniquely positioned to be able to serve that market.

For sure. Thanks, Mark. First, let me start by saying I'm excited to be here. And I would say that my time at Progeny has only served to reinforce that I've joined a company with a great team and it's very vibrant at Progyny.

Progyny Select is purpose-built for that 100-plus employer, and it's informed by the data and outcomes we've generated over the last 10 years. Progyny Select is a fully insured pooled risk, fixed PEPM offering and like our standard ASO offering, it comes with the same things that differentiate progeny. That includes access to our managed network, our Smart Cycle benefit and personalized member navigation through our Progeny Care Advocate team.

Progyny Select is also going to broaden where we play and so provide a hedge against the ASO book we have in place today. We have been very intentional in building go-to-market capabilities. So things like eligibility, enrollment, billing and commissions are all powered through one integration to afford scaling across that fully insured market. And we're busy building distribution awareness now. And so that comes in the form of partner with general agents, with PEOs, with health plans and brokers such that we imagine the results of our distribution effort will show up in '27 similar to how our ASO selling cycle works.

Thanks, Melissa. So that's a good groundwork of the why and the what here around Progyny Select. But let's talk about timing. So Pete, like why now? Why is now the right time?

Look, as I mentioned before, there's really no reason you shouldn't have access to a benefit like this regardless of the size of the company you work for because, again, you still have the need. We identified this gap a few years ago. We've been investing in it since then in order to create the first fully insured premium funded plan. This plan is payer agnostic. It has characteristics that meet the unique demands of how these companies buy in the market.

We built the operational infrastructure in order to be able to, a, go to market and leverage the distribution partners that generally sell to these employers. And the infrastructure to service this market with the long tail of smaller employers. And maybe the most important factor is we built it in a way to investors and we built it in a way that we expect that we will be able to deliver this service without any decline in overall margins.

So moving on, obviously, Progyny Select isn't the only new product that we have. We've launched a number of them over the last year or so. Melissa, can you remind everybody what are some of these new services? And in particular, how do they fit into our overall strategy?

For sure. So we've been very purposeful in continuing to expand to add services in ways that continue to add value to clients and members, but equally broaden our reach across a given employer's population.

Our newest services include pregnancy postpartum parenting, leave and benefit navigation and menopause. And they're all power by our personalized member navigation team, our Progyny care advocates. These services are really intentionally designed to augment what is provided by a traditional health plan and provide increased coordination, navigation and education for conditions that are frankly often underserved and under-recognized.

We've also heard, as we've developed products, the input from our customers that's informed our build. I'll give you the example that I often hear from members. "I've loved working with my Progyny care advocate and now that I'm pregnant, I have to work with someone outside of Progyny." That reality helped shape our opportunity to add more services to the populations we serve.

I would also double-click for a second on leave and benefit navigation to share that this is more than just a traditional leave administration service. But it really is an integrator and a navigator of an entire suite of benefits an employer might provide such that they get the benefit of our Progyny care advocate, helping make sure those benefits are utilized and made known to the employee population they have. We've had really excited traction and as referenced earlier in the conversation, 1/3 of our core book has participated in these services in 2026. And we're very excited about the momentum and look forward to more.

Thanks, Melissa. And Katie, I think likewise for Global, we did an acquisition middle of last year. And there's been a lot going on and around that. It's evolved quite a bit. Maybe you could talk a little bit about that. I think, in particular, what are those aspects of the global offering that are most interesting to our clients?

Yes. I think as Melissa mentioned, we're constantly listening to our clients in terms of what are the needs. And one area that we have observed across the past few years is the need for especially U.S. employers to be able to provide a unified equitable benefit that focuses on women's and family building services, knowing that that's also very complex to do in the global landscape.

So as Mark mentioned, in 2024, we did complete the acquisition of Apryl, which provided an offering focused on family building. Going into 2026, we will add to that offering in terms of offering pregnancy, postpartum and menopause care resources to those populations. And when I take a step back and think about what our clients appreciating and finding as differentiators in that solution.

First, we're leaning very heavily on our Progyny care advocates, which has been such a key to our success in delivering excellent care U.S. and pushing that out from a global perspective. I'm also making sure that the offering is customized based on country-specific cultural, social and regulatory. And for our clients, they have the opportunity to have a much more simplified administration of the benefit that is also secure and GDPR compliant. So what we're offering with Global is a way of having local customization with global consistency and providing a unified benefit across the whole of their employee population.

The only thing I'll add to that, and just really to emphasize the importance of the strategic decision to invest in Global is when you're a multinational company based in the U.S., it's really important you have parity in terms of addressing across all of your employees around the world and having the ability to have the products and services that do that, not only in the U.S., but in any country we have employees is a really, really important component overall offering.

Thanks, everybody. And not to be left out, there's one for me. So look, I think cash flow is certainly an important part of the story of Progyny. We've had excellent conversion of our adjusted EBITDA to cash flow. We've been working very hard on making this as efficient a business as possible, both on our model and our back-end processes.

And in fact, we've been beating our long-term target of 75% conversion rate over these last few years. And so what do we do with that cash? And we've talked a lot about and we remain unchanged in our capital deployment priorities. So we're always looking to expand the business by expanding the offerings that we're providing, which you've heard about. We obviously then need to also invest in our go-to-market resources to be sure that we're in all of the opportunities that we can possibly be in and win.

We'll also maintain a selective mergers and acquisitions program wherever we can go through the process of build versus partner versus buy, we'll do that. And to the extent an acquisition makes sense, we'll do it.

