Progyny Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Strong sales-season momentum: Progyny said early commitments for 2027 are meaningfully ahead of last year, retention risk has been largely de-risked, and it remains confident of adding at least 1 million new covered lives.
  • Positive Sentiment: Record profitability and cash generation: Second-quarter revenue, gross profit, and adjusted EBITDA reached records, while gross margin expanded 180 basis points year over year. Operating cash flow exceeded $50 million for the fourth time in five quarters, and trailing-12-month operating cash flow reached $201 million.
  • Positive Sentiment: Share repurchases support per-share value: Progyny repurchased nearly 1.2 million shares for $31.5 million during the quarter and has reduced shares outstanding by approximately 12.5% since November, with roughly $142.5 million remaining under its current authorization.
  • Negative Sentiment: Near-term utilization softness: Management observed a more pronounced-than-usual seasonal slowdown in member engagement during the middle of summer and issued third-quarter guidance reflecting the impact, although it expects utilization to normalize in September and views the issue as temporary.
  • Neutral Sentiment: Continued investment and longer-term growth initiatives: Platform investment remains elevated, with second-quarter CapEx of $6.2 million, though spending is expected to taper from 2027. The new fully insured Progyny Select offering and health-plan distribution partnerships are progressing but are not expected to contribute materially in 2027.
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Earnings Conference Call
Progyny Q2 2026
00:00 / 00:00

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Operator

Good day, ladies and gentlemen, and Welcome to the Progyny, Inc. second quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode and the floor will be open for questions and comments after the presentation. If you wish to join the queue at any time to ask a question, you can press star one on your telephone keypad. Should you wish to remove yourself from queue, you can press star two. It is now my pleasure to turn the call over to your host, James Hart. James, the floor is yours.

James Hart
James Hart
VP of Investor Relations at Progyny

Thank you, Tom, and good afternoon, everyone. Welcome to our second quarter conference call. With me today are Pete Anevski, CEO of Progyny, and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions.

James Hart
James Hart
VP of Investor Relations at Progyny

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 2026, and the assumptions and drivers underlying such guidance, the demand for our solutions, our expectations for our selling season for 2027 launches, anticipated employment levels of our clients in 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.

James Hart
James Hart
VP of Investor Relations at Progyny

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.

James Hart
James Hart
VP of Investor Relations at Progyny

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.

Pete Anevski
Pete Anevski
CEO at Progyny

Thanks, Jamie, and thanks everyone for joining us this afternoon. We're pleased to report a strong second quarter highlighted by solid growth over the prior year period, resulting in record quarterly revenue, gross profit, and adjusted EBITDA, as well as further gross margin expansion and the continued generation of significant cash flow. Fueled by the strength and consistency of this performance, not just in the most recent quarter, but really over the past several years, we've created flexibility both to invest in the business by laying a foundation for future growth through the expansion of our platform while also returning value to shareholders through significant share repurchases. Mark will take you through the details of both that and the quarter shortly.

Pete Anevski
Pete Anevski
CEO at Progyny

Before that, I'd like to give you some color on how our latest sales season is progressing, because as you know, new sales in any year have the largest impact on our growth trajectory. I'm pleased to report our momentum from last quarter has continued, and we enter our most critical time of year for closing new clients in a favorable position. Strong momentum is driven by an acceleration in both early commitments for new sales as well as retention across our existing book of business led by our largest clients, which has largely de-risked client turnover for 2027 and positioned us for another year of strong retention. In short, we're seeing meaningful momentum in the market, and I think it would be useful to help you understand why we believe our solutions continue to resonate so strongly with employers.

Pete Anevski
Pete Anevski
CEO at Progyny

It starts with the reality that family-building and women's health solutions continue to be a priority for employers of all sizes and across all industries. We're addressing a very real and highly prevalent medical need and one that can be costly to employers when it's not managed well or not managed at all. Employers are also experiencing high cost trends in their traditional medical and pharmacy coverage, with increases of 10% or more and projecting further increases next year. In response, they're turning to solutions and benefit managers with a proven record of not only controlling trend, but helping to bend that curve. The buying criteria for employers evaluating options in the market continues to hone in on cost, quality, and member satisfaction with a heightened focus on accountability within each area.

