000155130612-312024Q3falseP1Yhttp://progyny.com/20240930#AccruedLiabilitiesAndOtherLiabilitiesCurrenthttp://progyny.com/20240930#AccruedLiabilitiesAndOtherLiabilitiesCurrentxbrli:sharesiso4217:USDiso4217:USDxbrli:sharespgny:segmentutr:sqftxbrli:pureiso4217:EUR00015513062024-01-012024-09-3000015513062024-10-3100015513062024-09-3000015513062023-12-3100015513062024-07-012024-09-3000015513062023-07-012023-09-3000015513062023-01-012023-09-300001551306us-gaap:CommonStockMember2024-06-300001551306us-gaap:TreasuryStockCommonMember2024-06-300001551306us-gaap:AdditionalPaidInCapitalMember2024-06-300001551306us-gaap:RetainedEarningsMember2024-06-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-3000015513062024-06-300001551306us-gaap:CommonStockMember2024-07-012024-09-300001551306us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300001551306us-gaap:TreasuryStockCommonMember2024-07-012024-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001551306us-gaap:RetainedEarningsMember2024-07-012024-09-300001551306us-gaap:CommonStockMember2024-09-300001551306us-gaap:TreasuryStockCommonMember2024-09-300001551306us-gaap:AdditionalPaidInCapitalMember2024-09-300001551306us-gaap:RetainedEarningsMember2024-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300001551306us-gaap:CommonStockMember2023-06-300001551306us-gaap:TreasuryStockCommonMember2023-06-300001551306us-gaap:AdditionalPaidInCapitalMember2023-06-300001551306us-gaap:RetainedEarningsMember2023-06-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-3000015513062023-06-300001551306us-gaap:CommonStockMember2023-07-012023-09-300001551306us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001551306us-gaap:RetainedEarningsMember2023-07-012023-09-300001551306us-gaap:CommonStockMember2023-09-300001551306us-gaap:TreasuryStockCommonMember2023-09-300001551306us-gaap:AdditionalPaidInCapitalMember2023-09-300001551306us-gaap:RetainedEarningsMember2023-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-3000015513062023-09-300001551306us-gaap:CommonStockMember2023-12-310001551306us-gaap:TreasuryStockCommonMember2023-12-310001551306us-gaap:AdditionalPaidInCapitalMember2023-12-310001551306us-gaap:RetainedEarningsMember2023-12-310001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001551306us-gaap:CommonStockMember2024-01-012024-09-300001551306us-gaap:AdditionalPaidInCapitalMember2024-01-012024-09-300001551306us-gaap:TreasuryStockCommonMember2024-01-012024-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-09-300001551306us-gaap:RetainedEarningsMember2024-01-012024-09-300001551306us-gaap:CommonStockMember2022-12-310001551306us-gaap:TreasuryStockCommonMember2022-12-310001551306us-gaap:AdditionalPaidInCapitalMember2022-12-310001551306us-gaap:RetainedEarningsMember2022-12-310001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100015513062022-12-310001551306us-gaap:CommonStockMember2023-01-012023-09-300001551306us-gaap:AdditionalPaidInCapitalMember2023-01-012023-09-300001551306us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001551306us-gaap:RetainedEarningsMember2023-01-012023-09-300001551306srt:MinimumMember2024-01-012024-09-300001551306srt:MaximumMember2024-01-012024-09-300001551306pgny:FertilityBenefitServicesMember2024-07-012024-09-300001551306pgny:FertilityBenefitServicesMember2023-07-012023-09-300001551306pgny:FertilityBenefitServicesMember2024-01-012024-09-300001551306pgny:FertilityBenefitServicesMember2023-01-012023-09-300001551306pgny:PharmacyBenefitServicesMember2024-07-012024-09-300001551306pgny:PharmacyBenefitServicesMember2023-07-012023-09-300001551306pgny:PharmacyBenefitServicesMember2024-01-012024-09-300001551306pgny:PharmacyBenefitServicesMember2023-01-012023-09-300001551306us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-09-300001551306us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001551306us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-09-300001551306us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001551306us-gaap:FairValueInputsLevel3Member2023-12-310001551306us-gaap:FairValueInputsLevel3Member2024-09-300001551306us-gaap:FairValueInputsLevel2Member2024-09-300001551306us-gaap:FairValueInputsLevel2Member2023-12-310001551306pgny:CorporateHeadquartersLeaseNewYorkNewYorkSeptember2019Member2019-09-300001551306pgny:ThroughFifthLeaseYearMemberpgny:CorporateHeadquartersLeaseNewYorkNewYorkSeptember2019Member2024-09-300001551306pgny:AfterFifthLeaseYearMemberpgny:CorporateHeadquartersLeaseNewYorkNewYorkSeptember2019Member2024-09-300001551306pgny:CorporateHeadquartersLeaseNewYorkNewYorkFebruary2023Member2023-02-280001551306pgny:AfterFifthLeaseYearMemberpgny:CorporateHeadquartersLeaseNewYorkNewYorkFebruary2023Member2024-09-300001551306pgny:CorporateOfficesLeaseTwoNewYorkNewYorkCommencing2024Member2022-02-280001551306pgny:CorporateOfficesLeaseTwoNewYorkNewYorkCommencing2024Membersrt:ScenarioForecastMember2025-10-010001551306pgny:CorporateOfficesLeaseTwoNewYorkNewYorkCommencing2024Membersrt:ScenarioForecastMember2025-10-012025-10-010001551306pgny:CorporateOfficesLeaseTwoNewYorkNewYorkCommencing2024Membersrt:ScenarioForecastMember2030-03-310001551306pgny:CorporateHeadquartersLeaseNewYorkNewYorkSeptember2019Membersrt:ScenarioForecastMember2029-06-300001551306pgny:February2024ShareRepurchaseProgramMember2024-02-290001551306pgny:May2024ShareRepurchaseProgramMember2024-05-310001551306pgny:August2024ShareRepurchaseProgramMember2024-08-310001551306pgny:May2024ShareRepurchaseProgramMember2024-01-012024-09-300001551306pgny:February2024ShareRepurchaseProgramMember2024-01-012024-09-300001551306pgny:May2024ShareRepurchaseProgramMemberus-gaap:CommonStockMember2024-09-300001551306pgny:February2024ShareRepurchaseProgramMemberus-gaap:CommonStockMember2024-09-300001551306pgny:February2024ShareRepurchaseProgramMemberus-gaap:CommonStockMember2024-01-012024-09-300001551306pgny:May2024ShareRepurchaseProgramMemberus-gaap:CommonStockMember2024-01-012024-09-300001551306us-gaap:CostOfSalesMember2024-07-012024-09-300001551306us-gaap:CostOfSalesMember2023-07-012023-09-300001551306us-gaap:CostOfSalesMember2024-01-012024-09-300001551306us-gaap:CostOfSalesMember2023-01-012023-09-300001551306us-gaap:SellingAndMarketingExpenseMember2024-07-012024-09-300001551306us-gaap:SellingAndMarketingExpenseMember2023-07-012023-09-300001551306us-gaap:SellingAndMarketingExpenseMember2024-01-012024-09-300001551306us-gaap:SellingAndMarketingExpenseMember2023-01-012023-09-300001551306us-gaap:GeneralAndAdministrativeExpenseMember2024-07-012024-09-300001551306us-gaap:GeneralAndAdministrativeExpenseMember2023-07-012023-09-300001551306us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-09-300001551306us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2024-06-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2024-06-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-06-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2023-06-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2024-07-012024-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2024-07-012024-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-07-012023-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2023-07-012023-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2024-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2024-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2023-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-12-310001551306us-gaap:AccumulatedTranslationAdjustmentMember2023-12-310001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-12-310001551306us-gaap:AccumulatedTranslationAdjustmentMember2022-12-310001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2024-01-012024-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2024-01-012024-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-01-012023-09-300001551306us-gaap:AccumulatedTranslationAdjustmentMember2023-01-012023-09-300001551306us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001551306us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001551306us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2024-01-012024-09-300001551306us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2024-01-012024-09-300001551306us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001551306pgny:AprylGmbHMember2024-06-172024-06-170001551306us-gaap:EmployeeStockOptionMember2024-07-012024-09-300001551306us-gaap:EmployeeStockOptionMember2023-07-012023-09-300001551306us-gaap:EmployeeStockOptionMember2024-01-012024-09-300001551306us-gaap:EmployeeStockOptionMember2023-01-012023-09-300001551306us-gaap:EmployeeStockMember2024-07-012024-09-300001551306us-gaap:EmployeeStockMember2023-07-012023-09-300001551306us-gaap:EmployeeStockMember2024-01-012024-09-300001551306us-gaap:EmployeeStockMember2023-01-012023-09-300001551306us-gaap:WarrantMember2024-07-012024-09-300001551306us-gaap:WarrantMember2023-07-012023-09-300001551306us-gaap:WarrantMember2024-01-012024-09-300001551306us-gaap:WarrantMember2023-01-012023-09-300001551306us-gaap:RestrictedStockUnitsRSUMember2024-07-012024-09-300001551306us-gaap:RestrictedStockUnitsRSUMember2023-07-012023-09-300001551306us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300001551306us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________
FORM 10-Q
____________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 001-39100
____________________________________________
Progyny, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________
Delaware27-2220139
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1359 Broadway
New York, New York
10018
(Address of principal executive offices)(Zip Code)
(212) 888-3124
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock,
$0.0001 par value per share
PGNYThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2024, the registrant had 85,153,267 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents
Page
21
69
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements, including, without limitation, statements regarding our future results of operations and financial position; our ability to acquire or invest in complementary businesses, products, and technologies; our ability to achieve profitability on an annual basis and sustain such profitability; the sufficiency of our cash and cash equivalents and anticipated sources and uses of cash; our business strategies, plans, objectives and goals; our ability to acquire new clients and successfully engage new and existing clients; our ability to effectively manage our growth; our ability to compete effectively with existing competitors and new market entrants; the impact of recently adopted accounting pronouncements; our ability to attract and retain qualified employees and key personnel; the plans and objectives of management for future operations and capital expenditures; general economic and market trends; the impacts of the COVID-19 pandemic, including variants, on our business, operations and the markets and communities in which we and our clients, members and providers operate; and the potential impact of evolving laws and regulations, including any laws and regulations restricting reproductive rights. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek,” “assume,” “future,” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under Part II, Item 1A. “Risk Factors” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.
