Progyny, Inc. (PGNY) Earnings Call Transcript & Summary

Good afternoon. I hope everyone can hear me. I'm David Schlanger, Chief Executive Officer of Progyny. I'm very happy to welcome you to the Progyny 2020 Stockholders' Meeting. Before I call the meeting to order, I'd like to introduce you to the other members of the executive team who are with us today via webcast. The other officers of Progyny in attendance today are: Peter Anevski, President, Chief Financial and Operating Officer; and Jennifer Bealer, Executive Vice President, General Counsel and Secretary. I would also like to introduce Mike Portegello and John Valla of Ernst & Young LLP, Progyny's auditors, who are available to respond to appropriate questions. We thank all of you for joining us today. We hope that you and your families continue to be healthy and safe. As we have collectively watched the events of the past week unfold, beginning with the senseless killing of George Floyd at the hands of law enforcement, we've all been flooded with a number of emotions: shock and outrage, that something like this can happen; sadness, that our nation continues to fail in its promise of equal protection and liberty for all of its citizens regardless of race, religion, gender orientation; fear among members of the black and brown community after skin color alone makes them a target of violence, particularly by those whose job it is to protect them; and frankly, if I can speak for myself, disgust. At Progyny, our values celebrate the quality, diversity and inclusion for all those who have dreams of a family, regardless of their skin color, gender, relationship or orientation. While our work strives to end inequity in family building, we must each broaden our focus and take action to combat the systematic racism, injustice and discrimination in all of the communities in which we work and live. We can't just help bring babies into the world. We have to work harder to create a fair and just future for them as well. We stand in solidarity with the black community and are committed to doing our part to build toward justice and equality for all people. I'm hopeful that if all of corporate America stands in support of ending discrimination and racism and takes tangible action to support all of their employees that our country can begin to live up to its promise of providing equal opportunity and fairness to all. The meeting will now officially come to order. We will proceed with the formal business of the meeting as set forth in your Notice of Annual Meeting and proxy statement. After the formal part of the meeting, we will give you an opportunity to ask questions -- any questions you may have. We'll begin the meeting with a brief update on our business. As a reminder, remarks made today in response to any questions may include forward-looking statements, including with respect to the impact of COVID-19 on our business and industry. Forward-looking statements involve risks and uncertainties, which are described in our SEC filings, including our first quarter Form 10-Q, and our actual results may differ materially. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we don't have any obligation to update them. We are holding today's meeting virtually to help prevent the spread of COVID-19 by minimizing large in-person gatherings. Clearly, COVID-19 has had an unprecedented impact around the world, and we thought you would want to hear today about the impact this had on Progyny and what we have done in response. As the pandemic began to unfold in March, the American Society for Reproductive Medicine issued guidelines recommending that fertility clinics in the United States should cease initiating new treatments. Although many clinics remained opened on a limited basis, most patients were unable to progress to treatment, and we saw our member activity drop meaningfully through the end of March and into the first half of April. Despite that, we reported a 72% increase in revenue in the first quarter of 2019 -- no, first quarter of 2020 as well as significant growth in both adjusted EBITDA and net income and more than $12 million of positive operating cash flow. Those results were due to the strong start we had to the year prior to the impacts from COVID-19. In April, ASRM updated its guidelines, advising that practices could reopen for all procedures so long as it could be done in a measured way that would be safe for patients and staff. Many clinics had already been preparing new protocols to address patient and staff safety, and these preparations have put clinics in a stronger position to open sooner rather than later with all of their services. By the end of June, we expect to see clinics open and providing their full range of services. Patient volumes should continue to ramp up as members feel more and more comfortable with receiving treatment, though it is still too early at this point to know when member utilization will return to normal levels. During this time, we also made the decision to have our employees work from home. We were well prepared to make the shift to a virtual working environment, and we are extremely proud of how our team has seamlessly managed the transition. There has been no disruption to our day-to-day processes or to our business controls. And all of the services we provide to our members, clinics and clients have continued as normal and without any interruption. At this point in the year, as we would be in any year, we are actively selling. Although much of what we are doing is fairly consistent with what we've done in prior sales seasons, we have made certain adjustments in the sales process itself, such as shifting meetings that would have been in person to virtual and telephonic meetings. But our sales team is out there engaging with prospects, and they have been successful in getting meetings with potential clients. We have adjusted the focus of our efforts by more narrowly prioritizing our activities, focusing on industries that are better positioned in this environment and where we've done well historically, such as technology, consumer packaged goods, pharmaceuticals, software and financial services. We are also focused on targeting a higher percentage of companies who are currently offering fertility coverage. It is impossible to know what the world will look like in late summer and early fall when our client prospects will be making their benefit decisions for 2021, but we are controlling what we can right now. Hopefully, that gives you some perspective on how COVID has affected Progyny and the fertility industry and the measures we have taken to respond. Before we move to the formal business of today's annual meeting, I wanted to provide a few highlights of what we accomplished this past year. We completed the initial public offering for our stock, raising nearly $80 million of proceeds. The IPO significantly increased awareness of our brand in the marketplace, strengthened our balance sheet and created a public market for our stock. We continue to make targeted investments to enhance the capabilities of our team, particularly in key leadership positions. We added an accomplished sales executive with over 25 years of experience in healthcare as our Chief Client Officer and also added an EVP of Finance and a Corporate Controller to expand the capabilities of our accounting and finance functions. We more than doubled our revenue in 2019, and our selling season added a record number of new clients and covered lives for 2020. We have continued to foster and develop our unique culture. Progyny is extremely proud to be a mission-driven organization where people want to make a difference in the lives of our members by helping them achieve their dreams of building a family. We've been named to Modern Healthcare's list of the best places to work in health care for 2 years in a row, to the CNBC Disruptor 50 list for 3 years in a row and to Crain's New York Fast 50 for New York City and the Financial Times' list of the fastest-growing companies in the Americas. Because of COVID-19, we are collectively going through unprecedented times. However, some things don't change, and one of them is people's desire to have children to start a family. As we look back across other times of national crises, we see that people tend to use these periods to think about what is really important to them. In these moments, family and family building becomes even more relevant to people than it was before. In addition, all of the macro trends that have helped contribute to our growth remain intact, specifically the high and growing rates of infertility, the lack of adequate coverage in the U.S. for this highly prevalent medical need, the need for inclusiveness and equality in the workplace and the need for employers to get the most from their healthcare dollars. We believe that, as we collectively emerge from the COVID crisis, Progyny's mission and how we accomplish it cost effectively for our clients becomes even more important, and we believe we are well positioned to successfully manage the impacts of the pandemic in our business. With that, we'll now move on to the next portion of today's meeting. Will the Secretary please report at this time with respect to the mailing of the Notice of the Meeting and the stockholders list?

