Conference Transcript - PGNY 2026-05-12

Alan Lutz, Analyst — Bank of America

Good morning, everyone. My name is Alan Lutz, Healthcare Tech and Distribution Analyst here at B of A. We are delighted to have the Progeny team here with us. We have CEO, Peter Nevsky, and CFO, Mark Livingston. Thank you both for joining us. Really appreciate it. You know, Pete, I'll start with you. On the last earnings call, at least I felt this way, you sounded notably more constructive on the selling season and some of the momentum that you're seeing in the business. around the new pipeline was building substantially favorable versus a year ago. Just overall, it seemed like a very constructive call. And so to kick things off here, would love to get a sense, just maybe taking a step back, what's informing, at least from our perspective, what seems like a little bit of increased confidence or some of the positive things you're seeing in the business so far in 2026?

Peter Anevski, CEO

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

Alan Lutz, Analyst — Bank of America

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

Peter Anevski, CEO

I'm not sure I can speculate as to what may be going on relative to our standalone competitors. I just wanted to make the observation around the increased RFP activity. And again, vis-a-vis last year or prior year is even much higher. I think if you look at our solution and look at the sustainability of our solution and the demonstration of our solution in client satisfaction that manifests itself in the form of 99% retention in our 10-year history, that's really positive. And we also talked about in the call as a good example of that, we had a large client present with us and discuss their third-party consultant that they hired analyzing their claims data in their claims data warehouse. and over a year period showed you know significant favorable results relative to doubling their their pregnancy rate with IVF relative to reducing their their preterm births and NICU rate and a bunch of other really important stats these would be the the favorable outcomes that we experience and I think they said it the best and they said you know they wish they could talk about all their benefits this way it's the perfect trifecta of better member experience significant cost avoidance, and increased clinical outcomes, and that's exactly what they're looking for for all their benefits.

Alan Lutz, Analyst — Bank of America

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

Peter Anevski, CEO

I think the market continues to grow, driven by the macro trend that we see where both fertility rates are declining overall, as well as the number of people giving birth in the U.S. are a higher proportion now that are over 30 versus under. So 53% of women that gave birth based on the latest CDC data were over 30 versus under 30. And then within that, even greater is the 35 and over. So the average age of a woman going through IVF is 36 years old. and 35 and over continues to grow at a compounded rate of, you know, above 2.5% over the last 10 or 11 years, right? So on an overall basis, the demand driven by the macro trend is increasing. The overall industry continues to grow at a roughly, you know, 9%, 10% compounded rate per year. And we'll continue to do so and continue to do so, I think, even more, given the fact that the trend of people waiting longer in life to start building their family hasn't stopped and is more pronounced. And as it keeps being more pronounced, it's going to drive that need even greater and greater.

Alan Lutz, Analyst — Bank of America

That's great. And so the industry growing 9%, 10%. And also your revenue is starting to diversify in a few different ways. You talked about the Cigna partnership. as one example in the last earnings call you have a more mature blues relationship as well can you talk about how material a contribution the health plan partners are today and is it fair to assume you know what's the relative growth rate of health plan contributions relative to direct is it materially different just trying to get a sense of of the trajectory of both of those parts to your business um uh here's the way to think about it uh the the distribution partners um that we're we're signing up and doing business with are uh continuing contributor to our overall growth we

Peter Anevski, CEO

we historically have added around a million lives a year um to our business that's not small it's about one percent of the addressable market um for us um not insignificant um the relationships are now getting deeper and stronger and that's sort of the part of what we called out with our Sigma partnership and as a result we're starting to get this is our first full year with that partnership in terms of the sales here coming up right now and we're seeing more traction with that and I believe that will add incremental value in the form of pull through and overall lives added but we'll see how that plays out. It's those types of relationships that we're going to continue to deepen with the payers around the country, the blues, regional payers, et cetera, and start to repeat that level of engagement with those partners to be able to help accelerate incremental lives. It will also help as we continue to roll out the first few months of go-to-market in our Progeny Select product, and those relationships will help in that area as well.

