Good day, and welcome to the Progyny, Inc. Third Quarter Earnings Conference Call. At this time all participants have been placed on listen-only mode. The floor will be opened for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, James Hart. James, the floor is yours.

Thank you, Paul, and good afternoon, everyone. Welcome to our third quarter conference call. With me today are Pete Anevski, CEO of Progyny; Michael Sturmer, our 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 2024 and the assumptions and drivers underlying such guidance, including the impact of our sales season and client launches and our expected utilization rates and/or mix, our anticipated number of clients and covered lives for 2025, 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.

Thank you, Jamie, and thank you, everyone for joining us this afternoon. In the third quarter, we continued to execute against strategic objectives that we outlined for you at our recent Investor Day, laying the foundation that will enable us to accelerate growth while meeting the needs of our clients and members and creating long-term value for shareholders. I'll expand on those areas shortly, but I want to begin with third quarter member activity, which continued to unfold differently from historical patterns with respect to how members progressed through treatment. Consequently, our third quarter results are below the ranges we set in August. I understand this is disappointing. To help you better understand what we're seeing, what we're doing in response and how we think about the business moving forward, we're going to walk you through several areas. First, what's been different and unexpected with respect to the member activity in 2024. Second, how we're reflecting this variability in our guidance. Third, while despite how the year has unfolded differently than expected, we firmly believe the business is not only fundamentally strong but also uniquely positioned to expand upon our leadership role in a large and growing market. I'll begin with member activity, which is actually two separate though related components. The first is the overall utilization rate which captures the percentage of our 6.4 million members who have taken action to pursue care out of fertility clinics, which includes initial consultations during the given period. The second is the measure of consumption, which reflects the volume and types of services that the utilizing members have done also during the period. With respect to the utilization rate, we continue to see that members are pursuing care at levels that are consistent with historical patterns and that has continued in 2024. Third quarter utilization was 0.47%, both consistent expectations and equal to Q2's level. In fact, 0.47% is not only within the historical range, it's towards the higher end of that range, emphasizing that not only are members pursuing care, they're doing so at levels that reflect a strong sustained need for our solution. Challenges with respect to forecast in our recent periods related to the other component consumption as we've seen activity in Q3 differ meaningfully from historical patterns, primarily two aspects: First, the progression to treatment has slowed down modestly as people are taking slightly longer to go from the consultation, which is the first step in the critical journey to the treatment stage itself. The difference of even just a few days translates into lower overall consumption within a given period. And second, once people are progressing, we're seeing them consume fewer average stimulation-related ART cycles than we've historically seen, specifically for freeze all and egg freezing. As this is a relatively new phenomenon during Q3, there isn't enough data to determine whether or not this is a new trend. The activity we're seeing thus far in Q4 is the best evidence that it may not be a new trend as we're seeing modest growth in average stimulation-related ART cycles per utilizer as compared to Q3 in 2024. In light of the seemingly contracting data, we believe it's more instructive to look at the recent ART cycle consumption in comparison to longer periods. For example, the three-year growth we've seen in egg freezing is consistent with the long-term pattern over many years, even though the volume more recently has been more variable from year to year. However, we're not factoring the improved levels of pacing in both utilization and ART cycle consumption that we are presently seeing in our fourth quarter guidance. Instead, given how this year has presented more variability than we could have anticipated, we believe it's prudent to guide with the expectation of a return to the unfavorable trend that we saw in Q3, even though that would be below the activity we're actually seeing right now. While that reflects what we are seeing, the wide side is inherently more difficult to understand. Our PCAs focus solely on member experience and success, supporting members through whatever their journeys and on their needs. And we help members navigate through every step of their unique journey, and we don't ask them just as the time it takes for them to get through those steps. That because we're sensitive to factors that can affect a member's timing whether it's medical options or life events that may impact that timing. We've ruled out a few things that are not causing this unexpected pattern. First, we know members have at least as much, if not more coverage and that they are maximizing their benefits. And second, we also aren't seeing a backlog at clinics; members are getting the appointments they want when they want them. And despite the fluctuations we've seen this year, these don't in any way reflect upon the health and strength of our business and our ability to deliver for our members. We've successfully supported tens of thousands of member journeys, delivering a better experience, achieving higher clinical success rates and driving meaningful