I have at this meeting a complete list of stockholders of record of our common stock on April 13, 2020, for the record date of this meeting. I also have an affidavit certifying that on April 22, 2020, a Notice of Annual Meeting of Stockholders of Progyny was deposited in U.S. mail to stockholders of record at the close of business on April 13, 2020.

At this time, I'd like to introduce Gustavo Jimenez of Computershare, who I'm appointing to act as Inspector of Election at this meeting. Mr. Jimenez has taken and subscribed the customary oath of office to execute his duties with strict impartiality. We will file this oath with the records of the meeting. His function is to decide upon the qualifications of voters, accept their votes and, when balloting on all matters is completed, to tally the final votes. Will the Secretary please report at this time with respect to the existence of a quorum?

I have been informed by the Inspector of Elections that proxies have been received for approximately 65% of the outstanding shares of common stock entitled to vote at this meeting. This constitutes a quorum for the meeting today, and we will now carry out the official business of the meeting.

We will now proceed with the formal business of this meeting. There are 2 proposals to be considered by the stockholders at this meeting.

The time is now 3:12 on Tuesday, June 2, 2020, and the polls are now open for voting on all matters to be presented. The polls will be closed to voting after we go through the matters to be voted on. The agenda and rules of conduct for the meeting are posted online at the website for our annual meeting identified in your proxy statement. We ask that you follow these rules to help the meeting run smoothly. We will address questions during the Q&A portion of the meeting. If you have a question, please submit it by e-mailing [email protected].

First item of business is the election of 2 Class 1 Directors to serve until the 2023 Annual Meeting and until their successors are elected. The nominees for Class 1 Director are Kevin Gordon and Cheryl Scott. Second item of business today is the ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as the independent registered public accounting firm of Progyny for the fiscal year ending December 31, 2020. That was the final proposal for today's meeting. The Secretary will now describe the voting procedures.

If you've already voted, there's no need to vote now unless you'd like to change your vote. If you have not yet voted and you would like to change your vote now or if you would like to change your vote, please go to www.investorvote.com/pgny. Enter your control number from the notice and vote your shares. We'll pause for a moment to give anyone who hasn't yet voted a chance to vote. Each share of common stock is entitled to one vote. [Voting]

The time is now 3:13, and the polls are now closed for voting. The report of the Inspector of Elections covering the proposed -- proposals presented at the meeting are as follows: one, the proposal to elect each of Kevin Gordon and Cheryl Scott as Class 1 Director of Progyny is carried; two, the selection of Ernst & Young LLP as Progyny's independent registered public accounting firm for the fiscal year ending December 31, 2020, is ratified. We expect to report our final voting results on a current report on Form 8-K to be filed with the SEC within 4 business days after the end of this meeting.

This concludes the formal portion of today's meeting. We will now entertain questions from stockholders and pause briefly for you to submit any questions. There being no questions, the meeting is now adjourned. Thank you, everyone.