In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
3
SUMMARY OF RISKS AFFECTING OUR BUSINESS
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the U.S. Securities and Exchange Commission, or the SEC, before making an investment decision regarding our common stock.
•We may fail to meet our publicly announced guidance or other expectations about our business and future results of operations, which would cause our stock price to decline.
•The fertility market in which we participate is competitive, and if we do not continue to compete effectively, our results of operations could be harmed.
•Unfavorable conditions in the global economy or our industry could limit our ability to grow our business and negatively affect our results of operations.
•Our business depends on our ability to retain our existing clients and increase the adoption of our services within our client base. Any failure to do so would harm our business, financial condition and results of operations.
•Our largest clients account for a significant portion of our revenue and a significant number of our clients are in the technology industry. The loss of one or more of these clients, changes to pricing terms with these clients or changes within the technology industry could negatively impact our business, financial condition and results of operations.
•If we are unable to attract new clients, our business, financial condition and results of operations would be adversely affected.
•The COVID-19 pandemic, including variants and resurgences, has had and may continue to have, and similar health epidemics or pandemics could in the future have, an adverse impact on our business, operations, and the markets and communities in which we and our clients, members and providers operate.
•A significant change in the level or the mix of the utilization of our solutions could have an adverse effect on our business, financial condition and results of operations.
•We have a limited operating history with our current platform of solutions, which makes it difficult to predict our future results of operations.
•Changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program, could adversely harm our business and results of operations.
•The health benefits industry may be subject to negative publicity, which could adversely affect our business, financial condition and results of operations.
•If our information technology systems, or those of our provider clinics, specialty pharmacies or other vendors, lag, fail or suffer security breaches, we may incur a material disruption of our services or suffer a loss or inappropriate disclosure of confidential information, which could materially impact our business and the results of operations.
•Our business depends on our ability to maintain our Center of Excellence network of high-quality fertility specialists and other healthcare providers. If we are unable to do so, our future growth would be limited and our business, financial condition and results of operations would be harmed.
•Our growth depends in part on the success of our strategic relationships with, and monitoring of, third parties, including channel partners and vendors, as well as insurance carriers.
4
•If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our network of specialty pharmacies or their supply chains, our business, financial condition and results of operations could suffer.
•We operate in a highly regulated industry and must comply with a significant number of complex and evolving legal and regulatory requirements, as well as complex judicial mandates.
•The healthcare regulatory and political framework is uncertain and evolving. Recent and future developments in the healthcare industry could have an adverse impact on our business, financial condition and results of operations.
GENERAL
Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Progyny,” “the Company,” “we,” “our” and “us” refer to Progyny, Inc. and its wholly owned subsidiaries.
“Progyny®” and our other registered and common law trade names, trademarks and service marks are the property of Progyny, Inc. Other trade names, trademarks and service marks used in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.
We announce material information to the public through filings with the SEC, our investor relations website at investors.progyny.com, press releases, public conference calls, and webcasts to achieve broad, non-exclusionary distribution of information. We therefore encourage investors and others interested in Progyny to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
5
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROGYNY, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
September 30,
2024		December 31,
2023
ASSETS  
Current assets:
Cash and cash equivalents$91,480 $97,296 
Marketable securities144,240 273,791 
Accounts receivable, net of $55,671 and $46,636 of allowances at September 30, 2024 and December 31, 2023, respectively
280,724 241,869 
Prepaid expenses and other current assets29,858 27,451 
Total current assets546,302 640,407 
Property and equipment, net11,928 10,213 
Operating lease right-of-use assets17,439 17,605 
Goodwill15,796 11,880 
Intangible assets, net1,448 — 
Deferred tax assets63,757 73,120 
Other noncurrent assets3,302 3,395 
Total assets$659,972 $756,620 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:  
Accounts payable$130,463 $125,426 
Accrued expenses and other current liabilities78,008 60,524 
Total current liabilities 208,471 185,950 
Operating lease noncurrent liabilities16,625 17,241 
Total liabilities225,096 203,191 
Commitments and Contingencies (Note 6)
STOCKHOLDERS’ EQUITY  
Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 97,477,153 and 96,348,522 shares issued; 88,343,258 and 96,348,522 shares outstanding at September 30, 2024 and December 31, 2023, respectively
9 9 
Additional paid-in capital551,587 461,639 
Treasury stock, at cost, $0.0001 par value; 9,749,875 and 615,980 shares at September 30, 2024 and December 31, 2023, respectively
(250,825)(1,009)
Accumulated earnings133,775 89,971 
Accumulated other comprehensive income330 2,819 
Total stockholders’ equity 434,876 553,429 
Total liabilities and stockholders’ equity $659,972 $756,620 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
PROGYNY, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Revenue$286,625 $280,891 $868,790 $818,658 
Cost of services227,381 218,267 678,859 636,753 
Gross profit59,244 62,624 189,931 181,905 
Operating expenses: 
Sales and marketing16,457 14,911 48,332 44,577 
General and administrative30,329 29,524 89,931 88,944 
Total operating expenses46,786 44,435 138,263 133,521 
Income from operations12,458 18,189 51,668 48,384 
Interest and other income, net5,504 2,742 13,876 6,045 
Income before income taxes17,962 20,931 65,544 54,429 
Provision for income taxes 7,541 5,033 21,740 5,862 
Net income$10,421 $15,898 $43,804 $48,567 
Net income per share: 
Basic$0.12 $0.17 $0.48 $0.51 
Diluted$0.11 $0.16 $0.46 $0.48 
Weighted-average shares used in computing net income per share: 
Basic90,067,675 95,502,250 91,650,576 94,698,616 
Diluted93,821,812 100,879,576 95,758,529 100,552,705 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
PROGYNY, INC.
Consolidated Statement of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Net income$10,421$15,898$43,804$48,567
Other comprehensive (loss) income, net of tax
Unrealized gains on marketable securities before reclassifications271 2,131 4,584 4,047 
Reclassification of gains on the sale of marketable securities into net income(2,193)(1,377)(7,311)(2,701)
Net change on unrealized gains on marketable securities(1,922)754 (2,727)1,346 
Foreign currency translation adjustments227 12 2381 
Total other comprehensive (loss) income, net of tax(1,695)766 (2,489)1,347 
Total comprehensive income$8,726$16,664$41,315$49,914
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
PROGYNY, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands, except share amounts)
Common StockTreasury
Stock		Additional
Paid in
Capital		Accumulated
Earnings		Accumulated Other
Comprehensive
Income		Total
SharesAmount
For the three months ended September 30, 2024:
Balance at June 30, 202490,711,413 $9 $(188,865)$519,670 $123,354 $2,025 $456,193 
Issuance of employee equity awards, net of shares withheld169,168 0 — (1,556)— — (1,556)
Stock-based compensation— — — 33,473 — — 33,473 
Repurchase of common stock(2,817,190)— (61,960)— — — (61,960)
Warrant exercise279,867 — — 0 0 
Other comprehensive loss, net of tax— — — — — (1,695)(1,695)
Net income— — — — 10,421 — 10,421 
Balance at September 30, 202488,343,258 $9 $(250,825)$551,587 $133,775 $330 $434,876 
For the three months ended September 30, 2023:
Balance at June 30, 202395,165,253 $9 $(1,009)$408,814 $60,603 $1,082 $469,499 
Issuance of employee equity awards, net of shares withheld351,765 0 — (2,175)— — (2,175)
Stock-based compensation— — — 31,405 — — 31,405 
Warrant exercise247,672 0 — 0 — — 0 
Other comprehensive income, net of tax— — — — — 766 766 
Net income— — — — 15,898 — 15,898 
Balance at September 30, 202395,764,690 $9 $(1,009)$438,044 $76,501 $1,848 $515,393 
For the nine months ended September 30, 2024:
Balance at December 31, 202396,348,522 $9 $(1,009)$461,639 $89,971 $2,819 $553,429 
Issuance of employee equity awards, net of shares withheld848,764 0 — (8,050)— — (8,050)
Stock-based compensation— — — 97,998 — — 97,998 
Repurchase of common stock(9,133,895)— (249,816)— — — (249,816)
Warrant exercise279,867 — — 0 0 
Other comprehensive loss, net of tax— — — — — (2,489)(2,489)
Net income— — — — 43,804 — 43,804 
Balance at September 30, 202488,343,258 $9 $(250,825)$551,587 $133,775 $330 $434,876 
For the nine months ended September 30, 2023:
Balance at December 31, 202293,301,156 $9 $(1,009)$349,533 $27,934 $501 $376,968 
Issuance of employee equity awards, net of shares withheld2,215,862 0 — (5,740)— — (5,740)
Stock-based compensation— — — 94,251 — — 94,251 
Warrant exercise247,672 0 — 0 — — 0 
Other comprehensive income, net of tax— — — — — 1,347 1,347 
Net income— — — — 48,567 — 48,567 
Balance at September 30, 202395,764,690 $9 $(1,009)$438,044 $76,501 $1,848 $515,393 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
9
PROGYNY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
20242023
OPERATING ACTIVITIES 
Net income$43,804 $48,567 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense10,351 5,862 
Non-cash interest expense— 58 
Depreciation and amortization2,307 1,647 
Stock-based compensation expense97,271 93,812 
Bad debt expense12,734 15,062 
Net accretion of discounts on marketable securities(3,759)(2,701)
Foreign currency exchange rate loss0 12 
Changes in operating assets and liabilities: 
Accounts receivable(51,579)(43,761)
Prepaid expenses and other current assets(2,396)(2,523)
Accounts payable5,072 22,884 
Accrued expenses and other current liabilities13,132 11,744 
Other noncurrent assets and liabilities4 492 
Net cash provided by operating activities126,941 151,155 
INVESTING ACTIVITIES
Purchase of property and equipment, net(3,510)(2,963)
Purchase of marketable securities(170,339)(262,961)
Sale of marketable securities299,955 158,813 
Acquisition of business, net of cash acquired(5,304)— 
Net cash provided by (used in) investing activities120,802 (107,111)
FINANCING ACTIVITIES
Repurchase of common stock(245,176)— 
Proceeds from exercise of stock options1,097 3,573 
Payment of employee taxes related to equity awards(10,389)(10,504)
Proceeds from contributions to employee stock purchase plan915 884 
Net cash used in financing activities(253,553)(6,047)
Effect of exchange rate changes on cash and cash equivalents(6)0 
Net (decrease) increase in cash and cash equivalents(5,816)37,997 
Cash and cash equivalents, beginning of period97,296 120,078 
Cash and cash equivalents, end of period$91,480 $158,075 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes, net of refunds received$34,872 $2,318 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Additions of property and equipment, net included in accounts payable and accrued expenses$144 $128 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
10
PROGYNY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Business and Basis of Presentation
Description of Business
Progyny, Inc. (together with its subsidiaries referred to as “Progyny” or the “Company”) was incorporated in the state of Delaware on April 3, 2008, and maintains its corporate headquarters in New York, NY.
