Progyny Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 8 speakers on the call.

Operator

Good day, everyone, and welcome to the Progyny, Inc. 2nd Quarter 2023 Earnings Call. At this time, all participants have been placed on a listen only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.

Speaker 1

Thank you, Matthew, and good afternoon, everyone. Welcome to our Q2 conference call. With me today are Pete Dunetzky, CEO, 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 Q3 and full year 2023 and the assumptions and drivers underlying such guidance, The demand for our solutions, our expectations for our selling season for 2024 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 expected benefits of our pharmacy program partner agreements, including future conversion of adjusted EBITDA to operating cash flow, 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.

Speaker 1

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

Speaker 2

our

Speaker 1

Investor Relations website. Any forward looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin on incremental revenue. More information about these non GAAP financial measures, including reconciliations with the most comparable GAAP measures, are available in the press release, which is available at investors. Progeny.com.

Speaker 1

I would now like to turn the call over to Pete.

Speaker 3

Thanks, Jamie, and thanks everyone for joining us this afternoon. We're pleased to report that Progyny had a very solid second quarter, highlighted by record quarterly revenue of $279,000,000 or 43% growth over the Q2 of 2022. The strength in this quarter's results reflect that member activity continues to be healthy, further affirming not only the essential nature of fertility care, but also the strong desire amongst members to pursue the appropriate medical treatments they need in order to realize their family building goals. In addition to the strong top line performance, our continued focus on operational excellence also produced our highest ever Quarterly adjusted EBITDA and quarterly cash flow as well. In short, we've entered the second half of the year with positive momentum across all the areas we look to when measuring our progress.

Speaker 3

In addition to our strong financial performance, We continue to deliver to our customers the benefits of value based care because of our clinical outcomes and member experience. And lastly, Based on what we're experiencing in our current selling season to date, we're continuing to see higher employer demand for fertility and family building solutions. Last month, the CDC released its annual outcomes data on the fertility industry in the U. S, reflecting treatments completed through the end of 2021. For the 7th straight year, Progyny has significantly outperformed the national averages across every relevant benchmark for success.

Speaker 3

As a reminder, Progyny is the only solution that is doing comprehensive outcomes reporting, reflecting virtually every treatment for every member across all relevant metrics. You'll see these results reported in our Q2 10 kit. Since launching our solution in 2016, We've consistently achieved higher pregnancy rates, higher live birth rates, lower rates of miscarriages and significantly fewer multiple births. Our superior clinical results not only create a better member experience as they ensure members avoid unnecessary treatments and painful complications, They also drive cost containment for our clients given that Progyny members on average require fewer treatments in order to get to the desired outcome of a healthy baby. A closer look at the data highlights a key measure of how we deliver this value to clients.

Speaker 3

An IVF journey entails 2 procedures, A retrieval followed by a transfer. The retrieval portion and the related medication represents substantial majority of the overall cost for IVF. It's also much more physically grueling for the patient than the transfer is, so it's desirable to get to a live birth with as few retrievals as possible. While our live birth rate is 27% than national averages, more importantly, our average number of retrievals per live birth It's now 36% better than national averages. This means that the average Progyny member needs only 2.2 retrievals To achieve a live birth versus the national average of 3.5.

Speaker 3

That's a difference of more than one full retrieval, which represents a substantial avoidance of cost for our clients as well as significantly less physical and emotional stress on the patient. While other facility solutions may continue to employ blunt utilization management techniques in an attempt to contain costs, We actively manage the benefit across our network, leveraging our vast data set to deliver the most efficient clinical pathways for our members and demonstrated cost containment, which controls the client's expense, where it has the largest impact while still delivering the best member experience in the form of the most favorable clinical outcomes. Turning now to the demand we're seeing in the market, The factors helping support our momentum are being noted in the latest research from health authorities and the benefit consultants. On last quarter's call, We reviewed the World Health Organization's latest research, which revealed an increase in the prevalence of infertility from 1 in 8 just a few years ago to one out of every 6 people of reproductive age today. While there are a number of factors driving this, The societal trend of pursuing family building until later in life when conception becomes biologically more difficult plays a significant role.

