Progyny, Inc. (PGNY) September 2026 Conference Transcript

All right, welcome everybody. My name is Stan Berenstein. I cover healthcare technology at Wells Fargo. With me today is Mark Livingston. He's a CFO of Progeny. Welcome. How are you? Thank you.

Great to be here.

So I guess let's just maybe start most recent earnings print. I think you had pronounced a bit of a slowdown midsummer. Can you just walk us through, you know, what has happened since then? How's your visibility through the end of the year? Kind of talk us through. Actually, before we dive in, for those that don't know, just give us a one-liner, what Progeny does, what are you guys doing, and then we'll dive into the quarter.

So Progeny is a fertility benefits administrator and women's health care company. We help companies who are looking to offer benefits to their employees to help build their family. We've been public for seven years now and have been offering the benefit for over 10, and we are the leading company in this space.

And so let's just dive into the quarter. So I think there has been a little bit of a softness in utilization. Can you just walk us through, you know, how's your visibility through the back half of the year? You know, anything that you're seeing from the demand side from clients? Sure.

Well, one thing I'll say is we're not giving an update here from what we gave as of the beginning of August. So my commentary will be really centered around that. We see seasonality every year. The summer is, in particular, August is a month where things typically slow a little bit. This year, as we were getting into preparing for the earnings call and looking ahead, we have about four to six weeks of visibility into authorizations that cover appointment windows so we have you know that that level of visibility as we look and so we can see some of September which typically is a month where things sort of snap back I think it's probably normal I think a lot of things in our daily lives act that way as well we called that out on the call because we were seeing that seasonal impact for August being just slightly more. I think one thing it's important for investors to understand is, and we obviously changed our guide a bit for the balance of the year, is we were taking a lot of things into consideration when we did that. As we got through the first half of the year, although our guide, although our results for the first two quarters were within and sort of, you know, inching towards the higher end of guide, we weren't at the high end of the full year guide. And so part of the adjustment we made in August was to acknowledge that we weren't anticipating that reduction versus the high to convert into the balance of the year. And then as far as the low end of the guide, we had actually reduced it in May from where we stood at the beginning of the year. We've just reset it back to where we were.

So look, it's a normal year for us we consider it quite stable from a utilization and and normal human consumption uh pattern and and that's sort of what we are expecting the the balance of the year to to yield okay and if we maybe take a step back just bird's eye view here right so you have over seven million uh lives uh that are eligible to participate with you there's um a tam i guess of over 100 million that you're you're going up against you've been in the market for a long time you're going against payers there's maybe a handful of other competitors i think the key debate here is how much white space do you actually see is opportunity more brown space versus white space and can you just

kind of level set where is your next level growth coming from so the when you talk about the self-insured market that is that 106 million tam that we've identified through even since our ipo a few years ago, adding the federal marketplace, public marketplace to that. As best as we can tell, and through the studies that the consultants do, maybe as much as half of the companies that comprise all of that membership have some type of a fertility benefit today, many of which, and we certainly consider ourselves to be really one of the only comprehensive benefits for fertility, that includes even small pieces of offerings. offerings to their members. So within half of that base, we consider a significant amount of expansion still available to us for those companies that realize that offering a comprehensive benefit for fertility would ultimately be the most cost-effective way of putting their money into a benefit like that. And then, of course, there's that second half. Each year that we've been here in this market. We've seen a continual awareness and growth towards acceptance of fertility as a, not a nice to have, but a must have as part of a benefit program. And so we continue to see that grow. Now we highlighted in the beginning of August around our selling season that we have been seeing a lot more competitive, you know, wins as well as things in our pipeline that are brownfields, so somebody that's had some type of a benefit, a higher proportion of those than maybe we've seen in years past. Not to say that we're not still seeing greenfield wins and greenfield pipeline ahead of us, but we attribute that really to the increasing pressure around cost on the overall medical plans. And I think employers are looking at these low double-digit increases and saying, how can we be sure that we're going to be spending our money in the most effective way. And I think that's where Progeny's story really leans in well, which is why we're seeing maybe a higher proportion this year.

So when we talk about costs, and a lot of these benefits are sold as driving ROI benefits, right, downstream. If you square the ROI benefits that your solutions have, how long does it take for an employer to recognize those? and then does the turnover, the employee base that gets turnover, does that mitigate how much ROI they can actually recognize?