Progyny is a provider of a fertility benefits solution and pharmacy benefits solution and operates and manages in one operating segment. The fertility benefits solution consists of a significant service that integrates: (1) the treatment services (“Smart Cycles”) that the Company has designed, (2) access to the Progyny network of high-quality fertility specialists that perform the Smart Cycle treatments and (3) active management of the selective network of high-quality provider clinics, real-time member eligibility and treatment authorization, member-facing digital tools and detailed quarterly reporting supported by the Company’s dedicated client success teams, and end to end comprehensive concierge member support provided by Progyny’s in-house staff of Patient Care Advocates (“PCAs”) (collectively, the “care management services”).
The Company enhanced its fertility benefits solution with the launch of Progyny Rx, its pharmacy benefits solution, effective January 1, 2018. Progyny Rx provides the Company's members with access to the medications needed during their fertility treatment. As part of this solution, the Company provides care management services, which include formulary plan design, simplified authorization, assistance with prescription fulfillment, and timely delivery of the medications by the Company’s network of specialty pharmacies, as well as medication administration training, pharmacy support services, and continuing PCA support. As a pharmacy benefits solution provider, Progyny manages the dispensing of pharmaceuticals through the Company’s specialty pharmacy contracts. The pharmacy benefits solution is only available as an add-on service to its fertility benefits solution.
Basis of Presentation
The accompanying interim unaudited consolidated financial statements include the accounts of Progyny, Inc. and its wholly owned subsidiaries. The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial reporting. These interim consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, include all adjustments necessary to fairly state the Company's financial position as of September 30, 2024, the results of the Company's operations for the three and nine months ended September 30, 2024 and 2023 and the results of the Company's cash flows for the nine months ended September 30, 2024 and 2023. Therefore, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024 (the “Annual Report on Form 10-K”).
The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results expected for the year ending December 31, 2024 or any other future period. Additionally, the coronavirus (“COVID-19”) pandemic continues to evolve and due to the uncertainty of the pandemic, including variants, the Company’s customers and members, provider network, specialty pharmacy partners, employees, suppliers, vendors, and other business partners may continue to be impacted in future periods. A resurgence of COVID-19 could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. The Company will continue to assess these potential impacts to its business and will make adjustments to its operations as necessary.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP generally requires management to make estimates and assumptions that affect the reported amount of certain assets, liabilities, revenue, and expenses, and the related disclosure of contingent assets and liabilities. Such estimates include, but are not limited to, the determination of accrued receivables related to revenue recognition, accrued claims payable, allowance for doubtful accounts, stock-based compensation expense, lease liabilities, and accounting for income taxes. Management bases its
11
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
2.Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 of the Company’s Annual Report on Form 10-K.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to clients in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company applies the following five-step model to recognize revenue from contracts with clients:
•Identification of the contract, or contracts, with a client;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, a performance obligation is satisfied.
Progyny’s contracts typically have a stated term of three years and include contractual termination options after the first year, allowing the client to terminate the contract with 30 to 90 days’ notice.
Fertility Benefits Solution Revenue
Progyny primarily generates revenue through its fertility benefits solution, in which Progyny provides self-insured enterprise entities (“clients”) and their employees and partners (together, “members”) with fertility benefits. As part of the fertility benefits solution, Progyny provides access to effective and cost-efficient fertility treatments, referred to as Smart Cycles, as well as other related services. Smart Cycles are proprietary treatment bundles that include certain medical services available to members through Progyny’s proprietary, credentialed network of provider clinics. In addition to access to Progyny’s Smart Cycle treatment bundles and access to Progyny’s network of provider clinics, the fertility benefits solution includes other comprehensive services, which Progyny refers to as care management services, such as active management of the provider clinic network, real-time member eligibility and treatment authorization, member-facing digital tools throughout the Smart Cycle and detailed quarterly reporting all supported by client facing account management and end-to-end comprehensive member support provided by Progyny’s in house staff of PCAs.
The promises within Progyny’s fertility benefits contract with a client represent a single performance obligation because Progyny provides a significant service of integrating the Progyny designed Smart Cycles and access to the fertility treatment services provided by provider clinics with the other comprehensive services into the combined fertility benefits solution that the client contracted to receive. Progyny’s fertility benefits solution is a stand-ready obligation that is satisfied over the contract term.
Progyny’s contracts include the following sources of consideration, which are all variable: a per employee per month (“PEPM”) administration fee (in most, but not all contracts) and a fixed rate per Smart Cycle. The PEPM administration fee is allocated between the fertility benefits solution and the pharmacy benefits solution based on standalone selling price, estimated using an expected cost-plus margin method. The Company allocates the variable consideration related to the fixed rate per Smart Cycle to the distinct period during which the related services were performed as those fees relate specifically to the Company’s efforts to provide its fertility benefits solution to its clients in the period and represents the consideration the Company is entitled to for the fertility benefits services provided. As a result, the fixed rate per Smart Cycle is included in the transaction price and recognized in the period in which the Smart Cycle is provided to the member.
12
Progyny’s contracts also include potential service level agreement refunds related to outcome-based service metrics. These service level refunds, which are determined based on results of a full plan year, if met, are based on a percentage of the PEPM fee paid by clients. The Company estimates the variable consideration related to the total PEPM administration fee, less estimated refunds related to service level agreements, and recognizes the amounts allocated to the fertility benefits solution ratably over the contract term. Progyny’s estimates of service level agreement refunds have not historically resulted in significant adjustments to the transaction price.
Clients are typically invoiced on a monthly basis for the PEPM administration fee. Progyny invoices its clients and members for their respective portions of the fixed rate per Smart Cycle bundle when all treatment services within a Smart Cycle are completed by the provider clinic. Once an invoice is issued, payment terms are typically between 30 to 60 days.
The Company assesses whether it is the principal or the agent for each arrangement with a client, since fertility treatment services are provided by a third party—the provider clinics. The Company is the principal in its arrangements with clients and therefore presents revenue gross of the amounts paid to the provider clinics because Progyny controls the specified service (the fertility benefits solution) before it is transferred to the client. Progyny integrates the fertility treatment services provided by the provider clinics into the overall fertility benefits solution that the client contracted to receive. In addition, Progyny defines the scope of the potential services to be performed by the provider clinics and monitors the performance of the provider clinics. Furthermore, Progyny is primarily responsible for fulfilling the promise to the client and has discretion in setting the pricing, as Progyny separately negotiates agreements with the provider clinics, which establish pricing for each treatment service. Pricing of services from provider clinics is independent from the fees charged to clients.
Pharmacy Benefits Solution Revenue
For clients that have the fertility benefits solution, Progyny offers, as an add-on, its pharmacy benefits solution, which is a separate, fully integrated pharmacy benefit. As part of the pharmacy benefits solution, Progyny provides care management services, which include Progyny’s formulary plan design, prescription fulfillment, simplified authorization and timely delivery of the medications used during treatment through Progyny’s network of specialty pharmacies, and clinical services consisting of member assessments, UnPack It calls, telephone support, online education, medication administration training, pharmacy support services and continuing PCA support.
The pharmacy-related promises represent a single performance obligation because Progyny provides a significant service of integrating the formulary plan design, prescription fulfillment, clinical services and PCA support into the combined pharmacy benefits solution that the client contracted to receive. The pharmacy benefits solution is a stand-ready obligation that is satisfied over the contract term.