And then finally, as you've seen, we've been returning value to shareholders over these last couple of years through share repurchase programs, first $300 million a year or so ago. and now a $200 million program, which we announced in November. And so those 4 capital priorities remain the same, and we expect to continue to follow them in the coming year.

Now before I hand the reins back over to Ben here for some Q&A, I just wanted to give Pete a quick last word on 2026 and ask him what do you think you're most excited about for the next year or so?

Thanks, Mark. Look, there's a lot of things to be excited about. As I mentioned before, I think the opportunity to help so many more people in the small employer market with Progyny Select is going to be really exciting. I think the investments we've been making and continue to make across our products, not only in the U.S. and globally, leveraging everything from new tech, AI, creating better member experiences, and ability to service every one of our customers through the best ways possible and every member is also really exciting.

I'm really excited about the team we put together, including the expansion of the C-suite to take advantage of these on is we couldn't be better well positioned for '26 in the future. So we look forward to updating you all in future earnings announcements.

Great. Thank you for that additional commentary. And I think that is a nice segue into the Q&A portion. So yesterday, you announced that fourth quarter results would be slightly above your guidance range. Can you just talk about what's driving that and maybe some of the puts and takes being factored?

Sure. So we're a utilization and care consumption model. We do our best to predict based on activity we're seeing at the time of net earnings, what we expect for the quarter. The demand for the benefit continues to be strengthened throughout the quarter. And as a result, our top line, we expect to be above our top line and the related drop-through in terms of earnings.

Excellent. You said Progyny Select is a pooled risk model. Can you just talk about what that means?

Sure. So if you're a small employer, right, one of the most important things that you want to prevent right? So in the world of medical coverage, what you can't predict as a small employer because you don't have enough employees to sort of predict instance prevalence across conditions is what your expense will be.

So therefore, you join larger pools of smaller employers, larger pools of people, unlike a large employer that has enough employees statistically to predict what their expense might be so that you predict and you buy that in that market on a PEPM basis so that your costs are predictable relative to your medical expense. That's a really important way to buy. Otherwise, all employers can't and don't and that's why they don't today, buy a self-insured employers, but fully insured, afford to take that utilization reset.

Makes sense. You said that Select creates a hedge against your existing self-insured populations. What do you mean by that?

Sure. So when Select gets to scale, if you think about the first question of why our earnings are topping our guidance range. It's when consumption is higher, right. Select, we get more contribution from our ASO model and that will offset a little bit the higher experience if the same experience happens in Select that you might get in terms of margin compression, fully insured side. The inverse is also true.

If consumption is down and utilization is down on the ASO model, Select PEPM revenue will be more predictable and offset any reduction you might get in the ASO model. And then on top of it, the earnings contribution higher from Select because you have less experience on that portion of your book of business.

And then one final one here on Select is just going into the high-level economics, I think that kind of ties in nicely. Are you expecting gross margins to be higher or lower than what you're seeing today with your self-insurance?

Mark, do you want to take that?

Yes, sure. Well, look, I think a couple of important things that Melissa said. So essentially, the offering is the same or very similar to what our ASO model is. That does include some of the newer services, but the reality is that we very well understand what that cost and experience is. We're probably one of the only entities anywhere that can really understand what utilization looks like across broad pools. And so we've designed the product to be able to hit that right point.

So the gross margins will be similar, although slightly higher because we obviously include a risk premium included in that fully insured product. Now there will be some incremental sales and distribution costs, which will fall below gross margins. But we expect that the incremental risk premium to be able to cover that, so net-net, when you get down to EBITDA, we're going to be basically on parity with the ASO model.

Great. Just on a broad level, what is driving some of the differences between the high rate of overall medical cost inflation versus some of Progyny's rate development over the last few years?

Melissa, do you want to take this?

I love to. I would love to. We all know medical cost is sort of 2 pieces, right, unit cost and utilization. And so in our case, there's 2 factors I'd point out. One is scale. Our growth over the last 10 years has afforded us the benefit of a favorable unit cost position with the network we manage. That's one huge piece relative to the difference has been.

The second is around the quality outcomes that we've delivered. Our total program management drives really reduce costs. When you think about things like NICU and preterm birth and better outcomes overall for a maternal situation, we're proud to say that our investments have delivered program management that helps meet a better medical cost position.

Great. And then how should we think about the gross margin profile for your newer services, are you adding costs in order to deliver these products?

And the spirit of all margin questions to Mark.

There you go. So yes, certainly, we need to bring on teams to be able to help manage that. But we do expect to be able to leverage our PCA and our platforms to be able to do so. Those newer products are obviously coming up to scale. So we've been making some investments in building those teams as that comes up. You saw that, that was embedded within our P&L in '25, and we expect that to continue as we go forward into '26.

Okay. And then how should we think about the cadence of adding new lives via Progyny Select maybe in 2026 and then beyond? And then does Select raise your target of at least 1 million new lives?

The short answer is, yes, it does. Right, because it is a 50 million life increase in addressable market, right? But I want to make sure we also address sort of the expectation around the contribution from Select. So this will be the first year in market we'll have Select. Renewals are generally happening for the most part for most of these companies at the end of the year. So financial contribution won't start to happen until '27.

As Select gets into the market and more and more people become aware of it, and we sign more and more distribution partners, the contribution in terms of adding lives from Select will grow over the years. And then we'll start have almost a compounding effect in terms of being more pervasive across many more distribution partners.

