Good day, everyone. Welcome to the Progyny, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, James Hart. The floor is yours.

Thank you, Kelly, and good afternoon to everyone. Welcome to our second quarter conference call. With me today are Pete Anevski, CEO of Progyny; Michael Sturmer, 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 third quarter and full year 2025, and the assumptions and drivers underlying such guidance, our anticipated number of clients and covered lives for 2025, the demand for our solutions, our expectations for our selling season for 2026 launches, anticipated employment levels of our clients and the industries that we serve, the timing of client decisions, 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.progyny.com. I would now like to turn the call over to Pete.

Thanks, Jamie. Thanks, everyone, for joining us this afternoon. We're pleased to report a strong second quarter with good growth in both revenue and adjusted EBITDA over the prior year, resulting in record quarterly results across both measures as well as gross margin expansion and the continued generation of significant cash flow. As the quarter begins -- as the third quarter begins, we're seeing that member activity remains healthy and is more consistent with historical seasonal patterns. Given that as well as our strong results over the first half of the year, we're pleased to be in a position to raise our full year guidance. During the quarter, we also continued to make good progress in the areas that will make the greatest contributions to our future growth. These include expanding our client relationships and deploying the investments to broaden our product portfolio which, as previously discussed, are expected to further enhance our already industry-leading solutions in women's health and family building. Let's discuss each of these areas, starting with our latest selling season. As you know by now, each year, we focus on 3 areas of growth. First, we want to continue expanding our market share through the addition of new logos. Second, we want to maintain the exceptionally high rate of client retention we've historically achieved, while also growing our relationships with those existing clients through expansions and upsells. And lastly, as a thought leader in our industry, we look to continue to attract partners who share our mission and who enhance our market position by extending our distribution reach. As we enter the heart of the season, we're pleased with our overall progress across these various goals. Starting with new client acquisition, employer interest remains high for women's health and family building solutions. As noted last quarter,…

Thank you, Pete, and good afternoon, everyone. I'll begin with the second quarter results and then provide our expectations for the upcoming quarter and for the full year. Second quarter revenue grew 9.5% over the prior year to $332.9 million, primarily due to an increase in the number of clients in covered lives as compared to a year ago. As previously disclosed, revenue this quarter included the final contribution from a large former client who had provided an extended transition period of care for members meeting certain criteria through June 30. This contributed $17.2 million to revenue in the quarter, slightly more than the $14.7 million that we had incorporated into the high end of our guidance. Total revenue, however, exceeded the top end of our guidance by nearly $8 million, driven by the improved member engagement, which occurred across our collective base. Excluding the impact of this former client from both periods, revenue increased by 18% in both the second quarter and over the first half of the year, demonstrating the solid growth that we continue to see in the core business. As of June 30, we had 542 clients with at least 1,000 lives, representing an average of 6.74 million covered lives in the quarter. This compares to 463 clients at an average of 6.41 million covered lives a year ago. I'll remind you that covered lives in 2025 already excludes the client under the transition of care agreement, so your models won't have to adjust the lives going forward now that the transition has concluded. A handful of clients launched in the second quarter, representing the last batch of clients won in the 2024 selling season as well as some early launches from the current selling season. As a reminder, although we typically see some amount of…

[Operator Instructions] Your first question is coming from Michael Cherny with Leerink Partners.

This is Dan Clark on for Mike. Just had a question. The commentary around the selling season and early commitments being comparable sort of in terms of client count and expected revenue, is that on a gross basis, like excluding the large customer contribution from last year? Or is that on a net basis in terms of what you won?

It's on a gross basis. So if you think about it, it's -- you would exclude the large client from both years and look at the growth this year. And if everything turned out the way it did for the full sales year, something in that neighborhood. So you're on pace on a gross basis.

Your next question is coming from Jailendra Singh with Truist.

So I want to stick with the selling season commentary. Are you implying that you are seeing more smaller-sized employer client wins, but they're signing up for multiple services from you guys and large employers are taking longer to make a decision? Or is it more like there has been some change in win rates among the large employer clients? And based on the number of lives you've seen so far, how confident you are that you can still add at least 1 million lives next year?

I'll start, and then I'll let Michael add any commentary. So it's not about whether or not small or larger clients are closing at a higher rate. It's how the sales year started where the overall pipeline from a lives perspective was slower but caught up materially in June and July and through now. And so as a result, if you think about it, the timing of when people are looking at a benefit and then making a decision as a function of when they start reviewing the benefit when they come into pipeline, right? So we are seeing large clients also close already, as I said in my prepared remarks. But the expectation -- our expectation, we believe, by the end of the sales year is that relative to average lives, we expect the year to catch up.

