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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
For the transition period from ___________________ to ___________________
Commission File Number: 001-39100
Progyny, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1359 Broadway
New York, New York
(Address of principal executive offices)
27-2220139
(I.R.S. Employer
Identification No.)
10018
(Zip Code)
(212) 888-3124
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock,
$0.0001 par value per share
Trading Symbol(s)
PGNY
Name of each exchange on which registered
The Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
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 ☒ No ☐
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 ☒ No ☐
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
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the registrant’s shares of
common stock as reported by The Nasdaq Global Select Market on June 30, 2021 (the last business day of the registrant’s second fiscal quarter), was approximately $4.1 billion.
As of January 31, 2022, the registrant had 91,234,747 shares of common stock, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement relating to its 2022 Annual Meeting of Stockholders to be filed within 120 days after the end of the fiscal year
ended December 31, 2021 are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
PROGYNY, INC.
TABLE OF CONTENTS
PART I
PART II
PART III
PART IV
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Reserved
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
SIGNATURES
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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 Annual Report on Form 10-K, 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, anticipated sources and uses of cash, our business
strategy and our ability to acquire new clients and successfully engage new and existing clients, our ability to effectively
manage our growth and compete effectively with existing competitors and new market entrants, 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, and ongoing 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 are forward-looking statements. These statements 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”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this
Annual Report on Form 10-K 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 Annual Report on
Form 10-K 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 I, Item 1A. “Risk Factors” and Part II, Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” of this Annual Report on
Form 10-K.
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 Annual Report on Form
10-K, 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 Annual Report on Form 10-K and the documents that we reference in this Annual Report on
Form 10-K 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.
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 below under the heading “Risk Factors” and should be carefully
considered, together with other information in this Annual Report on Form 10-K and our other filings with the U.S.
Securities and Exchange Commission, or the SEC, before making an investment decision regarding our common stock.
•
The ongoing COVID-19 pandemic, including variants, has had and is expected to 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.
• We may fail to meet our publicly announced guidance or other expectations about our business and future
operating results, which would cause our stock price to decline.
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•
•
•
•
•
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.
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.
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 history of operating losses and may not sustain profitability in the future.
• 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
materially and adversely harm our business, and operating results.
The health benefits industry may be subject to negative publicity, which could adversely affect our business,
financial condition and results of operations.
If our computer systems, or those of our provider clinics, specialty pharmacies or other downstream 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, vendors and insurance carriers.
If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our network of
specialty pharmacies, 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.
•
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 Annual Report on Form 10-K to the terms “Progyny,”
“the Company,” “we,” “our” and “us” refer to Progyny, Inc.
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“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 Annual Report on Form 10-K are
the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report on
Form 10-K 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.
MARKET, INDUSTRY AND OTHER DATA
This Annual Report on Form 10-K contains statistical data, estimates and forecasts that are based on independent
industry publications, such as those published by The American Society for Reproductive Medicine, FertilityIQ and other
publicly available information, as well as other information based on our internal sources. This information involves many
assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently
verified the accuracy or completeness of the data contained in these industry publications and other publicly available
information. Further, while we believe our internal research is reliable, such research has not been verified by any third
party. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors,
including those described under Part I, Item 1A. “Risk Factors,” of this Annual Report on Form 10-K that could cause
results to differ materially from those expressed in these publications and other publicly available information.
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PART I
ITEM 1.
BUSINESS
Overview
We envision a world where anyone who wants to have a child can do so. Our mission is to make dreams of
parenthood come true through healthy, timely and supported fertility journeys. 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 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 265 with at least 1,000 covered lives. We currently have contracts to provide coverage to approximately
4.0 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 we launched our fertility benefits solution, and our member satisfaction
is evidenced by our most recent industry-leading Net Promoter Score, or NPS, of +81 for our fertility benefits solution and
+79 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2021.
We are redefining fertility and family building benefits, proving that a comprehensive fertility solution can
simultaneously benefit employers, patients and physicians. We believe the differentiated value proposition we deliver to all
of these constituents is key to our success and growth. By empowering our members with education, guidance and
financial support, and enabling high-quality fertility specialists to use the latest science and technologies, our solution leads
to the development of customized treatment plans that result in optimal clinical outcomes for our members and cost savings
for our clients.