Progyny’s contracts include the following sources of consideration, all of which are variable: a PEPM administration fee (in most, but not all contracts) and a fixed fee per fertility drug. As described above, the PEPM administration fee, less estimated refunds related to service level agreements, is allocated to the pharmacy benefits solution and recognized ratably over the contract term. The Company allocates the variable consideration related to the fixed fee per fertility drug to the distinct period during which the related services were performed, as those fees relate specifically to the Company’s efforts to provide its pharmacy benefits solution to clients in the period and represents the consideration the Company is entitled to for the pharmacy benefits services provided. As a result, the fixed fee per fertility drug is included in the transaction price and recognized in the period in which the Company is entitled to consideration from a client, which is when a prescription is filled and delivered to the members.
As stated above, clients are invoiced on a monthly basis for the PEPM administration fee. Progyny invoices the client and the member for their respective portions of the fixed fee per fertility drug, when the prescription services are completed by the specialty pharmacies. Once an invoice is issued, payment terms are typically between 30 to 60 days.
The Company assesses whether it is the principal or the agent for each arrangement with a client, as prescription fulfillment and clinical services are provided by a third party—the specialty pharmacies. The Company is the principal in its arrangements with clients, and therefore presents revenue gross of the amounts paid to the specialty pharmacies. Progyny controls the specified service (the pharmacy benefits solution) before it is transferred to the client. Progyny integrates the prescription fulfillment and clinical services provided by the pharmacies and PCAs into the overall pharmacy benefits solution that the client contracted to receive. In addition, Progyny defines the scope of the potential services to be performed by the specialty pharmacies and monitors the performance of the specialty pharmacies. Furthermore, Progyny is
13
primarily responsible for fulfilling the promise to the client and has discretion in setting the pricing, as Progyny separately negotiates agreements with pharmacies, which establish pricing for each drug. Pricing of fertility drugs is independent from the fees charged to clients.
The Company does not disclose the transaction price allocated to remaining performance obligations because all of the transaction price is variable and is allocated to the distinct periods to which the services relate, as discussed above. The remaining contract term is typically less than one year, due to the client’s contractual termination options. There were no material contract asset or contract liability balances as of September 30, 2024 and December 31, 2023.
Accrued Receivables and Accrued Claims Payable
Accrued receivables are estimated based on historical experience for those fertility benefits services provided but for which a claim has not been received from the provider clinic at the end of the reporting period, which includes assumptions regarding the lag between authorization date and service date as well as estimates for changes and cancellations of services. At the same time, cost of services and accrued claims payables are estimated based on the amount to be paid to the provider clinic and expected gross margin on fertility benefits services. Estimates are adjusted to actual at the time of billing. Adjustments to original estimates have not been material.
As of September 30, 2024 and December 31, 2023, accrued receivables were $65.6 million and $45.8 million, respectively. Accrued receivables are included within accounts receivable in the consolidated balance sheet.
Accrued claims payable of $40.3 million and $30.3 million as of September 30, 2024 and December 31, 2023, respectively, are included within accrued expenses and other current liabilities in the consolidated balance sheet. Claims payable are generally paid within 30 days based on contractual terms.
As of September 30, 2024 and December 31, 2023, unbilled receivables, which represent claims received and approved but unbilled at the end of the reporting period, were $59.5 million and $45.1 million, respectively. Unbilled receivables are typically billed to clients within 30 days of the approved claim based on the contractual billing schedule agreed upon with the client. Unbilled receivables are included in accounts receivable in the consolidated balance sheet.
Accounts Receivable and Allowance for Doubtful Accounts
The accounts receivable balance primarily includes amounts due from clients and members. The Company estimates the allowance for doubtful accounts based on the lifetime expected credit losses for the client and member receivable pools, respectively. Under this current expected credit losses model, the Company determines the allowance for doubtful accounts based on factors such as the age of the receivable balance, historical experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions. An allowance for credit losses is applied at the time the asset is recognized. Expected credit losses are recorded as general and administrative expenses on the consolidated statements of operations. The following table provides a summary of the activity in this allowance (in thousands):
Nine Months Ended September 30, 2024
Balance at
Beginning
of Period
Charged
to Costs
and Expenses
Write-offs
Balance
at End
of Period
Allowance for doubtful accounts$46,636$12,734$(3,699)$55,671
Cost of Services
Fertility Benefits Services
Fertility benefits services costs include: (1) fees paid to provider clinics within the Company’s network, labs and anesthesiologists; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of the Company's general overhead, depreciation and amortization) for those employees associated with care management service functions: Provider Account Management, PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Contracts with provider clinics are typically for a term of one to two years.
14
Pharmacy Benefits Services
Pharmacy benefits services costs include: (1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by specialty pharmacy partners; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of the Company's general overhead, depreciation and amortization) for those employees associated with care management service functions: PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Contracts with the specialty pharmacies are typically for a term of one year.
In the specialty pharmacy contracts, the contractual fees of prescription drugs sold includes the cost of the prescription drugs purchased and shipped to members by the Company’s specialty mail service dispensing pharmacies, net of any volume-related or other discounts.
Vendor Rebates
The Company receives a rebate on formulations purchased and dispensed by the Company’s specialty pharmacies. The Company’s contractual arrangements with pharmacy program partners provide for the Company to receive a discount (or rebate) from established list prices paid subsequent to dispensing when products are purchased indirectly from a pharmacy program partner (such as through a specialty pharmacy). These rebates are recognized as a reduction of cost of services when prescriptions are dispensed and are generally estimated and billed to manufacturers within 20 days after the end of each month. The effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected has not been material to the Company’s results of operations.
Accounting Pronouncements Issued but Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard is intended to provide a better understanding of an entity's overall performance and business activities through improved disclosure about an entity's reportable segments, including more detailed information about reportable segment expenses. The new standard will be effective for the Company for the fiscal year beginning January 1, 2024 and for interim periods within the fiscal year beginning January 1, 2025. While the new standard requires additional footnote disclosure, the Company currently does not expect the adoption of the new standard to have a material effect on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard is intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. The new standard will be effective for the Company for the fiscal year beginning January 1, 2025. While the new standard requires further disaggregation of the income tax footnote, the Company currently does not expect the adoption of the new standard to have a material effect on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard is intended to provide enhanced transparency into the nature of expenses and requires more detailed information on specific expense categories (purchases of inventory, employee compensation, depreciation, and intangible asset amortization) included in certain expense captions presented on the face of the income statement. The new standard will be effective for the Company for the fiscal year beginning January 1, 2027, and for interim periods within the fiscal year beginning January 1, 2028. Early adoption is permitted. The amendments may be applied either 1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or 2) retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact of the new standard including the impact on its disclosures.
15
3.Revenue
Disaggregated revenue
The following table disaggregates revenue by service (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Fertility benefits services revenue$178,758 $175,110 $542,090 $504,993 
Pharmacy benefits services revenue107,867 105,781 326,700 313,665 
Total revenue$286,625 $280,891 $868,790 $818,658 
4.Fair Value of Financial Instruments
The fair value of financial instruments is determined based on assumptions that market participants would use when pricing an asset or liability at the balance sheet date. Certain assets are categorized based on the following fair value hierarchy of market participant assumptions:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value of the asset or liability and supported by little or no market activity.
The Company uses observable market data when available, and minimizes the use of unobservable inputs when determining fair value.
As of September 30, 2024 and December 31, 2023, the Company had $95.0 million and $35.2 million, respectively, in financial assets held in money market accounts and $144.2 million and $273.8 million, respectively, held in marketable securities, including U.S. treasury bills. All were classified as Level 1 in the fair value hierarchy. The Company measured these assets at fair value. The Company classified these assets as Level 1 because the values of these assets are determined using unadjusted quoted prices in active markets for identical assets. For the three and nine months ended September 30, 2024, interest income on cash and cash equivalents and marketable securities, including the accretion of discounts on investments, was $8.9 million and $10.4 million, respectively.
As of September 30, 2024 and December 31, 2023, the Company did not have any assets or liabilities classified as Level 2 or Level 3 in the fair value hierarchy.
5.Leases
In September 2019, the Company’s sublease agreement for the 25,212 square foot office in its corporate headquarters commenced in New York, NY and is scheduled to expire in May 2029. Pursuant to the sublease, the Company is obligated to pay the base rent of approximately $1.3 million per annum through the end of the fifth lease year and approximately $1.4 million per annum thereafter through the expiration date.
In February 2023, the Company's lease agreement for the additional 24,099 square foot office in its corporate offices commenced in New York, NY and is expected to expire in the fourth quarter of 2035. In accordance with ASC 842, the Company recorded right-of-use assets and lease liabilities of $12.2 million and $12.1 million, respectively. Pursuant to the lease, the Company is obligated to pay the base rent of approximately $1.4 million per annum through the end of the fifth lease year and approximately $1.5 million per annum thereafter through the expiration date.
16
The Company recognizes lease expense on a straight-line basis over the lease term. Lease expense for the three months ended September 30, 2024 and 2023 was $0.7 million. For the nine months ended September 30, 2024 and 2023, lease expense was $2.0 million and $1.7 million, respectively.
Cash outflows from operating activities attributable to the operating leases for the nine months ended September 30, 2024 and 2023 was $1.6 million and $1.0 million, respectively.