Pete Anevski
Pete Anevski
CEO at Progyny

They want to see a track record in achieving total cost and quality management with a high-quality member experience consistently. Success is measured on the strength of hard ROI savings back to the employer and members, yielding short and long-term trend control. While the competitive environment remains active, as we look across the landscape, we see the other solutions falling short in one or many of these categories. By contrast, Progyny, on the strength of our detailed transparent reporting, remains the only solution, in our opinion, that has consistently demonstrated the ability to deliver across every one of them. We've done this over a prolonged period, giving buyers confidence that we have the right solution that has been proven to work over the longest period of time.

Pete Anevski
Pete Anevski
CEO at Progyny

This is why we feel uniquely well-positioned to compete and win, whether it's a buyer with an existing solution or one who's adding coverage for the first time. The result of this enhanced focus from employers has us well positioned across our three areas for growth: adding new logos, maintaining high client retention, and expanding new partners to enhance our position and extend our reach. Looking a bit deeper within each area, on new client acquisition, early commitments are pacing meaningfully ahead of this time last year. While the sales season won't conclude until November, we have seen a meaningful number of early decisions, more than we'd expect at this point in the year. On that strength, we're confident we will meet our annual target of adding 1 million or more new lives.

Pete Anevski
Pete Anevski
CEO at Progyny

On client retention, based on current conversations and commitments, we believe we've removed the vast majority of retention risk, which is also earlier than usual at this point in the year. We think it isn't a coincidence that employers have been able to come to their decisions earlier this year and have chosen Progyny at the point when managing their escalating medical cost trend is a top priority. The wins thus far represent the typical diverse cross-section of the economy, including employers in energy, construction, manufacturing, aerospace, healthcare, labor, financial services, and education. This includes one of the oldest and most prestigious universities in the country. The early commitments have also been diverse in terms of size, spanning from 1,000 cover lives to the jumbos we see every year. Turning to retention, in any season, roughly 1/3 of the book is up for renewal.

Pete Anevski
Pete Anevski
CEO at Progyny

As discussed last quarter, when we described the comprehensive review one of our longest-standing clients had recently done to measure and validate the efficacy of our program over many years, existing clients are often in the strongest position to directly see the cost control and sustained savings our solutions deliver. That not only yields positive renewal activity, but also an opportunity for expansions, which is when a client adds more services with us beyond core fertility, we take that business away from the competitors who'd been previously providing some of those services. For those same reasons, our newest clients are selecting the typical level of coverage that we've historically seen, we aren't seeing existing clients look to reduce their benefit with us for the next year either. Lastly, we're satisfied with our momentum at this point in the year amongst our traditional self-insured employers.

Pete Anevski
Pete Anevski
CEO at Progyny

We're also pleased with the progress we're making across a number of other strategic areas, including health plan partnerships, public sector clients, and continuing to advance our new fully insured market offering called Progyny Select. We're seeing good results with our existing partnerships, as well as a strong increase in productivity from our health plan partnerships, many of which are now in their second year with us. Additionally, we're pleased with our pipeline of potential new health plan partnerships. We also continue to advance Progyny Select with a focus on building relationships across key distribution areas, like leading general agents and brokers who are focused on the fully insured market. These partnerships are an important step and no different from other relationships we've built and curated. We expect the first year will focus largely on forging those channel partners versus driving meaningful new volume.

Pete Anevski
Pete Anevski
CEO at Progyny

As we've said previously, we're not expecting Select to be a meaningful contributor in 2027. Instead view this as an important addition to the portfolio and a significant contributor to our medium and longer-term growth. To conclude, we're pleased with our strong performance over the first half of the year. Given the momentum we're seeing in the market, we're comfortable that we've positioned ourselves exceptionally well to meet our traditional target of adding 1 million or more lives. Let me turn the call now over to Mark.

Mark Livingston
CFO at Progyny

Thank you, Pete. Good afternoon, everyone. Before I begin, please note that the Form 8-K we filed a short while ago includes our customary slide presentation summarizing the results in the quarter, while also highlighting some of the longer-term trends that we believe are important in understanding the health and direction of the business. That material has also been posted on our website. Rather than repeating what those slides address, my remarks today will focus on the four key themes that impacted both the quarter and how we think about the rest of 2026 and beyond. Let's begin with the first theme. Over the first half of the year, member engagement has remained consistent with our long-established ranges. As it relates to the second quarter specifically, engagement was closer to the higher end of expectations reflected in our May guidance.