Speaker 3

Turning back to the latest CDC data for a moment, our cycles have not only continued to grow at a compounded annual growth rate of 10.5% over the last decade, but volumes are actually accelerating to a compounded annual growth rate of 11.8% over the past 2 years alone. This growth has occurred despite the impact of the pandemic, which significantly suppressed utilization in nearly every other healthcare category. Looking at this data another way, in just 1 year, the percentage of babies conceived through assisted reproductive technologies increased from 2% to 2.3% in the most recent period, which represents the largest year over year increase ever. We believe this is driven by the increased incidence and prevalence of the condition as reported by the WHO as well as continued adoption of facility benefits by more and more employers. Though adoption is still well behind where it needs to be when taking into account the latest incidence and prevalence data reported by the WHO and CDC.

Speaker 3

While any coverage is helping to increase access, we're also seeing more employers looking to eliminate health disparities through comprehensive and equitable coverage such as our solution. In fact, according to Mercer, nearly 2 thirds of large employers report They're planning to make enhancements to their health and well-being coverage in 2024. Of the other one third, the only all reported that they had already made Those enhancements within the last two years. Their study also reveals that 78% of large employers Said they're looking to improve the health equity in their plans, including initiatives to support diversity, equity and inclusion. This continues to be yet another tailwind for us as the Progyny benefit was specifically designed to provide equitable coverage for all types of journeys to parenthood and our focus on providing culturally competent care throughout the member journey makes our solution all the more relevant to employers.

Speaker 3

This data reveals that the macro trends that have been driving our growth remain fully intact and illustrate Why we see higher employer demand for fertility and family building solutions in our current sales season. As in every sales season, our priorities are to expand our market share by adding new clients, to retain existing clients who are in their renewal year and to grow our relationship with clients through expansions and upsells. I'll spend just a moment in each of these areas to help you understand our progress. First, new client acquisitions have always represented the largest contribution to our year over year growth. In every season, we see opportunities to grow by taking existing market share, by winning clients who already have a fertility benefit, most often through their managed health plan and also to expand the market with clients who are adding fertility coverage to their health plan for the first time.

Speaker 3

Over the last two selling seasons, our success has been equally divided across both groups as our solution appeals to both types of buyers. There's over 8,000 large self insured employers in the United States. And as of today, we have less than 5% of those as clients. So we're in the various earliest stage of addressing the market and we continue to see significant opportunities for ongoing expansion. We're now in the heart of our selling season and our pipeline continues to be favorable relative to where we were at this time last year.

Speaker 3

We're also continuing to add to our pipeline as companies each follow their own timetable in evaluating new benefits. And also at this point in the season, we've already received a healthy number of early commitments, which as in past seasons have come from a broad section A broad cross section of industries. These include leading brands in manufacturing, healthcare, financial services, Automotive and Professional Services to name just a few. And even though this is just our 1st full year of targeting tapped Hartley Groups, We're also seeing strong demand as well as early commitments from labor union populations. Thus far, these early commitments are choosing comparable levels of coverage to what we've seen in the past seasons and we're also continuing to see a high take rate on Progyny Rx, both of which indicate that buyers are fully committing to their coverage.

Speaker 3

While early commitments are one indicator of demand, We expect the majority of client decisions will come in the September, October timeframe as that's when most companies are finalizing their benefit decisions ahead of their open enrollment activities in the fall. In any selling season, our goal is to grow the absolute number of new clients and covered lives over what we've achieved in the prior season. And with the results we've achieved so far, we're pleased with where we are and believe we're on pace to meet this objective once again. With respect to renewals, the early activity thus far has been consistent with our typical high retention rate and upsell activity is positive. This includes services like ProSodyRx as well as expanded coverage through additional Smart Cycles or other services like surrogacy and adoption.