Yes. And I would just add, we continue to focus on our target set earlier in the year. And as usual or as in prior years, these next 3 months are our highest volume from a closing perspective. And as Pete referenced in his comments, with pipeline in a comparable position to last year, that's where we're focused and as we are every year.

Great. And then quickly one follow-up on the Progyny Rx. I understand trends there could fluctuate quarter-over-quarter, but I just want to make sure we are not missing anything there. If you look at first half, the growth at Progyny Rx is like roughly half the growth of fertility benefit business. So should we assume that Progyny Rx should outpace in the second half in terms of the growth rate on year-over-year? Just help me understanding there.

Yes. It is more timing the first half. First quarter, as you know, sort of more -- a higher percent of initial consoles was going to impact pharmacy. But overall, whether it catches up and/or surpasses medical or on a full year basis by the end of the year is close and comparable, we'll see because exact timing even within a full year could be off a little bit, but it's going to be -- it's still -- we expect it still to be close to in line with the medical by the end of the year.

Your next question is coming from Allen Lutz with Bank of America.

You have [ Dev on ] for Allen Lutz here. I just had a quick question on guidance. I'm just trying to do the math here. It seems like just based on the ART cycle guidance there, the high end and the low end of the range, I'm just looking at the average revenue per ART cycle in the first half and then trying to apply that to the second half and kind of getting above the range there. So curious on considerations for average revenue per ART cycle in the back half of the year. And then I just got one more follow-up.

Yes. One thing you need to be careful of when you're looking at first half versus second half, again, total revenue is going to also include sort of that disproportionately high number of initial consults and non-ART activity in the beginning of the year. So you'll see a higher number per ART cycle because people are just beginning their -- a proportion of people are just beginning their journey in Q1. So again, we've guided to it so that I think if you look at where we've guided previously, it's inched up a little bit, but it hasn't changed much since our prior guide for the full year.

Okay. Got it. That's fair. And then just one on new products. You're going to market with a handful of new services this year. Last year, adoption of the new products were quite strong. Just curious how conversations are trending around those new adjacencies, which are resonating more in this market with clients? And then in terms of like a growth -- material growth lever, which of those products should we think of as most imminent in terms of being beneficial to the P&L there?

Yes. This is Michael. On the first part, we're seeing active conversations really across all of our products, which is great to see as well as where Pete mentioned in his prepared comments, that includes the additions of leave navigation as well as our global services. So we're having full and complete and robust conversations across benefit administrators. And as for sort of which product they select as we go forward, again, that's very much aligned to where that particular client strategy might be, what they may have already implemented or where they're looking to go in '26 and beyond. So that certainly varies by client and by client preference. I'll maybe turn it over to Pete for the second part of the question.

Yes. As it relates to which products are going to contribute the most, I think is what you asked, there's not -- neither of them or none of them are sort of materially different in terms of expected contribution as uptake both from a client adoption perspective as well as just from an overall utilization perspective within each of their addressable markets takes hold. The expectations are relatively equal in material absolute dollars in terms of our expectation long term from those products.

Your next question is coming from Scott Schoenhaus with KeyBanc.

Just want to drill in more and follow Jailendra's question on the selling season commentary that you stated. So was it -- am I fair to understand that you're just saying that the wins developed later than last year sort of in June and July? Is that what you meant by the lives commentary? But you also included the word demographics there. So wondering if you're talking about the sort of the cohort of the population set within the new client wins versus previous years? Just trying to unpack that more with more color, please.

Yes. Let me clarify it. When we talk about June and July later than last year, we're talking about pipeline additions and making commentary relative to overall active pipeline as of today now being comparable, where earlier in the year, pipeline additions were slower and we were a little behind in lives, right, which is separate and apart from when we talk about early commitments, i.e., wins so far this year, which are comparable year-over-year from a number of prospects and expected revenue perspective. And the demographics of those are yielding a higher expected revenue just based on the industries that have committed so far, which is why the -- even though the lives are slightly behind prior year committed to date, the expected revenue is still comparable to what it was this time last year. Is that helpful?

Yes. Yes, yes, that's helpful, Pete. And then I know you made a comment about how you're not -- the big tech layoffs haven't impacted 2Q results. But wondering what you're seeing in July and August now that these layoffs have been rolling off more. Are you seeing a spike in utilization from these large tech companies as employees fear that they might lose this fertility benefit?

We're not seeing any sort of change in utilization patterns relative to some of those industries that are -- have some layoffs. The level of layoffs are, again, relative to those companies collectively not big. So no, we're not really seeing anything different. They're engaging on a normal pace.