Mark Livingston
CFO at Progyny

We believe both data points demonstrate how members are continuing to pursue the care and services they need when the time is right for them to do so. Likewise, second quarter revenue was also closer to the higher end of our guidance, reflecting a 5.3% increase on a reported basis, 11% when you exclude the contribution from a large former client who was under a transition of care agreement in the second quarter of 2025. I'll remind you that the transition agreement pertaining to this client ended on June 30th of last year. Accordingly, the second quarter is the last quarterly period where you have to take that client's contribution into account when looking at our comparative results. Moving on to our second theme.

Mark Livingston
CFO at Progyny

We continue to maintain healthy margins, even as we continue to invest to expand our product platform, enhance features for our members, and also lay the foundation to support our future growth. Gross margin expanded 180 basis points from the second quarter last year, comparable to the level of expansion we also saw in the first quarter. This is due to the efficiencies we've continued to realize in our care management and service delivery, as well as a reduction in stock compensation expense. Adjusted EBITDA margin also expanded from the year ago period, though at a lesser rate than we've seen with gross margin, as the platform investments we're making are more concentrated within our operating expense lines. Nonetheless, we're pleased with our ability to consistently maintain a level of overall profitability.

Mark Livingston
CFO at Progyny

As measured on a trailing 12-month basis, adjusted EBITDA margin was 17.2%, consistent with where it's trended throughout this period of increased investment, demonstrating our ability to invest to grow while simultaneously creating efficiencies throughout the business. As it relates to those investments, second quarter CapEx was $6.2 million. This was in line with our first quarter spend, as well as a $1 million increase over the prior year period. Although it's premature to offer detailed commentary beyond this year, we continue to expect that this investment program will begin to taper down starting in 2027. Turning now to the third theme. Through the ongoing disciplined and prudent management of the business, we've continued to achieve a high conversion of adjusted EBITDA to operating cash flow.

Mark Livingston
CFO at Progyny

This allowed us to once again meet, and somewhat exceed, our 75% conversion target, both in the second quarter and over the first half of the year. For the fourth time in the last five quarters, we generated more than $50 million in operating cash flow. This yielded $201 million on a trailing 12-month basis, and we've now exceeded $200 million in last 12 months operating cash flow for six consecutive quarters. Through our ongoing focus on managing the revenue to cash process, we drove further improvements in our DSOs, which ended the second quarter more than seven days lower from where it was in the year ago period. DSO also improved on a sequential basis from March 31st this year, reflecting the typical dynamic we see as the payment flows with our newest clients get up and running.

Mark Livingston
CFO at Progyny

As of June 30th, we had approximately $273 million in total working capital, which includes $237 million in cash, cash equivalents, and marketable securities. There were no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. Finally, our fourth theme is how our strong and consistent financial performance has provided us with the flexibility to both invest in the business while simultaneously returning value to our shareholders through ongoing share repurchases. In late May, we announced our latest share repurchase program through a $200 million authorization, which permits us to acquire shares via open market purchases as well as under structured plans. Under this latest program, which was in effect for a little over a month during the second quarter, we purchased nearly 1.2 million shares by June 30th for $31.5 million.

Mark Livingston
CFO at Progyny

Including the activity that has happened subsequent to June 30, we have now purchased a cumulative 2 million shares to date under the most recent program, and approximately $142.5 million remains available under the existing authorization. On an aggregate basis, combining this current program as well as our prior $200 million program, which concluded earlier this year, we have now purchased an aggregate 10.8 million shares overall since November. This has reduced our overall shares outstanding by approximately 12.5%. Turning now to our expectations for the third quarter and the remainder of 2026. As the third quarter begins, encompassing the peak of the summer, a seasonally less active time for members, we have seen a slightly more pronounced seasonal impact and have reflected that in our third quarter guidance.

Mark Livingston
CFO at Progyny

We view this to be the ordinary rhythm of activity and not an indication of a new macro trend or a change in the overall trajectory of engagement. Although our view into September is inherently limited at this point, we are not seeing this seasonality extend beyond the summer. Accordingly, we continue to expect that our engagement metrics for the full year will remain consistent with our long-established historical ranges, with the low end of our range consistent with our five-year low for annual utilization. The table at the back of today's press release outlines our assumptions at both ends of the full-year guidance ranges. On the basis of these assumptions, we are projecting revenue in 2026 of between $1.36 billion-$1.385 billion, reflecting growth of between 5.5%-7.5%.