Speaker 3

We also made progress in expanding our solution with our services that our clients and members would expect to receive from us, particularly ones that leverage our experience in cultivating networks of specialized providers, increasing access to care, Managing the patient experience to improve outcomes and providing concierge experience. For example, we continue to enhance our male infertility solution, which launched earlier this year. And we're pleased to release our next service expansion to address menopause, which is one of the least addressed and understood conditions in women's health, but one that is increasingly becoming a priority for employers. The Mercer study I mentioned earlier reported that menopause had the fastest growing support amongst employers with a more than threefold increase in companies looking to expand their coverage for 2024. And it makes sense for this to become a high priority Given that more than 40% of women in the workforce today are over the age of 45 and more than 1,000,000 women in the workforce experience Menopause symptoms annually, incurring 1,000,000,000 of dollars lost in productivity and direct medical costs according to the Mayo Clinic.

Speaker 3

While menopause coverage is broadly available through the health plan, this is an area that's been underinvested in historically as most OBGYNs and primary care providers aren't receiving the necessary training to recognize and effectively treated symptoms. This unfortunately leaves many women unsupported as they look for solutions. We're excited to help address this by creating a network of specialized providers of menopause care With MiddiHealth and Genev, the premier virtual platforms in this field as our first partners in this area. For an additional nominal fee, Progeny clients can provide their employees with access to convenient personalized treatment that addresses nutrition, Mental health and hormonal health, which builds on the comprehensive concierge support our members already received to navigate their fertility journeys. And these services will be integrated with the health plans of our clients, ensuring full coordination across all aspects of the members' healthcare.

Speaker 3

We believe adding these services continues to raise the bar for what employers should expect from their benefit providers and further advances Progyny's position as the industry leader in women's health solutions. Let me now turn the call over to Mark, and he'll go over our results. Mark?

Speaker 4

Thank you, Pete, and good afternoon, everyone. I'll begin by taking you through our Q2 results and then provide you with our expectations for both the Q3 and full year. Revenue in the Q2 was $279,400,000 reflecting growth of 43%. The growth versus the prior year was primarily due to an increase The number of clients and covered lives as compared to the year ago period. We had 384 clients with at least 1,000 lives as of the end of the second quarter, representing an average of 5,300,000 covered lives for the quarter.

Speaker 4

This compared to 2 73 clients And an average of 4,300,000 covered lives a year ago, reflecting approximately 25% growth in lives over the prior year. As expected, a handful of clients launched during the Q2, though these were relatively smaller accounts. Several months ago, a number of high profile companies announced planned reductions to their workforce for late 20222023. Some, though not all of those companies are Progyny clients. And in most cases, these were relatively modest reductions when compared to their overall costs.

Speaker 4

While we did see an impact from workforce reductions at some of our clients in the Q2, the level was consistent with what we had expected and that impact has continued to be offset by other clients that have been expanding their organizations either through additional hiring or M and A. This dynamic is consistent with the Labor Department data this year, which has continued to show an expansion of jobs across the economy as well as unemployment that has remained steadily below 4%, which is meaningfully better than what many thought it would be as of mid-twenty 23. Following the close of the quarter, several additional clients launched their Progyny benefit. Taking into account the launches that took place in July and over these 1st few days of August, We have over 390 clients today representing more than 5,400,000 covered lives. This is also consistent with what we had expected to see, and we continue to believe that our covered lives will remain at approximately $5,400,000 over the balance of the year.

Speaker 4

Looking at the components of the top line, medical revenue increased 36% over the Q2 last year to $173,000,000 due again to the growth in our clients and covered lives, while pharmacy revenue increased 56% in the quarter to $107,000,000 I'll remind you that our higher growth in pharmacy revenue continues to be driven primarily By an increase in the number of clients with the integrated solution. As of this time a year ago, approximately 84% of our clients had ProgynyRx, Well, 90% of our clients today do. Turning now to our member engagement metrics. Approximately 14,800 Art Cycles were in the Q2, reflecting a 42% increase as compared to the Q2 last year. The female utilization rate, which most closely corresponds to our financial results, was 0.50% this quarter, an increase from 0.44 percent a year ago and a modest increase sequentially from the 0.48% in the Q1 of this year.