Alan Lutz, Analyst — Bank of America

I'll get to the Progeny Select in a couple questions. I guess before we get there, though, one of the things I thought was most interesting about the call is you talk about the selling season and how strong it was, more RFP activity relative to a year ago, but then also two of your largest clients up for renewal have already committed to renew. So you're seeing, at least from our perspective, the market seems to be coming more toward progeny, and then your current customers also aren't looking elsewhere. And so there seem to be a confluence of tailwinds there that are really, really positive. When it comes to those two large clients that are up for renewal, I guess first they've already committed to renew. I just want to verify that. And then can you talk about what industry those clients are in? And then, you know, is there a typical timeline for when larger clients indicate their intent to renew during a year?

Peter Anevski, CEO

Yeah, I'll try and hit on all those. If I missed one, just let me know. I'll do the timeline first. Generally speaking, if they're going to go through an RFP process or a market check, it begins about now, maybe, you know, 30 days ago. and last differing periods, but through the summer, if you will, middle of the summer, sometimes later in the summer, by the time they finalize their decision. So it's as long as an RFP that you were going through with a new prospective client as it is with an existing client. It's just generally how long RFPs take. They're iterative in terms of their steps and the number of people they have involved, et cetera. As it relates to these two clients, yeah, they notified us. They were scheduled. We had an indication from them that they were going to do a market check this year, and they came to us already and let us know they're not going to do that, and they're continuing on with us, which is really positive, and we're also having positive conversations with them around some expanded products that they don't have with us today. So that's really positive. I forgot what the other question was.

Alan Lutz, Analyst — Bank of America

The typical timeline.

Peter Anevski, CEO

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

Alan Lutz, Analyst — Bank of America

Got it. And then, you know, as it relates to, again, it seems like there's more RFP activity, but these two clients are staying. You mentioned a lot of different reasons why maybe that is the case. around, you know, just sort of the benefits of progeny and some of the outperformance versus traditional fertility services. Is there anything that, and then also you're expanding the products that you're offering as well. As it comes to these two customers, is there anything specific you could point to other than them just being satisfied customers?

Peter Anevski, CEO

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

Mark Livingston, CFO

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

Alan Lutz, Analyst — Bank of America

That makes sense. And then going back to the Progeny Select, you know, really exciting market expansion for Progeny. We'd love to get a sense of what you're seeing initially, when we should get kind of more. I think the, you know, SMID businesses typically follow up in the fall or late summer.

Peter Anevski, CEO

You correct me if I'm wrong there. and then you know talk about the competitive landscape or lack of competitive landscape in that space and and so you know what are you seeing there and and talk about a competitive landscape sure so relative to progress we'll start there we've been signing up distribution partners and and are now in the process of of what I call pull through but essentially working with them, their producers, and ultimately the brokers that are in their network that ultimately interact with these small businesses. These small businesses generally, you know, materially are January 1 plan years and generally go through their renewal process. It's a shorter cycle, and they go through their renewal process for their medical plan in the, I'll call it, middle to back half of the fourth quarter in terms of commitment. So we won't see the actual pull through in any meaningful way until then but the progress around the partners that we're signing up and the effort that they're putting in to educate their network and their folks is positive to date and so relative to where we are early in in progeny selects go to market uh life cycle if you will um you know i'm pleased with the progress we're seeing so far relative With the competition, there's no other plan out there that's filed from an insurance perspective. The ability to have a supplemental plan in the country, as far as we can see, the attorneys go through, as you might imagine, the searches. So unless you're in a mandated state and your health plan for your fully insured population is offering you something relative to that mandate, There isn't stand-alone supplemental plan competition for Prosmy Select.

Alan Lutz, Analyst — Bank of America

And then shifting gears a little bit, as you think about the current state of the self-insured employer in general, utilization across both medical and pharmacy is high, and maybe a little bit higher than it's been historically. you know as we think about the white space here and getting you know the not nows over the finish line can you talk about how the conversation has evolved over the past couple years and what is the appetite in the current selling season for for the white space how does that compare to maybe the past couple years under utilization burst yeah look i the one thing i'm

Mark Livingston, CFO

Just addressing on utilization, so, you know, a good healthy quarter this quarter, you know, generally in line with what we were expecting. We obviously came in, you know, close to the high end of our guide, so our expectations all sort of ran with that. But, again, within the range of expectation over the last, you know, several years, anywhere from a .45 to a .49, we were slightly towards the higher end of that. So we're pleased that utilization and consumption has remained relatively consistent, certainly over the last five quarters or so. Helps us provide a good foundation for our guidance and what we're seeing currently and for the balance of the year. And I think from white space, obviously, you can talk more about it, Pete. We talked a little bit about Greenfield, Brownfield, and Pete's earlier comments around the sales pipeline, but you can.