So that's sort of the quick summary. The nice thing about Select is based on our data, in my opinion, the opportunity around Select from a coverage standpoint is even bigger than it was for Progyny 10 years ago, ASO business. So we look forward to helping many more people.

Great. In that spirit then, how are buyers thinking about women's health in context of other priorities, maybe such as weight management, MSK and mental health?

Katie's closest to this.

I'm happy to. So I think you can rely on benefit leaders are always going to be focused on the needs that address their population and are obviously going to have an impact on lowering medical trend.

So as you think about some of the conditions that you just referenced, for example, I think how we look at that is where we can solve for gaps in care that create a more cohesive member experience that can drive the cost outcomes and that we can then provide a more seamless partner management experience on behalf of our clients, those are places we're very interested in making sure that we're continuing to add.

Great. Just thinking about competition. Several other companies in your categories have begun to offer metabolic health or GLP-1 programs. Is that something you'd consider adding to your portfolio?

Sure, Melissa.

Sure. The short answer is yes. And when you think about the whole person reality of women's health, obesity plays a huge role in so many related conditions. I think for us, in any evaluation we do, it's building on what Katie just said. It's about that whole person care.

And so whether that is something that we offer through our network or through a partner, we're going to be keenly aware of how do we make sure that we're in the middle of the total set of services that impact overall fusion. So the answer is yes, and it has to be in the right form. We remain open to that and really fueling that whole person care.

Great. And just in the spirit of how your competition has been reacting to higher benefit costs, maybe seeing some stress to varying degrees. I guess, should we think about that pressure being specific to them? Or is this maybe an overall indicator health for your ...

It's a great question, right? Without getting into the details of our competitors and their models. In my opinion, Progyny demonstration then -- this is an area you can address and you can address successfully, and you can help as many people as you grow at scale and continue to deliver financial results for investors.

The struggle with our competitors, I believe, is rooted in their models, right? Their models are different in terms of how they're approaching it. They generally are burning cash. One of our smaller competitors went out of business this year, and there are many reports of competitors struggling to raise money and continue to just be around, if you will. So I think the market is healthy.

We're the best evidence that it can be healthy for many competitors. We welcome competitors. We think it's a big enough market for many to play in, and it's an important enough market that should be addressed by as many people as possible. But again, how others approach their market or whether or not they'll pay or adjust their models, that's up to them.

How much of your base is up for renewal in 2026 and our largest clients included in that?

So generally speaking, we are 3 years contracts with all of our clients. So based on the years that we've been in business and based on the fact that we every year add large clients, every single year, we have more clients coming to renew.

We never take for granted any of our clients. We focus on all of them every year, not only because they're in a renewal year in our opinion, every client is up for renewal every year because a client could cut their benefit whenever they want. So despite the 3-year contracts, the reality is that they could cut it back significantly or they can cut it. So in our mind, every year is a new year, but formally in terms of contract renewals every 3 years, they come up for renewal.

Great. And then you've talked about exposures across your industry in the opening comments. For your selling team, how are you thinking about specific industries and maybe what's driven some of your diversification decisions?

Sure. Katie runs the team so I'll let her take that.

Yes. I would just say that our teams are principally organized geographies, not industry. So that's because of the first point, I think in some places, there is a need for specialization. So labor, tapped hardly populations, public sector. Now with Progyny Select will be organized in that way. And I think it is our approach to market and knowing that these needs are not industry specific. They are human needs that impact anyone at any company they work for really represents the success we've had in diversification across the industry.

Okay. And just as a follow-up, are there any industries where you feel you're underpenetrated across your total book of business?

The short answer is no, and I'll give you a couple of data points. We didn't talk about -- our addressable market today, again, before Select is 105 million lives. We have -- we'll have 7.6 million lives covered in 2026.

So we're still single-digit penetrated across that market across 45 million there's no industry that we're even 20% penetrated and penetrate significantly of our biggest ones, as I mentioned before. So overall, we're not even close to penetrated relative to the overall opportunity to help as many people as possible.

Okay. You've discussed investments in 2025 to support your newest products. How does the member experience change because of that? And do you expect to continue investing in 2026 and beyond?

Sure. So I think the first piece around the member experience, and then I'll let Mark take the second piece. So the member experience is really important. And when you think about it, right, it's everything from the stuff they actually touch every day, whether it's digital assets, their apps, online, through their laptops, through their computers. But it's also everything that we do and invest in relative to all the folks that engage with those members, right?

So our Progyny care advocates have, on average, 15 touch points with the member throughout their treatment journey. And everything that we do is designed to lift as much what we call homework from the member to make their journey as frictionless as possible and also at the same time, as we partner with the providers in our network to make sure that we're working as closely as possible to do 2 things. One, help again that member's journey as much as possible, but also make sure that the administrative burden that clinics have is lighter than they experienced generally with any other payer. Mark, do you want to take the second part?

Yes, sure. And so as far as investments go, like we do have some discrete projects that we're working through that we do expect to continue into and through 2026.

As I said in the capital priorities, we will continue to do is so that we can have all of the platforms and the resources around making sure that we're driving around these new products. We'll certainly be giving even more detail when we provide our guidance here on our next call after February. But I think the right way to be thinking about it is that like the investments will be sort of proportional to the scale of the business and not a stair step as we've seen perhaps in the past.