Information related to the Company's leases is as follows (in thousands):
Balance Sheet LocationSeptember 30, 2024December 31, 2023
Operating Leases
Right-of-use assetOperating lease right-of-use assets$17,439$17,605
Short-term lease liabilitiesAccrued expenses and other current liabilities$2,872$2,149
Long-term lease liabilitiesOperating lease noncurrent liabilities$16,625$17,241
Other information
Weighted-average remaining lease term, operating lease8.8 years9.6 years
Weighted-average discount rate, operating lease4.60%4.60%
Future minimum facility lease payments related to the Company's operating lease liabilities as of September 30, 2024 were as follows (in thousands):
Year Ending December 31:Operating Lease Payments as of September 30, 2024
2024$752
20253,009
20263,013
20273,018
20283,023
Thereafter11,024
Total undiscounted lease payments$23,839
Less: imputed interest4,342
Present value of lease liabilities$19,497
Less: current portion of operating lease liabilities 2,872
Operating lease noncurrent liabilities$16,625
February 2022 Lease Agreement
As noted above, the Company commenced its lease for the 24,099 square foot office in its corporate offices in New York, NY in February 2023, pursuant to a lease agreement entered into by the Company in February 2022. The lease agreement also provides for additional space in the Company's corporate offices, including an additional 21,262 square foot office and continued occupancy of the 25,212 square foot office after the expiration of the current sublease. For the 21,262 square foot office, the lease commencement date, which is when the premises will become available to the Company for use, is currently expected to be in the fourth quarter of 2024. The Company is obligated to pay the base rent of approximately $1.3 million starting in the fourth quarter of 2025 for five years and approximately $1.4 million per year thereafter through the fourth quarter of 2035, the expected expiration date. For the current 25,212 square foot office, the Company is obligated to pay the base rent of approximately $1.6 million per year beginning in June 2029, which is the lease commencement, through the fourth quarter of 2035, the expected expiration date.
6.Commitments and Contingencies
The Company records accruals for loss contingencies when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible, the Company
17
discloses the matter, and the amount or range of the possible loss, if estimable, in the notes to the consolidated financial statements.
From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. The Company is not aware of any legal proceedings or claims, that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or results of operations.
7.Stockholders' Equity
Share Repurchase Programs
In February 2024, the Company's Board of Directors authorized a share repurchase program of up to $100 million in shares of common stock (the “February 2024 share repurchase program”). In May 2024, the Company's Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock (the “May 2024 share repurchase program”). In August 2024, the Company's Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock (the “August 2024 share repurchase program”).
During the nine months ended September 30, 2024, the Company repurchased a total of 9,133,895 shares of common stock under the share repurchase programs at an average price per share of $27.09 and a total cost of $249.8 million, inclusive of excise taxes and trading fees. As of October 2024, the authorized share repurchase programs were completed, and no amounts remained available for repurchase under the programs.
Stock-based Compensation Expense
The following table summarizes stock-based compensation expense, which was included in the statements of operations as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Cost of services$9,528 $8,941 $28,009 $25,967 
Sales and marketing8,101 6,938 23,515 20,389 
General and administrative15,554 15,372 45,747 47,456 
Total stock-based compensation expense$33,183 $31,251 $97,271 $93,812 
Accumulated Other Comprehensive Income
Accumulated other comprehensive income consisted of the following (in thousands):
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
Unrealized gains on marketable securitiesForeign currency translation adjustmentsTotalUnrealized gains on marketable securitiesForeign currency translation adjustmentsTotal
Balance at beginning of period$2,024 $1 $2,025 $1,088 $(6)$1,082 
Other comprehensive income before reclassifications, net of tax(1)
271 227 498 2,131 12 2,143 
Amounts reclassified from accumulated other comprehensive income, net of tax(3)
(2,193)— (2,193)(1,377)— (1,377)
Net current period other comprehensive (loss) income(1,922)227 (1,695)754 12 766 
Balance at end of period$102 $228 $330 $1,842 $6 $1,848 


18
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
Unrealized gains on marketable securitiesForeign currency translation adjustmentsTotalUnrealized gains on marketable securitiesForeign currency translation adjustmentsTotal
Balance at beginning of period$2,829 $(10)$2,819 $496 $5 $501 
Other comprehensive income before reclassifications, net of tax(2)
4,584 238 4,822 4,047 1 4,048 
Amounts reclassified from accumulated other comprehensive income, net of tax(3)
(7,311)— (7,311)(2,701)— (2,701)
Net current period other comprehensive (loss) income(2,727)238 (2,489)1,346 1 1,347 
Balance at end of period$102 $228 $330 $1,842 $6 $1,848 
________________________________
(1) Represents unrealized gain of $0.4 million, net of tax expense of $0.1 million, for the three months ended September 30, 2024 and unrealized gains of $2.1 million, net of tax expense of $0, for the three months ended September 30, 2023
(2) Represents unrealized gains of $6.3 million, net of tax expense of $1.7 million, for the nine months ended September 30, 2024 and unrealized gains of $4.0 million, net of tax expense of $0, for the nine months ended September 30, 2023
(3) The effects on net income of amounts reclassified from accumulated other comprehensive income were as follows (in thousands):

Details about Accumulated Other Comprehensive Income ComponentThree Months Ended
September 30,		Nine Months Ended
September 30,		Affected Line Item in Statement of Operations
2024202320242023
Gains on marketable securities$2,994 $1,377 $9,982 $2,701 Interest and other income, net
2,994 1,377 9,982 2,701 Income before income taxes
801 — 2,671—Provision for income taxes
$2,193 $1,377 $7,311 $2,701 Net income
8.Income Taxes
For the nine months ended September 30, 2024 and 2023, the Company calculated its year-to-date provision for income taxes by applying the estimated annual effective tax rate to the year-to-date profit from operations before income taxes and adjusts the provision for income taxes for discrete tax items recorded in the period. The Company updates its estimate of its annual effective tax rate at the end of each quarterly period. The estimate takes into account annual forecasted income before income taxes and any significant permanent tax items. During the nine months ended September 30, 2024, the Company recorded a provision for income taxes of $21.7 million primarily driven by the Company's operating profit and equity compensation activity that occurred during the period. During the nine months ended September 30, 2023, the Company recorded a provision for income taxes of $5.9 million, primarily driven by the Company's operating profit, partially offset by equity compensation activity that occurred during the period.
9.Acquisitions
On June 17, 2024, the Company completed its acquisition of Apryl GmbH, a Berlin-based fertility benefits platform, to expand its global offering. The transaction was for a purchase price of €5.1 million, or $5.5 million based on the exchange rate on the acquisition closing date, and was accounted for using the acquisition method. As a result, tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of the assets and liabilities assumed was recognized as goodwill and is subject to revision as the purchase price allocation is completed during the measurement period (up to one year from acquisition date). This acquisition did not have a material impact on the Company’s consolidated financial statements.
19
10.Net Income Per Share
Basic net income per share is calculated by dividing the net income by the weighted-average number of shares of common stock outstanding for the period.
Diluted net income per share is computed by dividing the diluted net income by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares assuming dilutive effect of outstanding common stock options, restricted stock units, common stock warrants, and shares issuable under the employee stock purchase plan. In periods when the Company has incurred a net loss, diluted net loss per share is the same as basic net loss per share because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. A reconciliation of net income and the number of shares in the calculation of basic and diluted net income per share is as follows (in thousands, except share and per share amounts):
Three Months Ended
September 30		Nine Months Ended
September 30,
2024202320242023
Basic net income per common share:
Numerator:
Net income $10,421$15,898$43,804$48,567
Denominator:
Weighted-average shares used in computing basic net income per share90,067,67595,502,25091,650,57694,698,616
Basic net income per share $0.12$0.17$0.48$0.51
Diluted net income per common share:
Numerator:
Net income$10,421$15,898$43,804$48,567
Denominator:
Weighted-average shares used in computing basic net income per share90,067,67595,502,25091,650,57694,698,616
Effect of dilutive securities
Options to purchase common stock3,377,9464,469,2523,624,5305,003,182
Shares issuable under ESPP12,7082,1466,9311,306
Warrants to purchase common stock283,620472,147237,630515,335
Restricted stock units79,863433,781238,862334,266
Total effect of dilutive securities3,754,1375,377,3264,107,9535,854,089
Weighted-average shares used in computing diluted net income per share93,821,812100,879,57695,758,529100,552,705
Diluted net income per share $0.11$0.16$0.46$0.48
The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted income per share for the period presented because including them would have been antidilutive:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Options to purchase common stock14,229,10211,988,89913,405,51811,887,706
Shares issuable under ESPP2,780—2,9351,589
Restricted stock units2,793,955986,7981,919,8931,045,151
Total 17,025,83712,975,69715,328,34612,934,446
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A. in this Quarterly Report on Form 10-Q.
Overview
We believe in a world where everyone can realize dreams of family and ideal health. Our mission is to empower healthier, supported journeys through transformative fertility, family building and women's health benefits. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients’ employees are able to pursue the most effective treatment across life's milestones from the best physicians and achieve optimal outcomes.
Progyny is a leading benefits management company specializing in fertility and family building benefits solutions in the United States. Our clients include many of the nation’s most prominent employers across a broad array of industries. We launched our fertility benefits solution in 2016 with our first five employer clients, and we have grown our current base of clients to over 465 with at least 1,000 covered lives. We currently provide coverage to approximately 6.4 million employees and their partners (known in our industry as covered lives), whom we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction. We have retained substantially all of our clients since inception, and our member satisfaction over that same time period is evidenced by our industry-leading Net Promoter Score, or NPS, of +80 for our fertility benefits solution and +80 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2023. Our members experience healthier pregnancies and superior rates of pregnancy and live births, as well as reduced rates of miscarriages and multiple births, saving valuable time and money and limiting personal and professional disruption.
