Good afternoon, ladies and gentlemen, and welcome to the Progyny Third Quarter 2021 Earnings Call. At this time all participants are in 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 third quarter conference call. With me today are David Schlanger, CEO of Progyny; Pete Anevski, 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 fourth quarter and full year of 2021 including our expected utilization rates and mix, 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 clients forward and timing of leadership and opportunities, our market opportunity, size and expectation of long-term growth, our corporate governance plans, business performance, industry 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 Progyny’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 10-Q. During the call, we will also refer to non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors.progyny.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 a solid third quarter with strong 24% revenue growth and 220 basis point gross margin expansion. These results reflect a continued improvement and utilization from the low point we saw during the early part of the quarter that it’s continued into Q4. And Pete will provide additional color on utilization shortly. In a few minutes Mark will walk you through the quarterly results in more detail. But I want to take a moment to talk about a few of the highlights. As you all know by this point of the year, we’ve largely completed our annual sales and client renewal season. And I’m happy to report that we’ll be entering 2022 position for another year of strong growth. For the fifth year in a row, we’ve achieved close to a 100% client retention rate. We also had strong upsell success within our existing customer base, where a third of our clients increase their benefit in some form or another for next year. From a new sales perspective and Pete will provide more detail shortly, 2021 has been the most successful selling season in our history, producing a record number of new clients and members such that we expect to enter 2022 with 265 points under contract, representing an estimated 4 million covered lives, which is nearly a 50% increase in members from the beginning of 2021. We believe this strong momentum in building our client base demonstrates that our market opportunities continue to be significant that we are in our strongest ever competitive position and that Progyny has become the provider of choice and industry leading fertility and family building solution for the largest and most successful companies in the world. Beyond the pure…

Thanks, David. Let me begin by saying that I’m enormously grateful for the close collaborative partnership that David and I have. As we each transition into new roles in 2022, I know that we’ll continue to work together in much the same way that we have throughout the past five years of rapid growth of Progyny. I also want to congratulate Michael on his expanded role. Michael just led our sales team through his most successful selling season in Progyny’s history. While Michael’s substantial experience in leading operations, sales and strategy functions throughout his career, I believe he’s ideally suited to take on this larger role as Progyny’s President. I still believe that we’re in the very earlier stages of addressing our significant market opportunities and I look forward to working with both David and Michael as we capitalize on those opportunities to continue to grow the business. Given that our ability to win new clients and retain our existing clients are the single largest contributors to our future growth, I’ll begin today with a recap of our most recent selling season, which is now largely complete. When the year began, we told you about the earlier than normal commitments that we were seeing, particularly from those not now accounts that we had been unable to make change to their benefits a year ago due to their need to focus on mitigating the effects of the pandemic to their workforce. While these early commitments provided us with a healthy start to the year, we obviously wanted to sustain that early momentum throughout the remainder of the season. We are pleased to report that we succeeded, having received commitments for more than 85 new clients in total, who represent an estimated 1.2 million new covered lives. This represents the most new…

Thank you, Pete and good afternoon everyone. I’ll begin with our results for the third quarter and then provide our expectations for the remainder of the year. Revenue grew 24% over the third quarter last year to $122.3 million driven primarily by the increasing clients and covered lives over the year ago period. Looking at the components of the top line medical revenue grew 17% to $85.3 million, while pharmacy revenue increased 43% to $37 million. We had 188 clients as of September 30, representing an average of 2.9 million covered lives during the quarter. This compared to 135 clients at an average of 2.2 million covered lives in third quarter last year which reflects a 29% growth in lives over the past year. As has been the case in the past a handful of the more than 85 new clients Pete mentioned a moment ago have chosen to launch their benefit ahead of the typical January 1 start date, and are reflected in our 188 clients as of September 30. I’ll remind you that these types of off cycle launches tend to happen with smaller companies who have greater flexibility in rolling out a new benefit to their workforce on dates that don’t coincide with the start of their plan years. Turning out to our utilization metrics, there were 6,892 art cycles performed during the third quarter, which is approximately 27% higher than the year ago period. For the reasons we discussed on last quarter’s call this reflects a slight decrease in the record number of art cycles that were performed in the second quarter though as Pete mentioned a few moments ago, we continue to see appointment volumes improve over the course of the quarter. Female utilization this quarter, which is a reminder is the component of utilization…