Great. Thanks for that clarification. So just as we're wrapping up here on time, we spent a lot on the retrospective. On a prospective basis, what do you think investors will appreciate about Progyny in 12 months that they don't currently today?

A couple of things, right? I think there's always a question as to whether or not we'd grab the low-hanging fruit and can we continue to grow? And the answer is we believe we can. I think reporting, as I talked about before, on our progress on Progyny Select and our ability to start to capture that market hopefully as quickly possible they'll appreciate.

I think they'll appreciate as they see -- as it goes in market, the investments, all the different assets that we have, when you bring to bear around all of the issues that employers are facing experience that members can have in what is a really difficult journey otherwise and make that journey as easily as possible and show the ability to do that and show that improvement, not only here, but around the world. All of those things, I think, are going to be things that investors will appreciate.

And if I can just add to it, I think, because it's important, I'm going to look backwards a little bit, but I think 12 months from now, they're going to look at a stable growing company. And I think part of the story of Progyny for these last several years is that we've been growing through so many other sort of macroeconomic challenges. We grew through -- will this company continue in a challenging economy. Will it expand in an inflationary environment? Will it expand in a challenged labor environment? The COVID even regulatory concerns, which 5 years ago, people were talking about.

Nobody talks about that now because it's not a concern. But I think we've continued to grow through all of those. And I think now -- I think investors are reacting to that, they see sort of an open road for us, and we're excited to drive down.

Excellent. Well, that's all the time we have here today. Thank you for all -- the team at Progyny for joining us and all of those listening at the webcast and in person. Thank you.

Thank you.

Thank you, Ben.

Thanks, Ben.

Good afternoon, and welcome to the Progyny, Inc. Earnings Conference Call.

[Operator Instructions] I'd now like to turn the call over to your host, James Hart. James, the floor is yours.

Thank you, Tom, and good afternoon, everyone. Welcome to our third quarter conference call. With me today are Pete Anevski, CEO of Progyny; Michael Sturmer, President; and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions.

Before we begin, I'd like to remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the fourth quarter and full year 2025 and the assumptions and drivers underlying such guidance, our anticipated number of clients and covered lives for both 2025 and 2026.

The demand for our solutions, anticipated employment levels of our clients and the industries that we serve, our expected utilization rates and mix, the potential benefits of our solution; our ability to acquire new clients and retain and upsell existing clients, our market opportunity and our business strategy, plans, goals and expectations concerning our market position, future operations and other financial and operating information, which are forward-looking statements under the federal securities law.

Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business as well as other important factors. For a discussion of the material risks, uncertainties, assumptions and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our Investor Relations website.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin on incremental revenue.

More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures are available in the press release, which is available at investors.progyny.com. I would now like to turn the call over to Pete.

Thanks, Jamie, and thanks, everyone, for joining us. We're excited to report that Progyny had a very strong third quarter with revenue and profitability that exceeded the high end of our guidance ranges. Member engagement continues to be healthy, consistent with what we've seen throughout the past year.

Following the consistent strength of our results, we're pleased to be in a position to once again for the third consecutive quarter, raise our full year guidance. With the most recent raise, we have now increased the midpoint of our revenue guidance by more than $70 million, above the midpoint of our original range for this year.

We're equally pleased with the results of our latest selling season. In any given year, our season reflects multiple priorities, the acquisition of new logos and lives, the retention of existing clients and the deepening of our relationships with existing clients through the expansion of their benefits with us for their employees. This year's selling season once again demonstrated our position as the leader in the market and how our value proposition aligns with both employers and their members.

It starts with the consistent expansion of our base, including over 80 new logos and approximately 900,000 lives this season. As we told you last quarter, although our pipeline initially built slower than we would have liked, largely attributable to the macroeconomic uncertainty earlier in the year, we are particularly pleased with this result in the face of historically high macro medical cost inflation.

We created a large influx of new opportunities throughout the spring and summer, which once again validates how family building and women's health remain a top priority for employers and their members. As the season entered its final stages, we saw that a select number of employers, including some large ones, weren't able to accelerate their decision-making process fast enough to offset their later entry into pipeline.

These companies instead become part of our traditional pipeline of not nows, setting us up well for next year's selling season. Our wins this year represent a broad cross-section of industries, including consumer goods, health care, financial services, education, tech, business services and Taft–Hartley groups.

In fact, this latest cohort continues the ongoing diversification of our member base, which is increasingly spread across dozens of sectors with no one area of the U.S. economy dominating the base. We continue to see a broad distribution by client size with our newest logos contributing anywhere from 1,000 to over 100,000 lives. The second way to see how our solutions are resonating is our near 100% renewal of existing clients in covered lives for 2026.

This extends the long track record of success we've maintained since our first year in market. In our opinion, this is the strongest testament to our market leadership and value proposition. This strength and continued execution is also highlighted in the expansion of benefits where nearly 30% of our clients have chosen to add to their solution in some way for 2026. And this includes clients consolidating their benefits with Progyny away from our competitors. Historically, this meant more smART cycles, adding Rx or expanding the coverage for areas like donor tissue or storage.

While those all still occur, we can deliver for our clients and their members an expanded suite of services, including end-to-end reproductive health support for both their domestic and international populations as well as benefit and lead navigation. Equally important, not one client has reduced their benefit in any meaningful way next year.

Our newest services in pregnancy postpartum, menopause and benefit and lead navigation continue to resonate particularly well with the clients. Although we're in just our second year in market with these programs, we've seen an incredible positive response. Between the uptake from existing clients as well as our newest logos, more than 2.7 million members will have access to one or more of these newest services in 2026. That's an incremental 1.2 million members versus this year.