In order to simplify the process for our members, we position the benefit to them using our proprietary Smart
Cycle approach. Smart Cycles are designed by us to include the medical services required for a member’s full course of
treatment, including all necessary diagnostic testing and access to the latest technology. In conjunction with the Smart
Cycle plan design, each of our members who utilizes our benefit has a dedicated Patient Care Advocate, or PCA, who has
fertility expertise and provides end-to-end concierge support, including logistical support (i.e., fertility specialist selection,
appointment scheduling, treatment authorization and treatment payment), clinical guidance (i.e., treatment options,
outcomes statistics and what to expect) and emotional support during the often challenging and unpredictable fertility
journey. Additionally, all Progyny members have access to our selective network of high-quality fertility specialists who
we equip with a benefits design that enables them to pursue the best treatment pathways, providing our members with
tailored treatments that result in optimal clinical outcomes.
In addition to our fertility benefits solution, we offer an integrated pharmacy benefits solution, Progyny Rx, which
can be added by our clients. 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.
We have demonstrated our ability to drive better outcomes for our clients, members and provider clinics across
multiple metrics. Provider clinics within our network produce outcomes that surpass their own reported practice averages
when treating Progyny members because of our differentiated solution. Additionally, across our membership, our outcomes
compared to national averages have been consistently superior to date.
Industry Background
The prevalence of infertility is high, affecting one in eight couples in the United States according to the Centers
for Disease Control and Prevention, or the CDC, and infertility is gaining attention as individuals are more openly
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discussing their struggles with fertility. As transparency and dialogue around infertility have increased, there has been a de-
stigmatization of the disease. Despite this change in perception of infertility and its high prevalence, it is one of the only
high-prevalence medical conditions with limited or non-existent medical insurance. By comparison, medical conditions
with a similar prevalence, such as diabetes and asthma, are comprehensively covered by conventional health insurance
carriers and employers. Due to the high prevalence of infertility, its high costs of treatment and the limited insurance
coverage provided for the disease, there is a significant unmet need for fertility services in the United States and several
macro trends are driving that need for fertility treatments and propelling the overall size of the fertility market higher.
While fertility treatments have been available for almost 40 years to help individuals suffering from infertility
build their families, access to these treatments has been limited due to the lack of comprehensive coverage and the
prohibitive costs. Only a small percentage of employers provide a benefits plan that addresses these costs. As a result, the
vast majority of patients who undergo fertility treatment must pay for most or all of their care out-of-pocket, which is cost-
prohibitive for many families and individuals.
We believe that the lack of adequate coverage has been the result of both broader public policy issues, as well as
conventional health insurance carrier-specific policies. For example, it was not until 2017 that infertility was first
recognized as a disease by the American Medical Association and, even now, only 19 states have mandated insurance
coverage for infertility. For the states that do mandate coverage, the mandates vary greatly and often leave patients with
inadequate coverage or unable to pursue care at all. When conventional health insurance carriers have chosen to structure
fertility coverage for their employer clients, that coverage often has limited lifetime dollar maximums and clinically
antiquated "one size fits all" clinical protocols, such as mandated step therapy protocols.
Major cultural shifts and the evolving demographics of the workforce in the United States are driving demand for
fertility treatments and adequate coverage to support them. More individuals than ever are making the choice to start their
families later in life, increasing the biological likelihood of infertility as an individual's fertility declines with age.
Additionally, the increased acceptance of non-traditional paths to parenthood has created an increased need for access to
fertility treatments. As employees are demanding more robust fertility benefits coverage, employers are increasingly
focused on providing a comprehensive fertility benefits plan that supports an inclusive and diverse workplace in order to
attract and retain top employees. Because employers in the same industry are competing for employee talent, once the
availability of fertility benefits begins to penetrate a particular industry, a demonstrable network effect occurs in which
employees within that industry begin to expect the benefit from their employers, which can cause an employer to adopt the
benefit to remain competitive and bolster employee satisfaction.