Thanks, Mark. Before we open up the call for your questions, I wanted to provide our thoughts on the remainder of this year and how that positions us for 2022. With the guidance we’ve issued, today, we’re expecting our fourth quarter will be our largest ever in terms of revenue, underscoring our strong belief that all the macro factors that have been driving our growth remained fully intact, net utilization continues to return to more normal levels. As we begin to look into 2022 despite our successful selling season, there will always be some accounts to determine it wasn’t the right time for them to take the benefit. And this selling season was no exception. To set this up with a larger pipeline than what we had at this time last year was positioned us well to start next year selling season with momentum. We continue to believe that we are at a very early stage of penetrating our core market. Once our newest clients go live, we will still have just a low digit percentage of the 8,000 employers in our target market. We’re also continuing to explore the possibility of broadening our portfolio of services or adding new markets where we believe that makes sense for us to expand. We expect that the significant majority of the new clients will go live with their benefits on January 1, 2022 and for the remainder to launch during the second quarter of 2022. At that point, we expect to have 265 clients representing an estimated 4 million covered lives. Typically the utilization that we see in the initial period following a new client’s launch provides us with insight as to what that client utilization could look like for the full year. As a result, we expect to be in a position to provide you with a revenue range for 2022 as well as profitability guidance when we report our year end results. With the visibility we have into 22 around new sales, client retention and upsells we remain comfortable that revenue will grow by approximately 50% in 2022. With that, we’d like to open up the call for your questions. Operator?

Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question is coming from Anne Samuel with JPMorgan. Your line is live.

I was wondering if you maybe can give us a little bit of color on within the 50% revenue guidance for next year what kind of utilization are you embedding within that and could you achieve that even if you don’t see any sequential improvement versus where you are now in utilization?

Relative to current utilization levels, it’s assuming that continues. Other than that we estimate what we expect based on our new client ads but until those utilization levels actually occur early in the year I can’t really comment on that until it happens. Even though we use our best estimates based on our experience of clients by industry I think we’re in the best position to give you any more clarity around that when the year starts when we give the full year guidance, when we report our year end results.

And then you said that a third of your clients increase the benefits. I was wondering if maybe you could talk a little bit about same store growth and how much of that 50% growth next year is coming from same store growth?

The third the clients that added some form of expanded benefit aren’t all equal. So some of them add project in Rx which is the biggest upsell opportunity for us. Some of them add fertility preservation, some of them add simply surrogacy reimbursement or smaller sort of forms of expanded benefit that we don’t sort of talk about in detail because they’re nominal in terms of their impact. I think that the point we were trying to make about the third is simply how many of our clients continue to look at the benefit and improve it as an indication of satisfaction. The majority of the approximate 50%, in terms of our view for next year right now comes from the new lives added. The small portion, but not insignificant comes from the upsells. Again until we provide guidance a year end any more clarity around that I think is probably premature.

Your next question is coming from Michael Cherny with Bank of America. Your line is live.

Good afternoon. Thanks for taking the question. First, just one quick technical question and then one more on the business. First just to the fourth quarter net income, maybe it’s just my math but my last trouble putting your EBITDA guidance or net income guidance, there’s something funky going on in between those lines that we should be considering the doubling effect on cash flow?

Mark will take a look at that and get back to you if there’s something there. Mike if there is we’ll publish something on the website.

