Welcome, everybody. My name is Scott Schoenhaus. I'm the healthcare technology analyst here at KeyBanc. I have the pleasure to have Progyny CEO Peter Anevski and CFO Mark Livingston joining us for our fireside chat today. I think, Pete and Mark, I think most people know your story, the one of the leading fertility benefits providers to employers, a large and growing market opportunity, and, you know, truly helping family building through providing better outcomes. So I guess I'll kick off the fireside chat with a list of questions for you both, Pete and Mark, and then we'll open up the floor for investor questions. So investors, if you do have a question, there is a chat box below your screen. If you submit a question, I will see it, and I will read it to the management team. Pete and Mark, thank you both for participating in our conference. I guess the first question that I'm sure you get on your meetings in from investors is the first quarter, the operational inputs and takes, the guidance reduction, and what you're seeing currently. I guess we'll just start there. What's happened in, you know, January, and what are you seeing now? Yeah. So first of all, thanks for having us, Scott. Good to see you. So we put out, when we reported year-end results, we put out guidance for the first time for Q1 and the full year. We called out that the Q1 guidance relative to the full-year guidance, some people may think was light because what we were seeing was an aberration of treatment mix in the first half of the quarter in terms of scheduled appointments, where they were lower on average, lower revenue contributors. And we quantified it, we calculated on a pro forma basis what you'd normally expect in terms of treatment mix. And it was roughly a $15 million impact for the quarter versus the guidance we put out. Now, we also pointed out when we reported earnings that we also were already seeing scheduled appointments for the back half of the quarter, mix being more normal to what we would expect. We also called out that the aberration that we're seeing in the first half of the quarter is, you know, happens from time to time, has happened to us, you know, essentially once that was big enough that we called out since we've been public in 2019, but doesn't happen often. What generally happens more often is treatment mix stays pretty constant for the full year. Not a lot of variation because, you know, fertility, like any disease, has incidence and prevalence overall, and with the population under management, it's as a size that it is. You know, the treatment mix on a longer-term basis, i.e., a full year, has been relatively consistent year after year. And so that's where our confidence in the treatment mix reverting back to the norm, for the balance of the year, plus what we're seeing already, in terms of scheduled appointments for the back half of the year comes from. The only thing I'd add to it is that we did certainly look at it in detail. We do, as Pete mentioned, we have a tremendous amount of data historically versus, you know, what we would have expected to see in a January, February, March timeframe. So we looked at it by client, we looked at it by client industry, by geographies across the U.S., and even by sort of individual clinics and providers, just to be sure that it was not something localized to any, you know, particular type of area or type. And in the end, it was, you know, although there was variation, there always is variation from, you know, day to day, week to week across each of those different, you know, sort of spheres of analytics. It really was sort of a broad-based and short-lived aberration, which gave us, again, as we saw that shift back to normal for the second half of the quarter, you know, that gave us the confidence to know that there wasn't, you know, some underlying trend or anomaly, you know, within some pocket that we needed to understand better. That's helpful. But to break this down maybe from a real-life use example—and it doesn't mean that this was representative of what happened in, you know, whatever, mid-December through the first half of the quarter—but it, I like to use always, like, life, real-life examples to help kind of understand the fertility process. But so when a woman has an egg retrieval, which tends to be the highest-cost procedure and the medications involved, and if she gets older on that scale, say between the age the scale of 30-40 years of age, as she goes towards the 40 end of the age, her age, she'll typically need to do multiple egg retrievals, to have viable embryos. So, is what you saw in the first quarter in fact partially a factor of women that you thought were on that age spectrum, older on that age spectrum, that didn't have to do more or didn't elect to do multiple egg retrievals and the associated costs with the procedure, along with the expensive medications? Just kind of trying to frame a real-life example of, oh, the pattern that you would normally see from your members that kind of. Yeah. Yeah. A better example, so no, that's not what we saw. Okay. I'll start with that. So a better example and better sort of way to describe it is when you start out with what we talked about, which is from what we were seeing so far in the quarter, demand in the form of utilization rate, was as strong as it was a year ago. So there weren't any fewer people using the program. So then you have a statistical anomaly where for a short period of time where you'd normally see the percent of people, some percent of the people doing a fresh cycle, which is a full IVF cycle, some percent doing a retrieval cycle, which is what you just described, a freeze-all cycle, some percent of the people doing fertility preservation in the form of egg freezing, and some percent of the people doing transfers, right? A higher percent of people down that whole chain, the largest contributor from a revenue perspective, is the full IVF cycle. The lowest contributor from a revenue perspective is the transfer. A higher