So the, you know, one thing that's unique about Progeny is when you're, and I'll just go in the case of a new company to your question. Before they join us, we do something called a targeted outcomes analysis where we, as much data as they're willing to share about their population and their experience, particularly if they've already had some form of a benefit, using that claims activity to project for them what their experience will be under progeny is really compelling. And so we do that for them as part of the sales process. But we follow that up every quarter from then on as a customer, showing them the actual mix of treatments, the avoidance of multiples, the avoidance of low birth weight babies, the increase in the speed to birth or the live birth rate per transfer than they were experiencing before. And they can see how that money can be directly attributed to that. NICU stays is usually the easiest to wrap your head around. Many customers sometimes would come to us because they've had these really, really expensive babies under their old health plan. When you put the right protocols, best practice in place and enforce it, as we do under our program, you'll find that you have less of those type of more challenging early baby situations, and the costs go down. Interestingly, one of our long-standing clients in the tech space did a commissioned study of, I think, about eight years worth of their experience with progeny. I think, in particular, measuring it against the things that we said that we would do for them going in, and their experience has been incredibly positive. They presented it at a healthcare conference, I think, back in the fall. But really, a compelling story for them directly. We didn't really participate in it. They did it in and of themselves. And if you think about the competitive landscape, would you say the pairs is where you're bumping up against uh on a competitive landscape and then why would you offer better roi versus something that a pair can just you know white label and and bundle with with other services that they have yeah it's interesting the uh so we do consider the payers as sort of our primary competition per se it's interesting somebody was asking me this question a bit earlier around competition what does competition actually mean for a pair it's very easy and for a client it's very easy for them to activate the CPT codes in and around fertility. They have a network in place and they just begin doing the same cost management routines that they've done in many other areas of care. What that has never yielded, because effectively it is very much in line with what the national average is, it doesn't yield better clinical outcomes. And so there aren't savings that you can attribute to being covered by a plan or not covered by a plan. And many of them have tried for years. Most recently, in the last year and a half or so, we've partnered with Cigna, who now uses us as their primary vehicle partner around fertility. And it's not that they didn't compete with us year after year. They had had an offering, but they found that it was better to join us, I think, rather than try to directly compete with us. So I think the proof is ultimately in the outcomes of it. All of those various efforts, you know, don't replicate the service that we provide. For us, you know, beyond just the plan design and beyond just the support that we give members, which is critical in the process, we also oversee our network and we also hold them to the standards that the Society for Reproductive Medicine holds for best practice. And so all of that monitoring and effort, there's a cost to it. There's an effort to it. And the payers don't make any more money whether they cover or don't cover fertility. So for an employer, it could be easy to actually engage in fertility by just having their payer authorize this. But they're not getting the benefit and the outcomes from it. And ultimately, the costs will grow because of that.

So just to play devil's advocate here, you go to one of these accounts, you say, okay, we have an ROI that you can recognize based on our history. What's the primary reason why one of these clients doesn't go with you? What's the reason why they don't sign a contract with you?

So most of the wins that we don't get in a year are more deferrals than no's. um and i look it's not a especially for a client that's greenfield it it's not an insignificant you know incremental investment to to take on this benefit although again it's only as best we can tell between let's say one and three percent incremental so it's not you know a huge chunk but uh you know when you're already facing the increases that they're planning with now it's like where am i going to put my dollars here um and so they often have multi-year roadmaps where they're trying to initiate certain things at different times. And so some of our early engagements can be more fact-finding than actual sales. And we've certainly come accustomed to working with and, you know, keeping our pipeline active for those companies that are really more on a multi-year decision journey than just, you know, a one and done. That's not to say that we don't have a lot of those, but that's the case. And look, you know, sometimes they just want to take a half step in if a $10,000 lifetime cap reimbursement model feels quote-unquote safer to them in the first year, then they'll do that. That's not something that we offer. But once they learn more and they get the experience of the back-end costs of it and where the outcomes come and the experience that their employees and their members get from that, which is substandard, that's when they start asking more questions, and that's where progeny will shine. So when we talk about these deferrals, they're not a hard no they're deferring how long does it take to convert like what how how active is your pipeline that's deferred but maybe downstream you're able to convert them you know honestly it's a it's a conglomeration of every company's story so it changes from time to time um you know the you know some companies can wait it can be years some companies it you know it's the next year um i think one of the stories i know pete likes to share is uh our first sort of major healthcare company, they spent years trying to say, well, this isn't the right year, and I've got to wait, the next year is going to be the right year, we're going to defer. And I think they just finally came to the conclusion that there isn't going to be a right year, and that they had to just get started. And one of our most successful clients over the last several years, and now we have a much larger healthcare practice as a result of that. so it there just isn't uh there isn't like a standard model around it i'd suppose okay and when you do on the on the rare occasions that you lose business um what's what's the deciding factor is a price is it some kind of feature set that the competitor has that you don't have like what usually drives a loss um look i think in years past uh i know that uh there are clients that were looking for uh products that would address their global populations that's that's something that you know as of a few years ago we've really closed that out um you know some