Peter Anevski, CEO

Yeah, so demand continues to be positive for both white space and for both Brownfield and Greenfield in terms of the space. There's still a significant amount of companies and across a broad spectrum of industries that don't offer the benefit at all. But even the brown space is a huge opportunity because a lot of those are limited in terms of what they're covering versus a comprehensive covered benefit like what you would do with Progeny, right? So both are huge opportunities for us. continue to be positive conversations sometimes even with the awareness that we've created now for the need for a fertility benefit I'm over the last 10 years sometimes there's still a little bit more of a conversation as to why you should be doing this when you hear noise in your in your employee base for not having it and we still have to do a little bit more education there but but it's not as much as it was in the past but still positive and here's the reality the companies that aren't covering it with the trend the macro trend that i talked about before um you can only be able to ignore it for so long um the range of of folks that we that engage with our benefit are 30 to 42 years old they're your millennial population they're a large portion of your employee base a really important portion of your employee base and they have this need and so to continue to ignore it i think is is not possible it's just a matter of when you're going to add the benefit yourself and also you know get educated on the reality that you're already paying for it in some way or a portion of it so there's a lot of cost avoidance on top of it you're going to be able to do and redistribute your money across more people needing the benefit versus paying for high cost claimants in the form of you know premature births or NICU births, and that kind of thing.

Alan Lutz, Analyst — Bank of America

That's really helpful. And then one of the things we've talked about in the past is GLP-1s and how that may impact how employers that currently don't provide fertility benefits might be thinking about expanding the benefits. So just to level set here, over the past three years, spending on GLP-1s from a self-insured employer perspective has exploded. I don't think anyone would dispute that. But what we've seen, and so expectations in 24 built into 25, and I think in 2026, expectations for GLP-1 spend have been really high. But what we've observed in the early part of 2026 is that a lot of that volume for GLP-1s is actually flowing outside of the employer benefit toward direct-to-consumer. So it's possible that employers are seeing a lower trend, at least in the beginning of the year, relative to their expectations. As you think about the 2027 selling season, clearly something is going on that's positive in terms of demand for fertility benefits. My question to you is, are you seeing some of these not-nows or some of these employers who may be – are they telling you that, hey, our GLP-1 spend is falling below trends, so we're actually now able to commit to a fertility benefit whereas we hadn't in the past? I'm curious if that is something that's coming up in your conversations. Just any type of context around that would be helpful.

Peter Anevski, CEO

Unfortunately, it's not as explicit as that. I wish it was. But there feels like a little less mind share around GLP-1s, a lot more focused on sort of how to contain that cost and different types of ways to implement your benefit in order to contain that. And I think you're right. The proliferation of D to C in GLP-1s is going to cause more companies to decide whether or not how much of GLP-1s are they going to cover or not because now they're affordable for people on a DTC basis and will address other areas. So although nobody is saying last year or the year before, because of GLP-1s, we were holding off on fertility, the fact that there's less conversation just in general around that suggests there's less mindshare vis-a-vis what it was recently and possibly could be one of the reasons why there's more activity.

Mark Livingston, CFO

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

Alan Lutz, Analyst — Bank of America

And to kind of piggyback off that, you know, you've expanded to new products, menopause, postpartum and leave, benefit navigation.

Peter Anevski, CEO

I think 20% of your current customers have added a new benefit and 40 percent of new have added um can you talk about the momentum or what what you're most excited about when it comes to your new offerings that are now you know more than a year old yeah i think um it's important to have uh solutions that address a larger portion of your employer's uh population right um and address specific needs that they're concerned with um and And in the case of a lot of these benefits, they're either, you know, addressing areas where you can help bend the cost curve and some of the trends that they're seeing or just filling a need in terms of a gap relative to access to care. In the case of leave and benefit navigation, amplifying many good things that you're already doing for your employees but them not realizing it with sort of more traditional tools and utilizing tools that could help them better understand, better appreciate and better use all the things that you're offering to them all have different features that are positive for the overall experience of the employee and and the good that the benefit managers are trying to do for those employees and so I think the general excitement that they are all touching and addressing parts of family building and overall women's health is also really positive so they've been resonating really well we have a lot of really good healthy conversations with our existing clients and continue to talk about what we're doing whether they have the benefit or not and what are what's on our roadmap for those those products or whether or not they're looking to add them but all really positive conversations vis-a-vis their roadmap in terms of what they want to do for their benefits and what we have to offer going back to utilization for a minute.

