Welcome, everyone. My name is Scott Schoenhaus. I'm the Healthcare Technology Analyst here at KeyBanc. I have the pleasure to have Pete Anevski, CEO, Progyny on our fireside chat. Thank you, Pete, for attending here. We'll just keep this really casual, Pete. Maybe introduce yourself a little bit about Progyny. I think most people on this call know the company, and then we can dive into fireside questions. If audience members, you have a question, you can submit it through the portal, and I'll be able to ask Pete. Yeah, Pete, I'll kick it off to you.
Sure. First of all, thank you so much for having me. My name is Pete Anevski. I'm Progyny's CEO. Progyny is a fertility and family building company, as well as a women's health company, supporting employees and members of plan sponsors through different major milestones in their life. We're excited to provide an industry-leading member experience throughout all the different journeys that people go through as they're building, as they're thinking about conceiving, and ultimately building their families and growing through the journeys of doing that. All the other things around supporting them for return to work, et cetera, are all the different types of products that we offer.
Great. Let's provide some context and look back at the last year and maybe the strong fourth quarter results in the first Q guidance. Let's take a step back, Pete. In 2024, there were sort of air pockets of demand, I think mostly around egg retrievals. You saw some weird anomalies around the behavior of the employees at some of your employers. That seemed to recover here in the fourth quarter and so far year to date in the first quarter. Maybe, Pete, explain, if you can, what you're seeing year to date, what the strength has been. We can talk clinically, if you can. What's baked around your full year guidance based on what you're seeing and put it in context with, obviously, that weird anomaly that happened in 2024.
Sure. I'll try to hit on all of that. If I miss anything, please feel free to follow up. What happened in 2024 was we saw more than usual variability in utilization, mostly around care consumption, specifically as it relates to progression to treatment for those that go through the process of initial consultation with a reproductive endocrinologist and then ultimately go on to treatment. What we generally saw historically was, as the year progresses, the largest proportion of people that are starting on their journey happens in the first quarter. As the year progresses, the ART cycles per utilizer grow seasonally from the first quarter to the second quarter, second quarter to the third quarter, and third quarter to the fourth quarter. We had put out and published data around that in that history so that people had that context.
What we saw for the first time in 2024 was we saw a decline in Q3 of ART cycles per utilizer. We have never seen that before in terms of that seasonality that I am describing. Really, what that suggests is that a small percent, but nonetheless enough, that changed the normal trajectory and pattern of behavior of people did not progress to treatment. Therefore, the average number of ART cycles per utilizer declined. That impacted our revenue expectations versus actual reported results. What we saw in Q4 when we reported our Q3 results, which was the beginning of November, is we saw the beginning of the return of ART cycles per utilizer increasing again. We had called that out on our earnings call that that is what we were seeing.
We also said that given the variability in consumption that we saw all year, our guidance did not reflect that return. Our guidance, in fact, reflected either flat on the high end or down on the low end of ART cycles per utilizer continuing. That is what our guidance reflected. The good news is what we ended up ultimately seeing was not only the improvement that we were already seeing when we guided and reported in early November, but that improvement, in fact, continued throughout the end of the quarter, where we ended up improving ART cycles per utilizer versus Q3. Therefore, the financial results ended up beating both our guidance as well as expectations that were out there. As we continue into Q1, what we are seeing is the continued improvement that we saw in Q4.
You have to seasonally adjust it because Q1 is always lower ART cycles per utilizer for the same reason that I said in 2024 in every year where the largest proportion of utilizers begin their journey. Nonetheless, the improvement we're seeing continued improvement in ART cycles per utilizer seasonally adjusted for Q1. We guided similarly like we did in Q4, where we guided both the full year as well as the quarter. It is showing not that improvement, but sort of steady state, if you will, versus what we're seeing seasonally adjusted. We put those numbers out there in conjunction with our financial guidance for the full year. For overall utilization rate of a range of 102%-104% as well as ART cycles per utilizer for the full year of 0.89-0.91 as a range.
Got it. If we look clinically, when we're talking about ART cycles, if we look clinically, have you seen a mix shift in fourth quarter and so far year to date back towards egg retrievals, egg freezings? If we can talk maybe clinically, Pete, on what you're exactly seeing on the procedural side.