percent of people shifted down in those services in that short period of time than you otherwise would normally see. You normally see, again, with a big enough population like ours, you know, over, you know, sort of a six-week period, you're going to see more normal distribution of what they're utilizing. It just so happens, it's happenstance, that you saw, you know, again, an aberration of more people utilizing the lower-dollar services impacting the overall revenues in that short period of time. So, it's literally that. And it's not necessarily that what you're describing, which is, you know, many of them the average age of the fertility user, for example, hasn't changed. So it's not like a shift up, and they're older, and therefore, you know, she needed more retrievals but didn't do it or anything else like that. They're going through, you know, a fertility journey, and they're doing what they need, what their doctors are recommending. And it just so happens that the collection of them in this short period of time utilized the downstream services that are lower revenue contributors is the best way I can describe it. Got it. Now, when I think about not the downstream, but the frontstream, we should be seeing your you had a very strong selling season last fall. We should be starting to see that upstream come through the cycle now, right, with the consultation fees, and then the egg retrievals and the medications as well, right? We, I mean, that usually kicks in within the first quarter, or at least you'll get a sense of utilization from your new clients that you've onboarded from this selling season. Is that the right way to think about it? And is there any strange utilization or behavioral changes with this new cohort of employees or members that. There's you sort of, you know, you're calling out the right thing. Especially with the new cohort, it's just we only have basically six weeks of data at that point. It's really hard to sort of talk about trends or anything else like that relative to that cohort. It's early. Overall, though, we do guide based on what we're seeing currently and utilize past history and trends, you know, and there's sophisticated models that are doing that, to basically guide both the quarter and year on. But, you know, too early to call out whether or not there is or isn't any sort of anomalies with that newer population. It's brand new and so little data, you know, and in a short period of time, you know, that data is noisy. You need to see some more experience with them to start to really, you know, identify whether or not there is or isn't anything unique. That said, we didn't notice anything super unique about them. But either way, it's too early to sort of say definitively that there is or isn't anything. Got it. Shifting to your pharmacy side of the business, there was, you know, a lot of uplift over the past year, you know, selling that business to your legacy clients. Now it's sold upfront, and I believe 90% penetration. Is that the right stat currently, with your clients that use your pharmacy benefit, your pharmacy services? Ninety... ninety-three. Ninety-three, now in 2024. Okay, 93. Can we talk about, you know, where growth should normalize for that business going forward? Should we you know, this is something that emerged, I remember, last year, when there was a dispute on the Menopur. Talk about just the moving parts on the medication side and and what we should expect for kind of, like, normalized growth now that we're at almost full penetration of, from your legacy clients. Well, as you get closer and closer to 100%, your growth rate's going to be more like the medical growth rate, the overall growth rate. Yep. It is sort of the first piece of it. In terms of the moving parts, the Menopur shortage was unique and short-lived throughout the eight years that I've been here. Drug shortages have only happened twice, and they're both short in duration. So that's the only real thing that could sort of impact the top line, whenever there is a drug shortage and alternatives are utilized. And although not ideal in terms of sort of, you know, what the docs prefer to utilize from a treatment perspective, you know, but other than that, there's no real other significant dynamics to talk about or call out because, you know, all of the dynamics throughout the whole, you know, distribution chain, if you will, of our pharmacy product have been consistent and performing, you know, throughout our history. So, but for the drug shortages that caused, you know, very short-term bumps in the road, you know, nothing really sort of to call out. Great. I want to talk about Alabama and the legislative issues. Now, the White House and, I'm sorry, the Congress worked pretty quickly to resolve this, but wanted to hear your thoughts on these red states that potentially or many investors fear potentially could inhibit IVF treatment facilities from operating at capacity or whatever or not doing pre-embryo creation. Yep. So real quick, for those who may not know what the Alabama issue is, Supreme Court in Alabama ruled on a case where they effectively said that an embryo, in a dish or in a tank, is an unborn baby. And to the extent that it's destroyed inadvertently or accidentally or intentionally, it's, you know, harmful, you know, to an adult, essentially. So what the effect of that was to shut down all the clinics in Alabama for a very short period of time. As you pointed out, Alabama, by the way, is one of the most red states from a anti-abortion law perspective, and also relative to this ruling was about as extreme as you can get. Quickly, the legislature there and their governor passed the law essentially protecting fertility, and clinics are now reopened. Other states, you know, the largest sort of red state out there, which is Texas, has already had a case where both in its ruling and on appeal upheld said that embryo is, in fact, property and not an unborn life. And so none of those types of wrongful death sort of laws