Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second-quarter revenue grew 9% year-over-year to $304.1 million, marking the first quarter to exceed $300 million in revenue.
- Progyny Inc (PGNY, Financial) added new clients and covered lives, with a 20% growth in covered lives compared to the previous year.
- Gross profit increased by 13% from the second quarter last year, with a gross margin improvement of 80 basis points.
- Adjusted EBITDA grew 15% in the quarter, with an adjusted EBITDA margin of 17.9%, up 90 basis points from the previous year.
- The company has nearly 470 clients representing approximately 6.5 million covered lives, with expectations to end the year with 6.5 to 6.6 million covered lives.
Negative Points
- Revenue guidance for the second half of the year has been adjusted lower by approximately 5% at the midpoint due to lower-than-expected ART cycles per utilizing member.
- The company experienced a net reduction of approximately 100,000 covered lives in the quarter, impacting the top line by approximately $10 million.
- Pharmacy revenue growth was lower at 4% compared to medical revenue growth of 12%, partly due to lower ART cycles per utilizing member.
- The company is facing variability in ART cycles per utilizing member, which is impacting revenue projections.
- There is uncertainty around the factors causing the lower-than-expected ART cycles per utilizing member, making future projections challenging.
Q & A Highlights
Q: Hi, thanks so much for the question and thanks for the incremental disclosure in the release. Really helpful. I was hoping perhaps you could help us understand what might be driving some of this volatility in mix and utilization. Just wondering like has anything changed within the benefit structure or coverage that might be leading to this shift? Have any best practices changed? The fertility clinics that might be leading to better outcomes or perhaps less prevalent, given the adoption of GLP-1. Just curious if you have any thoughts on what might be driving that.
A: Sure, Annie. Thanks for the question. And the last part of your question, you came in and out, so I didn't catch it, but I got the spirit of the question. So --. Sorry, it was -- is there maybe higher success rates driven by perhaps less prevalence of PCS from GLP-1s? Yes. So right now, as I mentioned in my prepared remarks, we don't know exactly what's driving this. It's not a mix issue. It's a cycles per female utilizer and it's -- not that it's a decline, but it's the rate of growth that you would normally see seasonally as the year progresses is not what it has been traditionally, which is why we broke out not only the sort of full-year expectations, but the quarterly trends historically to give you some insight into that. And so as we sit here now, we don't know exactly what may be driving that. We also don't know whether or not it will persist. It's just that we're seeing it right now for Q3 as well as what we saw in and where our forecast is, therefore, continuing to project what we're seeing in terms of that lower rate of growth. But we don't know exactly why. And certainly, we'll do our best to continue to find out why to the extent that we can. But as we sit here now, we don't exactly know why.
Q: Great. Thanks. And then I was just wondering if perhaps you could just provide a little bit more color what are you seeing around lives. How are you thinking about the backdrop just going forward, just kind of given some of the more elevated unemployment and some of the more recent calls for recession?
A: Yes. I think as Mark talked about in his comments, the net adjustment in lives, I think it just happens to be one quarter or more net down than up true-up, lack of a better term, that we normally get from our clients every quarter. They're reporting lives to us and lives go up and down, and they usually net out to either the same or plus or minus for the book of business. It just so happens this quarter that they netted out to a slightly fewer lines. But as we also talked about, we've heard of no actions of any kind from anybody that would be driving this. I think it's just normal -- it's just sort of normal activity. And I think overall continued, albeit most recent report, slower growth in job growth reported by the government, I think, should support any concerns anybody may have that there's further degradation in the base as we don't believe we'll have.
Q: Afternoon, and thanks for taking the question. So we started the year with guidance that was below what you guys had hoped for. This is now the second tie-down that we've seen. Pete, I understand that some of the stuff is out of your control. But as you sit here at this point in time, what's your comfort level that the low end called $1.165 billion of revenue is the last cut that you need to make?
A: It's why, Mike, we share the assumptions that are inherent in that low end. There's hopefully no more surprises this year. And therefore, I have a lot of comfort in that number. That said, it's very difficult to predict the unknown or even size of the unknown. Unfortunately, this is a year where we've had some surprises that are to the negative. Two of them sort of were short-lived and didn't continue. This third one is right now persisting. So it's the best answer I can give you without other unknown surprises that I can't predict, I feel really comfortable.
Q: And I know so much of your model is built on new member adds. It's very early for this, but as we think about heading into the end of the year, and you're obviously seeing a big difference between membership growth and ART cycle growth, how should we think about where your normalized revenue growth rates should be? Are you exiting the year at a run rate that is the, quote, new normal for this business? Where are you seeing the various different moving pieces beyond obviously, the additional services? Which are a nice uptick. But to get back, I don't know if you want to call it growth acceleration, the growth normalization or whatever the new normal for this business should be. I'm taking away from next week, I apologize. But just trying to get down to the bottom of the growth opportunities.
A: No, it's a fair question. So the biggest driver of growth is and will continue to be adding logos and lives. I'm happy to have Michael expand on where we're at. So far, I talked in my prepared remarks that we're pleased with where we are relative to adding logos and lives versus where we were at this time last year, but nonetheless, happy to give more color. Beyond that, barring again any surprises or changes relative to volume and utilization, if you will, per unique member, that will still remain the single largest driver of growth for us as it has in the past.
Q: Thank you and thanks for taking my question. Actually, I want to follow up on the last question from Michael about this long-term growth in the business. I know we are seeing three different issues this year in the first seven months. Of these two issues, we still don't know why those happened. And I understand the strong demand among employees and employees. But based on your experience thus far, does that change in terms of how you think about your approach to guidance in future? And also related to that, have you guys thought about any changes you can do in your business model, either in terms of provider contracting or per contracting, which can result in less variability in your results?
A: Regarding the first part, we're certainly going to do a couple of things. One is continue to get as much additional information as we can to inform our models and guidance and also to the extent that we can get more real-time information through our providers and prove the data that we get that will inform us, that will be something that we're going to continue to work to enhance versus our current algorithms and models. And considering the couple of surprises we had this year, in the future, our ranges will definitely get wider, right, to sort of capture some of that. Regarding changing how we do business, it is a care consumption model and without putting in some sort of minimums by client or anything else like that, it's hard to sort of mitigate the variability in actual consumption. So there isn't thinking around that as we sit here
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
