Wherever you want to sit. All right. Welcome, everybody. My name is Stan Berenshteyn. I cover healthcare technology at Wells Fargo. With me today is Mark Livingston. He's the CFO of Progyny. Welcome. How are you? Thank you. Great to be here. 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 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 Progyny does, what are you guys doing, then we'll dive into the quarter. Sure. Progyny is a fertility benefits administrator and women's healthcare 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 the space. Great. Let's just dive into the quarter. There has been a little bit of a softness in utilization. Can you just walk us through how's your visibility through the back half of the year? Anything that you're seeing from the demand side from clients? Sure. The one thing I'll say is we're not giving an update here Sure from what we gave as of the beginning of August. 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. We have that level of visibility as we look. 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 that's important for investors to understand is, 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 results for the first two quarters were within and sort of inching towards the higher end of guide, we weren't at the high end of the full year guide. 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. 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, and 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 a normal human consumption pattern, and that's sort of what we are expecting the balance of the year to yield. Okay. If we maybe take a step back, just bird's eye view here, right? So you have over 7 million lives that are eligible to participate with you. There's a TAM, I guess, of over 100 million that 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 the opportunity, more brownfield versus the white space? Can you just kind of level set where is your next leg of growth coming from? 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 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. 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. We continue to see that grow. We highlighted, in the beginning of August around our selling season, that we have been seeing a lot more competitive wins as well as things in our pipeline that are brownfield, 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 l 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?" I think that's where Progyny's story really leans in well, which is why we're seeing maybe a higher proportion this year. When we talk about cost, 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? Then does the employee base that gets turned over, does that mitigate how much ROI they can actually recognize? One thing that's unique about Progyny is when you're, 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 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 Progyny is really compelling. We do that for them as part of the sales process. 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 longstanding clients in the tech space did a commissioned study of, I think, about eight years worth of their experience with Progyny. 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. If you think about the competitive landscape, would you say the payers is where you're bumping up against on a competitive landscape? Then why would you offer better ROI versus something that a payer can just white label and bundle with other services that they have? Yeah. It's interesting. 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 payer, 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. 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. 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 don't replicate the service that we provide. For us, 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. 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. 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 them. 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? Most of the wins that we don't get in a year are more deferrals than nos. Look, especially for a client that's greenfield, it's not an insignificant incremental investment to take on this benefit. Although again, it's only, as best we can tell, between let's say 1% and 3% incremental, so it's not a huge chunk. But 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?" They often have multi-year roadmaps where they're trying to initiate certain things at different times. Some of our early engagements can be more fact-finding than actual sales. We've certainly come accustomed to working with and keeping our pipeline active for those companies that are really more on a multi-year decision journey than just a one and done. That's not to say that we don't have a lot of those, but that's the case. Look, sometimes they just want to take a half step in. If a $10,000 lifetime cap reimbursement model feels "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 backend 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 Progyny will shine. When we talk about these deferrals, they are not a hard no, they are deferring. How long does it take to convert? How active is your pipeline that is deferred, but maybe downstream you are able to convert them? Honestly, it is a conglomeration of every company's story. So it changes from time to time. Some companies can wait, it can be years. Some companies, it is the next year. I think one of the stories I know Pete likes to share is our first sort of major healthcare company. They spent years trying to say, "Well, this is not the right year, and I have got to wait. The next year is going to be the right year. We are going to defer." I think they just finally came to the conclusion that there is not going to be a right year, and that they had to just get started. 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 there is not a standard model around it, I suppose. Okay. When you do, on the rare occasions that you lose business, what is the deciding factor? Is it price? Is it some kind of feature set that the competitor has that you do not have? What usually drives a loss? Look, I think in years past, I know that there were clients that were looking for products that would address their global populations. That is something that, as of a few years ago, we have really closed that out. Some clients are looking for a limited cost benefit. Some are not really looking to cover fertility comprehensively, but they want to give something. So it is a mix of different reasons. Okay. I guess the next question, I'd love to maybe move into the medical and pharmacy cost inflation area. Obviously, you participate in that. Does the environment help your proposition, that there's a rise in cost associated with pharmacy-related costs? Is that something that 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? I'm not sure if I'm following your question fully, but let me see if I can get it. There's certainly underlying cost increases throughout healthcare. On the fertility side, the non-pharmacy side, we've done an excellent job over all of these years in containing that cost, those costs of reimbursements for our providers. Look, we have a great relationship with our network. We work very closely with them. They recognize that the value that Progyny brings to them is the incremental members that are coming that are fully covered. We collect member cost-share from them. They're very administratively straightforward. 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. We've been able to keep those largely flat for years. Very small increases. 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 Progyny, 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. 