savings for our clients. That's what ultimately creates value for our key constituents, our clients, our providers, our members, and our shareholders. And we're more committed than ever to continuing to deliver against our strategic priorities in those areas. In any year, the selling season is obviously one of the most important priorities and we're pleased with this year's results, which produced 1.1 million new lives from over 80 new client commitments. This is our fourth straight year of adding over 1 million lives, demonstrating once again the importance of fertility family building and women's health solutions to employers and the differentiation of our solution. This year's season is similar to past seasons in a number of important ways. Our newest clients continue to select robust levels of coverage, offering an average of two or three smart cycles, affirming that employers aren't suddenly looking to offer a skinnier version of the benefit and we saw a mid-90% take rate for Progyny RX, affirming the better member experience and cost savings we deliver through our integrated solution. Our wins represent a broad cross-section of nearly two dozen industries including energy, consumer goods, health care, media, financial services, automotive manufacturing, and software. This continues our sector diversification and emphasizes how truly universal the need for our services is amongst all types of employers. And lastly, we continue to see a broad distribution by client size with our newest logos contributing anywhere from 1,000 to over 100,000 lives. In fact, the distribution of our newest clients by size is newly identical to the base as it is today, highlighting the diversity of our opportunities and our room for ongoing growth. A notable difference this year from past seasons is a slightly higher skew amongst our largest clients as those groups tend to do the deepest assessments and diligence. This reaffirms our confidence in our competitive position. You'll recall that we previously told you how commitments were pacing ahead of last year and the pipeline was strong overall. So we understand that you may be looking at the 1.1 million lives in the context of the 1.3 million we achieved a year ago. I'll remind you that last year's 1.3 million included approximately 300,000 lives without access to our medical benefit. So on a like-for-like basis, our new fully eligible lives are higher than last year. When we spoke to you in August, there were a number of jumbo opportunities in our pipeline, jumbo reflecting our largest deals that gave us visibility to well over 1.3 million new lives as of August. Of the jumbo opportunities that remained and made a decision, we won all of them. The ones who didn't come to a decision represent over 400,000 lives and remain open and active opportunities in our pipeline. So we aren't able to project whether or when a decision will be made. This is no different than any sales year where some portion of our prospects in the sales year are a not now. They may have had competing priorities to consider or they just were not in a position to make a final decision. As we've seen in the past, we'll enter next year with a very healthy pipeline of advanced opportunities, which are in addition to the new pipeline generated through our traditional methods, including working with channel partners who play a key role in broadening our reach and improving our sales efficiency. This year, we made significant strides with expanding those channel partner relationships. You'll recall how we signed our first regional health plan partner a year ago. This year, we're extremely excited to have added our first national health plan in addition to another large regional health plan and additional TPAs. And some of these groups are also becoming our clients entrusting Progyny to serve their own employee populations. This is an incredible testament to the demonstrable value we create. It makes me more proud of that and I am excited to share more details as the partnerships grow. As important as our new sales and new partnership activities are, our selling season also includes renewals and upsell activity. So let me give you some updates there as well. As we previously disclosed, a large client made a decision to exercise an option to conclude their services agreement with Progyny. Every client's decision always requires introspection and this was no different. We also heard from the 99% of our clients who remain with Progyny into 2025, given the positive impacts we made to both these clients as well as their workforce. While retention is one validation of our service, so are our upsells and expansions. This year, we continue to see existing clients who are looking to deepen their Progyny relationship with approximately 30% of clients increasing their program in some way in 2025. Historically, that meant more smart cycles are adding Progyny RX. While those still occur, upsells now include those clients who are adding our newer services in maternity postpartum and/or menopause. We're extremely pleased with the reception we've seen for these newer services in the first year we've offered them. About 20% of our existing clients and 40% of our newest clients are adopting one or more of these programs in 2025. Taken together, more than 1.5 million of our covered lives or more than 20% of our overall base will have at least one digital program beyond the fertility and family solution. As 2025 will be our first year in market with these services, we don't have a sense for what the usage patterns will be. We don't expect meaningful revenue contribution from these products next year. Nevertheless, the interest and adoption we've seen from our clients speaks to their willingness to entrust Progyny with even more aspects of their health programs. And with that, let me turn the call over to Mark to discuss the quarter in more detail and provide our expectations for the balance of the year. Mark?