Driven by these market dynamics, according to the CDC, the market for fertility treatments grew at a 9.4%
compound annual growth rate from 2010 to 2019 as more individuals pursued treatment. Given this increasing demand
coupled with inadequate existing coverage, there is a greater need than ever before for a fertility benefits manager who can
provide comprehensive and effective benefits to the employer market.
Industry Challenges
We believe employers are faced with three major challenges relating to providing fertility benefits to their
employee bases:
● the lack of a comprehensive fertility benefits solution that optimizes their fertility treatment expenditures;
● the need to reduce the significant maternity and neonatal intensive care unit, or NICU, expenses, and the
workplace impact, resulting from multiple births caused by fertility treatments; and
● the desire to find innovative ways to attract and retain highly sought-after talent.
Employers are seeing an increasing demand for fertility and family building benefits solutions from their
employees, yet the programs offered by their conventional health insurance carriers do not successfully address these core
challenges.
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Lack of Effective Fertility Benefits Solutions
The conventional fertility benefits options available to employers have been designed to control the utilization of
services (and expenditures) by employees rather than to optimize outcomes. As such, their plan designs have included
restrictive features, such as lifetime dollar maximums, mandated step therapy protocols and limited or no coverage for
advanced diagnostics and procedures. In addition, these plan designs have failed to provide access to premier fertility
specialists, robust patient support and the ability to dispense fertility medication in a timely manner.
When conventional fertility benefits coverage is restrictively structured with a lifetime dollar maximum, the
patient often makes poor clinical decisions that ultimately result in greater costs for the employer. Because the dollar
maximum can easily be exhausted in the midst of a fertility treatment cycle, patients may elect to transfer multiple embryos
because they are under financial pressure and mistakenly believe that it will optimize their chance of becoming pregnant.
The common use of multiple embryo transfer belies the fact that this procedure greatly increases the risk of multiple births
and health complications among the mother and babies. One of the most common complications associated with multiples
is preterm births, which significantly escalates healthcare costs, including maternity care, labor and delivery costs and
NICU expenses.
Conventional health insurance carriers also often mandate step therapy protocols and restrict access to use of
advanced diagnostics and procedures, which exacerbates the inefficient utilization of dollars available under the lifetime
dollar maximum and wastes valuable time on less effective treatments. A patient with mandated fertility step therapy
protocol may be required to undergo three to six cycles of intrauterine insemination, or IUI, which has an average success
rate range of 5% to 15%, takes place over three to six months and can cost up to $4,000 per cycle (or an aggregate of
approximately $12,000 to $24,000), according to FertilityIQ.
The fertility process is a long, rigorous journey, both emotionally and physically. Conventional benefits programs
lack any meaningful care coordination, education or patient support. Patients and their dependents have no help in
understanding the complex choices they are faced with and discerning between treatment alternatives. There is also limited
emotional support when patients face setbacks or unexpected outcomes as the current system ignores the emotional burden
of patients embarking on the path to pregnancy through assisted reproductive technology, or ART, treatments and the
impact that burden has on employee productivity and the workplace.
The conventional pharmacy delivery infrastructure is not designed to address the uniqueness of fertility treatment,
which requires highly coordinated and timely delivery of medications. Conventional benefits managers require extensive
and multiple authorizations and have inconsistent approval processes, which can complicate and delay the provision of
medications that are essential to fertility treatment. We believe that with conventional benefits programs, authorization and
delivery times of one to two weeks are typical. If medications are not received on time, patients may have to wait a month
or longer to commence another round of fertility treatment, wasting valuable time and money. In addition, the storage,
preparation and administration of fertility medication is complex and requires extensive self-administered injections, yet
most fertility benefits programs offer limited guidance and clinical support to patients around these issues. Additionally,
fertility medications are often self-administered injectable drugs, and the effectiveness of a patient’s treatment may be
compromised by improper storage and/or incorrect administration of their medications if the patient is not provided access
to education and support.
Because of the unique challenges of infertility, including the high costs and complexity of treatment and the
variability of outcomes across fertility specialists, conventional benefits solutions have been unable to optimize outcomes
and efficiently utilize employers’ dollars committed to fertility. As a result, employers are facing increased demand for an
expensive benefits program without the availability of an effective solution in the conventional managed care environment.