Yeah, I would say, and one of the things you alluded to was one of the egg freezing overall is roughly only 10% of the cycles just to put it in perspective. When we saw the drop in Q3, it was more pronounced than egg freezing. It was not the only thing that dropped and dragged it down, but it was part of the answer. We saw the mix of egg freezing and overall mix be more consistent with historical patterns in Q4 and seeing that continue in Q1 so far, right, is what I would say around that. The drop in egg freezing that we saw was most pronounced in Q3 and back to normal levels within our Q4 results.
Yeah. You had a pretty strong selling season this last fall despite a big loss on the tech side of a legacy customer. Can you talk to us about last year's selling season, what employers were looking for? Maybe talk about we can also tack on the question on your expanded service offerings and how they're doing in the marketplace. Yeah, just talk to us about last selling season, what you were seeing in the market, what kind of were they once again diverse wins across midsize to large employers across different industries? Maybe just talk about last year's selling season a little bit.
Yeah. Just to recap, we sold 80 large self-insured new logos defined as 1,000 employees or more and representing 1.1 million covered lives. They're across industries. I believe they were across 30 of the 45 industries, approximately. Don't hold me exactly to the 30, but 30-ish of the 45 industries that we now have clients in. They ranged everything from large to small across the book of business, pretty proportionate to our overall mix of clients. I think we put that out once a year, I believe, when we report Q1, we put out the distribution of clients by size. You'll see that detail. They were across the board, large and small.
The nice thing about the success of the sales year was the majority of the time when we do not win clients, they are not nows, they are not losses to other competitors, whether they are the standalone competitors or whether they are the payers. They are mostly not nows. They are not really losses. They are just deferrals of a decision, right? When a decision was made, in particular, we saw success with jumbo accounts, I define as 80,000 employees or more. With those accounts, we won virtually every one of them against every competitor, as you might imagine when there are competitors. I am sorry, when an account is of that size, everybody gets invited to participate.
Everyone's pursuing that bid. Yeah.
Right. Everybody's pursuing it, and everybody gets invited to it. It's a pretty lengthy, detailed process, right? That was positive relative to.
Were those jumbo accounts not nows like last year?
Some were, some were not. They always vary. Sometimes they are not nows from two years ago also, not just last year. There was a mixed bag of brand new and some literally from prior year not nows and some from two years ago not nows and three years ago even sometimes, right? The different companies and benefit managers have two- and three-year plans around their benefits. A lot of times they will evaluate things earlier, and they will be making a decision down the road, and that is part of their plan. They do not always disclose that when they are evaluating the benefit. They just evaluate the benefit. You ultimately find out whether or not it is something that they are going to decide on in the current year or something that they are going to decide on in subsequent years.
The other positive that came out of the sales season was we had significant success with upsells. Traditionally, upsells are around the fertility and family building benefit where they're adding a Smart Cycle.
Smart Cycles. Yeah.
Yeah, they're adding a Smart Cycle, or they may be adding fertility preservation they didn't have, or maybe they're adding pharmacy if they didn't have it, et cetera, adoption and surrogacy, et cetera, those kinds of services. Also now include our expanded product offering.
Right. Male infertility.
Male infertility is included in part of your fertility and family building, but it's the menopause products or the pregnancy and postpartum products that are out there. It was the first year in market that we were selling those.
You had success on the upsell on those?
Yeah, we had tremendous success. Overall, 20% of our book of business has one or more of those offerings, and that represents roughly 1.5 million lives across those offerings. Of our newest clients, 40% of those bought one or more of those offerings. It was really successful both in new sales and in the existing book of business in the first year in market and selling those. That was also really positive. The last piece that's important is from a client retention perspective, despite the loss of the one customer that you referred to, we still had 99% retention. We only lost five clients in total.
That's pretty amazing if you think about, in general, if you think about healthcare and any company or any industry, that retention rate, which we've experienced since our beginning of 99, 99 plus % retention was really positive. The other really positive thing is we didn't have clients cutting the benefit back in any way, right? That's also really important as an indication of what clients are thinking about and how much they appreciate the value of the benefit.