Thank you, Pete, and good afternoon, everyone. I'll begin with our third-quarter results and then provide our expectations for the remainder of the year. Third-quarter revenue grew 2% over the prior year to $286.6 million. The growth was primarily due to the increase in clients in covered lives as compared to a year ago, which was then offset by the lesser rate of consumption overall that Pete described earlier. So let me take a moment to walk you through this dynamic in greater detail. Female utilization was 0.47% in the third quarter. This was a modest decrease, as we had told you to expect, from the near record 0.49% that we reported in the third quarter a year ago, but flat on a sequential basis from the 0.47% that we reported in August. While utilization can vary modestly from period to period, it continues to be highly consistent with what we've seen for many years, reinforcing our belief that we aren't seeing some underlying change in either medical need, member demographics or the desire for people to pursue family building. The different pattern of consumption in Q3 that Pete was describing earlier is reflected in reported ART cycles. Approximately 14,900 ART cycles were performed in the quarter, reflecting a decline of just under 1% from the year ago period. So while the rate of people pursuing care is consistent, the pattern of consumption is different, creating the challenge with respect to our forecast and guidance. Today's press release includes a table on the last page to help you see how ART cycles per unique female utilizer during the quarter diverged from past patterns. We've historically seen an increase in ART cycles per unique utilizer over the course of any given year. However, this year, in a complete divergence from past patterns, we instead saw a decrease in Q3. Thus far in Q4, even though we've seen an improved level of pacing in both utilization and consumption as compared to what we saw in Q3, we believe it's prudent to assume that another variance could occur. The high end of our guidance assumes similar levels to what we saw in Q3, while the low end contemplates a further decrease. I'll walk you through those impacts in a moment. As of September 30, we had 468 clients with at least 1,000 lives, representing an average of 6.4 million covered lives over the third quarter. This compares to 392 clients and an average of 5.4 million covered lives a year ago. Covered lives increased nearly 50,000 versus June 30, reflecting the last batch of client launches from last year's selling season, which was offset by a slight net reduction of lives from our existing clients during the quarter. While we've continued to see the impact of workforce reductions at certain clients, others have grown, which further highlights how important it is to have a diverse customer base that spans many different areas of our economy and why we are so pleased with the results of our most recent selling season, given that our newest clients once again are coming from nearly two dozen industries. Turning back to the components of the top line this quarter, medical and pharmacy revenue grew at essentially the same rate over the year ago period to $179 million and $108 million, respectively. As the penetration of Progyny RX will reach approximately 94% in 2025, the growth rates for medical and pharmacy revenue should continue to be more closely aligned on an annual basis moving forward. Turning now to our margins and operating expenses. Gross profit decreased 5% from the third quarter last year to $59.2 million, yielding a 20.7% gross margin, a 160 basis point decline from the prior year period due to investments made in our care management services as well as the impact of the unanticipated decline in cycles per utilizer in the quarter. On a year-to-date basis, gross margin is more comparable to the first nine months of 2023, demonstrating the flexibility of our cost structure even when the top line unfolds differently than expected. As we look over the remainder of the year, I'll remind you that we typically see a sequential decline in gross margin as we onboard the headcount that's needed to support the new lives starting on January 1. We expect a lesser impact than usual this year as we are onboarding as many new hires following the previously disclosed loss of a large client in 2025. Sales and marketing expense was 5.7% of revenue in the third quarter comparable to the 5.3% in the year ago period, as the investments to increase our go-to-market resources and channel partner relationships were somewhat offset by the leverage we've gained through our client acquisition and retention activities. G&A costs were 10.6% of revenue this quarter, in line with the 10.5% in the year ago period, though year-to-date, G&A is down 50 basis points as compared to the first nine months of 2023, reflecting the efficiencies that we continue to realize in our back-office operations. While our OpEx line items were comparable to the third quarter last year, adjusted EBITDA declined 7% to $46.5 million and adjusted EBITDA margin declined 160 basis points to 16.2%, reflecting the impact of the lower gross margin. Net income was $10.4 million or $0.11 per diluted share. This compared to net income of $15.9 million or $0.16 per share in the year ago period. The lower income in EPS as compared to a year ago reflects lower operating income as well as higher tax expense in the current period, which was only partially offset by the reduction in shares outstanding following our buyback programs in 2024. Turning now to our cash flow and balance sheet. Operating cash flow during the quarter was $44.5 million, which compared to $54.2 million generated in the year ago period. The change reflects the timing of certain favorable working capital items in the prior year period as well as higher cash payments for income taxes in the current period. Over the first nine months of the year, we've generated $127 million of operating cash flow, representing an 84% conversion of our adjusted EBITDA over the same period. As of September 30, we had total working capital of $338 million, reflecting over $235 million in cash, cash equivalents, and marketable securities and no debt. The decrease in our cash position versus June 30 reflects our stock repurchasing activity during the quarter. In the third quarter, we repurchased 2.8 million shares for approximately $61.4 million. Since launching the first program in February and including the activity in Q4, we've returned value to our shareholders through the repurchase of nearly 12.4 million shares overall. This completes our previous authorizations and has reduced our shares outstanding as of the start of the year by 13%. Turning now to our expectations for the fourth quarter and full year 2024. As you can see in the table in the back of today's press release, our range for the full year assumes utilization of 1.05% at the low end, which assumes a slightly lower level of Q4 utilization than what we've seen thus far this year and 1.06% at the high end. The low end of the range also assumes that ART cycles per unique utilizer declines in the fourth quarter as compared to Q3, while the high end assumes consumption stays flat sequentially, even though at this point in Q4, we've seen an improved level of pacing in both activity and treatment volume as compared to Q3. As I said before, we believe it's prudent to assume yet another variance occurs and have contemplated the ranges accordingly. With those assumptions, we expect revenue of $266.2 million to $281.2 million for the fourth quarter. This translates to revenue of $1.135 billion to $1.150 billion over the full year. Turning to our profitability, we expect adjusted EBITDA of $37.8 million to $42.8 million in the fourth quarter and net income of $6.1 million to $9.5 million. This equates to $0.07 and $0.10 earnings per diluted share or $0.31 and $0.35 of adjusted EPS on the basis of approximately 91 million fully diluted shares. For the year, we now expect adjusted EBITDA of $189 million to $194 million, along with net income of $49.9 million to $53.3 million. That equates to $0.52 and $0.56 earnings per diluted share or $1.54 and $1.57 of adjusted EPS on the basis of approximately 96 million fully diluted shares. I'll remind you that our income projections do not contemplate any discrete income tax items.