Mark Livingston
CFO at Progyny

If we exclude the $48.5 million in revenue from the client who was under a transition of care agreement over the first half of 2025, our full-year revenue growth is projected to be between 9.7%-11.7%. With respect to profitability, we expect a range of $233 million-$240 million in adjusted EBITDA with net income of $104.8 million-$109.9 million. This equates to $1.26 and $1.32 in earnings per diluted share and $2.04 and $2.10 of adjusted EPS on the basis of approximately 83 million fully diluted shares. As it relates to the third quarter, we expect between $335 million-$345 million in revenue, reflecting growth of 6.9%-10.1%, with the sequential change in second quarter revenue reflecting the slightly more pronounced seasonality in activity this year.

Mark Livingston
CFO at Progyny

On profitability, we expect between $56 million-$59 million in adjusted EBITDA in the quarter, along with net income of between $24.5 million-$26.7 million. This equates to $0.30 and $0.33 of earnings per diluted share, or $0.50 and $0.52 of adjusted EPS on the basis of approximately 82 million fully diluted shares. At the midpoints of the ranges for both the quarter and the year, you can see we expect to maintain a consistent adjusted EBITDA margin even with the investment to grow the business. With that, we would like to open the call for questions. Operator, can you please provide the instructions?

Operator

Certainly. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your keypad at this time if you wish to join queue. Please hold a moment while we poll for questions. Our first question today is coming from Brian Tanquilut from Jefferies. Brian, your line is live. Please go ahead.

Brian Tanquilut
Brian Tanquilut
Analyst at Jefferies

Thank you. Good afternoon, guys. Maybe just on the comments on ART cycle seasonality, just curious if you can expand further on that slowdown that you're seeing this summer and if you have any thoughts on what drove this increased seasonality, and when do you think this peaks, and when do we get back to more normal trends?

Mark Livingston
CFO at Progyny

I think what's important, Brian, is to also look at what we've done here for the first half of the year. Although we've had a good strong Q1 and Q2, we haven't hit the high end of our ranges. Part of what we're doing here is recalibrating and narrowing the year just in recognition of where we're at here six months in. As far as the third quarter, the comments around the slightly more pronounced seasonality, it's really limited to just this middle part of the summer here, and we do have some visibility as we get into September as the appointment scheduling builds there. Look, we don't see it as anything that is prolonged or any kind of change in trend, our guidance reflects really more of a stable utilization and consumption pattern consistent with what we've seen in other years.

Brian Tanquilut
Brian Tanquilut
Analyst at Jefferies

Got it. When I think about the sequential improvement in fertility revs per cycle, what is driving that? Is that ancillaries? Maybe another part of that question would just be any comment you can share on pricing, both on the PBM side and on the services side?

Mark Livingston
CFO at Progyny

Yeah. On fertility pricing, we do have the ability to modestly increase pricing based on CPI. On the fertility side, that's something that we've done over the last couple of years, so that contributes, but we're talking low single-digit percentages. On the pharmacy side, we've looked to absorb some of the cost increases that we see in order to keep our clients whole.

Pete Anevski
Pete Anevski
CEO at Progyny

I think if you're focused, though, on sequential is impacted by a lower proportion of ART cycles in the first quarter and a higher proportion of initial consults, but the average is calculated in terms of revenue per cycle. Second quarter seasonally has a bump up in ART cycles versus the first quarter and a lower proportion of initial consults. That's normal every year. As you talk about sequential revenue per cycle, that's what impacts that.

Brian Tanquilut
Brian Tanquilut
Analyst at Jefferies

Got it. Thank you.

Operator

Thank you. Your next question is coming from Jailendra Singh from Truist Securities. Jailendra, your line is live. Please go ahead.

Jailendra Singh
Jailendra Singh
Analyst at Truist Securities

Thank you, and thanks for taking my question. I want to go back to this seasonality point you raised. I know it's only one month of data, but given the experience the company has had in the past couple of years back, what additional data points or observations you have, which makes you believe this is really more of seasonal softness you're seeing? Outside of being prudent in your guidance approach, anything else you're doing proactively to make sure you don't get caught off guard once you get out of this seasonal weak period?

Pete Anevski
Pete Anevski
CEO at Progyny

Just to answer your first question, in terms of data points, every year, we see seasonality in the summer, in the middle of the summer. This year is a little bit more pronounced. If you recall I think three or four years ago, we saw the same thing, and then exiting the quarter, we saw the same thing in terms of engagement returning to normal levels. Of the visibility we have so far for September, that appears to be the case for this year as well. That's why we added the color and commentary relative to what we're seeing not only this year, but in periods past. We do see that seasonality as more pronounced in this quarter and then coming back to normal engagement levels in the balance of the year. It's just a little bit more pronounced this year than normal.