Taken together, these data points build a complete picture of Progyny's market leadership and the continued demand for our services, and it's what inspires us to continue to expand both the services and segments of employers that have access to Progyny's benefits. A few weeks ago, the White House announced its focus on expanding access to fertility care. We view this as a significant step forward for the country and a strong positive for us.

It's also an affirmation of the work we have accomplished over the last 10 years. The administration expressed its enthusiastic support for supplemental plans to address the small and midsized market. To date, those employers have had limited choices in adding family building care with cost predictability to their benefits, which has forced their employees into the same one-size-fits-all dollar-based plan designs that our model has long proven to be ineffective and inefficient use of resources.

In the past, we've referenced that we've been developing a product for small and midsized companies to address the more than 50 million covered lives within these businesses in the U.S. This is in addition to the 100 million-plus lives that we're already addressing today through large self-insured federal government and Taft–Hartley populations. We're pleased to announce the first of its kind supplemental plan for fertility and family building, which will be in our product portfolio in next year's selling season.

In addition to this expansion, we have also broadened the platform through our newly launched Progyny Global offering. This provides multinational employers with a continuum of integrated services, including family building, pregnancy, postpartum and menopause across their full populations. Progyny's platform was purposely built for global markets and delivers member support tailored to their local environment.

This marries together the capabilities we acquired last year with what we had created in-house and produced a better, more comprehensive offer that's second to none in the market. Given the results we've achieved this past year, coupled with generating more than $50 million in operating cash flow this quarter, which brings the total operating cash flow to a record $156 million over the first 9 months of the year, we believe our stock is significantly undervalued.

Accordingly, with our solid cash position and the overall strength of our balance sheet, we're pleased to return value to our investors through the announcement of a new share repurchase program for up to $200 million. Mark will describe this program in more detail, along with our higher expectations for the year.

Hopefully, my remarks today help you understand why we're happy with our performance thus far in 2025 and why we're even more excited for the year ahead. With the momentum we've built, we are well positioned to continue our growth trajectory into the next year and beyond and look forward to keeping you updated on our progress. With that, let me now turn the call over to Mark.

Thank you, Pete, and good afternoon, everyone. Before I begin, I'd like to first highlight that we're introducing a new format for my prepared remarks. We're aware that many of you routinely have multiple companies reporting at the same time as us, and we recognize how this divides your time and focus.

Our prepared remarks have traditionally included commentary on the drivers to our recent results. To make it easier and faster for you to understand those drivers at your own pace, the 8-K we filed this evening includes a set of summary slides providing highlights of the quarter as well as some of the longer-term trends that we believe are important in understanding the health and direction of the business.

We've also posted that material to the IR section of our website. Rather than duplicate that content here in my remarks, I'll instead focus more on the key takeaways and important trends. Our hope is that this will not only create more time for Q&A, but also give you some time back by shortening the call. We intend for this to be our approach going forward. We certainly greatly value the feedback of our investors and analysts, so please let us know your thoughts.

Moving on to the key takeaways for the quarter. As shown in the press release and the accompanying slides, our results this quarter reflect the continuation of several long-term trends. First, we continue to see good revenue growth, 9% on an as-reported basis in the quarter or 23% when excluding the impact of a large former client in the year ago period. I'll remind you that the transition of care agreement pertaining to this large client ended as of June 30, 2025.

So our results for the third quarter and second half of the year do not include any contribution from them. Second, member engagement this quarter, which is we measure in the utilization rate as well as in ART cycles per unique utilizer was consistent with or slightly better than what was reflected in our guidance.

Accordingly, revenue exceeded the top end of our guidance by more than $8 million. The engagement we're seeing reflects that members are continuing to pursue care and services they need in order to fill in order to meet their family building and overall health goals. Third, we continue to achieve healthy levels of profitability through a 23% gross margin and a 17.5% adjusted EBITDA margin.

We've accomplished this while we've continued to invest to expand our product platform and to integrate the acquisitions that were completed over the last year or so. I'll also highlight that this quarter's results include a $2 million reduction to expenses related to the employee retention credit program, which we received during the quarter.

Fourth, through disciplined, prudent management of the business, we continue to achieve a high conversion rate of adjusted EBITDA to cash. In the third quarter, we generated more than $50 million in operating cash flow, which contributed to a record $156 million over the first 9 months of 2025, an increase of $29 million over the comparable period in 2024.

Third quarter CapEx was $4.7 million, a $2.9 million increase over the prior year period and reflects the previously disclosed investments enhancing member experience and integrating our recent acquisitions. We continue to expect that the incremental CapEx for those projects will be approximately $15 million over our 2024 spend levels.

As of September 30, we had total working capital of approximately $412 million, which includes $345 million in cash, cash equivalents and marketable securities. There are no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. With our balance sheet strength and solid cash position, we're pleased to be in a position to return meaningful value to our shareholders through our latest share repurchase program.

The Board has authorized up to $200 million in open market and facilitated purchases, and this is immediately available for us to use. While this is a sizable program, we're also maintaining our ability to continue investing in our business for future growth across our other long-standing capital priorities. I'll remind you, those priorities include product expansions, new distribution channels and select acquisitions.

Turning now to our expectations for the fourth quarter and the year. As the fourth quarter begins, we continued to see that member engagement is consistent with recent periods. With the unexpected variability we experienced at certain times in 2024, the assumptions we're making today reflect the potential for further variability in activity and treatments, particularly at the low end of our ranges.