Thanks, Mark. I hope today's call has helped you understand how the business remains fundamentally strong and uniquely positioned to take advantage of our large and growing market opportunities despite the challenges that impacted our recent results. As we look forward into 2025, consistent with our past practice, we expect to provide our financial guidance when we report year-end results in February, and we'll have insight into the clients launching on January 1. At this point even with the loss of the one large client, we expect to continue generating strong profitability and meaningful cash flow in 2025, which is a testament to the diversity of our business and the strength of our business model. With that, we'll open up the call for your questions.

And the first question today is coming from Anne Samuel from JPMorgan.

I was hoping maybe you could speak a little bit to how you get visibility or understanding into what's going on with your utilization and consumption? Are the PCAs perhaps able to offer any insight on trends from recurring conversations that they're having around what may be causing some of this disruption?

So relative to understanding our utilization and consumption to date, which is, I think, the first part of your question, Anne, we look at contextualized data. So same point in the quarter in Q3 versus now and we look at both overall unique utilizers, i.e., utilization rate as compared to that time period. And then we look at the ART cycles per utilizer that are at that point scheduled versus what was scheduled in Q3, right? Relative to the PCAs, as I mentioned, their conversations are primarily around the members' needs, the journey they're on, helping them answer their questions, helping them schedule appointments, et cetera. They're not talking to them about any other type of activity relative to timing or anything else. As you might imagine, there's roughly 30,000 unique utilizers in a given quarter, aggregating those conversations even if they were happening is not something that is realistic, but they don't occur that way. The way I said it in the prepared remarks, they're just helping them get through and fulfilling their needs relative to what their current needs are.