Yeah. I want to follow up there on sort of your additional services and offerings. You acquired BenefitBump as well as, I think, parent and child wellbeing offering. Maybe talk about what services you—it seems to me like you keep continuing to add on more and more services. Is it because the employer market is looking for a one-stop shop for women's health or family building benefit, and you want to be more competitive in this market? Explain to me the strategy of adding on more and more of these service offerings. Is it for a competitive advantage? Is it for the ability to expand revenue opportunities? Maybe dive into because we have seen sort of an accelerated either through M&A or organically building out more and more services on the Progyny platform.
Yeah, it's a great question. The answer is what you said. Employers are looking for more solutions across their employee population that could be addressed by one vendor partner, right? They do that for two reasons. It's not just because one of the reasons, but this isn't just it. It's not just because it's more convenient and efficient for them as benefit managers to deal with one partner across these different products, it's really about the member experience itself. If you think about your own experience when your employer offers you a lot of benefits, right, to the extent that you can offer many different solutions under one umbrella, it makes it a lot easier to engage with one care advocate in understanding all those benefits, it makes it a lot easier in engaging with one digital app in navigating those benefits, et cetera.
It dovetails into what BenefitBump does for us and our employer clients, right? It is, by the way, also strategic for us as it relates to revenue expansion and having a more diversified product offering and also helping with client retention and being stickier in terms of having more services with those clients, right? Going back to BenefitBump, BenefitBump does two things, right? Or really a few things. They are a benefit navigator. What they do is they ingest everything an employer has for their employees, whether they're offered through us or whether they're offered through other vendors or whether they're even offered through state programs or other things that somebody could also use. It helps the employee navigate and amplify everything their company is doing for them. That is a positive for the employer because they offer these benefits for a reason.
They're designed to help the employee out. They're designed to help the employee as they're going through the journey, starting with when you're thinking about having a baby to the point where you get pregnant, whether you do it naturally, for lack of a better term, or you need the help of assisted reproductive technologies. Once you're pregnant, then supporting you through that pregnancy, postpartum, and then, as you mentioned, other services like parent-child services, and then also down to when you're at the end of your reproductive journey and you're potentially in menopause or on the male side in terms of needing testosterone support, et cetera. All of these types of services, right, are the services that are available to the employee, including financial support. You're planning to have a baby. You're going to go on parental leave. What does the parental leave process look like?
What is your financial support during parental leave? What is your company offering you? What else is available out there in terms of maybe state funding or anything like that? All of these types of things as you're navigating this journey, all really designed ultimately to help you through the journey, but also to ultimately help you also return to work is what all this stuff is designed to do. To the extent that you can help employers amplify everything they're doing already and help the employee navigate all of these things in an efficient way, that's a really positive thing for employers to offer their employees.
Makes sense. I want to get to the regulatory environment. Maybe first, let's talk about your federal exposure and the DOGE cuts. I know last year we talked about opportunities on the federal landscape, and it was mostly winning contracts and really through the consulting fee. It wasn't anything deeply clinical. I know that eventually that would have been a nice tailwind. What are your thoughts on pursuing the federal market given DOGE and the new administration's efforts to try to cut and gut the federal department? Secondly, on the reverse side, we have an executive order that's trying to expand national access for IVF. Who knows what that really means. It could mean lowering the cost of the providers. It just means a broader federal mandate for employers to have to offer IVF services.
Maybe let's start with the federal impact on your side and the opportunities or maybe the more cautious optimism around that end market. Then let's talk about the other side of the coin.
Yeah. I think there's all more positive than negative in everything you just said. Let's start with our federal program that we do today. We service roughly 300,000 federal employees. As you said, it's mostly case management and not clinical in nature in terms of their journey through us. Nonetheless, we support them in the way that we can. The thinking is strategically to continue to work with the federal government and ultimately expand either the number of lives or the services or both across the federal population. Even if the DOGE cuts and the activity that's going on reduce the size of the federal employee population, the reality is they're still going to be the largest employer in the country ultimately.
Who knows how big the cuts are going to be, but when you're starting out with sort of non-Medicare, 5.5 million employees as a population, however much it gets reduced, it's still going to be one of the largest populations. There's still an opportunity for us that will continue to work and continue to do a good job and continue to try and expand that relationship. Last year was the first year we had that relationship. This is beginning the second year. Hopefully, as we continue that relationship, we'll be able to expand it. As it relates to the executive order, you hit on it. There are two things that the executive order asks for policy recommendations on. It's, one, protecting access to IVF, and two, making it more affordable for people, right? If you know anybody who's gone through the process, it's a very expensive process.