some clients are looking for you know a limited you know a limited cost benefit some are not really looking to cover fertility comprehensively but they want to give something uh so it's it's a mix of different reasons okay um and i guess the next question i'd love to kind of maybe move into the medical and pharmacy cost inflation area um obviously you participate in that um you know does the environment kind of help your proposition that you know there's a rising cost associated with um you know pharmacy related costs is that something you're bundling and you're able to drive

conversions is that something that helps you or is that really just a nice to have so um from a i'm not sure if i'm following your question fully but let me see if i can get get it so there's um certainly underlying cost increases throughout both uh you know throughout health care on the fertility side the non-pharmacy side uh we've done an excellent job over all of these years in containing that cost, those costs of reimbursements for our providers. We have a great relationship with our network. We work very closely with them. They recognize that the value that Progeny brings to them is the incremental members that are coming that are fully covered. We collect member cost share for them. They're very administratively straightforward. And I think most importantly, it allows them to practice their very best medicine. And they're not structured in by the sort of typical cost control measures that a payer might put against it. So we've been able to keep those largely flat for years, very, very, very small increases. And so we've managed to control the cost for ourselves and for our clients. On the pharmacy side, there are underlying wholesale cost increases. We do have the right to pass those along to our customers when they come. But given the scale that we've been able to achieve across the whole pharmacy ecosystem year after year, we're able to absorb some of those cost increases on their behalf, again, to keep costs in check and neutral. We did a study that we shared at an earlier conference at the beginning of the year, sort of the multi-year impact of what price increases have been for progeny, and we're talking mid-single digits over a multi-year period, which, frankly, I think across the rest of healthcare is completely unheard of. So, you know, that's an area where, and we've said this for many years, the savings that we generate either through our leverage, through how we leverage the support costs that we have to deliver the benefit, whether it's our provider costs or pharmacy costs, you know, some of that savings we pass along to our clients through either much, much lower price increases or no increases at all or reductions. uh and some of that we keep for the company to invest and some of it we've passed along to our shareholders which is sort of why you've seen our gross margins you know uh eat go over over the years okay and you know we are approaching open enrollment for for this year uh has there been any changes in your discussion with benefit managers where the focus is for employers um anything in terms of how you're positioning your product this year versus last year um you know no i don't think so and we've had our expanded products that uh out there in the market now this is a really the call the second full selling season for um all these other uh products that we have uh i think the the roi model which we talked about before is is really compelling for for employers as they're making those decisions uh and look i think you know perhaps when the selling season is is over we're sort of in the early mid to height of the actual conclusion of it um you know we'll put some perspective around that and maybe share it at the end of the year as uh you know once with the all the dust and the chips settle okay i do want to use that time to pivot to progeny select uh so so does your your new risk-based model here um can you just walk us through maybe just a quick word about how this is structured who you're targeting and then i'd love to kind of maybe go into how you're actually driving the sales motion with this area of the business that's maybe a little bit different from your core business yeah sure so the core business has always been self-insured employers which typically uh you know are thousand employees and greater and so that's the area that we've always identified as as our as our tam that tam we talked about earlier now we're also targeting uh a tam of an incremental $50 million or so for employers that are smaller than that. So today, the offering is for employers of 100 employees to 1,000. It is not an offering that we intend on, nor are we providing to larger employers, and nor would they be interested for all the same reasons they self-insure today. So that's the market around it. We've designed the product to essentially mirror what a standard benefit would look like under the progeny program. So there's a limit to the number of smart cycles they could have. There's also a cap within, an overall utilization cap within the product to allow for some risk control. We've talked about some of the guardrails that we have in place around the product. I know there initially was some concern about us taking on risk. Honestly, I don't know if there's a company out there that has as much data and information around fertility, benefits, utilization, patterns, et cetera, that would be better positioned than us to underwrite something, even the payers, frankly, because, again, we know what the outcome of all of our treatments are. So that's effectively Progeny Select. Now, the way it's sold, it will be different, and it's not sold by our individual sales teams. It will be going through broker channels, general agents, along with the support of health plans and consultants. And that's where our effort has been focused since we really announced it late last year, is getting those networks in place, getting those agents up to speed. Now, you are working through a third party. And so the time to get things trained and laid out, et cetera, the protocols in place, you know, that does take time. So our expectations for what gets sold this year, and that would be really towards the end of the year as well, because primarily many of these companies are 1-1 renewal cycles, and they're much shorter decisions cycles, not like our large employer base that we're used to.