Speaker 4

Utilization rates can vary from period to period due to a number of factors, including the timing of new client launches, the time of the year and demographic mix. Nonetheless, we believe the engagement in the current period is reflective of both the high priority members placed on family building as well as the increasing need for treatment given the growing prevalence of infertility as measured by the World Health Organization. We also believe that the Q2 reflects a small amount of member activity that was slightly pulled forward likely due to that population's pursuit of other commitments in July August like the vacations and travel. Turning now to our margins. Gross profit increased 38% From the Q2 last year to $60,600,000 yielding a 21.7% gross margin.

Speaker 4

As compared to the year ago period, gross margins decreased 80 basis points reflecting the impact of planned cost containment efforts that were shared with our clients as well as incremental investments in care management resources. While healthcare and employers have felt pressures from medical inflation on unit costs, we're pleased to be able to leverage our growing scale to hold our rates constant and even pass along unit cost savings in certain circumstances as we believe this provides a further differentiation in our model. Looking across the first half of the year, our gross margins have expanded by 130 basis points over the gross margin in the first half of twenty twenty two, reflecting the efficiencies that we've continued to realize through our economies of scale. As we look to the back half of twenty twenty three, we expect that our gross margins We'll reflect the typical level of incremental investment that we make to add care management personnel in advance of the new client launches in the subsequent year. Sales and marketing expense of 5.5 percent of revenue in the 2nd quarter, an improvement from the 5.9% in the year ago period, As investments we've made to increase our go to market resources were more than offset by the leverage we continue to gain through client acquisition and retention.

Speaker 4

G and A costs were 10.8 percent of revenue this quarter as compared to 12.1% in the year ago period. The 130 basis point improvement is primarily due to ongoing efficiencies in our back office operations, Reflecting the inherent nature of our expanding margins on G and A as we grow revenue. These efficiencies more than offset higher non cash With our strong revenue growth and the operating efficiencies that we've realized Throughout the business, adjusted EBITDA grew 44% this quarter to $47,500,000 Adjusted EBITDA margin of 7 15% this quarter was up slightly from the year ago period. Over the first half of the year, our adjusted EBITDA margin on incremental revenue was 21.2 percent. We continue to believe this measure is useful as a forward indicator of where the business is capable of moving as it highlights our high rate of margin capture as we expand the business.

Speaker 4

Net income was $15,000,000 in the second quarter or 0 point 15 Higher income and EPS as compared to a year ago primarily reflect operating efficiencies realized in our higher revenues, which was only partially offset by higher stock comp expense and higher tax expense in the current period. Turning now to our cash flow and balance sheet. Operating cash flow for the quarter was $76,000,000 which compares to $19,200,000 generated in the year ago period. The significant improvement is primarily due to the impact of new terms we've reached with our pharmacy program partners as well as the timing of certain working capital items. Many of you will recall that we announced new pharmacy program partner agreements back in 2021.

Speaker 4

We are pleased to share that we have renewed and extended some of those agreements, Not only with favorable unit economics, but we also accelerated the payment receipt terms on one of our rebate agreements from 150 days to 90 days. As a result of the shorter terms, our cash flow for the Q2 reflects a one time catch up receipt And our AR balance now only reflects just 1 quarter of rebate receivable related to this agreement. Under these new terms, we don't anticipate the same working capital use that we've been seeing for the past 2 years as it relates to this receivable, And we would expect to see our conversion of adjusted EBITDA to full year operating cash flow improve from the mid-sixty percent range that it Had been coming into this year to mid-seventy percent for 2024 and beyond. We anticipate that the initial unwinding of the working capital will provide a greater benefit for our expected 2023 cash flow conversion. As of June 30, we had Total working capital of $367,000,000 including $283,000,000 in cash, cash equivalents and marketable securities and no debt.

Speaker 4

Turning now to our expectations for the Q3 and full year 2023. Given our strong first half results, we are pleased to be in a position to raise our guidance again for 2023. It's worth noting that these ranges reflect a normal level of seasonality that we typically expect to see with member activity over the peak of the summer when outside commitments like family vacations and travel take priority for certain members. And as a reminder, Last year, there were a number of outsized early and off cycle launches, which muted the seasonality that we ordinarily see in the summer months. For the full year, we are raising the range and now expect revenue to be between $1,075,000,000 to $1,090,000,000 reflecting growth of between 37% 39% or 38% at the midpoint.