Outcome
National Averages
for All Provider
Clinics
Progyny In‑Network
Provider Clinic
Averages
for All Patients
Progyny In‑Network
Provider Clinic
Averages
for Progyny
Members Only(3)
Live birth rate per attempted retrieval(2)
35.5%37.4%44.4%
Single embryo transfer rate(1)
75.5%77.8%93.9%
Pregnancy rate per IVF transfer(1)
53.8%55.2%62.8%
Miscarriage rate(1)
18.4%18.2%15.8%
Live birth rate per transfer(2)
41.6%42.6%52.9%
IVF multiples rate(2)
6.9%6.2%1.9%
________________________________
(1)Calculated based on the Society for Assisted Reproductive Technology, or SART, 2020 National Summary Report, finalized in 2023.
(2)Calculated based on CDC, 2021 National Summary and Clinic Data Sets, published in 2023.
(3)Calculated based on the 12-month period ended December 31, 2022.
Fertility Benefits Solution. Our fertility benefits solution includes providing members with access to effective and cost-efficient fertility treatments through our Smart Cycle plan design. Smart Cycles are proprietary treatment bundles designed by us to include those medical services available to our members through our selective network of high-quality fertility specialists. Medical services under our Smart Cycles include everything needed for a comprehensive fertility treatment cycle, including all necessary diagnostic testing and access to the latest technology (such as, in the case of in
21
vitro fertilization, or IVF, preimplantation genetic testing). We currently offer 20 different Smart Cycle treatment bundles, which may be used in various combinations depending on the member’s need. Each Smart Cycle treatment bundle has a separate unit value (i.e., some have fractional values and some have whole values). Our clients contract to purchase a cumulative Smart Cycle unit value per eligible member. These can range from one to an unlimited unit value. Members, in consultation with their PCAs can choose their preferred provider clinics within our network and utilize the specific Smart Cycle treatment bundles necessary for the treatment pathway they determine throughout their fertility journey.
In addition, we provide care management services as part of our fertility benefits solution, which include active management of our selective network of high-quality fertility specialists, real-time member eligibility and treatment authorization, member-facing digital solutions, detailed quarterly reporting for our clients supported by our dedicated client success teams and end-to-end comprehensive concierge member support provided by our in-house staff of PCAs. Clients can also add adoption and surrogacy reimbursement programs as part of this solution.
Pharmacy Benefits Solution. We went live with our integrated pharmacy benefits solution in 2018. Progyny Rx can only be purchased by clients that purchase our fertility benefits solution. Progyny Rx provides our members with access to the medications needed during their fertility treatment. As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support.
Our Clients. We currently serve over 465 employers with at least 1,000 covered lives in the United States across more than 40 industries. Our current clients, who are industry leaders across both high-growth and mature industries and who range in size from approximately 1,000 to 600,000 employees, represent approximately 6.4 million covered lives.
Revenue Model
Our clients primarily contract with us to provide our fertility benefits solution and, where added on by our clients, our Progyny Rx solution. Our revenue has both a utilization-based component and a population-based component, as follows:
•Utilization Component. Clients pay us for the fertility benefits and Progyny Rx solutions utilized by their employees. With respect to the fertility benefits solution, we bill clients for Smart Cycles in accordance with our bundled case rates, which vary by the type of fertility service rendered and clinic location. Case rates include all third-party fertility specialists, anesthesiology and laboratory services, as well as all of our care management services. With respect to Progyny Rx, we bill the client for the fertility medication dispensed to their employees in connection with the authorized fertility treatments. Medication fees also include our formulary management, drug utilization review and cost containment services and other care management services.
•Population-Based Component. Clients who purchase our fertility benefits solution also typically pay us a per employee per month fee, or PEPM fee, which is population-based. This allows us to provide access to our PCAs for fertility and family building education and guidance and other digital tools to all of our members, regardless of whether they ultimately pursue fertility treatment. PEPM fees represented 1% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively.
Our revenue in a given year is determined by the level and mix of the utilization of our fertility benefits and Progyny Rx solutions by our members as well as the number of members enrolled in our clients’ benefits plans. Each year, we contract with new clients for our fertility benefits solution and, where added by the client, our Progyny Rx solution. Given that the majority of our clients contract with us for a January 1st benefits plan start date, our sales cycle follows the conventional healthcare benefits cycle, which largely concludes by the end of October of the prior year to allow for benefits education and annual open enrollment to occur in November. For some clients that are considering a start date later in the year, the sales cycle can extend through the next year.
Similarly, for existing clients, any changes in plan designs are typically elected by the end of October so that clients can inform their employees of the benefits during the open enrollment period ahead of a January 1st plan year start.
22
Key Operational and Business Metrics
In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
Member and Client Base. Our addressable market is primarily large self-insured employers as well as labor populations under the Labor Management Relations Act of 1947 (also known as the Taft-Hartley Act) and federal government populations. There are approximately 8,000 employers in the United States who have a minimum of 1,000 employees, who together with Taft-Hartley labor populations and federal government populations, represent approximately 106 million potential covered lives in total. Our current member base of approximately 6.4 million covered lives represents a mid-single digit percent of our total market opportunity. We intend to continue to drive new client acquisition by investing significantly in sales and marketing to engage, educate and drive awareness of the unmet need around fertility solutions among benefits executives. We also increase brand awareness and adoption with employers by leveraging our strong relationships with benefits consultants. In particular, we are focused on expanding the number of clients with more than 2,500 covered lives. As of September 30, 2024 and December 31, 2023, we served 468 and 392 clients, respectively, representing 6,446,000 and 5,418,000 members, respectively.
Importantly, as we have continued to grow, we have meaningfully diversified our client base across more than 40 different industries currently from just two industries when we launched our fertility benefits solution in 2016. We are expanding our client base within each industry and have an industry-specific strategy that enables us to most effectively target our addressable market. Because our clients within an industry compete with each other for employees, we believe our solutions are increasingly viewed as an important way for them to differentiate from, or remain competitive with, one another. Additionally, we believe that our expanding presence has resulted in a heightened awareness of the need to offer fertility benefits and has informed the market of the value we provide to our clients and our members, which we believe also helps facilitate growth. In addition, we are continuously utilizing our established client relationships to evaluate other potential fertility solutions that could benefit our members and simultaneously drive growth. Our ability to attract new clients will depend on a number of factors, including the effectiveness and pricing of our solutions, offerings of our competitors, the effectiveness of our marketing efforts to drive awareness and the demand for fertility benefits solutions overall. We define a client as an organization for which we have an active contract in the period indicated. We count each organization we contract with as a single client including divisions, segments or subsidiaries of larger organizations to the extent we contract separately with them.
Benefits Utilization. A key driver of our revenue is the number of members we serve and the rate at which they utilize their fertility benefits. As our client base has grown, our membership has grown from approximately 110,000 members in 2016 when we launched our fertility benefits solution to approximately 6.4 million members as of September 30, 2024.
The following table highlights the number of assisted reproductive treatment, or ART, cycles performed for Progyny members and the member utilization rates for each of the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Assisted Reproductive Treatment (ART) Cycles(1)
14,91115,00545,27542,947
Utilization - All Members(2)
0.54%0.56%1.10%1.11%
Utilization - Female Only(2)
0.47%0.49%0.90%0.93%
Average Members(3)
6,444,0005,428,0006,381,0005,366,000
________________________________
(1)Represents the number of ART cycles performed, including IVF with a fresh embryo transfer, IVF freeze all cycles/embryo banking, frozen embryo transfers and egg freezing.
(2)Represents the member utilization rate for all services, including but not limited to, ART cycles, initial consultations, IUIs and genetic testing. The utilization rate for all members includes all unique members (female and male) who utilize the benefit during that period while the utilization rate for female only includes only unique females who utilize the benefit during that period. For the purposes of calculating utilization rates in any given period, the results reflect
23
the number of unique members utilizing the benefit for that period. Individual periods cannot be combined as member treatments may span multiple periods.
(3)Includes approximately 300,000 members from a single client who are not reflected in utilization as a result of the client's chosen benefit design.

Impact of COVID-19 on our Business
The COVID-19 pandemic significantly impacted various markets around the world, including the United States. Restrictions related to COVID-19, including variants, and our responses to them significantly impacted and may continue to impact how our members use our services, access our providers, and how our employees work and provide services to our clients and members, resulting in an impact on our revenue. To the extent that the markets we serve experience increased cases of COVID-19, including variants, state or local governments may reinstitute measures to control its spread, which could again negatively impact our members’ access to care, which could in turn impact our business. We will continue to evaluate the nature and extent of these potential impacts to our business, results of operations and liquidity.

For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q.
Components of Results of Operations
Revenue
Revenue includes fertility benefits solution revenue, pharmacy benefits solution revenue and PEPM fees.
Fertility Benefits Solution Revenue
Fertility benefits solution revenue primarily represents utilization of our fertility benefits solution. Our client contracts are typically for a three-year term and pricing for this solution is established for each Smart Cycle treatment bundle, based in part on when the client first became a client and the number of members covered under the solution. Fertility benefits solution revenue includes amounts we receive directly from members, including deductibles, co-insurance and co-payments associated with the treatments under the fertility benefits solution. Revenue is recognized based on the negotiated price with our clients and includes the portion to be paid directly by the member. Revenue is recognized when Smart Cycle services are completed for a member. Revenue is also accrued for authorized Smart Cycle services rendered based on member appointments scheduled with a fertility specialist in our network but for which no claim has yet been reported, net of expected changes and cancellations of services.