Jailendra Singh
Jailendra Singh
Analyst at Truist Securities

My follow-up, and thanks for all the color on the selling season, Pete. It's good to see you feel good about meeting or exceeding annual target of 1 million lives. A quick follow-up there. As you look at these type of lives, industries these lives are coming from, expected utilization or number of offerings they might have access to, how do you think about the revenue attached to these lives? Do you think it's similar to this year or better or worse? Any color will be helpful.

Pete Anevski
Pete Anevski
CEO at Progyny

Obviously, we're not going to quantify it, but I think my commentary spoke to not only the commitments, but the contribution from them, which is sort of what you're alluding to, being meaningfully ahead of last year at this point.

Jailendra Singh
Jailendra Singh
Analyst at Truist Securities

Got it. Thank you.

Operator

Thank you. Your next question is coming from Michael Cherny from Leerink Partners. Michael, your line is live. Please go ahead.

Michael Cherny
Michael Cherny
Analyst at Leerink Partners

Good afternoon, thanks for taking the question. Sorry to harp on this same topic, this is not the first time, obviously, we've seen summer seasonality you've alluded to maybe a bit more than before. When you think about the visibility you had at this point last quarter, you talked about utilization improving. I guess, how much was this on the foresight, given that, again, you're seeing an already uptick in September. As the work you've done over the years to improve your visibility has been significant, how did that play out, specifically tied to ending the quarter and into the print?

Pete Anevski
Pete Anevski
CEO at Progyny

The visibility, Mike, hasn't changed. The algorithms that we use have improved, which is what you're referring to in terms of the work we've done. The visibility is still the same, right? We have good visibility into the month ahead and a little less visibility into the month after that. That's not new. That's generally how far ahead people are scheduling appointments. We look at a lot of things underlying that data. That's what we use when we guide always, and that's what we used last quarter when we reported in May, and that's what we're using now as we report Q2 and what we're seeing so far exiting the quarter. Also looking at past history relative to that being normal in terms of normalizing back to normal levels of engagement for the remainder of the year.

Michael Cherny
Michael Cherny
Analyst at Leerink Partners

Got it. Just one more additional question. The cash flow build has been very strong. You obviously have Select going on. You have some of the other ancillary programs. How do you think about the future usage of capital deployment through both internal, external investments as you continue to broaden your lead in the market?

Pete Anevski
Pete Anevski
CEO at Progyny

Like I mentioned in my remarks, the good news is we have strong enough cash flow to continue to invest if we need to. The level of investment will come down, as we had mentioned a couple of times on the last couple of calls. Next year and in the future, based on what we have planned, our large investments happened over the last two years, and will finish out in terms of incremental investments through the end of this year. As you mentioned, we have the capital to make decisions whether there are any opportunities around M&A, whether they're tuck-ins or otherwise, whether there's additional repurchases that we're going to do or any other additional investments. We have the cash flow to do all three.

Operator

Thank you. Your next question is coming from Sarah James from Cantor Fitzgerald.

Sarah James
Sarah James
Analyst at Cantor Fitzgerald

Thank you. On the improved algorithm that you were talking about, can you give us an idea of what the slope of level of confidence looks like? How is your confidence in your two-week out forecast versus four versus six? What does that look like for you now?

Pete Anevski
Pete Anevski
CEO at Progyny

Given the actual visibility we have, and given that it's a consumption model, obviously any periods further out inherently are going to have less. Again, the algorithms have improved significantly. They've proven to be pretty predictable. Things like a more pronounced seasonality than you otherwise didn't have visibility into can happen, and that's what we're experiencing. By the way, overall, if you look at sort of the midpoint, it's a 1% adjustment. We're not talking about a large adjustment and change in consumption. Either way, it's a fair question.

Sarah James
Sarah James
Analyst at Cantor Fitzgerald

You mentioned also the growing pipeline of your broker relationships. Can you talk about how material that channel is now to your business and where you think it could go over time?

Pete Anevski
Pete Anevski
CEO at Progyny

Sure. It's not material today, as I mentioned in my prepared remarks, not expected to be material at all relative to what it's going to contribute in terms of new lives next year. That's consistent with the comments we've been making. Those channel partners will take time, both in terms of signing up, which we've been successful in doing so far, but more importantly, in getting throughput from them relative to the reality of when their renewals happen, the majority of which are for one-one, the reality of getting through those organizations, because many of them are inherently roll-ups of a lot of small companies, and it's a little bit more of a grassroots effort in terms of getting the message through to all their brokers, et cetera.