would apply to anything related to embryo. So, you know, to the extent that those rulings and no sign that the appellate decision upholding that case is going to be appealed higher. And so to the extent that case law protects in Texas already, it does. Texas is also, again, although a red state, one of the 20 states in the country that actually has a fertility mandate, already has a law around fertility. And so politically seems to be and also their anti-abortion law carves out, as opposed to the other anti-abortion laws that were vague on sort of when life starts, theirs was specific relative to carving out and specifying that it's a fetus, and not just an embryo in a tank or in a dish that, you know, is essentially a child and it's destroyed is violating sort of anti-abortion laws, right? Yep. I think the reaction, both in many, many other states on both sides of the aisle, as well as at the federal level, that fertility should be protected, I think, is a really positive sign and should alleviate any concerns that anybody has around, you know, any red state sort of, you know, effectively, you know, harming and/or stopping, assisted reproductive technology services in those states. That said, even if they did, even if all of them would have to collectively do it and when you exclude Texas, it's basically 3% of the population. So it's not that big sort of as a financial risk, if you will. You know, again, we think any person not being limited and not being able to build their family, isn't right. But, you know, relative to, you know, financial impact. Or a financial picture. And that's what I wanted to bring up, Pete, here at the end was, you know, the exposure to Alabama and these states is pretty insignificant in the industry, not at all, let alone you guys. Which. The only one thing I'd add to it, and Pete's sort of said it, but I want to emphasize it, is, you know, both of the presidential candidates, the presumptive nominees at this point. Yep. Have been very explicit about their support for IVF. Yep. Not to be too, you know, quip about it, but there aren't too many things that both sides of the aisle agree on, you know, at all. But this happens to be one of them. So I think setting that tone, I think importantly, on the red side of the aisle is critical. And that's been pretty explicit. Yeah, I think that's a great point. And you've seen both, yeah, you said both candidates being very vocal about that. This is a hot issue, obviously, a very sensitive issue, an important issue. Okay, moving on here, can you talk about the new benefits you've added for the 2024 selling season? What kind of traction you're seeing with these offerings so far? Yeah. So we added new products, a preconception product, a maternity product, a menopause product, you know, pregnancy and postpartum, we call it the maternity product, etc., into the portfolio. Sold them to a few pilot clients, and they're just in market, really early to sort of give any other color around it. But to say that, you know, there's utilization is light right now, but it's similar to sort of other point solutions. We have to do some member marketing, and testing, if you will, which is why they were rolled out on a pilot basis. But they are being offered to the rest of the book of business, as well as new prospective clients, while we refine sort of the ways that we can reach those members within our covered lives that would need those benefits. I want to talk about utilization, Pete. So you saw record utilizations in 2023, just to give investors a kind of context. It went from 0.45% in 2022 to 0.49%, which is a big step up, reaching record levels. What happened last year that caused that, in your view, from what you saw? How should we think about utilization going forward? I just want to walk through the moving parts because it was a big year in utilization for you. Yep. And those numbers you're referring to are the quarter? Female. Sorry. Yeah, female only. Yeah. A, female utilizers. And B, for the year, they were 1.03%-1.09%. Important. Sorry. Those were quarterly figures. Yeah. Yep. Yep. Important is just pointing out the year only because people utilize the benefit throughout the year. They don't just sort of get it all done within one quarter. And so they're whatever period we report, it's unique on a unique basis. You know, a lot of factors could contribute to that, everything from the continued growing incidence and prevalence of infertility to the continued impact of upsell activity where clients are expanding the benefit. And by definition, if you expand the benefit and either add more cycles or add fertility preservation if you didn't have it before, etc., you're going to have, you know, utilization increase. We never know for sure exactly what causes these things. It's hard to know because, you know, as I as I like to say all the time, you know, in the prior year versus this year, you know, it's hard to know why the percent of people trying to have a baby and then what percent of them sort of ultimately determined that they were infertile and needed the help of assisted reproductive technology and how that fell into the year. The utilization's been sort of trading, you know, performing in a way that's in a range of 1.03-1.09 since we've been public. Last year was 1.09. We had another year that was 1.09, ignoring the first COVID year, which was when the industry shut down for two months. Yeah. You know, a lot of factors sort of impact utilization and everything. You know, it's the number one driver is as you add lives and as well as the lives that you have, the percent of population that you have under management that's in childbearing years, right? And that's going to always vary slightly. And then just, you know, awareness sort of grows over time. That's part of it. Even though we're the only option when you roll out the Progyny benefit, it's not like it's a choice between us or your carrier. It's the only option that you have when you roll out the benefit, that you do with