But we have a modest expectation of what would actually be sold in this year, but with that beginning to gain traction throughout 2027. okay hypothetically so you're targeting for this uh progeny select you're targeting employers with this employee size of a between 100 and 1 000 employees hypothetically you sell progeny select to an employer that has 800 employees three years later there are 2 000 employees what happens is the contract move outside of back into the core type of business So the way that the Progeny Select model and the pricing is designed, it doesn't include a risk premium.

So we are taking risk for any one particular client. And so like any health plan, right, for a smaller employer. So what happens is that they gain their own scale, their own population size. They have the financial wherewithal and the interest of taking that risk back on themselves and self-insuring. And so, you know, might there be a path for, you know, smaller companies to graduate out of a self-insured product to a fully, sorry, a fully insured product to a self-insured product? Sure. But I don't think that that's, ultimately, I don't think that's going to be the primary focus. That'll be sort of on the edge. Interestingly, we have clients today that are already sub 1,000 that self-insure. And so there'll be a gray, you know, maybe a gray zone there where people may want to do that. But once you get beyond those sizes, you're not going to see a company wanting to pay that incremental risk premium forever.

Okay. And you earlier framed when we talked about the competition and where you're moving. I think you said that the lack of being exposed to global markets was maybe an impediment previously and maybe lost some RFPs there. Now that you've gone into that, does that change your trajectory in terms of who you're going after in terms of clients? Have you seen any kind of adoption on the global scale?

I think, look, we've been getting multinational employers forever. I think the value that we put forward on the U.S. fertility product is incredibly compelling. That doesn't mean that, you know, HR functions aren't looking for solutions for their OUS employees as well. And I think being able to provide that is important. It's a good box that we're checking in the selling RFP process. Do I feel like we lost a lot of deals because of that? No, I don't feel like we did. But we've certainly taken that, you know, that out of the conversation. And look, we've got a great product now. We've bought a company a couple of years ago, which helped accelerate our efforts. We already had had a product. And we've been building out into many more countries and many more languages over these last couple of years, as well as adding some of our other products, such as pregnancy, postpartum, and menopause, to the global product itself. And so bringing it up to that standard that we have here for our fertility and women's health products in the state. So, look, I think, you know, we'll see how that, I'm not going to comment on what it's doing for this selling season, but certainly we feel we're very competitive there.

So, you just mentioned you've kind of moved the product portfolio outside of the core fertility. I think you mentioned, you know, postpartum, menopause, midlife. I think there's also, I think, leave navigation and parental and child well-being and all this other stuff. Basically a family platform at this point. all of these add-ons how do you you know are these just um they're priced a little bit differently than the core business right can you just discuss that and is there a time where you're going to break out these other segments from the core business yeah when they become meaningful we'll we'll be breaking them out uh you know more material to uh than what they are today um look it's an ecosystem around family building as you said and family uh and the women's reproductive journey.

They're priced differently, so they're not claims-based, so part of the, you know, part of our top line and obviously some of our cost of services is, you know, fertility charges and claims costs themselves. These are more case rate based, and so when somebody enrolls, they begin following that program, you'll see a case rate, and then, you know, they usually have access to that case for a period of time typically 12 months and so you'll see the revenue sort of spread out over that over that time frame so uh just a different model together in terms of you know top line and uh and margin contribution okay obviously your business is is becoming a bit more you know you have both breadth more complexity you are profitable just what's going on with capital allocation you have a lot of different priorities can you just give us a top-down view

of what's at the top of your priority list at the bottom and how you're allocating capital across that?