Understood, and then just turning back to Anne’s question relative to utilization I guess you said that’s continuing to improve. I know that this is obviously a common theme from last quarter. Relative to what you would expect it to be or maybe where the guidance was before what percentage of that right now and are there any subsets either from what you are hearing from your customers, what you’re hearing from your providers within your network as to for the ones that are getting back towards normal are already at 100% of normal? What caused them to come all the way back? And is it also part of the fact that the ones that are coming back first are the ones that are the negative mix shift free for revenue perspective? I know there’s a lot of questions, but a lot these want to make sure I hit on.

Yes. The easiest way to think about the current utilization levels versus what we were seeing in the middle of the summer is two components of utilization which I think you just touched on. One is rate of utilization overall. And second is the mix of what’s being utilized. What’s coming back, what continues to come back is the rate of utilization. What’s coming back a little stronger is the mix relative to full cycles being utilized more as a proportion of total medical services. It’s consistent I think with our belief of what was going on early in the summer relative to just the utilization drop off that was temporary from what we expected which is people just made decisions to pause, pursuing treatment and as they’re starting to pursue treatment again, as you might imagine, they are going to start with initial consults first and then go on to treatment. So that’s sort of the high level explanation as to how the utilization is returning.

Got it. That’s good for me. Thanks.

Your next question is coming from Stephanie Davis with SVB Leerink. Your line is live.

Thank you for taking my question, guys, and congratulations, the whole team for the transition enrolls. Pete now that you’ve been announced as the incoming CEO for about 30 minutes, I was hoping you could get your initial goals for the new seat or maybe your top three priorities as the steeled of some tech kind of rapidly expands?

I think we alluded to some of them at a high level. They’re a combination of expanding our addressable markets in certain ways both with product and with markets themselves. They’re also looking at new development opportunities and David alluded to that he’ll also be focused on as well as Michael. And so at a high level, it’s just creating structure and resources around exploring newer opportunities beyond the current opportunity, which as we talked about still believe we’re in the early really first inning of.

The pulling on that thread a little bit more than when did have clients that maybe opt in for a different competitor or is that no, were there certain features they were seeking out that you would want to add to your solution to be more than just pure play fertility?

Yes, the not now’s a role materially just timing based on their own priorities of when they want to add the benefit. They were not, not now’s because we lost them the competitors or they were not now’s because our offering is somehow deficient. That said we believe there’s still things we can do to improve it which when we’re ready about ready to talk about we will, but right now, or not, now’s where like they are in prior years, last year, and prior years, even pre-COVID where they’re simply just other priorities and when they’re ready. And so it’s normal activity in terms of not now.

And one quick follow up if I can sneak it in just on the knot now is fine? Did we see a pretty complete conversion of this group from last year? Or is there going to be a longer tail convergence to come up with coming year so we just need some sustained height?

We saw like we did in prior years. Both the number of accounts and covered lives coming from not now grew very nicely this year as grown each year for us. And our expectation is that there is no reason why that shouldn’t continue.

Awesome. Thank you so much. And congrats again on the seat.

Thank you so much.

Your next question is coming from Ralph Giacobbe with Citibank. Your line is live.

Great, thanks, good afternoon. I guess last quarter, you also talked about 50% revenue growth for 22. At the time of midpoint of guidance, it was about $780 million. Is the 50% still holding for 22 off the lower revenue base or around 765? Or is it still applied to the prior baseline?

Yes, I think that the 50%, as we talked about last quarter was an approximate, it’s still an approximate, for the reasons that I said in total. Until and when we see the actual utilization from new clients we’re really not in a position to give any more precision. The delta, whether you do it off of the midpoint at Q3, or the current guidance is really not that significant relative to the overall growth. And if I were in a position or we were in a position as a company to provide more specific guidance now we would we’re just not. And so really, that’s why we continue to say approximately 50%. I think that’s more instructive, versus trying to be more precise at this point.

And then I just wanted to reconcile some of the commentary because you talked about close to 100% retention. But just looking at the numbers, you’re adding 85 clients in 2022, you also said you’re going to have 265 clients by 2Q, 22. So the math there would just imply that eight or so are rolling off. Is that is right math we should be doing or do you expect maybe you add so it’s not as sort of?

