All right. Thanks everybody for joining us today. We're happy to be hosting Progyny. 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. Pete, maybe to kick off the conversation, 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. 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. The business is in really good shape. As you mentioned, Peter, we exited the year with four 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. Overall, we feel good about with the investments that we've made in 2025 and the investments we're making in 2026, we feel well-positioned for the future.
Great. 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 2026 to $7.2 million, down slightly, citing some of the administration or 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?
Yeah. 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 constantly monitoring that. We're not seeing an impact relative to the reported lives versus the actual utilization.
For us, it's sort of a non-event, if you will, and more of a, you know, I'll call it a reporting true up than anything else.
Got it. I guess I know you just said those lives were 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? 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. The majority of clients that we sold launch already in Q1. The second thing is, you know, 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. Our expectation is that we don't expect to see that. You know, 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 to a net reduction. That's an anomaly for us in all the quarters that we've been reporting.
Got it. Okay. Maybe we'll flip over to kind of over 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. I'll start with the historical range of utilization. We've been in a tight range of 1.03-1.09 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. When we do utilization, it's on a unique basis, and so it's deduplication of utilizers within a quarter. 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. As you have somebody utilizing one quarter and they spill over and are doing multiple treatments in the second quarter, they only count it once for the full year as an example, right?
What we're seeing now is what we guided with, right? The utilization rate that we're seeing, when we look at the first six weeks of utilization of the year, we look at that versus past patterns, in particular for the existing clients but also for new clients. We use that to predict the utilization not only for the remainder of the quarter, but for the full year. What we're seeing is that what we guided to, and then we build in the variability in utilization on the low end.
The low end of the range for the full year, both from an overall utilization rate as well as from cycles per utilizers, 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. Within that historical range, I mean, how much does the broader macro environment impact 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. I'll touch on just the tax refund comment as an example. Our utilization isn't impacted by whether or not somebody may or may not get, you know, a quick, you know, 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. When they get to a point in life where they're trying to have a baby and then realize that they need or may need the help of assisted reproductive technology, they'll utilize the benefit.
That'll 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 your average age of a person, woman going through IVF is 36 years old. Her ovarian reserves are already on the way down. The biological clock, as I like to say, is real. 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 a baby, even with IVF services, go down dramatically. Each year after that go down dramatically.
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. 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 healthcare services, but for necessary services, when it reopened, fertility came back the fastest vis-a-vis, you know, many other areas of healthcare because, again, the biological need of building your family is so important. When you realize that, you know, time is not your friend, you're gonna go through and use the benefit when you need it.
Great. Maybe we can segue then to the competitive landscape. We get a lot of questions here, and I know Progyny's 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. 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. One thing, I think part of what you're referring to, Peter, is the standalone competitors.
Yep.
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 standalone competitors, right? 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 standalone competitors are out there. There's no sort of difference from a competitive perspective for the standalone competitors. They've been around, some of them longer than we've been around. That's really not a changing dynamic. They've been out there. They'll be out there. We continue to be differentiated versus them.
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 a client makes a decision, one way or another to do this benefit.
Got it. 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 mode is there, and why have they maybe not gotten more into the space?
Yeah, it's a great question. We get it all the time as well. 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 healthcare, 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.
That's why they haven't, not one of them has, to date. You know, a few of them over the years have tried to, you know, wrap a marketing wrap around in terms of what they're doing, but not really change quite about doing what they're doing underneath. That hasn't proven to be competitive for us. Overall, you know, it's just not within their priorities.
Got it. 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? In terms of clients that are adding those new offerings and what the response has been, where are you seeing the most interest in terms of conversations for next year?
Yeah. 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. 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, you know, each sales year cohort generally adds something, you know, as time progresses. As they have a good experience with the benefit, they'll ask, for example, initially they may have only gotten a two -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 surrogacy. They'll add that. Now with the expanded products, they wanna address a larger portion of their population. They'll add the menopause offering, or they'll add the maternity support, et cetera. All of these are areas that, based on the last two 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, you know, one vendor manage multiple solutions, and cover a larger portion of their overall population.
Great. I'm 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? In terms of the sales cycle, is there any difference from the traditional sales cycle that you guys see?
Yeah. I'll take the first part first. Infertility and the incidence and prevalence of infertility is one in five in the U.S. It doesn't matter whether you work at 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. The general agents, the 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, you know, viewed by their employees as acting like a big company kind of thing, right? It's a very real need. It's a human need.
It's one in five, again, in the U.S., right? 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. 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. 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 to the smaller employer, and as an attractive product in terms of a differentiator, you know, for those that launch with us first in market.
Great.
In terms of the sales year, they're not unlike in terms of when you know fully insured buyers buy. The significant majority of them are one calendar year companies, and so they renew and their renewal period is generally in the fourth quarter or a lot of times later in the fourth quarter. It'll be the same cycle roughly, maybe a little more towards the back 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 you know middle of August through October time period.
Okay, that makes sense. 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 PMPM 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. I'll hit that last part first. Fully insured buyers buy on an annual basis, and so they're one-year contracts. Each year you set premiums based on experience that you see. If our underwriting group, you know, is off by a little bit and we have to adjust premiums in year two, we could easily do that because, you know, 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, you know, in the early days when the populations are smaller, there's a little bit of utilization risk that we're gonna take.
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, you know, with you know, over 7 million lives, doing it successfully, for 10 years now. We're just gonna do the same for ourselves. Once the risk pool gets big enough, it doesn't have to be that big, then it's gonna be no different than us having a large self-insured employer to manage the benefit overall, and that utilization risk will be mitigated you know, based on the size of the risk pool.
Got it. 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. 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. You know, game changer are quotes that I've heard. Super positive when we talk to a lot of folks, whether they're all the way 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, you know, this early in the sales season.
Great. It's now that we only have a few minutes left. I mean, I wanna hit on some of the financials before we call it. 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?
Yeah. The biggest thing that can do that is always utilization overall, but within it, you know, consumption in terms of cycles per utilizer. That's always the biggest factor that's gonna meaningfully swing one way or another, revenue versus expectations.
Got it. 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. We get questions around, like, why shouldn't we extrapolate that 1Q, which is a little bit lower to the full year? 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?
Yeah. Every year, the seasonality in terms of consumption of the benefit is that the higher proportion of members are in the first quarter gonna do consults versus doing actual treatments as a percent of total utilizers, right? That then grows in terms of those you know being cycle utilizers versus just doing the early initial consults and diagnostics as the year progresses in quarters two, three, and four. That's not different this year. That's been the case since I've been running the company in you know 2017.
Yeah. All right. 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 should we weigh maybe gross margins versus EBITDA margins, and how should we think about that?
Sure. The overall opportunity for us beyond 2026 to expand margins, there's a couple things. One is the tapering off of the investments that we're making. We don't expect that to go significantly beyond 2026. Those are incremental investments that started in 2025 and continuing in 2026, and won't continue at that level going into the out years, right? That's the first thing. 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 gonna create efficiency. 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'll create efficiency down the road as well.
Got it. 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? 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?
Yeah. 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. We look forward to, you know, a good year and taking advantage of how we're positioned.
Great. 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? Then anything you think that people are missing or anything you wanna touch on, to wrap this up?
Sure. We generally expect about 1 million lives. We're also hopeful that Select will add incrementally to that. You know, 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-à-vis stand-alone competitors or the MCOs that are out there. Our opportunity is significantly ahead of us. We look forward to continuing to deliver.
Great. With that, I think our time's up. Thanks, Pete.
Thank you.
I really appreciate the time today.
Continue.
Yeah. Good to see you too.