Pharmacy Benefits Solution Revenue
Pharmacy benefits solution revenue primarily represents utilization of Progyny Rx. For clients who contract for the fertility benefits solution, we offer an add-on, separate, fully integrated pharmacy benefits solution designed by us. Progyny Rx provides our members with access to our formulary plan design, simplified authorization, prescription fulfillment and timely delivery of the medications used during treatment through our network of specialty pharmacies, as well as provides our members with medication administration training and other pharmacy support services. Prescription drugs are dispensed by our contracted mail order specialty pharmacies. Revenue related to the dispensing of prescription drugs by the specialty pharmacies in our network includes the prescription fees negotiated with our clients, including the portion that we collect directly from members (deductibles, co-insurance and co-payments). The contractual fees agreed to with our clients are inclusive of the cost of the prescription drug from our specialty providers, less any applicable discounts (or rebates), as well as the related clinical and care management services. Revenue from these arrangements is recognized when the drugs are dispensed. This solution was introduced in the marketplace in the third quarter of 2017 and went live with a select number of clients on January 1, 2018.
Per Employee Per Month (PEPM) Fee
Clients who purchase our fertility benefits solution also pay us a population based PEPM fee, which provides access to our PCAs for fertility and family building education and guidance and other digital tools for all of our covered members, regardless of whether or not they ultimately pursue fertility treatment. We earn a PEPM fee for the majority of
24
our clients. Revenue from the PEPM fee is billed and recognized monthly based upon the contractual fee and the number of employees at that specific client for that month.
Cost of Services
Our cost of services has three primary components: (1) fertility benefits services; (2) pharmacy benefits services; and (3) vendor rebates.
Fertility Benefits Services
Fertility benefits services costs include: (1) fees paid to provider clinics within our network, labs and anesthesiologists; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization) for those employees associated with our care management service functions: Provider Account Management, PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Our contracts with provider clinics are typically for a term of one to two years.
Pharmacy Benefits Services
Pharmacy benefits services costs include: (1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by our specialty pharmacy partners; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization) for those employees associated with our care management service functions: PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Contracts with the specialty pharmacies are typically for a term of one year.
Vendor Rebates
We receive a rebate on certain medications purchased by our specialty pharmacies. Our contractual arrangements with pharmacy program partners provide for us to receive a rebate from established list prices, which is paid subsequent to dispensing. These rebates are recorded as a reduction to cost of services when prescriptions are dispensed.
Gross Profit and Gross Margin
Gross profit is total revenue less total cost of services. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors, including the geographic location where treatments are performed, as well as pricing with each of our clients, provider clinics, labs, specialty pharmacies and pharmaceutical companies, all of which are negotiated separately, have different contracting start and end dates and durations which are not coterminous with each other. Additionally, staffing levels and the related personnel costs, including stock-based compensation expense, and other costs necessary to deliver our care management services will continue to grow as we continue to add clients and their associated members.
Operating Expenses
Our operating expenses consist of sales and marketing and general and administrative expenses.
Sales and Marketing Expense
Sales and marketing expense consists primarily of employee related costs, including salaries, bonuses, commissions, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization for those employees associated with sales and marketing. These expenses also include third-party consulting services, advertising, marketing, promotional events, and brand awareness activities. We expect sales and marketing expense to continue to increase in absolute dollars as we continue to invest and grow our business.
General and Administrative Expense
General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation
25
and amortization for those employees associated with general and administrative services such as executive, legal, human resources, information technology, accounting, and finance. These expenses also include third-party consulting services and facilities costs. We anticipate that we will incur additional general and administrative expenses on an ongoing basis to support the growth of our business.
Interest and Other Income, Net
Interest and other income, net primarily includes interest income and expense as well as investment income and losses.
Provision for Income Taxes
We are subject to income taxes in the United States. Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. We believe there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets are realizable.
Results of Operations
The following tables set forth our results of operations for the periods presented and as a percentage of revenue for those periods:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
(in thousands)(in thousands)
Consolidated Statements of Operations Data:
Revenue$286,625 $280,891 $868,790 $818,658 
Cost of services(1)
227,381 218,267 678,859 636,753 
Gross profit59,244 62,624 189,931 181,905 
Operating expenses:  
Sales and marketing(1)
16,457 14,911 48,332 44,577 
General and administrative(1)
30,329 29,524 89,931 88,944 
Total operating expenses46,786 44,435 138,263 133,521 
Income from operations12,458 18,189 51,668 48,384 
Interest and other income, net5,504 2,742 13,876 6,045 
Income before income taxes17,962 20,931 65,544 54,429 
Provision for income taxes 7,541 5,033 21,740 5,862 
Net income$10,421 $15,898 $43,804 $48,567 
________________________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Cost of services$9,528 $8,941 $28,009 $25,967 
Sales and marketing8,101 6,938 23,515 20,389 
General and administrative15,554 15,372 45,747 47,456 
Total stock‑based compensation expense$33,183 $31,251 $97,271 $93,812 
26
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Consolidated Statements of Operations Data, as a percentage of revenue:
Revenue100.0 %100.0 %100.0 %100.0 %
Cost of services79.3 77.7 78.1 77.8 
Gross profit20.7 22.3 21.9 22.2 
Operating expenses:
Sales and marketing5.7 5.3 5.6 5.4 
General and administrative10.7 10.5 10.4 10.9 
Total operating expenses16.4 15.8 16.0 16.3 
Income from operations4.3 6.5 5.9 5.9 
Interest and other income, net2.0 1.0 1.6 0.7 
Income before income taxes6.3 7.5 7.5 6.6 
Provision for income taxes 2.7 1.8 2.5 0.7 
Net income3.6 %5.7 %5.0 %5.9 %
Note: percentages shown in the table may not foot due to rounding.
Non-GAAP Financial Measure – Adjusted EBITDA
Adjusted EBITDA is a supplemental financial measure that is not required by, or presented in accordance with, U.S. GAAP. We believe that Adjusted EBITDA, when taken together with our U.S. GAAP financial results, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation, evaluating our operating performance, and for internal planning and forecasting purposes.
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of Adjusted EBITDA include: (1) it does not properly reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating income and expenses, including interest and other income, net; and (5) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net income, gross margin, and other U.S. GAAP results.
We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, interest and other income, net, and provision for income taxes. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with U.S. GAAP, for each of the periods indicated:
27
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
(in thousands)
Net income$10,421 $15,898 $43,804 $48,567 
Add:
Depreciation and amortization837 579 2,307 1,647 
Stock‑based compensation expense33,183 31,251 97,271 93,812 
Interest and other income, net(5,504)(2,742)(13,876)(6,045)
Provision for income taxes 7,541 5,033 21,740 5,862 
Adjusted EBITDA$46,478 $50,019 $151,246 $143,843 
Comparison of Three Months Ended September 30, 2024 and 2023
Revenue
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Revenue$286,625 $280,891 2 %
Revenue increased by $5.7 million, or 2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase is primarily due to a $3.6 million, or 2%, increase in revenue from our fertility benefits solution and a $2.1 million, or 2%, increase in revenue from our Progyny Rx solution. The increases in revenue from our fertility benefits solution and Progyny Rx solution were primarily due to the increase in the number of clients and covered lives.
Cost of Services
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Cost of services$227,381 $218,267 4 %
Cost of services increased by $9.1 million, or 4%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatment delivered. This increase was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as a $0.6 million increase in stock-based compensation expense.
Gross Profit and Gross Margin
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Gross profit$59,244 $62,624 (5)%
Gross margin20.7 %22.3 %
Gross profit decreased by $3.4 million, or 5%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
28
Gross margin decreased 160 basis points for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in personnel-related costs in the delivery of our care management services.
Operating Expenses
Sales and Marketing Expense
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Sales and marketing$16,457 $14,911 10 %
Sales and marketing expense increased by $1.5 million, or 10% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was due to a $1.1 million increase in personnel-related costs mainly attributable to an increase in stock-based compensation expense, as well as a $0.4 million increase in other related sales and marketing expenses.
General and Administrative Expense
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
General and administrative$30,329 $29,524 3 %
General and administrative expense increased by $0.8 million, or 3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was due to a $3.6 million increase in personnel-related costs attributable to incremental headcount. This increase was partially offset by a $2.3 million decrease in bad debt expense and a $0.5 million decrease in other related general and administrative expenses.
Interest and Other Income, Net
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Interest and other income, net$5,504 $2,742 101 %
Interest and other income, net increased by $2.8 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in interest income.
Provision for Income Taxes
Three Months Ended
September 30,
20242023% Change
(dollars in thousands)
Provision for income taxes $7,541 $5,033 50 %
For the three months ended September 30, 2024, we recorded a provision for income taxes of $7.5 million, as compared to $5.0 million for the three months ended September 30, 2023, primarily due to a decrease in tax benefits for equity compensation, including discrete tax benefits, in the current year period.
29
Comparison of Nine Months Ended September 30, 2024 and 2023
Revenue
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Revenue$868,790 $818,658 6 %
Revenue increased by $50.1 million, or 6%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase is primarily due to a $37.1 million, or 7%, increase in revenue from our fertility benefits solution and a $13.0 million, or 4%, increase in revenue from our Progyny Rx solution. The increases in revenue from our fertility benefits solution and Progyny Rx solution were primarily due to the increase in the number of clients and covered lives.
Cost of Services
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Cost of services$678,859 $636,753 7 %
Cost of services increased by $42.1 million, or 7%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatments delivered. This increase was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as a $2.0 million increase in stock-based compensation expense.