Pete Anevski
Pete Anevski
CEO at Progyny

The relationships we've built so far are positive, and they are inclined to work with us and work with their people to do that. That's why it's more of a medium- to long-term strategy. I would say it's more important to the medium- and long-term, in terms of being additive as opposed to looking for something for 2027.

Sarah James
Sarah James
Analyst at Cantor Fitzgerald

Thank you.

Operator

Thank you. Your next question is coming from Scott Schoenhaus from KeyBanc Capital Markets. Scott, your line is live. Please go ahead.

Scott Schoenhaus
Scott Schoenhaus
Analyst at KeyBanc Capital Markets

Thanks, guys, for taking my question. Just to drill in a little bit more on the summertime softness here. If I think about it, is there anything that's glaringly different than you expected in terms of a certain cohort? Is it this new cohort that you onboarded from new wins this year that you saw a less amount of egg retrievals happening into the summer, but now you're starting to see those appointments being booked for those surgeries, or you're seeing the medications being ordered now for September into the fall? Was it a regional softness?

Scott Schoenhaus
Scott Schoenhaus
Analyst at KeyBanc Capital Markets

Any color as to explain to why this was more pronounced this year versus other years, and if you're actually seeing it from a one-from-one delay in a certain population of employees from a certain employer that delayed an egg retrieval with medication in the summer and now you're seeing that pick up in the fall.

Pete Anevski
Pete Anevski
CEO at Progyny

Yeah. The short answer is there isn't anything pronounced in any one of those categories that you described. We certainly take a look at that to see if there's anything that would be different than a seasonality event. It's more across the board, really in all those categories that you're describing.

Scott Schoenhaus
Scott Schoenhaus
Analyst at KeyBanc Capital Markets

On the selling season, the one comment that I thought was really interesting was that you're seeing the most sort of customer conversations from people that had previously had a competitor's benefit. Maybe can you go dive into more color, Pete, on what exactly they're telling you and why they're coming to you to explore options? Is it ROI? Is it the fact that their employees want a more robust benefit? This is, I think, the first time you've ever commented on something like this, and I kind of want to hear what the customers are saying when they're coming to you. Thanks.

Pete Anevski
Pete Anevski
CEO at Progyny

Sure. It's important to note that the only reason why I'm calling it out is because it's more than what we've seen in the past. We're getting all sorts of opportunities from brownfield and some greenfield as well. When you do get these opportunities, you don't always get the opportunity to understand everything they're unhappy about. They just simply are out there, and they're just out there in more volume this year, so you compete for them. You spend more time talking about your solution, and you just infer that something isn't right, when they're going out to RFP. A lot of them many times do market checks.

Pete Anevski
Pete Anevski
CEO at Progyny

Either way, there isn't a lot of discussion around sort of what's not working. There's some anecdotal stuff, but I don't want to comment on anecdotal stuff as opposed to we're hearing something constant and systemic. I think the more insightful commentary is that it's happening and that we're winning a lot of it.

Mark Livingston
CFO at Progyny

Yes, Scott, the only thing maybe I'd add to that is Pete's prepared remarks around cost containment and the pressures on employers now, which I think we believe is part of that root cause of why they're coming to us. We obviously have a proven model that helps control costs, so we believe that's part of what's driving it.

Scott Schoenhaus
Scott Schoenhaus
Analyst at KeyBanc Capital Markets

That's helpful color. Thanks.

Operator

Thank you. Your next question is coming from Allen Lutz from Bank of America Merrill Lynch. Allen, your line is live. Please go ahead.

Allen Lutz
Allen Lutz
Analyst at Bank of America Merrill Lynch

Good afternoon. Thanks for taking the questions. One for Pete, Mark here. I guess to follow up on the selling season piece here, is there any way to bifurcate between the engagement you're getting from prospects that are looking at fertility benefits for the first time versus those that are potential competitive conversions? Would love to get a sense of anything's changed there, with those that currently don't offer a fertility benefit. Second, we've talked about this a little bit in the past, but the conversation around GLP-1s continues to evolve. Some of the big PBMs are talking about employers just offering that type of benefit less. If employers are not offering GLP-1 coverage, are you seeing any increased interest in fertility benefits? Just trying to get a sense of, to triangulate if any of those things are hitting your prospects or if it's just too early. Thanks.