Alan Lutz, Analyst — Bank of America

Mark, given OneQ came in so strong, can you talk about the key variables to get to the high end and then what would need to happen to get to the low end, just what's embedded in each as far as your guidance is concerned around utilization?

Mark Livingston, CFO

Yes, we're following a very similar guidance philosophy that we've been using here for the last five or six quarters or so. So we anchor what we're seeing today, the activity, how we're seeing clients and their journeys progress from Q1 to Q2. That's embedded within our Q2 guide closer towards the higher end of our guide, and therefore that projects on to the higher end of the guide for the balance of the year. The lower end reflects incremental variability at a level that considers some of the variability that we had a couple of years ago. So that way we've got a range that sort of incorporates some of the changes in human behavior and patterns that could happen through the year. But, again, what we're seeing today and the activity that we're seeing today would skew a little bit closer towards the high end of the range than the lower end.

Alan Lutz, Analyst — Bank of America

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

Peter Anevski, CEO

So it's everything from the back-end platform to be a more efficient company that's today multi-product, where we started out as a single product company, right? So everything we built originally was built on the back of a single product platform, and that creates some level of both tech debt as well as difficulty in adding capabilities from a timing perspective for engineering. So that back-end platform investment is huge and will give us the ability to add capabilities and or new products and get them to market a lot faster, that's one. Two is that platform is built with both interoperability as well as with the ability to leverage AI so that we can augment what all the care management folks are doing, whether they're on the provider side as they do provider account management and interface with the network, or whether they're on the member side as they're engaging the progeny advocates engaging or the clinical educators engaging with the patients they're going to be able to do that in a much more efficient way and spend a lot more time on their medical journey and sort of what they're talking about there versus sort of you know like everything removing administrative sort of tasks i like to call it homework from the members plate so that they can you know get through the journey a lot faster and a lot easier right so so those are the the positive things there's also a lot of investment in the digital assets that we're doing and then finally adding a suite of products to our global offering that address all the same areas that we do in the u.s. in order to make sure that that for our our customers that are global multinational customers that they can if they want to have the same type of offerings that address the same type of areas as they do in the U.S. because that's a lot of times a complaint that they hear from their colleagues around the world.

Mark Livingston, CFO

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

Alan Lutz, Analyst — Bank of America

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

Peter Anevski, CEO

Thinking hasn't evolved. The thinking is always around maximizing shareholder value. um the you're right the acquisitions we've done are or what i'll call smaller tuck-in acquisitions meaningful and and and adding value already despite their their um dollar size if you will um we haven't identified anything um of size um that makes sense um valuations continue to be nutty in certain areas and so we wouldn't do an irrational uh acquisition for the sake of doing it we'll we'll build de novo and we're perfectly fine with that but if something presents itself we'll we'll take a look at it if we believe it's going to add shareholder value we believe it's either a creative or a clear path to being a creative um you know we'll look at it but nothing has presented itself to date relative to that type of stuff so we'll continue to do what we do which is um uh you know maximize shareholder value and if that means returning value to shareholders through things like buyback programs, that's what we'll do in the interim with the excess cash that we're generating.

Alan Lutz, Analyst — Bank of America

So with the last minute or so, as we talk about your business, 99% retention rate, the industry's growing high single digits, you're selling seasons going well, yet the public market valuation, at least from our perspective, seems pretty disconnected with the growth that you've been putting up.

Peter Anevski, CEO

I guess, what do you think investors are are missing uh the most about the progeny story here i think honestly they're missing the big picture opportunity that progeny has um the macro trends that continue to drive our business are growing not declining the opportunity relative to um uh all the different areas that we're addressing is is still in its early stages um we couldn't be better well positioned both from a technology standpoint from a network and relationship standpoint and continue to increase the size of the moat vis-a-vis competitors in terms with all of our investments and and on top of that are adding new products that are that are continuing to increase our tam i think all of those things are really positive and i couldn't feel better about where we are sounds great uh looks like we are out of time pete mark thank you so much for the time and thank you everyone for joining us. Thank you.

Alan Lutz, Analyst — Bank of America

Thanks for having us.