That's helpful. And just wondering maybe is the kind of the national conversation and the recent election, maybe would you attribute some of the disruption you've seen to that? Some of your competitors recently launched a faith-based fertility program. Are your members asking for anything like this? Do you think that's factoring at all?

Well, I haven't heard a request around the second part of your question in terms of your faith-based programming or anything else like that from our members or PCA is hearing that. I'm sorry, what was your second question? It's hard to say whether or not the election had any impact on utilization or not. As you rightly point out, the election cycle did have fertility as part of the overall conversation. But as we said earlier in the year, the good news is that on both sides of the aisle, they talked about protecting fertility. And so that's positive. So it's hard to know. We haven't heard that or haven't heard anything around that in terms of it impacting it. So I'd be guessing if I commented further.

Great. If I could just ask one more question. Now that you have a more comprehensive total women's health benefit, we've been hearing from employers that they are seeking a really thorough benefit covering all aspects of women's health. Did that influence any of your discussions this year, possibly contributing to the increase in the core fertility benefit? And did that allow you to engage with more employers than you expected?

Yes. So thanks for the question. So it definitely saw good strong interest in our new products, certainly help contribute to a successful sales season this year. That goes from both a new logo prospect perspective as well as our existing book of business and adoption rates there. I'll turn it back to Pete for some additional color.

Yes. If you examine the RFP activity, there was a higher percentage of RFPs seeking a full suite of solutions, even if they didn’t purchase all of them, compared to the previous year. The most encouraging statistic is that 40% of the new clients opted for additional products alongside the fertility benefit. Overall, this indicates a growing demand, as more clients are interested in a comprehensive solution.

The next question will be from Allen Lutz from Bank of America.

Mark, one for you. The gross margin was under a little bit of pressure this quarter, and you called out care management services or investments in care management services. Can you talk about what exactly is driving the gross margin compression as it relates to those care management investments? And then as we shift to 2025, can you provide just high-level commentary on what's going to drive the gross margin next year? I know you're dealing with the client loss, you have new offerings. There's these investments in care management that you're talking about. But how should we think about whether or not you can increase the gross margin into 2025?

Yes. For this quarter, we have been building our staff in anticipation of last year's launches, which has contributed to a sequential decline in gross margin. Additionally, the unexpected revenue from ART cycles has impacted margins. Looking ahead, we are moderating hiring related to gross margins and the care management services teams supporting them, although we plan to grow next year. While our membership is expected to increase next year, it is too early to discuss our plans for 2025, as we usually provide guidance in February. We are currently in the budgeting process and will closely monitor all costs while planning for the upcoming year, especially considering the outcomes of our selling and retention seasons.

And then one housekeeping question. 6.4 million members today, adding 1.1 million that gets you to about 7.5 million, minus the disclosed client loss gets us to about, call it, 6.3 million. That's a little bit of a delta versus the 6.7 million that you called out. Is there anything else to mention there? Any other churn going on? Or is it just sort of rounding?

Yes. About 100,000 went live this year, so they're already included in the 6.4 million from the current selling season. That's essentially the delta.

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

I'll continue by reviewing these numbers. If I have 80 clients in the current book, I see 548 instead of 530, which shows an 18 account difference. Are any of those accounts losses? If so, is there a common factor among them?

Yes. There are approximately 100,000 lives that have gone live already, and there are about 10 or 12 new clients. Overall, we experienced five losses.

Okay. Are you seeing demand in the market for plans that can offer a more moderated utilization trend? And do you anticipate having an offering that can serve that type of client?

I'm not sure if you could be more specific on what you're referring to relative to a moderated utilization trend. If you talk about a skinnier benefit or sort of more pull back benefit or the ones that are out there already, which are dollar maximum benefits, which effectively achieve that. They're out there, but we don't believe in those, in particular because when a dollar maximum benefit, you run out of your money in the middle of treatment literally. It's not a good experience and members then operate in a world where they're operating with economic scarcity in their mind and try and preserve dollars. And therefore, forego portions of treatments to have their probability of success for a birth rate. So it's not something we believe in as a good member experience. But if you can clarify if I'm thinking about something else, then I'm happy to answer the question.