Pete Anevski
Pete Anevski
CEO at Progyny

Yeah. I'll try and capture the spirit of all that you asked, Allen. First thing is building on Mark's comment. What we are seeing more of this year is more brownfield than greenfield. We'll start with that. It is from all competitors, not just the VC-backed competitors, but also those that have a carrier solution today. We still view them and always view them as a competitor, probably the largest competitor still relative to where others are getting a fertility benefit beyond our VC-backed competitors. That's not surprising given the fact that, as we sort of talked about ending last year and coming into this year, medical cost inflation is real. A lot of what's driving that is some of what you're alluding to, which is GLP-1s and other sort of new drugs in the market that are driving higher utilization and overall increase in medical costs.

Pete Anevski
Pete Anevski
CEO at Progyny

It's not surprising that it's those that are looking to contain costs or save money, i.e., in a brownfield situation, are the ones that are doing more looking and more committing this year, versus the greenfield, right? We're still getting greenfield, but it's more pronounced in the brownfield. That's probably the easiest way I could answer, I think, most of what you asked. As it relates specifically to GLP-1s, I don't know that I have enough good information to say, as a result of companies cutting back on GLP-1s, now they feel that they're in a better position to buy fertility or not. I think there's an overall reality that they're trying to manage costs overall, and that higher utilization from things like GLP-1s, and therefore are adjusting just to keep doing what they can to bend that cost curve a little bit for themselves.

Operator

Thank you. Your next question is coming from Peter Warendorf from Barclays. Peter, your line is live. Please go ahead.

Peter Warendorf
Peter Warendorf
Analyst at Barclays

Hey, yeah, thanks for the question. It looks like clients may be ticked up slightly in the second quarter, but membership was closer to flat. It's not a huge difference, but I'm just curious if you're seeing any impact from the broader employment trends, and maybe a weaker employment environment. What you're assuming in guidance over the second half of the year in terms of membership at current clients. Thanks.

Mark Livingston
CFO at Progyny

Yeah. Just as a reminder, we typically count only those clients that have 1,000 lives or more. We have a number of them that are smaller, but we've always excluded them. We include the lives, but not the counts. There were a handful of clients that graduated beyond the 1,000-life level, obviously in and of themselves, not going to drive your overall averages. As far as lives are, they've been pretty consistent that we've seen some clients go up a little, some go down a little, but it's been relatively stable. From a projection standpoint, we're projecting the same. We have the same level of full year estimate as we've been maintaining for a couple of quarters now.

Mark Livingston
CFO at Progyny

We do have a couple of very small clients that are starting here in the second half, not anything meaningful from a revenue contribution or whatnot. You see a little bit in the coming quarters, but frankly, it's just more rounding than anything.

Peter Warendorf
Peter Warendorf
Analyst at Barclays

Great. Just quickly on the selling season, it's encouraging that you guys reiterated the 1 million target for this year. Just curious how much visibility you guys have into that target for next year at this point, maybe what the expectation might be for how many of those lives come from Progyny Select versus traditional membership. Thanks.

Pete Anevski
Pete Anevski
CEO at Progyny

Well, I'll start by saying our target is always that pretty much every year. We do have a pretty nice pipeline build for the next year's selling season so far. Also we expect more pipeline to come in from now going forward, most of which will be carryover pipeline into next year. There is some pretty good activity, in particular from some jumbo opportunities for next year. It's early to comment on whether or not they will or won't get us to 1 million lives. So I can't reiterate sort of the same kind of clarity around achieving that target. I can tell you that we're pleased with the overall pipeline build, even for next year as well, as we sit here now.

Peter Warendorf
Peter Warendorf
Analyst at Barclays

Thanks a lot.

Pete Anevski
Pete Anevski
CEO at Progyny

As it relates to Select, as I said in my previous comments, as soon as we have more clarity into how much and when Select will start to contribute more meaningfully, we'll add that color in our commentary. As I said before, most of what's going to happen now and over the next, I'll call it 12-18 months, is going to be us signing up those relationships and then working with those companies and entities to get to as many of their brokers through tactics that we both will do, the companies and us, in order to get adoption going.

Peter Warendorf
Peter Warendorf
Analyst at Barclays

Great. Thank you.

Operator

Thank you. Your next question is coming from John Pinney from Canaccord Genuity. John, your line is live. Please go ahead.

John Pinney
John Pinney
Analyst at Canaccord Genuity

Hi. John Pinney on for Richard Close. Thanks for the questions. Good to hear about the selling season. I guess, just provide any commentary about what gives you the confidence for anyone who hasn't been signed as of yet at this point in the selling season, that their intent is to sign by the end of the year for next year. I guess it's just like, what gives you the confidence they won't turn into not nows?