Speaker 4

We are also raising our guidance on profitability. We now expected adjusted EBITDA of between $183,000,000 to 187,500,000 For net income, we now expect between $51,200,000 to $54,300,000 or between $0.50 $0.53 earnings per share on the basis of approximately 102,000,000 fully diluted shares. Our net income projections do not contemplate any discrete income tax items, including any income tax benefit related to equity compensation activity. To the extent that activity occurs, we will continue to benefit from those 3 tax items throughout 2023. At the midpoint of this guidance, we are expecting to see the continued expansion of our margins in 2023 with adjusted EBITDA margin on incremental revenue of more than 20%.

Speaker 4

For the Q3, we are projecting revenue of between $268,000,000 $273,000,000 reflecting growth of between 30% 33%. For the Q3 adjusted EBITDA, we expect between $44,700,000 $46,200,000 along with net income of between 9 $5,000,000 to $10,500,000 or between $0.09 $0.10 earnings per share on the basis of approximately 101,000,000 fully diluted With that, we'd like to open up the call for your questions. Operator, can you please provide the instructions?

Operator

Certainly, everyone at this time, we'll be conducting a question and answer session. Your line is live.

Speaker 2

Afternoon. Congratulations on another great quarter. I just want to make sure I heard everything right. Mark, you talked about the 2Q performance, and I think you used the term pull forward, but then the guidance talked about seasonality. I just read the outperformance and the timing is nothing but seasonality.

Speaker 2

I just want to make sure that we understand exactly the dynamics of how you think about what happened in 2Q and the performance relative to what you would typically expect of the seasonality of your business?

Speaker 4

Yes. So for Q2, Certainly, utilization was healthy. We're sort of pointing out that we believe that there's some slight pull forward Potentially utilization for the July, August time frame, it's something that we see typically. So when you're looking at Q3, remember last year, we had a significant number of Launches that were early that we're not really seeing in this particular year. So that sort of Summer just the comparison versus Q2 tends to be A little bit more on par as obviously our guidance is indicating.

Speaker 4

That was a little bit obfuscated by those launches last year. So But again, I mean, it's really looking at the full year and what we see in Q4 and beyond. And again, the overall utilization has remained really healthy. We're just making sure that people can be focused on the dynamics of how that Q3 seasonal piece It relates to what we're seeing in Q2 and for the balance of the year.

Speaker 2

Okay. But nothing abnormal that you would typically see in a normal year, which I know again we haven't had in a while in In terms of that dynamic between 2Q and Q?

Speaker 3

Yes. No, Mike, the short answer is you're right. It is normal seasonality. If you look back at 2021, you saw this a little bit. So you saw a dip in Q3 versus Q2, but by the end of Q3 and into Q4, it ramps back up.

Speaker 3

It's normal. So you're absolutely right.

Speaker 2

Perfect. And then my other question, obviously, the cash flow catch up is great, but cash flow has been building As you go pretty healthy level on the balance sheet, no debt. What are the plans for the cash?

Speaker 3

The plans continue to be To look for opportunities, whether it's in the space or expanding into adjacencies, Haven't identified any yet, but we're going to keep our powder dry relative to the cash we have in the balance sheet. And the good news is At least rates are now favorable and so as the cash sits there, it at least earns favorable treasury rates in the interim until we identify opportunities to deploy it.

Speaker 2

Perfect. Thanks so much. Congrats again.

Speaker 3

Thanks, Mike.

Operator

Your next question is coming from Scott Schoenhaus from KeyBanc. Your line is live.

Speaker 5

Hi, team. Congrats on the record quarter. Pete, thanks for providing those, Progyny Ag Retrieval stats versus the national average for in order to get to a live birthing that puts your success in context. So I just wanted to ask about the new wins and pipeline. You noted it in the release and in your prepared remarks that the pipeline is up versus last year.