To be clear, this is the same approach we've taken throughout the past year. As you can see in today's press release, we have narrowed our assumption for full year utilization to 1.05% at the low end and 1.06% at the high end. This is still lower than the 1.07% we saw in 2024. In terms of consumption, given the current pacing of member activity, we've maintained our assumptions for full year ART cycles per unique of 0.91 at the low end of the range and 0.92 at the high end.

With these assumptions, we're projecting between $292.7 million to $307.7 million in fourth quarter revenue, reflecting growth of negative 1.9% to positive 3.1%. As the transition of care with a large client concluded on June 30, there's no contribution from that client in the second half of this year. If we exclude the $35.9 million in revenue from that client in the year ago quarter, our fourth quarter guidance reflects growth of 11.5% to 17.2%.

On profitability, we expect between $45.3 million to $49.3 million in adjusted EBITDA in the quarter, along with net income of $12.5 million to $15.5 million. This equates to $0.14 to $0.17 of earnings per share or $0.37 and $0.40 of adjusted EPS on the basis of approximately 91 million fully diluted shares. As usual, our expectations for the fourth quarter profitability reflect the ramp-up in hiring ahead of our newest client launches on January 1, in addition to the previously disclosed increased spend this year to expand the features of our platform and integrate our recent mergers.

Please note that our assumptions do not consider the impacts of the repurchase program we announced today given the unpredictability of the underlying timing of its execution. With our strong results over the first 9 months of the year, we're pleased to raise our full year guidance. We now project revenue of between $1.263 billion to $1.278 billion, reflecting growth of between 8.2% to 9.5%.

If we exclude the revenue from the client under the transition of care agreement from both years, our full year revenue growth is projected to be 17.8% to 19.2%. We also expect between $216 million to $220 million in adjusted EBITDA with net income of between $58.5 million to $61.5 million. This equates to $0.65 and $0.68 earnings per diluted share and $1.79 and $1.82 of adjusted EPS on the basis of approximately 90 million fully diluted shares. With that, we'd like to now open up the call for questions. Operator, can you please provide the instructions?

[Operator Instructions] And the first question today is coming from Jailendra Singh with Truist Securities.

Congrats on a strong quarter. My first question is around the 900,000 new covered lives. It might be slightly below your 1 million goal, but it is definitely higher than broader investor expectations. How should we think about these results in light of your messaging around lives running lower year-over-year for the last couple of earnings call?

Did win rates you guys pick up in the last couple of months or you were trying to message this potential 100,000 shortfall? And does your messaging on the last earnings call that lives coming at a higher revenue attach than prior year still hold true?

This is Michael. Thanks for the question. So first off, we're very pleased with the team's execution on this year's sales year -- this year's successful sales year. especially in light of there were a few headwinds during the season that the team had to overcome and execute well against. First, starting with the late developing pipeline, which was a new development for us as well as relatively high macro health care inflation, right?

All those component parts do influence employers' decisions. But again, I think the team executed really well against that to get us to the $900,000 sales year this year. Relative to the 100,000 delta, remember, that's also a relatively small number of clients that would -- on a decision basis, really roughly a handful as well as the 100,000 is relatively small against what will be the broader roughly $7 million base.

Last thing I would say on that front is, while we always have some small opportunities remaining post November, we do have a larger volume this year of those deals, probably as a result of that slower developing pipeline this year and therefore, decision-making extending a little bit further. That said, we're not counting on those deals closing this year. It would be nice if they do. But either way, whether they close or not, it will contribute to a strong start to the pipeline next year. Pete, would you add anything?

No, but I'll take the second part of that question, which is the revenue value of the $900,000. The easiest way to think about it is given mix of clients, industries, benefit design, et cetera, it's pretty proportionate to what the $1.1 million added last year is the way to think about it.

Yes. I think we had said -- just finishing that off. I think we said on the previous call, we expected the -- even though the early commitments were of relatively higher value, we expected that to normalize by this time, and that's what happened.

That's helpful. And then a quick follow-up on -- there is some confusion around the current administration's focus on improving the affordability of the cash pay market for fertility medications and what this means for your Progyny Rx business. And I completely understand the value employers see in keeping medical and pharmacy together.

But just curious, if prices do come down in the cash pay market, what that means for your business? Could that result in employers looking for some pricing concession? Just give us some flavor how you think about the impact for your business.

Sure. So I'll give you some context around the announcement. So the announcement is around what already exists across manufacturers in terms of patient assistance programs for those that don't have coverage. The announcement from [indiscernible] is no different. They've had for years, certainly longer than we've been around cash pricing and the cash assistance program, patient assistance program for those that don't have coverage.

And the announcement is simply just deepening a little bit the discount around those. A large portion of people won't qualify for those. Some will. There will be an income exclusion as part of that. But either way, these have been around for a long time. So I don't expect there to be an impact on covered benefits and/or what manufacturers have in terms of pricing for covered benefits. These are separate cash assistance programs for those that don't have coverage.

Your next question is coming from Brian Tanquilut from Jefferies.

Congrats on the quarter. Maybe just to follow up on the question on the selling season. I mean, just curious what those discussions were this quarter? And then what are you seeing in terms of your current employer clients in terms of layoffs and how that's impacting your view on utilization going forward?