Pete Anevski
Pete Anevski
CEO at Progyny

Yeah. We have a lot of tracking and tools and obviously conversations with our sales force and our sales leaders, in particular around the larger opportunities that are in pipeline. We track a lot of activities. A lot of our criteria as to what we call pipeline is objective in terms of sales progression. It's a combination of the commentary from our sales teams, the objective data that we have around the sales activity, what they're looking at, the buying questions, that kind of thing, and our past history around that to estimate where we're going to get to.

John Pinney
John Pinney
Analyst at Canaccord Genuity

Okay. Just as a follow-up, is there any way you can quantify, how much the investments for this year are factoring into EBITDA guidance for the year?

Mark Livingston
CFO at Progyny

Yeah. We've never really quantified it, what we've said historically, it's still the case, is that the increase in CapEx that you've seen from 2024-2025, and now sort of equivalent here in 2026, there's about an equivalent amount of OpEx running through the P&L as well.

Pete Anevski
Pete Anevski
CEO at Progyny

Related to the investments.

Mark Livingston
CFO at Progyny

Related to the investments, yeah.

John Pinney
John Pinney
Analyst at Canaccord Genuity

All right. Thank you.

Operator

Thank you. Our final question this afternoon is coming from David Larsen from BTIG. David, your line is live. Please go ahead.

David Larsen
David Larsen
Analyst at BTIG

Hi. We spoke recently with a benefits consultant, and he said that of his 12 or 13 clients that he supports, Progyny was in about seven of them, which I was positively surprised to hear. It makes me think that you have somewhat of a dominant fertility support position in the market. I guess, what are your thoughts in terms of growing your revenue and what opportunities there are to insell additional services into your existing base? What products or services may you develop that could drive incremental revenue growth? Then can you also comment on international expansion efforts since you're doing so well in the U.S.? It seems like Europe and the international markets are the next frontier.

Pete Anevski
Pete Anevski
CEO at Progyny

As it relates to our existing base, we don't own as much market share in the market as what that consultant said, so that's not representative. Nonetheless, we are one of the larger providers of fertility and family benefits in the country for sure. As it relates to opportunities with existing clients, it's the stuff we already do, which is whether it's any of the expanded products that we have and/or whether it's them expanding the fertility benefit with us. Most clients start with the two to three cycle benefit. Not everybody starts with egg freezing.

Pete Anevski
Pete Anevski
CEO at Progyny

Over time, and we've shown in the past charts around this, over time, each sales year cohort generally buys up a little bit more, whether they add more cycles, whether they add egg freezing, small portion that doesn't buy pharmacy every year, whether they add that, whether they add any of the expanded products or the opportunities around the existing base. The opportunities for us still, as I mentioned in my prepared remarks, is still around adding new logos all the time. Although what we're winning this year is more pronounced in brownfields, that doesn't mean there isn't significant opportunity out there for brownfield and greenfield, as indicated by our expectations for the sales year so far. As it relates to opportunities OUS, the OUS opportunity isn't the same in terms of financial contribution as it is in the U.S.

Pete Anevski
Pete Anevski
CEO at Progyny

It's more of an opportunity around winning multinational companies, in particular, whose parent is in the U.S., and having a solution that will address the needs of their global population that's at least similar in terms of what it's addressing, even if it's not the same type of solution due to many limitations like regulatory limitations, et cetera, OUS. It continues to be an opportunity that we invest in and have invested and will continue to invest in order to win as many multinational companies as we continue forward fueling the overall fertility and family building business that we have today.

David Larsen
David Larsen
Analyst at BTIG

Okay, thanks very much. Congrats on a good quarter.

Pete Anevski
Pete Anevski
CEO at Progyny

Thank you.

James Hart
James Hart
VP of Investor Relations at Progyny

Thanks.

Operator

Thank you. This does conclude today's question and answer session. I would now like to hand the floor back to James Hart for closing remarks.

James Hart
James Hart
VP of Investor Relations at Progyny

Thank you, Tom. Thank you everyone for joining us this afternoon. Please feel free to reach out, of course, if you have any follow-up questions. We'll also be attending a conference next week, so perhaps we'll see some of you there in Boston. Otherwise, enjoy the rest of the summer.

Operator

Thank you. This does conclude today's conference call. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.

Executives
    • James Hart
      James Hart
      VP of Investor Relations
    • Pete Anevski
      Pete Anevski
      CEO
Analysts
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