Progyny, Inc.

Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you. Good afternoon, and welcome to the Progeny, Inc. Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we'll open the floor for your questions and comments after the presentation. I'd now like to turn the call over to your host, James Hart. James, the floor is yours.

Thank you, Tom, and good afternoon, everyone. Welcome to our third quarter conference call. With me today are Pete Ineske, CEO of Progeny, Michael Stermer, 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 2025 and the assumptions and drivers underlying such guidance, our anticipated number of clients and covered lives for both 2025 and 2026, the demand for our solutions, anticipated employment levels of our clients in the industries that we serve, our expected utilization rates and mix, 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.progeny.com. I would now like to turn the call over to Pete.

Thanks, Jamie, and thanks, everyone, for joining us. We're excited to report that Progeny had a very strong third quarter with revenue and profitability that exceeded the high end of our guidance ranges. Member engagement continues to be healthy, consistent with what we've seen throughout the past year. Following the consistent strength of our results, we're pleased to be in a position to once again, for the third consecutive quarter, raise our full year guidance With the most recent raise, we have now increased the midpoint of our revenue guidance by more than $70 million, above the midpoint of our original range for this year. We're equally pleased with the results of our latest selling season. In any giving year, our season reflects multiple priorities. The acquisition of new logos and lives, the retention of existing clients, and the deepening of our relationships with existing clients through the expansion of their benefits with us for their employees. This year's selling season, once again, demonstrated our position as the leader in the market and how our value proposition aligns with both employers and their members. It starts with the consistent expansion of our base, including over 80 new logos and approximately 900,000 lives this season. As we told you last quarter, although our pipeline initially built slower than we would have liked, largely attributable to the macroeconomic uncertainty earlier in the year, we are particularly pleased with this result in the face of historically high macro medical cost inflation. We created a large influx of new opportunities throughout the spring and summer, which once again validates how family building and women's health remain a top priority for employers and their members. As the season entered its final stages, we saw that a select number of employers, including some large ones, weren't able to accelerate their decision-making process fast enough to offset their later entry into pipeline. These companies instead become part of our traditional pipeline of not-nows, setting us up well for next year's selling season. Our wins this year represent a broad cross-section of industries, including consumer goods, healthcare, financial services, education, tech, business services, and Taft-Hartley Groups. In fact, this latest cohort continues the ongoing diversification of our member base, which is increasingly spread across dozens of sectors, with no one area of the U.S. economy dominating the base. We continue to see a broad distribution by client size, with our newest logos contributing anywhere from 1,000 to over 100,000 lives. The second way to see how our solutions are resonating is our near 100% renewal of existing clients and covered lives for 2026. This extends the long track record of success we've maintained since our first year in market. In our opinion, this is the strongest testament to our market leadership and value proposition. This strength and continued execution is also highlighted in the expansion of benefits where nearly 30% of our clients have chosen to add to their solution in some way for 2026. And this includes clients consolidating their benefits with progeny away from our competitors. Historically, this meant more smart cycles, adding Rx, or expanding the coverage for areas like donor tissue or storage. While those all still occur, we can deliver for our clients and their members an expanded suite of services, including end-to-end reproductive health support for both their domestic and international populations, as well as benefit and leave navigation. Equally important, not one client has reduced their benefit in any meaningful way next year. Our newest services in pregnancy, postpartum, menopause, and benefit and leave navigation continue to resonate particularly well with the clients. Although we're in just our second year in market with these programs, we've seen an incredible positive response. Between the uptake from existing clients as well as our newest logos, more than 2.7 million members will have access to one or more of these newest services in 2026. That's an incremental 1.2 million members versus this year. Taken together, these data points build a complete picture of Progeny's market leadership and the continued demand for our services. And it's what inspires us to continue to expand both the services and segments of employers that have access to Progeny's benefits. A few weeks ago, the White House announced its focus on expanding access to fertility care. We view this as a significant step forward for the country and a strong positive for us. It's also an affirmation of the work we have accomplished over the last 10 years. The administration expressed its enthusiastic support for supplemental plans to address the small and mid-sized market. To date, those employers have had limited choices in adding family building care with cost predictability to their benefits, which has forced their employees into the same one-size-fits-all dollar-based plan designs that our model has long proven to be ineffective and inefficient use of resources. In the past, we've referenced that we've been developing a product for small and mid-sized companies to address the more than 50 million covered lives within these businesses in the U.S. This is in addition to the 100 million-plus lives that we're already addressing today through large, self-insured, federal government, and Taft-Hartley populations. We're pleased to announce the first of its kind supplemental plan for fertility and family building, which will be in our product portfolio in next year's selling season. In addition to this expansion, we have also broadened the platform through our newly launched Progeny Global offering. This provides multinational employers with a continuum of integrated services, including family building, pregnancy, postpartum, and menopause across their full populations. Project's platform was purposely built for global markets and delivers member support tailored to their local environment. This marries together the capabilities we acquired last year with what we had created in-house and produced a better, more comprehensive offer that's second to none in the market. Given the results we've achieved this past year, coupled with generating more than $50 million in operating cash flow this quarter, which brings the total operating cash flow to a record 156 million over the first nine months of the year, we believe our stock is significantly undervalued. Accordingly, with our solid cash position and the overall strength of our balance sheet, we're pleased to return value to our investors through the announcement of a new share repurchase program for up to $200 million. Mark will describe this program in more detail along with our higher expectations for the year. Hopefully my remarks today help you understand why we're happy with our performance thus far in 2025 and why we're even more excited for the year ahead. With the momentum we've built, we are well positioned to continue our growth trajectory into the next year and beyond and look forward to keeping you updated on our progress. With that, let me now turn the call over to Mark.