Your next question is coming from Brian Tanquilut with Jefferies.

Congrats on the quarter. Maybe just a question on the upsell. As you mentioned, some clients are expanding. Just curious what those conversations are and how hard it is to convince these corporates to add benefits to what they already have given the environment that we're in right now.

Yes. Go ahead. Why don't you do it, Michael?

Sure. So yes, I mean, these are -- right, when we've talked about this before relative to fertility benefits as well. But these are -- particularly the large clients have a benefit strategy that is a multiyear approach. And as it relates to women's health, as we referenced in the comments around some of the survey findings. But even as we're out in the market talking, certainly, women's health benefits remain top of mind for benefit administrators, and they have a plan and strategy of how they're rolling that out. And so as we talk about what's next, we interact often with our existing clients often on a quarterly basis. And we're working with them over the course of the quarters and years to put these things in place. And so the conversation is sort of naturally progresses. But again, really varies depending on the strategic objective of the client, what they're seeing in their own cost and what they're trying to mitigate in their own costs. And that determines whether we expand into maternity or parenting or whether we're adding in menopause or some of our newer programs around global and leave navigation.

Got it. And then Mark, maybe just a quick question. Are you able to share with us the ART cycle for female utilizing member, excluding the big contract change and then maybe the rev per ART cycle ex contract change in the quarter as well?

Yes. We haven't broken that out before. But know that -- so we haven't provided in the press release a projection of what the Q3 range would be that supports the guide. And obviously, without the client there, you can do your own math.

Your next question is coming from Sarah James with Cantor.

I just wanted to go back to the comment of sales that have closed so far, the revenue being in line with past years, but the lives being lower because of the type of industry that the clients in. Does that mean that these clients are expected to have a higher utilization, and that's why the total revenue per client is higher? Or are these clients and industries that coming on as new clients are starting to purchase a broader set of your products?

No, it's the former. So a simple example that we gave in the past is whether it's tech, hospital systems, media, higher utilizing industries as opposed to labor and some older economy companies, retail, et cetera, are lower utilizing. So it's more a function of utilization rate by industry than it is a broader suite of products.

Got it. And could you talk a little bit about how you're seeing interest out there from midsized employers or sort of a smaller size of large employers? Are you seeing an increase in demand to adopt fertility and family planning products?

We're seeing, as we've seen in the past, increasing demand across companies of all sizes. And that's been the case this year as it's been the case for us really since our existence. So as I look at overall active pipeline, number of prospects within it and the total lives and compare it to prior year this time, it basically says that there's interest across the board relative to company size.

Your next question is coming from David Larsen with BTIG.

Congratulations on the good quarter. Can you talk a little bit about the mix? Like I think in terms of like maybe transfers versus egg freezes and sort of the pricing, the mix, any thoughts there would be helpful.

Yes. There's nothing to call out relative to mix this quarter vis-à-vis any periods, whether it's prior -- aside from normal seasonality, Q1 to Q2, but comparing it to prior year, et cetera, nothing really to call out in terms of mix. So I'm not sure what exactly you're looking for.

Well, it seems to me like maybe utilization was at risk of declining a little bit earlier in the year given the uncertainty in the economy. Now that it's sort of the market has come back up and people feel better about the economy, they're having babies and perhaps the mix of services has switched from eggs, which are lower priced to transfers, which are higher priced, which is obviously a benefit or a tailwind to the business is what I was getting at.

I'll just clarify. So as it relates to transfers, only egg freezing is actually higher, not lower. But either way, if you think about it, right, if you look at just the overall utilization rate, cycles per utilizer and the return to the normal seasonality of cycles per utilizer Q1 to Q2, for example, and then sort of what we guided for Q3 versus what we saw last year, I would say that the mix has returned to more normal, i.e., prior to 2024 than 2024 is sort of the easiest sort of high-level way to process it.

And then just any color on -- I think you said you won some business with Amazon. Have you ever had clients that left and then came back at some point? Just any color on that -- those commentary would be very helpful.

Yes. We talked about a partnership with Amazon Connect, not that we won business with Amazon. But either way, we actually have, at times, have had clients return that left. None sort of to speak of or talk about by name, but it has happened more than once.

There are no further questions in queue at this time. I would now like to turn the floor back over to James Hart for closing remarks.

Thank you, Kelly, and thank you, everyone, for joining us this afternoon. Please feel free to reach out to me as needed for any follow- ups and clarifications. Otherwise, we look forward to seeing you over the course of the fall and during our next conference call.

Thank you, everyone. 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.