I would think not just an employer that maybe wants to offer less cycles but one that maybe wants to make those cycles harder to access, so technically offering, but not really having global utilization that you're used to.

I'm not sure sort of what type of benefit that is. Again, we wouldn't support that. Either you believe your employees need to benefit and you believe your network and your network management and the physician's network are making decisions for appropriate treatment. But to restrict access sort of arbitrarily, I don't believe in. We don't believe it. We believe in the doctors in the network, making the medical decisions necessary for appropriate treatment.

The next question will be from Michael Cherny from Leering Partners.

Maybe if I can dive into a little bit of the maternity and menopause services you talked about for '25 again, not trying to get to guidance in any way, shape, or form at this point in time. But as you think about the materiality of those businesses for next year against your '28 targets, which I recall, we're about for $200 million of run rate revenue is on. How is the sell-through on the new products that you expected tracking? And is there any way we should think about qualitatively how they should ramp at the start and then over the course of the year?

The sell-through, I think, was positive relative to our first year-on-market expectation. Having now launched and being live with the 1.5 million lives across the number of clients that we talked about, both new and existing. I think is really positive. It's the utilization patterns of those benefits. The take rate, if you will, where that we create across those members that are at those employers will be what will be the progress that we'll see over not just the next year but over the next couple of years.

I understand that the international acquisition you made was a small deal, but how do you see that impacting the financial model? Can you provide any additional information regarding the lives covered by your recent additions? Even though it was a minor deal, what are your thoughts on the growth potential and contribution from that business?

Yes, this presents more of an opportunity for us in relation to multinational employers who want to engage with their global employees in addition to their U.S. workforce. This is a recent and ongoing investment aimed at providing offerings not just in the fertility and family building sectors, but also expanding into other areas globally. However, at this moment, we haven't included lives from global populations in our reported numbers. Considering the recent timing of the acquisition, it likely represents a greater opportunity for us in the 2025 selling season.

The next question will be from Glen Santangelo from Jefferies.

Pete, I have a couple of quick questions for you. Could you provide some qualitative insights on the current selling season and how it compares to the competitive landscape? It appears that your competitors Maven and Carrot are becoming more aggressive. We’ve also received inquiries about upcoming renewals since you signed many clients several years ago when competition was less fierce. Any qualitative insights you can share would be appreciated. Additionally, I have a brief follow-up on financials.

Yes. I'll take the second part first and then I'll have Michael comment on the selling season and competitive environment. As it relates to renewals, as you might imagine, our base of clients has been growing over years. So every year, we have a significant amount of renewals coming up each and every year. There are generally three-year terms. And as I mentioned in the previous question, we only lost five clients, notwithstanding the large one that we announced this past renewal season. So from a renewal perspective, we still maintain 99% of our client base.

Yes. So just overall, we've been operating in that competitive environment for at least a couple of years from sort of the BC privately held companies. And then, of course, we've operated from a health plan perspective. We really compete with them on each and every sale. Sort of from both perspectives, particularly when you look at our new sales this year, we saw consistent win rates against those competitors, especially, or I should say, including those jumbo clients that Pete referenced earlier, where, as you would imagine, those are some of the most competitive bids. And we fared well there and feel really good about our position there. And then as it relates to the health plans, again, that's an area that we've been competing for a number of years. And as we referenced earlier, starting to add on some of those health plans, shifting them from competitors to partners, also, we view as a positive competitive side.

Maybe if I can just quickly follow-up on the membership question. I mean, Pete, it looks like your membership is going to be up 3.5%, 4% on a sequential basis going into 2025. And I appreciate you don't want to give any guidance around fiscal '25 at this point. But like given where utilization rates trended in fiscal '24, it's hard to imagine maybe to get much worse. So is it reasonable for us to at least be thinking about the company generating revenue growth in fiscal '25? Is that a fair assessment?

It's a fair assessment. Certainly, we've always talked about looking at lives relative to directional growth for the company. That said, given the variability we've seen this year, plus having no visibility into the new clients and what their utilization might be, including what we talked about already relative to what we're seeing for Q4, but didn't guide to, I think it's prudent for us to withhold any sort of definitive comments for '25 at this point.