Yeah, sure. We've never kind of characterized them as top to bottom, or maybe it's better to say that I do have the luxury of being able to fund all four of our priorities and have for years now. So one, we are always investing in our go-to-market strategies. We've expanded into labor a couple of years ago, et cetera. We're also expanding our product offerings, which we just covered. So those are two very high priorities for us to continue. We have our target of a million lives a year that we get a lot of questions about on the core fertility side. We don't believe that we're not in every conversation around fertility, so adding more and more and more on the go-to-market side may not yield any more lives, but we're certainly always watching for opportunities to focus on expertise, et cetera, and products we've already covered. Our other two priorities include potential M&A transactions. We've done a couple of small tuck-ins over the years, but we have a pretty high bar for what we think is one, it has to be accretive, or there has to be a path through accretion for the company. Pete and I have both together and separately done many, many transactions and divestitures, and so I think we have we believe we have a very sharp eye for what works after the announcement and not just for the announcement um and so uh so we've been disciplined about it private company valuations have stayed pretty high and we just haven't found anything that we thought uh was worth you know bringing in at that point but we're always you know looking uh and then finally we've done share purchases we've done you know quite a bit in the last couple of few years uh i think it's a good way especially at a you know we believe that we're undervalued and it's a good way to return value to our shareholders we create quite a lot of operating cash flow based on our model and

to the extent that we have excess capital and we believe that's the right thing to do we'll do it and we've we've done a number of times the last two years nice and you you did mention that the 1 million lives that you're you're targeting to add what's your visibility how does it compare to last year at this time?

So the comments we made at the beginning of August were that we were running ahead in terms of the early commitments that we had already secured as of that point with pipeline in place to get there. We expressed that we felt confident that we were going to mean or exceed that $1 million this year. And I think as far as qualities go, it's across a number of different industries, old and new economy industries you know nothing sort of unique or different about you know the profile of them or what they're or what they're buying again this is from the early commitments we typically buy two or three smart cycles with some profile of other choices and that's what we're seeing again this year so nothing nothing really to call out different from that perspective okay without like maybe calling out long-term guidance maybe just the final question just if If you think about two to three years from now, where are you most excited about the current platform as it is today?

Where do you think you're going to get the most amount of traction over the next two to three years versus where we are today?

Look, I think, and we talked about it a little bit earlier when we were talking about the TAM and where there's white space. I still think we're in earlier innings here. We have 7.2 million out of 106 million, plus another 50 million from the fully insured base. I think there's just a long trajectory left for us to continue to do what we do, to do it well, to bring more and more members in. That's the biggest driver of growth for us, has been every year. We, you know, I think we've shown incredible durability through a variety of, you know, macro forces, whether it's recessions, inflation, COVID, or what have you, through all of that. And I think what that really tells you is that the strength of desire to build your family really overrides many of those considerations. And in particular, when you have infertility and you know that's part of your particular journey, it really creates such a strong demand. And so I think, you know, we'll look back in two or three years and we're going to look at, you know, the growth of our core fertility product as, you know, continuing to march forward as the way that we have. And we'll do our best to continue to operate the company in a way that we're being efficient with our costs, you know, continuing to expand margins and cash flow. I think that will be a big part of the story. And then I would say if there was a byline to that, and let's just say maybe only one font size smaller, would be Progeny Select. I think it's an important advancement that small companies will be able to access a benefit that you had to work at a large company to get beforehand. I think we're very well positioned to offer a really compelling product to that market, and we look forward to seeing what that does in the next couple of years or so. but I think that will be a big part of our story as well.

It certainly doesn't hurt that the average pregnancy age keeps going up.

Yeah, the maximum factors, they've been in place, and they remain in place. People are having babies later in life. There's cost pressures on people of that age. The last thing you want to – and the demand for that to be a benefit is critical. You think about your – you just graduated seven or eight, maybe nine years out of college. You maybe just paid off all of your college debt and you're hoping to try to buy a home. The last thing you want to find out is that you're going to have to take on $50,000, $60,000, or $70,000 of debt just to have a child. And that's where a benefit like this can be incredibly life-changing for a member. And again, from the company's standpoint, the best use of their money because it's saving costs on the back end from the bad decisions that that person under all that pressure is making.

Well, we're at time here. Thanks so much, Mark. thanks everybody for joining us. Yeah, thank you. Thanks for having us. Appreciate it.