us. If you try to do it through your carrier, you would get denied, essentially, and told you have a Progyny benefit. Even with that, there's a lot of variables at play. But overall, we were pleased with the utilization lift. And what we're seeing so far, which is what we reported year-end, was, you know, utilization, you know, through the first quarter at the time we reported, you know, virtually almost the same as last year. So in all indications are, you know, last year's utilization level, is, you know, should repeat for this year. And that's where. Yeah. That's where our guidance is based on. Yeah. I guess to just dive into that further and just to be frank, there's a lot of investors that speculate whether the legacy tech clients and the, you know, all the layoff talk forced behavior last year to take that benefit that wouldn't have been forced. And I guess maybe to ask this in a way that could answer this question to investors is that you didn't really see a strange anomaly in behavior on your legacy tech clients that would have caused this, you know, nice utilization step up throughout the year. Well, here's how I would answer that. The collective tech companies, not all of which are clients of ours. In terms of quantified announced layoffs, were about 150,000 lives last year. Right. Right? When you consider the size of the population, last year was 5.4 million under management. Again, those 150,000 lives weren't all our clients. And you consider the percent of that population, you know, that overall utilization rate, if you want to use it, of 1.09% or whatever it is, right, or the increase, the amount of folks that were potentially terminated and therefore, accelerated their timeline relative to when they want to build their family would be too small to move the needle at that level, given, you know, the lift as a percent, right, 1.09% versus 1.03%. So I don't think that's it. And there's nothing that would suggest within our data that was it. But in theory, they're going to you know, the other argument, you know, somebody would make is, well, there were maybe layoffs that weren't announced, but that also caused that. Who knows? All I know is, you know, as I said, all I know is what's currently happening. What's currently happening is utilization, as we talked about on our earnings call, utilization was consistent with prior year at that point. And that's why we guided the way we did. And that's also why we called it out in terms of, you know, assumptions in the guidance, because that's what we're seeing so far. That's how we always guide. We always guide based on what we're seeing currently. It's the best we can do. But things change. And who knows? But right now, you know, as we reported on our first quarter, I'm sorry, on our year-end earnings call, that's what we're seeing. That's how we guide. Yeah. And again, setting aside Q1 and 2024, you know, looking at 2023 and that step up, which is your question, it was across industries. It was across the, you know, the age of the client, if you will, the cohorts, whether they launched with us six years ago or two years ago, there was a consistent level of growth across all. You know, there's slight variations in the scale of all of that, but there was, you know, it, you're not seeing, like, a concentrated, you know, step in one direction that's centered around one particular group. That's yeah. That's really important. Great color, Mark. Thanks. I kind of want to focus now on, you know, operating leverage, where you see, you know, margins both on the gross margin side and the adjusted EBITDA margin side from here, where you can pull some levers going forward. And just as a reminder, I guess, for investors, on the gross margin side, it's really with the providers, bringing volume in and renegotiating, and then on the adjusted EBITDA margin side, it's really operating expenses. Right. Yeah. I mean, really, a few key parts to cost of services and gross margins. And obviously, pricing is a component of that as well. So again, over the years, we've saved money through leverage and negotiation, both with our providers and our pharmacy partners, our rebate partners. We've kept some of that money, and some of that we've shared with our clients. And so some of that has come in the form of reduced revenue. So we've balanced that as we've grown. You can see that our gross margins have improved sort of year after year. There is also the component of all of the care management services teams that we have internally here who support people as they go through their journeys, who oversee the management of our network and ensuring that they're, you know, complying with the best possible care protocols, you know, etc. So we found over the years that, you know, those internal teams, we don't need to grow, really as fast as we're growing revenue. And obviously, we've done well as we've scaled to save money, again, across our provider, pharmacy and rebate partners. So that's a trend that has, you know, continued over time. And, you know, we expect that we could do that further. But again, these are incremental changes. As it relates to operating expenses, you know, our sales and marketing line, you know, cost of acquisition for customers has been actually relatively flat in the last couple of years. We've been investing in those teams as we've expanded into different verticals. Labor, we've talked a lot about in the last year or two that we've built up. We've had some good success. But obviously, there's some investment there. But again, at a pretty modest level of revenue, we could always leverage that further. But certainly, we want to continue to feed growth at the company. So we watch that carefully. And then on the G&A line, we've continuously reduced sort of year after year. Certainly, as we retain our customers at our, you know, near 100% retention rate, you know, you're seeing us be able to leverage G&A sort of year after year because ultimately, the cost of administering them isn't