The next question will be from Jailendra Singh from Truist Securities.

I want to go back to the issue of less consumption in Q3. First, I want to confirm this is the same issue you guys called out for missed and guidance cut on Q2 call? Or are there any differences in trends or behaviors you're seeing or just the same trend getting worn in Q3? And related to that the recovery you're seeing in consumption in Q4 thus far, are you able to somehow figure out this is a pickup from members you started engaging in Q2 or Q3? Or these are new members who are driving faster consumption? Just trying to understand if there is any structural change driving the timing lag between utilization and consumption?

Yes. So first part of your question, what we saw in Q2, if you recall, was the increase in utilization, ART cycles per utilizer that you would normally see sequentially from Q1 to Q2; we didn't see as big of an increase. The difference in Q3 is now we have seen a decline, which we've never seen before. So that's the most stark difference relative to Q3 and what we saw there versus what we saw in Q2 was just a slower rate of growth. As it relates to the members in Q4 so far, they're across the board new and those that have already begun their journey. And as we have commented for Q3, what impacted the ART cycle utilizers that journey getting slightly elongated. And so by definition, it's going to get elongated into Q4 instead of having ended up in Q3 for a portion of those members.

And then my follow-up given all the volatility you have seen in results in 2024 around utilization and consumption, Pete, what are your thoughts on business models where you have exposure to member utilization like today versus having a model which is much lighter and demonstrative in nature while still adding value to clients through member engagement services. Are you open to having such arrangements with employers given the recent developments?

The short answer is yes. But beyond thinking about it, there's nothing that we do with clients at this point, but we are thinking about different ways to mitigate utilization variability, but not much more to talk about at this point.

The next question will be from Stephanie Davis from Barclays.

We have observed a sustained period of a usual mix in utilization and consumption. I would like to continue on the point that Jailendra raised. Have you discussed with any of your clinic partners whether this reflects broader trends, such as the introduction of new technology or an increased prevalence of PGT testing that is enhancing transfer efficacy? Or is it possible that GLP-1 is influencing factors like PCOS and contributing to improved fertility? I mean, it's too early to identify a trend, but several quarters have passed.

So thanks for the question, Stephanie. Regarding the last two points, we haven't heard anything from the clinics related to GLP-1s or higher PGT testing, which would result in more favorable clinical outcomes, which I think we are alluding to. As it relates to trends in consulted treatment timing, a few of the clinics have observed especially on the West Coast and also have observed lighter utilization of egg freezing benefits and we're also seeing some of that. But again in Q4, we're seeing a reversal of that, if you will, at least the beginning of a reversal versus what was Q3, which is why in my remarks, I talked about it's too early to call it a trend and it's more of a short-term phenomenon, I'll call it, which right now, we're not guiding differently to, but we are seeing the beginning of a reversal, if you will, relative to overall ART cycles per utilizer and within that related to my comment now within that on the egg freezing side, particularly.

Now I have a follow-up for Mark and you're kind of going to hate question. So I just want to keep that in mind. But given some of the lessons learned from guidance this past year, are you thinking that maybe taking a more conservative approach to guidance as you look at '25? Or how are you changing the philosophy?

I think we've certainly learned lessons throughout 2024, particularly regarding the variability within the business. This quarter, we're placing a greater emphasis on the variability we’re observing and are slightly reducing our reliance on the most recent data points to determine our projected ranges. This is the philosophy we are adopting right now.

The next question will be from Scott Schoenhaus from KeyBanc.

I want to explore the selling season in more detail. You mentioned 6.7 million lives for next year and the additional 1.1 million lives this year. I want to clarify that the 300,000 federally added this past year are only consulting and not full ART cycles. Regarding the 1.1 million lives added for next year, can you provide insights on the distribution? Is it broad-based or concentrated more in the middle of the country? Last selling season, you noted progress in the central regions. Any additional details on this new group of clients?

Sure. I'll provide some comments, and then Michael might add more. To address your first question, the 300,000 lives still do not account for the full benefit. The situation is similar to this year, which is the simplest way to explain it. Regarding the distribution of new sales, they cover a range of industries, as I mentioned in the prepared remarks. Additionally, the size distribution of these new clients closely mirrors our existing business, reflecting a range from small to large in terms of size distribution.