Gross Profit and Gross Margin
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Gross profit$189,931 $181,905 4 %
Gross margin21.9 %22.2 %
Gross profit increased by $8.0 million, or 4%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Gross margin decreased 30 basis points for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to an increase in personnel-related costs in the delivery of our care management services.
30
Operating Expenses
Sales and Marketing Expense
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Sales and marketing$48,332 $44,577 8 %
Sales and marketing expense increased by $3.8 million, or 8% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily due to a $3.1 million increase in personnel-related costs attributable to an increase in stock-based compensation expense, as well as a $0.7 million increase in other related sales and marketing expenses.
General and Administrative Expense
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
General and administrative$89,931 $88,944 1 %
General and administrative expense increased by $1.0 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily due to a $3.6 million increase in personnel-related costs attributable to incremental headcount, largely offset by a $2.3 million decrease in bad debt expense, as well as a $0.3 million decrease in other related general and administrative expenses.
Interest and Other Income, Net
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Interest and other income, net$13,876 $6,045 130 %
Interest and other income, net increased by $7.8 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to an increase in interest income.
Provision for Income Taxes
Nine Months Ended
September 30,
20242023% Change
(dollars in thousands)
Provision for income taxes $21,740 $5,862 271 %
For the nine months ended September 30, 2024, we recorded a provision for income taxes of $21.7 million as compared to $5.9 million for the nine months ended September 30, 2023, primarily due to the higher operating profit as well as a decrease in tax benefits for equity compensation, including discrete tax benefits, in the current year period.
Liquidity and Capital Resources
As of September 30, 2024, we had $91.5 million of cash and cash equivalents and $144.2 million of marketable securities. Since inception, we have financed our operations primarily through sales of our solutions and the net proceeds we have received from sales of equity securities, including our initial public offering. Our cash and cash equivalents and
31
working capital are affected by the timing of payments to third party providers and collections from clients and have increased as our revenue has increased. In particular, during the ramp up and onboarding of new clients who typically begin their benefits plan year as of January 1st, our accounts receivable has historically increased more than our accounts payable, accrued expenses and other current liabilities in the early part of each calendar year. Historically, these timing impacts have reversed throughout the remainder of the fiscal year. Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period.
We believe that our existing cash and cash equivalents, including the proceeds from our marketable securities, and cash flow from operations will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. We also expect these sources of existing cash and cash equivalents will be sufficient to fund our long-term contractual obligations and capital needs. However, this is subject, to a certain extent, to general economic, financial, competitive, regulatory, and other factors that are beyond our control. Moreover, our future capital requirements will depend on many factors, including sales of our solutions and client renewals, the timing and the amount of cash received from clients, the expansion of our sales and marketing activities, and the continued market adoption of our solutions.
Other than the prior impact on our revenue growth and the related cash flows resulting from the various restrictions on activities due to the COVID-19 pandemic, as of September 30, 2024, our sources and uses of cash were not otherwise significantly impacted by the COVID-19 pandemic and, to date based on the information currently available to us, we have not identified and do not expect any material liquidity deficiencies as a result of the COVID-19 pandemic. For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q.
We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.
The following table summarizes our cash flows from operations for the periods presented:
Nine Months Ended
September 30,
20242023
(in thousands)
Cash provided by operating activities$126,941 $151,155 
Cash provided by (used in) investing activities120,802 (107,111)
Cash used in financing activities(253,553)(6,047)
Effect of exchange rate changes on cash and cash equivalents(6)0 
Net (decrease) increase in cash and cash equivalents$(5,816)$37,997 
Operating Activities
Net cash provided by operating activities was $126.9 million for the nine months ended September 30, 2024, primarily consisting of net income of $43.8 million adjusted for certain items, which include $97.3 million of stock-based compensation expense, $12.7 million of bad debt expense, $3.8 million of net accretion of discounts on marketable securities, $10.4 million of deferred tax expense, and $2.3 million of depreciation and amortization. Changes in operating assets and liabilities resulted in cash used in operating activities from increases in accounts receivable of $51.6 million and prepaid expenses and other current assets of $2.4 million, partially offset by cash provided by operating activities from increases in accrued expenses and other current liabilities of $13.1 million and accounts payable of $5.1 million. These changes were a result of the impact of revenue growth and our operating results as well as the timing of cash collections and payments to third parties, including $34.9 million of cash paid for income taxes, net of refunds in the nine months ended September 30, 2024.
Net cash provided by operating activities was $151.2 million for the nine months ended September 30, 2023, primarily consisting of net income of $48.6 million adjusted for certain items, which include $93.8 million of stock-based compensation expense, $15.1 million of bad debt expense, $5.9 million of deferred tax expense, $2.7 million of net accretion of discounts on marketable securities, and $1.6 million of depreciation and amortization. Changes in operating
32
assets and liabilities resulted in cash used in operating activities from increases in accounts receivable of $43.8 million and prepaid expenses and other current assets of $2.5 million, partially offset by cash provided by operating activities from increases in accounts payable of $22.9 million, accrued expenses and other current liabilities of $11.7 million, and other noncurrent assets and liabilities of $0.5 million. These changes were a result of the impact of revenue growth and our operating results as well as new agreements with our pharmacy program partners, which included more favorable payment receipt terms and resulted in an additional receipt in the nine months ended September 30, 2023, and the timing of cash collections and payments to third parties.
Investing Activities
Net cash provided by investing activities was $120.8 million for the nine months ended September 30, 2024, which primarily consisted of net proceeds from marketable securities of $129.6 million, partially offset by $5.3 million used for a business acquisition, net of cash acquired. For the nine months ended September 30, 2023, net cash used in investing activities was $107.1 million, which primarily consisted of net investments in marketable securities of $104.1 million. The remainder of the activity for each of the nine months ended September 30, 2024 and September 30, 2023 consisted of purchases of computers, software, including capitalized software development costs, and leasehold improvements.
Financing Activities
Net cash used in financing activities was $253.6 million for the nine months ended September 30, 2024, consisting of $245.2 million of repurchases of common stock under the February 2024, May 2024, and August 2024 share repurchase programs and payments of $10.4 million for employee taxes related to equity awards, partially offset by $1.1 million in proceeds from stock option exercises and $0.9 million in proceeds from contributions to our employee stock purchase plan.
Net cash used in financing activities was $6.0 million for the nine months ended September 30, 2023, consisting of payments of $10.5 million for employee taxes related to equity awards, partially offset by $3.6 million in proceeds from stock option exercises and $0.9 million in proceeds from contributions to our employee stock purchase plan.
Share Repurchase Programs
In February 2024, our Board of Directors authorized a share repurchase program of up to $100 million in shares of common stock (the “February 2024 share repurchase program”). In May 2024, our Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock (the “May 2024 share repurchase program”). In August 2024, our Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock (the “August 2024 share repurchase program”).
During the nine months ended September 30, 2024, we repurchased a total of 9,133,895 shares of common stock under the share repurchase programs at an average price per share of $27.09 and a total cost of $249.8 million, inclusive of excise taxes and trading fees. To date, we repurchased a total of 12,382,193 shares of common stock under the share repurchase programs for a total cost of $300.3 million, inclusive of trading fees. As of October 2024, the February 2024 share repurchase program, May 2024 share repurchase program, and August 2024 share repurchase program were completed, and no amounts remained available for repurchase under the programs.
Operating Lease Commitments
In September 2019, we commenced a sublease agreement for our corporate offices in New York, New York. The sublease is for a 25,212 square foot office and will expire in May 2029. Pursuant to the sublease, we will pay the base rent of approximately $1.3 million per year through the end of the fifth lease year and approximately $1.4 million per year thereafter through the expiration date.
In February 2022, we entered into a lease agreement for additional space in our corporate offices in New York, New York, consisting of a 24,099 square foot office and a 21,262 square foot office, and also for continued occupancy of the 25,212 square foot office after the expiration of the current sublease. For the 24,099 square foot office, we will pay the base rent of approximately $1.4 million per year through the end of the fifth lease year and approximately $1.5 million per year thereafter through the fourth quarter of 2035, the expected expiration date. For the 21,262 square foot office, we will pay the base rent of approximately $1.3 million starting in the fourth quarter of 2025 for five years and approximately $1.4 million per year thereafter through the fourth quarter of 2035, the expected expiration date. For our current 25,212 square
33
foot office, we will pay the base rent of approximately $1.6 million per year beginning in June 2029 through the fourth quarter of 2035, the expected expiration date.
Critical Accounting Estimates
Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
We believe that the assumptions and estimates associated with our accrued receivables related to revenue recognition, accrued claims payable, stock-based compensation expense, and accounting for income taxes have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting estimates.
For additional information about our critical accounting policies and estimates, see the disclosure included in our Annual Report on Form 10-K as well as "Financial Statements (Unaudited) — Note 1 – Business and Basis of Presentation" and "Financial Statements (Unaudited) — Note 2 – Significant Accounting Policies" in the notes to the unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no material changes to the Company’s critical accounting policies and estimates since our Annual Report on Form 10-K.
Recently Adopted Accounting Pronouncements
For a full discussion of recently adopted accounting pronouncements, see "Financial Statements (Unaudited) —Note 2 – Significant Accounting Policies", to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Interest Rate Risk
Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
At September 30, 2024, we had cash and cash equivalents of $91.5 million and marketable securities of $144.2 million. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. A hypothetical 10% change in interest rates would not result in a material impact on our consolidated financial statements.
Inflation Rate Risk
While it is difficult to accurately measure the impact of inflation on our results of operations and financial condition, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

35