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Costs Associated with Multiple Births and Poor Fertility Treatment Outcomes
Regardless of whether an employer chooses to cover fertility treatments, they end up bearing the significant
medical costs associated with unanticipated multiple births and miscarriages, as well as the associated impacts on the
workplace. The high number of multiple embryo transfers that conventionally occurs during IVF leads to a significant
number of multiple births, which in turn is a primary cause of dangerous and expensive preterm births, the most common
complication resulting from multiple births, which lead to extensive maternity and NICU costs. In addition to multiple
birth rates, the relatively higher miscarriage rate associated with IVF treatment also results in significant additional medical
costs for employers and their employees, as well as emotional and physical strain on patients. As a result of these
suboptimal treatment outcomes, employers also bear the related costs of increased employee absenteeism at the workplace,
which is common with instances of multiples births. Employers may not be fully aware of the causal effect and ultimate
impact of suboptimal fertility care under the current solutions offered by the conventional benefits programs since these
programs do not collect outcomes data from their fertility specialists and therefore cannot accurately report on their
program’s performance in a timely manner.
Ability to Attract and Retain Talent
Employers are facing increasing competition to attract and retain talent. As a result, we believe that employers are
enhancing their value proposition to employees by evaluating and providing benefits that are most in demand. Family
building solutions are an increasing area of focus for employees, and in turn, employers.
Our Market Opportunity
We believe we have a significant opportunity to provide employers with a superior comprehensive solution that
addresses the unique challenges and complexities of fertility treatment and related fertility pharmacy services. We estimate
that the market for fertility treatments in the United States was approximately $8.0 billion in 2019, based on data published
by the CDC regarding the number of treatment cycles and FertilityIQ’s estimate of the average cost per cycle. We estimate
the potential size of the U.S. fertility market to be at least twice as large because this figure excludes those individuals who
do not seek treatment for infertility. Furthermore, when comparing the United States to other countries, the percentage of
babies born utilizing ART is materially lower, at less than 2% in the United States (where fertility treatment is not
adequately covered), compared to approximately 10% in Denmark and 5% in Japan (where there is more public health
funding for fertility treatment).
We contract with employers to provide fertility and family building benefits to their employees and covered
dependents. We believe our addressable market consists of the approximately 8,000 self-insured employers in the United
States (excluding quasi-governmental entities, such as universities, school systems, and labor unions). These 8,000
employers have a minimum of 1,000 employees, representing approximately 75 million potential covered lives in total. As
such, we estimate that our current member base of 4.0 million covered lives under contract represents a low single digit
percent of our total market opportunity.
Regardless of whether or not these self-insured employers currently provide a fertility benefit, we believe they are
prospective clients of Progyny. Further, 35% of our clients had no prior fertility coverage before adopting Progyny and
94% of our clients enhanced their coverage when they switched to Progyny. Overall, we believe our market opportunity is
substantial and is continuing to grow as a result of the rising demand for fertility benefits solutions, the lack of adequate
offerings in the market today and the increasing awareness of the challenges of infertility we are driving.
Our Solutions
We are redefining effective fertility and family building benefits through our purpose-built, data-driven and
disruptive platform through which we offer our fertility benefits and Progyny Rx solutions. Our innovative and
comprehensive fertility solution has proven to be simultaneously beneficial for our clients, our members and our network
of fertility specialists. 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 from the best fertility
specialists and achieve optimal outcomes in a cost-efficient manner, while our clients and members achieve savings in
upfront treatment costs as well as reduced maternity and NICU expenses.
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Fertility Benefits Solution
Differentiated Benefits Plan Design
The innovative Smart Cycle is our easy-to-understand fertility benefits design. Our Smart Cycle plan design
allows members equitable access to the treatment they need and is designed to drive superior outcomes and reduce both
upfront treatment expenses and subsequent costs. Everything needed for a comprehensive fertility treatment is contained
within a Smart Cycle treatment bundle, including all necessary diagnostic testing and access to the latest technology (e.g.,
in the case of IVF treatment, preimplantation genetic testing). We currently offer 19 different Smart Cycle treatment
bundles, which may be used independently or in combination depending on the member’s need. Each Smart Cycle 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 unlimited cumulative Smart Cycles
units. Members can choose their preferred provider clinics within our network and utilize their Smart Cycles for whichever
treatments they and their fertility specialists determine to be necessary throughout their fertility journey.
