Progyny, Inc. (PGNY) Earnings

Management highlights

- Financial Performance & Capital Return * The quarter delivered record revenue, gross profit, and adjusted EBITDA, with continued gross margin expansion and strong operating cash flow generation. * Strong consistent performance provides flexibility to invest in platform expansion for future growth and return value to shareholders via share repurchases. * Under the $200 million May 2026 share repurchase program, 1.2 million shares were purchased for $31.5 million by June 30, with a cumulative 2 million shares purchased post-quarter end; $142.5 million remains available under the current authorization. Aggregate repurchases since November 2024 total 10.8 million shares, reducing outstanding shares by approximately 12.5%. - 2027 Sales Season Update * Sales momentum from Q1 2026 has continued, with early new sales commitments and client retention pacing meaningfully ahead of last year at this point, with more early client decisions than historically expected. * Management remains confident of hitting the annual target of adding 1 million or more new covered lives. Vast majority of 2027 retention risk has already been derisked, with no expected client benefit reductions for 2027. * New early commitments span a diverse cross-section of industries (energy, construction, manufacturing, aerospace, healthcare, financial services, education, etc.) and client sizes, ranging from 1,000 covered lives to large jumbo clients. * Retention and upsell activity remains strong: existing clients directly observe Progyny's cost control results, creating opportunities to expand services beyond core fertility and take business from competing providers. - Competitive Positioning * Family building and women's health benefits remain a top priority for employers across all sizes and industries, as unmanaged care creates high costs for employers. * Facing 10%+ projected medical and pharmacy cost trend increases, employers are prioritizing solutions with proven track records of cost control, quality, member satisfaction, and measurable hard ROI. Management notes that most competing solutions fall short in at least one of these criteria, leaving Progyny uniquely positioned to win new business. - Strategic Growth Initiatives * Good progress is being made in high-priority strategic growth areas: health plan partnerships, public sector client acquisition, and the new fully insured market offering, Progyny Select. * Health plan partnerships (many now in their second year) have delivered increased productivity and a strong pipeline of new partnership opportunities. * Progyny Select development is focused on building key distribution partnerships with general agents and brokers for the fully insured market; the initiative is expected to be a medium/long-term growth driver and will not contribute meaningful volume in 2027. - Operational Trends * Member engagement in H1 2026 remained consistent with long-term ranges, with Q2 2026 engagement hitting the higher end of May guidance ranges.

Guidance

- Full-year 2026 guidance projects revenue of $1.36 billion to $1.385 billion, representing 5.5% to 7.5% reported growth; when excluding the $48.5 million transition of care revenue from the former client in H1 2025, growth is projected at 9.7% to 11.7%. - Full-year 2026 adjusted EBITDA guidance is $233 million to $240 million, with diluted EPS of $1.26 to $1.32 and adjusted diluted EPS of $2.04 to $2.10, based on ~83 million fully diluted shares. - Q3 2026 guidance projects revenue of $335 million to $345 million (6.9% to 10.1% year-over-year growth), with adjusted EBITDA of $56 million to $59 million, diluted EPS of $0.30 to $0.33, and adjusted diluted EPS of $0.50 to $0.52, based on ~82 million fully diluted shares. - Management states the slightly more pronounced seasonal softness in Q3 2026 is limited to the middle of summer, not a reflection of a longer-term trend; full-year 2026 engagement is still expected to remain within long-term historical ranges, with the low end of the range aligned with the 5-year low for annual utilization. - Platform investment spending is expected to begin tapering starting in 2027, after concentrated investment over 2025 and 2026.

Segment performance

The transcript does not break out financial performance for multiple distinct product segments. Overall firm-level results for Q2 2026 include: record quarterly revenue, gross profit, and adjusted EBITDA; revenue grew 5.3% on a reported basis, and 11% when excluding the contribution from the large former client under a transition of care agreement (which ended June 30 2026). Gross margin expanded 180 basis points year-over-year, driven by care management and service delivery efficiencies and lower stock compensation expense. Trailing 12-month adjusted EBITDA margin was 17.2%, consistent with trend during the period of increased platform investment. Trailing 12-month operating cash flow exceeded $200 million for 6 consecutive quarters, hitting $201 million in Q2 2026, with a conversion rate of adjusted EBITDA to operating cash flow above the 75% target. Q2 2026 CapEx was $6.2 million, $1 million higher than the prior year period. Days Sales Outstanding (DSO) improved more than 7 days year-over-year and sequentially from Q1 2026. As of June 30 2026, the firm held $273 million in total working capital (including $237 million in cash, cash equivalents and marketable securities) with no outstanding debt.

Risks & headwinds

- Forward-looking statements (including guidance, sales projections, and growth plans) are subject to material risks and uncertainties that could cause actual results to differ materially from projections; key risk factors are detailed in the company's SEC filings and earnings press release. - Seasonal summer engagement softness is more pronounced than in typical years, though management expects it to be limited to the middle of Q3 2026, with activity returning to normal levels in Q4 2026.

Analyst Q&A

• Q: What is driving the more pronounced summer seasonal engagement softness, and when will activity return to normal trends? /

  A: Management confirms the softness is limited to the middle of summer, with no sustained change to underlying utilization or demand trends. Historical precedent (including a similar more pronounced seasonal dip 3-4 years ago) and current visibility into September appointment scheduling indicates engagement will return to normal levels for the rest of the year. The full-year guidance adjustment is a small ~1% midpoint change, not a material shift in consumption expectations.

• Q: What is driving higher competitive conversion activity, and why are more employers switching to Progyny from existing providers? /

  A: Management notes that competitive conversion (brownfield) opportunity volume is higher this year than historical levels, with employers across all competitor segments initiating RFPs and market checks. Root cause is widespread employer pressure to contain rising overall medical cost trends, and Progyny has a proven long-term track record of delivering cost control, quality, and transparent ROI that competing solutions have failed to match. Management adds that the company is winning a large share of these converted opportunities.

• Q: What is the breakout of new 2027 sales between first-time fertility benefit buyers (greenfield) and competitive conversions (brownfield), and has GLP-1 cost pressure impacted buying behavior? /

  A: Management confirms that 2027 new sales activity is disproportionately weighted toward brownfield conversions, compared to greenfield new coverage additions. Broad medical cost inflation (driven in part by GLP-1 utilization and new high-cost drug adoption) has pushed employers to seek out cost-saving solutions, driving the increased brownfield opportunity. There is not enough data yet to confirm that GLP-1 coverage cutbacks directly increase fertility benefit adoption, but overall cost containment pressure broadly benefits Progyny's value proposition.

• Q: How does Progyny plan to deploy its strong excess cash flow going forward, for internal investment, M&A, or additional shareholder returns? /

  A: Management confirms that concentrated large platform investments over the past two years will be largely completed by the end of 2026, with investment spending tapering in 2027. Strong current cash flow gives the company flexibility to pursue three priorities concurrently: continued incremental internal investment for growth, tuck-in M&A opportunities if attractive, and ongoing share repurchases to return capital to shareholders.