I think you might have missed one of the comments, a few small clients like in past years, where we sold them during the year have already gone live. And so part of the 85 overall are a handful of small clients that have already gone live in our A&R our numbers as of September 30. But if you notice that the overall live didn’t go up that much, because again, these are small clients. So not a big impact at all relative to revenue contribution or anything this year relative to the overall base.

Your next question is coming from Sarah James with Barclays. Your line is live.

Hi, guys. This is Steve Brown on for Sarah. So we could just unpack the new client adds. So historically, you had a gen one start for new clients and you flagged more starts to this quarter. Is that related to more of the return to office and COVID? Or should we think about that as the end type of the employer you’re targeting? And how should we think about like that shifting the seasonality of new client adds could that be shifting it away from the historically gen one starts into more of 2Q?

The majority of dollars in lives are going live in Q1 mostly in January 1. There is a handful of clients that are going live in Q2, mostly because that’s when their plan year starts. So they are in industries that don’t have a calendar year plan year. So there’s no sort of shift, if you will of any kind, relative to when clients go live. These still materially are going live consistent with their plan year. The client I talked about the small few handful of small clients that already went live this year, they’re the more, they’re the indicators of those that have gone live off of their normal plan year and just a little earlier. But there is no delay of any kind in terms of view client commitments and when they’re going live.

Your next question is coming from Iris Zhilin Long with Berenberg. Your line is live.

Hi, thanks for taking my question. First, I want it to go back to Pete’s comment. I think you mentioned that utilization was lower for IVF and fertility preservation in Q3. Can you talk about that dynamics a little bit? Are you seeing or do expect the same trend to continue in Q4, and then maybe next year?

Yes. What I mentioned was the proportion of full IVF cycles versus overall medical treatments was a little lower than normal. That is already based on what we’re seeing in October, scheduled for October, November, is already returning back to normal levels. It’s really the proportion that we saw that was lower over the summer, is consistent with what we believe was going on overall, which is just a slight pause in pursuing treatment due to the fact that the pandemic it’s been around for back then 15 months or so and people were just looking to basically, maybe get half maybe go on vacation, whatever it was, it was consistent with comments we were hearing from our providers in terms of what they were also seeing in their business.

So it sounds like it’s just Q3 then.

Yes, slightly lower proportion with Q3 is already returning in what we’re seeing already for Q4. It’s part of why our expectation around Q4 guidance has baked into it.

And then my next question is on the new customers, I’m wondering if you can talk about the characteristics and maybe the client profile for your new 85 clients that you’re adding? So are these clients that you’re adding are they smaller than your existing clients or maybe they are in similar size? And I’m wondering if you can talk about the dynamics that you’re seeing? Are these clients, mostly from a certain industries or, in general, like, do you see higher demand for certain industries?

Yes. So a couple things there one related to client size. The average size of new clients that we added in this year selling season for next year are higher than last year but similar to what they’ve been in previous years. Last year with COVID, the pandemic as a backdrop, it impacted larger clients coming on board in a more significant way in the last year selling season. This year is if you will back to normal from an average client size perspective. Related to industries they were across 20 industries many of, most of which are industries that we already had clients and there was no disproportionate size in any industry. And from an account perspective, they were across the board and very positive. As we continue to penetrate these industries, it becomes a network effect where more and more other companies in those industries who want to remain competitive and attractive and retain employees in the future become easier and easier to sell into.

This concludes the Q&A portion for today’s call. I’d now like to turn the floor back to James for closing remarks.

Thank you, Catherine. Thank you, everyone, for joining us today. Just a follow up question Michael Cherny asked. There is a table at the back of the press release that does has a reconciliation to the guidance, Mike hadn’t yet seen that table. So that addresses his question. So if there are any other questions, please never hesitate to reach out to me. And otherwise we look forward to speaking to you in February. Enjoy the rest of the year.

Thank you ladies and gentlemen, this does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.