Yes. I mean very similar makeup to prior years from a demographic and distribution of industry perspective as well as Pete said, from a size perspective. As was referenced in the comments, we did have a nice season with jumbos this year. And outside of that, again, nothing different necessarily from a makeup of the sales season.

The next question will be from Richard Close from Canaccord Genuity.

Congratulations on the selling season. Regarding the losses you mentioned and the large client, have you noticed any similarities or commonalities in those losses when you reviewed them?

The short answer is no. There were only five cases, including the large one we announced, and there aren't any commonalities. The reasons differ; sometimes the losses are related to the parent company being acquired. It's not always due to dissatisfaction or any other factors related to the benefits. So with five cases, the answer is no, there weren't really any commonalities.

That's good to hear. Regarding the health plans and their success, which is relatively new, starting in the second half of last year and now expanding nationally and to other regions, as you consider bringing those customers on board, is there a difference in utilization or consumption patterns compared to employers, or is it still too early to determine?

Yes. To clarify the difference in partnerships, health plans act more as partners in our market approach rather than just as clients based on utilization. Through these health plan partnerships, we bring on employers similarly to how we engage with our other partners. We have observed that the utilization of employers works the same way, regardless of whether they come directly or through a partner, and we haven't noticed any differences based on their contracting methods with us.

Yes. There's no impact a different way, there's no impact whether or not to direct sale or through a partner on utilization. There's nothing structural there that would impact it in any way. And then we had made a comment that some of them trusted us with their employees as well as a client house account that's just normal utilization, normal onboarding for employees, no different than any other client.

The next question will be from David Larsen from BTIG.

When I was at the health conference recently, I heard from a couple of your competitors, Kindbody, Maven, and also Carrot, a couple of the things broadly speaking that I was hearing were things like maybe a company wants a $10,000 or $20,000 or a $30,000 max sort of benefit which I think maybe you would describe as being low. I think the way you described it, Pete was $1 max benefit or something like that. I mean, do you have a product or a program that can accommodate something like that? And then maybe how you want to describe it, upsell them or grow the product over time? Just any thoughts there would be helpful because the mix, it seems to me like you're winning more blue-collar accounts, so they have less money to spend, so they'll buy fewer IVF cycles, which is basically explains your consumption challenge. Just any thoughts there would be very helpful.

Yes. Let me clarify that. So I'm not sure we referred in terms of blue-collar accounts; the clients we're winning are adopting the benefit, the same that they've been adopting it, two cycles, three cycle benefit. They are full treatment bundles. They're full cycles. They're not limited by an arbitrary dollar constraint. So when a company and a vendor offers a $10,000 maximum benefit, they're not even offering enough money for one actual medical treatment for IVF, not in close, right? Whether they offer a $20,000 maximum benefit, they're not offering enough statistically to have a baby for most people because national live birth rates are below 50%, and a cycle with the drugs is going to be in the $20,000 plus range. So mathematically, you're not going to get there. Right? And so the clients that are buying our benefit understand that an arbitrary dollar maximum benefit is an inequitable benefit. And because around the country, especially if your national employer, reimbursement rates vary dramatically. And so certain people in the middle of the company where reimbursement rates are lower are going to have more attempts under a dollar maximum benefit than employees that you might have on the East and West Coast, where reimbursement rates on average are higher. But either way, a $1 maximum benefit drives, as I said before, different behavior by the patient in the doctor's office as they're making decisions for treatment and those decisions are made from a position of economic scarcity, where they're trying to preserve dollars and, therefore, select things that otherwise would help them achieve success. And so sort of the upsell concept is a good one but we have an offering and the offering is, if you want to do a one-side benefit, you could do it, but having a dollar maximum, we believe is not the right way to do.

That does conclude today's Q&A. I will now hand the call back to James Hart for closing remarks.

Thanks, Paul, and thanks, everyone, for joining us this afternoon. We hope you found this informative, but feel free to reach out to me at any time for any follow-up. And otherwise, we look forward to speaking to you at the start of the year.

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