Sure. I'll do the second part first, and I'll let Michael answer the first part. We're not seeing anything relative to anything of size or meaning with respect to layoffs. The layoffs that have been announced are small relative to those companies and small in general. So there haven't been any widespread. I'll bring you back to the beginning of -- I think it was 2023 when there was a series of announcements that were then really what I call back then rightsizing versus reductions in workforce -- I'm sorry, I think it's '22, but versus reductions in workforce.

Collectively back then, even though there was a series of announcements across all tech companies, and again, they weren't all in our portfolio, there's only roughly collectively 150,000 lives sort of identified back then. So we're not seeing or hearing anything from our clients. that we believe you'll notice in terms of impact relative to layoffs is sort of the short answer.

Yes. And then to the other part of the question, as for discussions in the market, similar that they've been in other years, right? Employers always want to understand and focus on really 3 areas: member experience, quality and outcomes and cost control. Those remain the same.

Certainly, this year, cost control remained in that top 3 category. And all 3 fit well into our value proposition, whether that's exhibited by, I should say, whether that's the, again, the strong sales season or in particular, the near 100% retention of our existing clients where those things are even more visible to them on a year-over-year basis.

Got it. And then maybe, Mark, just a quick follow-up. As I think about gross profit margin being what it is. Is there any specific call out there? How should we think about modeling that going forward?

Yes. Look, I think we've continued to expand our gross profits year after year. We've made some investments. I think importantly, here as you look at Q4, we always model that down. in part of my prepared comments addressed that we're building that staff as we enter into the next year. But look, we try to keep that fairly consistent from a profitability standpoint, leveraging those teams as we grow.

Your next question is coming from Michael Cherny from Leerink Partners.

Really nice job on the quarter and the selling season. Maybe if I can just follow up on the drug pricing question. Right now, in terms of what you see as cash prices in the market, how do they compare roughly to the net prices you offer clients?

They vary based on drug. Obviously, cash pricing is cheaper across the board, but they vary and sort of getting into that detail, I'm not sure how that helps. But at the end of the day, I think the more important point is that they have been around for a long time and haven't been a catalyst around pricing for coverage to date nor even a conversation relative to what's out there and clients are aware that they're out there, but they understand that patient assistant programs exist where you don't have coverage. And so it's probably the best way I can answer it. The best color I can give you around it.

No, that's completely fine. And then just maybe one more question, at least for me, and I'm just thinking about the selling season. In terms of the upsell potential, as you think about the -- I think the 1.2 million incremental lives on the new products, how does that evolve now in terms of ongoing upsell, i.e., is this something where you have the ability now because of new products to essentially open up a longer selling season window, kind of upsells over the course of the year? How should we think about that in terms of the relationships, both your existing customers, but also as you continue to work towards that pipeline of customers that didn't get to the finish line?

Yes. Thanks for the question. This is Michael. So yes, we meet with our clients quarterly. Part of that is obviously going through what they've already purchased and how those services are performing as well as where their priorities are and opportunities to expand. So certainly, the teams have more products and services to talk with clients about and where their costs may be -- where we maybe have opportunity to impact their costs or impact and provide services in areas that they're strategically going. And we do have those conversations throughout the year.

Your next question is coming from Scott Schoenhaus from KeyBanc.

On the quarter and the strong selling season. So I guess I wanted to dive more into the selling season commentary from last quarter. You said the mix less lives last quarter, developed later, but there was higher utilization. Just wondering -- and you said that trend has normalized and from the additional lives that we've seen now added.

Just wondering how you obtain or sort of manage those -- that pool? Are you looking at claims data? Are you looking at demographic issues? How much data is a new employer or a potential new client giving you in front of the selling season to be able to understand the cohort of employees and the utilization profile.

Sure. So we've been -- the same way we've been doing it for years. It's everything from the plan design, the products purchased and the industry that they're in and obviously, the lives that, that client represents, right? And so when you roll all that up, we have enough experience and more data than anybody across all these industries to have really good predictability around their revenue contribution, right?

And the way it's been working out for us for years is that the pool becomes predictable. There's variability always within individual clients. But as a pool, when you roll it all up based on expectations for each of those clients, again, by plan design, et cetera, and size and industry and roll that up, there's a pool expectation, which is where our earlier comments were driven from as well as our comments.

Helpful. And then as a follow-up, when you think about -- I'm not asking for guidance for next year, but typically, you wait for your first month of utilization to get a better sense of revenue, provide guidance. But given the choppiness we've seen over the last several years, and we're seeing a tremendous rebound in utilization this year, how are you strategically thinking about guidance going forward?

Here is -- I think that what you guys call the choppiness, I call a small amount of variability. I do appreciate that in any given year, variability, plus or minus 5% can impact year-over-year results and can impact a growth rate. But overall, it doesn't impact materially the overall financial results position or trends, et cetera, right?

That said, we have been -- we have increased and taken into account in the guidance ranges that we've been giving out all year long and expect to continue to do that, factoring in that variability that we've seen in -- over the last couple of years when we put out guidance and that we don't expect that to change.

Your next question is coming from Dev Weerasuriya from Bank of America.

Maybe I'll follow up on Scott's question here. I guess I'm thinking about it in kind of the ART cycles per female utilizer that's typically trended up through the quarters. If I just back out the large client contribution this quarter, it seems like revenue is still slightly down quarter-over-quarter versus historically typically trending up. I guess how are you seeing -- but it seems like utilization is firming up a bit.