incremental. So, you know, when you boil all that in, we've for the last few years now and guided to nearly this number for 2024, about a 20% incremental margin on the incremental revenue, so adjusted EBITDA margin on incremental revenues, which is, you know, you know, a handful of points above where our EBITDA has been, which is why you've seen our EBITDA grow sort of, you know, each year. The other thing I'd just point out in that is, and Pete mentioned it earlier, as we've, you know, as we're bringing some of these new products to market, you know, it does involve bringing on teams to ideate, design, create, implement, and then begin to roll out all of these products. That's all in there. So we've been able to, again, expand margins while we're also preparing new areas of growth, outside the fertility and pharmacy benefits. You know, there's, you know, as you can see, our capital investments are very low, when you look at the cash flow statement. So, you know, all of that's in there as we prepare for new phases of the company. Great. That's super helpful, Mark. We have a follow-up question emailed in from an investor on the margins, specifically on Q1. "Why is Q1 EBITDA margin expected to contract roughly 80 basis points per the guidance year-over-year, even if you add back the $15 million at a 20% margin, still be down 60 basis points? Just wanted any color here on the first quarter. Thanks. Yeah. So, yeah, Q1, again, you're seeing new clients ramping up, as we get through Q1. I think you actually brought it up a little bit earlier. You're starting off with comparative you have utilization, but at sort of comparatively lower levels of revenue. And obviously, we need to be staffed to handle all of the volume, for, you know, for what we're seeing in Q1. And so that's, you know, a bit of the what we see typically in a Q1 period. Again, I think it's important. There is some seasonality in the business. Looking at what the full year should be is important. We also, by the way, have a couple of hundred thousand lives that are going to be going live, across Q2 and Q3, which we talked about on our call as well. So again, we're built for a little bit bigger company than is actually live here in Q1. So that plays a little bit of a role as well. Well, the other piece, the $15 million would have dropped through better than the average overall margin because all your other care management costs are in place. Yeah. There's no incremental expense there. The staff is there. Yeah. Higher incremental margins on that $15 million. Yeah. You would have. That's exactly right. Okay. Let's talk about. I get this a lot. Your customers, employers, their budgeting behavior. Are they still adding more bundles? Are they getting more, are they scrutinizing more in their budgets? You know, the theory is just we approach the back half of this year, maybe sponsor more GLP-1s, and then their budget dollars shrink for fertility. What are you seeing from your employer customers, with your offerings? Yeah. The easiest way to answer that is if you look at the last two sales years, which include what the existing base does, you know, from a budget perspective, in two years where there was fear of a looming recession for essentially a two-year period where GLP-1s, you know, popped up as a topic most of last year, here's what didn't happen. We didn't lose any more clients, or our retention rate was essentially almost 100% from a lives perspective. We didn't have clients reduce their benefit. In fact, in the last two years, 20%-25% in the two years of our clients expanded their benefit and added to the benefit. So to the extent that there's concern that clients are budget-conscious and it will start impacting us, that hasn't started yet based on those data points. I don't believe it's going to start. When I say started yet, to the extent that people are concerned about that, it hasn't started. And I don't believe it's going to start because this is a top-of-mind benefit for clients, especially when they have it and their members are giving them real positive feedback relative to the experience. And it is a member it is a benefit that's being utilized. It becomes a really important benefit, top-five benefit for Millennials. You know, and so from that perspective, you know, I don't believe what people fear may happen is going to happen. Great. That's great color, Pete. Last question for me. I know we're running up on time here. I saw that you just announced your first share repurchase authorization, and you're planning on executing on shares opportunistically. Talk to us about how you view share repurchases. You've strategically also done some M&A or have been talking about using cash deployed on M&A. Talk about your capital allocation strategy. Sure. So, we have, and continue to have enough cash reserves. And with the cash flow that we have, a strong balance sheet in order to be able to take advantage of any M&A opportunities that present themselves. We have not been able to identify one yet. That makes sense. And so we continue to develop new products internally, and we'll build. But to the extent that we like an area of the market and want to go into it and buying something will accelerate that from a timing perspective, and it makes sense from a valuation perspective, we'll do that. In the interim, we did announce our first share buyback program. It was opportunistic in terms of the announcement because we believe the stock is undervalued. We structured it in a way that it has both automatic as well as opportunistic buying capabilities within it. You know, we'll make decisions down the road to the extent that we exhaust this program, in terms of adding new programs or not. But we'll continue to maximize, do what we think is right to maximize shareholder value. Great. I think we'll end it there. Thank you so much, Pete and Mark from Progyny for participating. I'll see you tonight at our dinner. Great. Thanks, Scott. Good to see you. Thanks, Scott. Good to see you. Bye-bye. Bye-bye.