Progyny, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Progeny, Inc. Second Quarter 2021 Earnings Call. At this time, all participants are on a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.

Thank you, Catherine, and good afternoon, everyone. Welcome to our second quarter conference call. With me today are David Schlanger, CEO of Progeny, Peter Nevsky, President and COO, 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 today's call contains forward-looking statements, including but not limited to statements about our financial outlook for both the third quarter and full year of 2021, the impact of COVID-19, including variants on our business, clients, member activity and industry operations, our ability to acquire new clients and retain existing clients, our market opportunity, size and expectation of long-term growth, are corporate governance plans, business performance, industry outlook, financial outlook, strategy, future investments, plans and objectives, and other non-historical statements as further described in our press release that was issued this afternoon. These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to progeny's growth, market opportunities, and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our periodic and current reports filed with the SEC, including in the section entitled Risk Factors in our most recent 10Q. During the call, we will also refer to non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations with most comparable gap measures are also available in the press release, which is available at investors.progeny.com. I would now like to turn the call over to David.

Thank you, Jamie, and thank you, everyone, for joining us today. We are pleased to report that we had a solid second quarter, reflecting not only our continued strong revenue growth and market expansion, but more importantly, our further success in scaling the business, growing our presence in the fertility industry, and building long-term value in our business. We believe 2021 will be another year where we not only achieve exceptional client retention, but also deepen many of those relationships through upsells and expansions. In fact, a large number of our existing customers have already committed to service expansions for 2022. And while client retention is critically important to the growth of our business, so too is sales activity. And our selling season is off to the strongest start we have ever seen at this point in the year as it relates to both new sales and upsell commitments. Additionally, we have built a strong pipeline of active opportunities that we are continuing to pursue over the remainder of this year's selling season. We believe this positive momentum across many facets of our business demonstrates how Progeny remains in its strongest ever competitive position, that our market opportunity remains very robust, and that all of the macro factors that have been contributing to our growth remain fully intact. You have likely seen from our press release that we have slightly revised our outlook for the second half of the year to reflect a lower level of expected utilization for Q3 that began somewhat suddenly at the end of June with a drop in the pace of new appointment scheduling for July and August as compared to what we would normally have expected to see. I want to be clear that we don't believe that this is indicative of any macro change in behavior. In fact, 90 plus percent of our members have been going through treatment as we would normally expect. For a small percentage of members, the uncertain and changing external environment appears to have caused a slight pause in their pursuit of treatment. It's difficult to gauge whether this is associated with the summer vacation season after 16 months in the pandemic or the impact of the Delta variant or both. We're already starting to see indications in the most recent week that the pacing of appointment scheduling is returning to more typical levels. And while we believe this is an anomaly that will be short-term in nature, we expect it to have a modest impact to near-term results, and we've adjusted our guidance accordingly. While Mark will take you through the results in more detail, here are a few of the highlights in the second quarter. Revenue in the quarter nearly doubled over the second quarter of last year, to $128.7 million. Adjusted EBITDA of $18.5 million in the quarter reflected a nearly five-fold increase in the second quarter a year ago, and our margins continued to expand at a healthy rate. Art cycles more than doubled from the year-ago period to a record 7,340. Average members for the quarter grew more than 30% from the year-ago period to 2.8 million, showing the resilience of both our business and our clients during the worst of the pandemic. Another highlight during the second quarter was the CDC and the Society for Assisted Reproductive Technology releasing their latest fertility data, which affirmed two things. First, our outcomes continued to significantly outperform the national averages, as they have done each year over the past five years. And second, our outcomes have continued to improve each year, while the national averages have stayed largely the same over those five years. But the lack of improvement in the national averages really underscores not only how differentiated the progeny approach to managing fertility is as compared to the rest of the industry, but also how difficult it is for a competitor to replicate our approach. Otherwise, we would see their improvements reflected in better outcomes. Unlike progeny, both the traditional carriers and the new entrants in our space are struggling to demonstrate their value as they are unable to either impact or measure the outcomes for their members. due to their benefit design, member support, and network models. We are exceptionally proud that Progeny is the only company with a five-year history of achieving proven, documented outcomes over thousands of patients that far exceed the national averages, with over 60,000 completed ART cycles since the launch of our benefit in 2016. And we believe that outcomes are the best measure of the value of a fertility solution. From the employer's perspective, better outcomes result in better financial value happier employees, and higher retention. To illustrate this, Progeny's live birth rate is now 25% better than the national average, reflecting our success in not only getting people pregnant more quickly, but also in a healthier way that resulted in significantly fewer miscarriages. Consequently, the typical Progeny client will have to fund significantly fewer rounds of treatment across their member population than they would under a competitive solution. When you add in the value of the medical cost avoidance from fewer multiple births, the progeny benefit provides meaningful financial savings, both in terms of medical and pharmacy costs, as well as improved employee productivity. And we do so while also creating an experience where each member feels educated, supported, and cared for throughout their journey. The combination of our superior outcomes and the exceptional experience we deliver has also allowed us to consistently achieve an industry-leading NPS score from our members, which now stands at its highest level ever. This high level of member satisfaction, as well as our leading clinical outcomes, provide the foundation upon which we have continued to build the company's scale and industry presence. To talk about the progress we made in the second quarter from a sales and client perspective, I'll now turn the call over to Pete. Thanks, David. Good afternoon, everyone.