Speaker 5

And then you mentioned, Pete, that the mix was equal between employers with Fertility Solutions and those without, I think I got that right. Just curious about the competitive market versus this time last year from those that you're converting away from a current fertility provider.

Speaker 3

Yes. Just to clarify, when I refer to the greenfield versus brownfield, I was really talking about the last 2 full sales seasons. This sales season is early in terms of giving that kind of commentary. We'll give that color relative to this sales season When we report in November, the full sales season, and so that's one clarification. Overall, the Environment is, I would say about as competitive as it was last year, sort of no more, no less.

Speaker 3

Bigger opportunities usually have more competition, smaller ones usually have less. We still compete Generally across the board, we look across all the accounts primarily with The carriers, the payers across the country manage care, but certainly competition in this space Continues and I would say relatively comparable to last year.

Speaker 5

Great. Thanks Pete for that color. And then on the gross margin side, you noted You're sort of giving back some to the client. Is that a way for you guys to also ensure that You're being competitive in the market. Just kind of walk us through those dynamics and How we should think about gross margins, I guess, in the near and longer term?

Speaker 5

Thanks.

Speaker 3

Yes. So the gross margins, It does give us a competitive differentiator for a couple of reasons. A lot of the other competitors in this space Are usually pricing off of pricing at the clinic, so X percent off, are usually also Doing an overlay of what's renting somebody else's network. And so as a result, dealing with the reality that healthcare inflation is real For us, part of what we do in terms of benefit to our clients is a combination of cost containment measures. And one of them is to the extent that we can take advantage of our growth and be able to Keep costs constant or and or bring unit costs down.

Speaker 3

We do that really important. The other piece of it, as I highlighted on the call Is making sure that our version of utilization management is the smartest version that creates the best member experience, but delivers real value and real cost containment in the form of really favorable live birth rates per retrieval as an sample, plus all the other clinical outcomes that we talk about. Those are the really important ways to do that as opposed to sort of traditional blunt instrument utilization management techniques. So it all sort of goes into the mix of continuing to differentiate ourselves and deliver value to our existing clients as well as being able to position ourselves well for prospective clients.

Operator

Your next question is coming from Jalendra Singh from Truist. Your line is

Speaker 6

live. Thank you. I actually want to ask about any update on your reimbursement discussion with your clinic partners With all the concerns around healthcare and general inflation, have you seen any pressure on case rates from them? And if that happens, how much Similarly, do you have in terms of passing on these increases to your employer clients?

Speaker 3

So it's not happening. It's not happening any more than normal. So every year as you might imagine negotiations, they start want more And we talk about we use data as we have these conversations and talk about How much business we're adding for them, etcetera. And so ultimately, we've come out where we've been coming out on a net basis based on our history. So there's nothing More happening relative to that.

Speaker 3

So but to answer the second part of your question, To the extent that, that does happen, we do have the ability and flexibility to raise rates with our clients. Unfortunately, we've been successful in not doing that and we've been keeping unit costs flat to down and this year is no different. But we do have that flexibility contractually with clients to be able to raise rates should we need to.

Speaker 6

And my follow-up on a quick question, which we have got from some investor recently is around ProgynyRx. And I know rebates play a crucial role in that business. Just curious with all the noise and scrutiny around rebates for PBMs. I know your PBM is unique and is focused on niche area. Do you see any concerns in that business model if there's More scrutiny around rebate for PBMs in general?

Speaker 3

We I don't have one yet. When I say, yes, I mean, we're not experiencing sort of that same type of activity or questions around it. Remember, our model is very different. We don't have a traditional model where we're collecting and giving rebates back for us. Everything is part of the Pricing that we do at the point of sale, so that the member can also enjoy the benefit of it.

Speaker 3

And that model has been performing for us and continues to perform for us. So it is one of those areas that we've been hearing about for many, many years. We'll see what happens, but we're not concerned.

Speaker 6

All right. Thanks, guys. Congrats on a good quarter. Thanks.