If you do not have coverage, it is a very difficult process, and if you do not have coverage, the significant majority of people cannot afford to do it on their own and just do not. The idea of addressing affordability and also protecting access is positive. Nobody knows yet how far that will go. Policy recommendations by themselves are generally only going to cover the federal employees. Maybe there could be some tax credits that are out there for people to help them from an affordability standpoint if they are going to go through it.
Maybe that is possibly a policy that will be possibly addressed, but again, would require some legislative action. Anything else that would cover and mandate coverage for everybody, not just federal employees, including tax credits or anything else, any other assistance would require legislative action. Maybe that is what the recommendations will be. We will see.
Nonetheless, we view it as positive and in the right direction relative to the first administration ever even addressing the issue in the area. I think overall, it's smart because if you and the data just came out for national birth rates, national birth rates continue to decline not only in the U.S., but around the world. It's a geopolitical issue. The reality is that it's really important for access to IVF, especially when it's not affordable by most people who suffer from it. It's the reason why in the U.S., only 2.4-2.5% of babies come from IVF, whereas in other countries around the world where there is broad comprehensive coverage, it's more like 10%, right? That's the reality of it. It's positive that there's an administration that's addressing the issue.
Yep. Okay. I want to talk about the competitive market here, Pete, a little bit. There are some competitors that are in the market, as you know, that have a slightly different model. They have a take-rate-based model where for the first six to nine months, it's a $2,000 cap for the employer for employee, and they're trying to get you not to use IVF clinical services until you reach that nine-month, whatever timeframe. Are you seeing from your conversations with employer clients that that's the model that should be the new model or that they're looking to sort of cap upfront costs a little bit per employee? Are you going to kind of maybe be more flexible in your offering to meet these competitors that way?
As much as you want to answer this question, I think there's just a lot of investors have a lot of questions about where fertility benefits managers' market is 12 months, 24 months. Has pricing come down? Just help us walk through that.
Sure. Sure. From the beginning, we addressed those types of issues that were already out there that were predominant in the payer plan designs, right?
Yes.
From the beginning, we highlighted that those are really bad plan designs for a number of reasons.
I know personally they are bad plan designs.
For a number of reasons. If you experience it personally, you understand it. What happens is when you give people dollar maximums, right, there are two things you're doing. You're not covering. You're limiting coverage. This is the only medical condition I know of where we're doing that, right? When you do that, you create really bad decisions by the employee as they're going through the journey because they operate in a mentality of economic scarcity. They make bad decisions around the procedures they do within the IVF journey that affect both the success of a live birth as well as whether or not they're going to have a healthier pregnancy in the form of singletons versus being pregnant with twins or high-order multiples, which create the risk of premature babies, high-risk pregnancy for the mother who's carrying the fetuses.
Ultimately, if there are premature babies, those that end up in a NICU and all the stress, anxiety, and cost that comes with that, right? That is not new. The fact that some of our competitors are continuing to be willing to do that is not something we are interested in because from the beginning, we did not believe that was right. At the end of the day, if you are going to claim to be a women's health company, you should be fighting for coverage, not acquiescing and allowing for limited coverage as if that is a good solution, right? That is our strong opinion. That has been our strong opinion and will always be our strong opinion.
We believe in providing people with a full cycle and full cycles of treatment where arbitrary dollar amounts do not limit and affect your decisions of what you are going to do when you are on each treatment journey so that you can, at a minimum, make the right decisions every time on that journey. That is our belief in doing it the right way, especially when you say your mission is to be a family-building and women's health company.
Yeah.
By the way, just for the record, we win when decisions are made, and we pretty much get invited to every opportunity way more than we lose. At the end of the day, if that were a trend, we would be having a problem.
Yep. You're not seeing any shift in those conversations with your employer clients?
No.
Okay.
Nope. Every time the topic comes up, we educate them on all the reasons why that's a bad idea.
Okay. Got it. You said earlier, you mean last selling season, you said that they were increasing their, call it dollar spend, the cycles. You expect that to continue.