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, some of that savings we pass along to our clients through either much lower price increases or no increases at all, or reductions. Some of that we keep for the company to invest, and some of it we pass along to our shareholders, which is sort of why you've seen our gross margins inch up over the years. Okay. We are approaching open enrollment for this year. Has there been any changes in your discussions with benefit managers, where the focus is for employers? Anything in terms of how you are positioning your product this year versus last year? No, I don't think so. We've had our expanded product set out there in the market now. This is really, we'll call it the second full selling season for all of these other products that we have. I think the ROI model, which we talked about before, is really compelling for employers as they are making those decisions. Look, I think, perhaps when the selling season is over, we are sort of in the early mid to height of the actual conclusion of it. We'll put some perspective around that and maybe share it at the end of the year once all the dust and the chips settle. Okay. I do want to use that time to pivot to Progyny Select. So it is your new risk-based model here. Can you just walk us through, maybe just a quick word about how this is structured, who you are targeting, and then I'd love to kind of maybe go into how you are actually driving the sales motion with this area of the business that's maybe a little bit different from your core business. Yeah, sure. The core business has always been self-insured employers, which typically are 1,000 employees and greater. So that's the area that we've always identified as our TAM, that TAM we talked about earlier. Now we are also targeting a TAM of an incremental 50 million or so for employers that are smaller than that. So today, the offering is for employers 100 employees to 1,000. It is not an offering that we intend on nor are we providing to larger employers. 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 Progyny 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. That's effectively Progyny Select. The way it's sold, it'll 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. 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. You are working through a third party, and so the time to get things trained and laid out, et cetera, the protocols in place, that does take time. 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 Progyny Select, you're targeting employers with an employee size of between 100 and 1,000 employees. Hypothetically, you sell Progyny Select to an employer that has 800 employees. Three years later, there are 2,000 employees. What happens? Does the contract move outside of, back into the core type of business? The way the Progyny Select model and the pricing is designed, it does include a risk premium. We are taking risk for any one particular client. Like any health plan for a smaller employer, 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. Might there be a path for smaller companies to graduate out of a self-insured product to a fully insured product to a self-insured product? Sure. 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 zone there where people may want to do that. Once you get beyond those sizes, you're not going to see a company wanting to take that risk, pay that incremental risk premium forever. Okay. 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 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. We've certainly taken that out of the conversation. 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 a product. 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 and to the global product itself. Bringing it up to that standard that we have here for our fertility and women's health products in the States. Look, I think 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. You just mentioned you've kind of moved the product portfolio outside of the core fertility. I think you mentioned Postpartum, Menopause and Midlife. I think there's also Grief Navigation. Yes Parent and Child Well-being. all this other stuff. Yeah. Basically a family platform at this point. All of these add-ons, they are priced a little bit differently than the core business, right? Can you just discuss that? Is there a time when you are going to maybe break out these other segments from the core business? Yeah. When they become meaningful, we will be breaking them out, more material than what they are today. Look, it is an ecosystem around family building, as you said, and family, and the women's reproductive journey. They are priced differently. They are not claims based, so part of our top line and obviously some of our cost of services is fertility charges and claims costs themselves. These are more case rate based. When somebody enrolls, they begin following that program. You will see a case rate, and then they usually have access to that case for a period of time, typically 12 months. You will see the revenue sort of spread out over that timeframe. Just a different model altogether in terms of top line and margin contribution. Okay. Obviously, your business is becoming a bit more. You have both breadth, more complexity. You are profitable. Just what is going on with capital allocation? You have a lot of different priorities. Can you just give us a top-down view of what is at the top of your priority list, at the bottom, and how you are 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. 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 1 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 it has to be a path to accretion for the company. Pete and I have both together and separately done many, many transactions and divestitures. So I think we believe we have a very sharp eye for what works after the announcement and not just for the announcement. So we've been disciplined about it. Private company valuations have stayed pretty high, and we just haven't found anything that we thought was worth bringing in at that point. But we're always looking. Then finally, we've done share repurchases. We've done quite a bit in the last couple of few years. I think it's a good way, especially at. 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. 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 done it a number of times in the last two years. Nice. You did mention the one million lives that you're targeting to add. What's your visibility? How does it compare to last year this time? 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 meet or exceed that one million this year. I think as far as qualities go, it is across a number of different industries, old and new economy industries. Nothing sort of unique or different about the profile of them or what they are buying. Again, this is from the early commitments. They typically buy two or three Smart Cycles with some profile of other choices, and that is what we are seeing again this year. Nothing really to call out different from that perspective. Okay. Without maybe calling out long-term guidance, maybe just a final question. If we think about 2- 3 years from now, where are you most excited about the current platform as it is today? Where do you think you are going to get the most amount of traction over the next 2- 3 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 is white space. I still think we are 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 is 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 is the biggest driver of growth for us, has been every year. We I think we have shown incredible durability through a variety of macro forces, whether it was recessions, inflation, COVID, or what have you, through all of that. I think what that really tells you is that the strength of desire to build your family really overrides many of those considerations. In particular, when you have infertility and you know that is part of your particular journey, it really creates such a strong demand. I think we will look back in two or three years and we are going to look at the growth of our core fertility product as continuing to march forward as the way that we have. We will do our best to continue to operate the company in a way that we are being efficient with our costs, continuing to expand margins and cash flow. I think that will be a big part of the story. Then I would say if there was a byline to that, and let us just say maybe only one font size smaller, would be Progyny 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. I think that will be a big part of our story as well. Nice. It certainly doesn't hurt that the average pregnancy age keeps going up. Yes. That probably- Yeah. The macro 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 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 standpoint, the best use of their money because it is saving costs on the back end from the bad decisions that that person under all that pressure is making. Awesome. Well, we are at time here. Thanks so much, Mark. Thanks, everybody, for joining us. Yeah. Thank you. Thanks for having me. Thanks so much. Appreciate it.