Operator

Thank you. Your next question is coming from David Larsen from BTIG. Your line is live.

Speaker 7

Hi, congratulations on the good quarter. I just want to confirm what I think I heard. You're not seeing any slowdown In the market, I mean, are you hearing any clients or any of your sales people talk about belt tightening or just Can you provide any color or thoughts or comments on how clients might view the fertility benefit? Is it potentially Is it a potential area of savings, reducing that benefit for employers in the event of a recession? Just any color there would be helpful.

Speaker 3

Yes, I think Michael should Michael's call us to the sales force. He should handle that.

Speaker 4

So thanks for the question. At the end of the day, Our facility from a value perspective operates the same way that the rest of the healthcare does. It's about Delivering a great member experience, delivering great quality and controlling costs. That's no different today And it has been in the last several years. And to the last sort of line of questioning, we have some good levers that we've been able to pull and keep down from a unit cost perspective.

Speaker 4

And we'll continue to do that in the market as we go through the selling season and And into the retention business with our clients.

Speaker 7

Okay. And then can you just comment on the PBM itself? Like Why would somebody use your pharmacy benefit like couldn't they get the same rates with Medco or CVS or Optum? Or is your pricing better? I just would think that with their scale, they would have very competitive prices on these drugs.

Speaker 7

Can you just maybe give some color around that, please?

Speaker 3

Sure. There's a couple of factors to it, right. One is, it's about the whole member experience and it's how we sell it first. It's about having a single authorization, So that cycles are never delayed because cycles are tied closely to women's menstrual cycle. And so that's one big wrinkle that gets avoided.

Speaker 3

It's also about the fact that we deliver we're the only A company I know of PBM that serves that services the facility space that has a waste management program where we are in conjunction with our network of providers are dispensing more than one time throughout the Treatment cycle so that we're never over dispensing visavis, dosing instructions versus what happens traditionally, which is You get your day 1 dosing instruction and then 80% of the time that's going to decline as you go through the cycle, but The prescription is written for the full 10 days at that day one rate, if you will, and it's all dispensed. And so we have We've been achieving somewhere in the 12% to 14% range of less dispensing with our waste management program. That's huge savings because all these drugs or specialty drugs. The last piece is that we are competitive from a pricing perspective despite the size of the other PBMs because They're bigger in general, obviously, but we're pretty big in this space and continue to grow at a rapid rate and go to our partners and with business cases that gets us competitive pricing, so that that's not an issue.

Speaker 7

Okay. So it sounds like by using your PBM, there's a higher quality of patient care, higher quality of service and that obviously leads to better outcomes, more effective birth rates, ultimately lower costs and better clinical care. Okay. And then just one last quick one. We've been hearing about like Maven and KINDbody.

Speaker 7

It seems like it's a very competitive space. Just at a high level, what's the key differentiator between Progyny and a handful of your peers, your competitors?

Speaker 3

The key differentiator is that we are directly contracted with our entire network. As a result of being directly contracted with our entire network, we get a tremendous amount of data on every one of our patients, including what I just described, which is the ability to manage a waste management program that otherwise without that relationship, you wouldn't be able to do. We get a significant amount of data points on the entire journey and are in a position to monitor and manage adherence to best practices that ultimately drive the clinical outcomes that we get. It's pretty significant where the It's also why we're the only benefit provider in this space that reports outcomes on every one of their patients and they're in our SEC filings as well and it's also been validated by third parties in terms of Millman. And so Overall, it's pretty significant demonstrated at scale ability to deliver value based care in this space.

Speaker 3

That's really second to none. And so that's there's details in the approaches, but that's the high level significant difference.

Speaker 7

Okay, great. Thanks very much. Congrats on a good quarter.

Speaker 3

Thank you.

Operator

Thank Thank you. That concludes our Q and A session. I'll now hand the conference back over to James Harte for closing remarks.

Speaker 1

Thanks, Matthew. So thank you, everyone, for joining us today. Otherwise, we'll look forward to speaking with you again in a few months' time.

Operator

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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Earnings Conference Call
Progyny Q2 2023
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