Has continued. Every year. Last year was no different. Every single year, 20-30% of our client base adds cycles or adds other services like egg freezing if they don't have it, like adoption and surrogacy if they don't have it, like pharmacy if they don't have it, et cetera, and other nuances within it. Those are sort of the big ones. That happens every season. The last season was no different. We didn't have cutbacks, and people weren't looking to limit more, which is really positive, I think, for all the members that we manage.
Got it. If I could go back to your guidance, when we strip out the client impact that you noted in the first half, where I think you said 75% of it is going to hit in the first quarter, you strip all that out. On your ex-that client, you're seeing normal behavior in terms of what you've historically seen, as much as you can say there's an average historical kind of behavior. Ex those employees or, sorry, yeah, ex those members, you're seeing kind of normal year-to-date behavior on the rest of your book of business. Is that fair to say, Pete, in terms of?
Yeah. That's fair.
Okay.
That's fair.
Let's see. I could spend an hour with you guys, but we're getting closer to the time here. I guess maybe just talk to us, is there a segment of the employer population that you feel like you're under-penetrated in? We know that you're very much penetrated in tech. You have probably market dominance in there. Maybe do you have the financial industry? Is that a big area where you have a large opportunity to attack? Maybe talk about certain industries where you'd love to be in that you're not currently in, if you could.
We're in the biggest industries in a meaningful way. That said, we're only 7% penetrated across our addressable market, right?
Yeah.
The good news is, although some of our biggest industries in tech is no longer our biggest industry, are some of the biggest industries that you might expect, like healthcare, like consumer goods, retail, and tech. The reality is that there's still plenty of room to go relative to every industry that we're in. The industries that are the smallest for us are also smaller industries. We're in 45 different industries. There isn't an industry where I stare at the size of the industry and wonder why we're not penetrated there yet. The good news is there's opportunity in every industry to continue to grow where we have 6.7 million covered lives against a 105 million life addressable market.
That does not include the market that we are expanding into, which is middle market, which will add another 50 million lives of addressable market for us as we develop that product and go to market with it. Overall, even in the current addressable market, which is commercial, labor, and federal government, 105 million covered lives, we only have 6.7 million covered lives right now across a little more than 530 clients. I think that is the positive. There are not industries you stare at relative to the size of the industries themselves where they have not started buying it, right?
Yeah. Yeah. Okay. When you're talking to the human resources or the benefit managers of these companies, you talked about the strength and demand for fertility in general and for your product offering, but has any conversations come up around restricted budgets or more budget dollars towards another benefit like GLP-1 or anything that would have changed versus last year?
No. The dialogue, last year, the most recent selling season two years ago and even five years ago, there's always competing factors around budgets, right?
Yeah.
GLP-1s are the latest sort of competing factor, but there's always competing factors around budgets. The conversations generally aren't this or that as a conversation, but we are aware of, again, more so through what the benefit consultants tell us versus direct conversations with prospects, they are considering what they're doing with GLP-1s, right? A lot of times, it's not as simple as, "Do I offer them or not?" It's, "I'm offering them already, and I'm going to adjust my plan design, and there'll be some cutbacks in terms of what we're doing," right? They sort of go both ways relative to what companies are doing with GLP-1s and what their policies are around them, et cetera. Either way, they're not behind the scenes.
They may be for some of them, budget decision, and I'm going to do one versus the other this year versus next year, but ultimately, it all gets addressed. They're not with us sort of direct conversations that say, "I'm weighing this versus that." It does take some mind share for sure.
Yeah. I guess as my last question here, you talked on the last earnings call about investments being made and will impact margins for this year. Pete, can you just dive into that? That's a little bit of the last question here, and we'll wrap up.
Sure. Sure. The investments that we're making are a combination of the integration of the companies we've acquired, both Apryl that we acquired mid-year last year and BenefitBump that we acquired at the beginning of this year, as well as the product expansion globally that we're investing in, similar to the product expansion that we have in the US, as well as creating an integrated digital experience for members around all these products and services as they engage with these benefits.
Amazing. That should hopefully drive more engagement, and hopefully, we can track that on our app tracker and looking forward to that. Pete, and I know James is in the background. Thank you both for this Fireside Chat. Again, I could go on probably for hours with you guys, but I appreciate the access, and thank you all for investors for joining the Fireside.
Yeah. We appreciate the opportunity again. Thank you so much, Scott, and everybody for joining, and look forward to continued dialogue.
Bye-bye.