So I'm trying to think about how we should think about this into the next couple of quarters because the 4Q guide still considers ART cycles per utilizer kind of below prior years. What are your expectations? How did 3Q trend versus expectations? And are you seeing anything on the ground that gives you confidence that this -- at cycles for utilizer will get back to historical ranges in the coming years?

Yes. So I'll make a couple of comments relative to what you just said. There is seasonality in Q4. And in general, the base book of business does go down a little bit in Q4 versus Q3, mostly because of the holidays. There's 2 big holidays, obviously. There's Thanksgiving and then there's also the Christmas season, if you will, that does impact just capacity in clinics in terms of them being open to use that time to do a lot of cleaning, et cetera, right, plus people make decisions relative to deferring outside of those weeks for exactly that reason.

They don't want to be going through treatment through the holidays, right? In the past, where you've seen, and I'll take last year as an example, sequential increase versus decrease, that was more a phenomenon of cycles per utilizer returning -- trending back up towards normal versus seeing a decline for the first time where we normally see sequential increases throughout the quarters. If you look at prior years, there's always a little bit of noise relative to what's reported versus what impacts Q3 to Q4 sequentially, right?

At the end of the day, I don't look at $6 million in the sequential revenue as a negative trend. I look at it just sort of what we're seeing right now. But as Mark said and we said in our prepared remarks, we don't see any weakness, if you will, relative to utilization or care consumption versus Q3, but factored in the normal seasonality that happens in Q4. So that's the best I can answer that type of question.

Got it. That's helpful. And then just one other quick one. I think Rx revenue growth is still trending below medical. And I think it was attributed to a mix impact last quarter. Was that the same this quarter? And then how should we think about when those 2 maybe converge, I think, as previously expected?

Yes. Look, I think one of the things you have to remember, there are a variety of factors that will -- that factor into each line so that they don't perfectly converge. There are timing differences. There are treatment and program mixes. So there are certain treatment journeys that carry less amount of drugs than others. So minor variations in treatment mix. Pricing is also an impact.

We've talked over the years about how we have been managing cost control tightly for our clients and in some cases, absorbing some of the manufacturer increases on the Rx side where there is not that case on the medical side. So they can vary a bit. As we look at -- and I guess the last thing is that we aren't breaking out the revenue from our newer products into their own category. They do get accounted for in that fertility services line. And so you're seeing some revenue growth there with no associated pharmacy growth. So it isn't going to perfectly align, but they should grow in tandem over the long term.

Your next question is coming from David Larsen from BTIG.

Congratulations on the good quarter. Can you talk a little bit more about the supplemental product that you mentioned? It sounds like it's a sort of a cash-based solution maybe for more middle market accounts maybe that want to spend a little less money on the fertility benefit but want to start with something.

Yes. To start with, it's not a cash-based solution. It's a covered solution. But you're right, it does address small and middle market companies. think of everything from ASO, minimum premium and/or fully insured population, so however they're funded, but again, small and mid-market companies.

And it provides a solution that's more predictable relative to expectations around cost that these smaller companies generally need in terms of understanding what their cost might be and adding this type of benefit. And -- but it is a robust solution that puts them into a position to compete with much larger companies having now what generally is offered to large -- through larger employers, a benefit offering that covers these needs.

That's great. And then can you talk about the year-over-year growth in number of clients expected for 2026 versus the number of lives growth expected in '26. And I guess what I'm getting at is, it looks like you're going to add maybe 55 clients in '26, which is a decline from 73 in '25, but maybe the number of lives are going to increase. Just any thoughts around that would be helpful.

Early go-lives [indiscernible]

So part of the challenge whenever we do this -- we update all year long the number of clients that are live. When we talk about our sales season, many times more clients go-live earlier or go out, if you will, and/or might be off-cycle clients and they have already gone live, but they're included in what we describe as sales overall.

And so the way you're thinking about it is as of what we just reported today versus what we just announced in terms of overall number of companies and clients that we've added, but it includes a decent number, although not significant in terms of revenue contribution, no different than last year, no different than every year, where the -- you might have a number of clients usually really small and when they're not, we call it out, usually really small in terms of live contribution. Think of it in a way that says the majority of the lives contribution is starting next year.

Your next question is coming from Sarah James from Cantor Fitzgerald.

This is Gaby on for Sarah. I wanted to double-click on the supplemental plans. As you get ready to roll those out for the 2026 selling season, should we think about that having impact on the expense line in 2026? Do you need to increase the sales force? Do you need to increase marketing efforts? And then do you expect them to be read through to the revenue and EBITDA line as soon as '27?

Yes. Although you're right, we will have to -- we've already been doing some of that, but we will have to add resources relative to go-to-market. It's not going to be noticeable in the way you're thinking about it where it's going to be significant and change the profitability profile within sales and marketing in a meaningful way is the way I would tell you to think about it.

Okay. Great. And then any updates you can share on the global or international business and how that rollout has been?

Yes, we had -- we did some -- we had some nice adds this year on that with the enhanced benefit and global services and solution. And then as we said in the script, we're excited to now be able to pull really our full U.S. portfolio of services now international, and that will be available for sale next year as well. So good momentum and excited to continue that from a global basis.

Thank you. That does conclude our Q&A for today. And I'd now like to turn the floor back to James Hart.

Thank you, Tom, and thank you, everyone, for joining us this evening. Please, as always, feel free to reach out to me for any further questions or clarifications you may need. We appreciate your time and attention. We know it's been a busy day. We look forward to reporting our next results in February.

Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.