The Smart Cycle structure allows our members, together with the advice of their fertility specialists and the
support of their PCAs, to select the Smart Cycle treatment bundles that align with their unique treatment needs and their
intended family building pathway, without having to follow the “one size fits all” protocols common to conventional health
insurance carriers, and without the worry that their desired treatment approach will not be authorized or covered for the full
treatment cycle. Our comprehensive Smart Cycles, which are our proprietary treatment bundles, are assessed regularly by
our Medical Advisory Board, and include access to the latest science and technologies, enabling our network of fertility
specialists to utilize best practices. Our superior clinical outcomes driven by our Smart Cycle plan design include higher
rates of pregnancy and live births, as well as lower miscarriage rates and fewer multiple births.
Personalized Concierge-Style Member Support Services
Our fertility benefits solution provides members with access to significant support services that are crucial to the
success of the fertility and family building journey. Before the fertility treatment process begins, and throughout every step
of the fertility journey, we deliver high-touch member support services through a dedicated PCA, who is paired to a
member and interacts with them an average of 15 times over the course of their treatment. Our PCAs have deep fertility
expertise and provide extensive clinical education, guidance and emotional support to our members. Additionally, we have
an in-house clinical staff, comprised of professionals with substantial expertise in reproductive endocrinology, fertility
nursing, clinical psychology and social work that design our PCA training curriculum and direct our comprehensive
member experience.
Our comprehensive member portal, accessible via any desktop or mobile device, further supports the member
experience by providing key educational resources and easy-to-access benefits information to our members. Our members
can use the portal to securely message their PCA or access a curated library of videos, articles, podcasts and webinars on
fertility and family building. The portal also offers digital solutions that help our members address the emotional effects
that are often associated with infertility, including loss, self-blame, anxiety and depression. Additionally, the portal can be
used to review plan coverage, benefit utilization, claim details and account balances. We believe our platform provides our
members with best-in-class support services to help them navigate their fertility and family building journeys.
Selective Network of High-Quality Fertility Specialists
We have utilized our deep industry knowledge and the insights derived from our data analytics platform to
establish and actively manage a national network of the leading fertility specialists in the country. Our members receive
access to our selective Center of Excellence network of high-quality providers that includes approximately 900 fertility
specialists who practice at over 650 provider clinic locations throughout the United States. Our network includes 46 of the
top 50 fertility practice groups by volume in the United States according to 2019 CDC data, which was published in 2021
and is the most recent data available. Fertility specialists who are invited to join our network must meet and maintain
rigorous credentialing standards and quality thresholds that we set for inclusion in our network to ensure that our members
receive the highest quality of care. Our national network serves members in virtually every state, providing extensive
geographic coverage to our national employers.
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Progyny Rx, an Integrated Pharmacy Benefits Solution
Progyny Rx is our integrated pharmacy benefits solution that can be added by clients that utilize our fertility
benefits solution. This solution provides our members with access to the medications needed during their 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 single treatment
and medication authorization process reduces the administrative burden, creating an efficient pharmacy solution for our
members and their fertility specialists. Progyny Rx reduces dispensing and delivery time to two days to eliminate the risk
of missed treatment cycles. Our single medication authorization and delivery process ensures that our members will not
miss or delay cycles. We provide access to phone-based, clinical education and support seven days a week to ensure that
our members understand any necessary medication storage requirements and administration techniques, including injection
training. To further support those members that require additional education, we also offer a library of on-demand videos.
Given the importance of the timely use of medication to the success of fertility treatments, and the complexity involved in
administering the medications, we believe Progyny Rx provides a differentiated and effective pharmacy solution for our
clients and their employees.
Robust Data Collection Process
We believe that we are the only fertility and family building benefits company to collect data in a timely manner
directly from providers on adherence to treatment protocols and clinical outcomes, including single embryo transfer rates,
pregnancy rates, miscarriage rates, live birth rates, multiple birth rates, practice patterns, treatment timelines and costs per
birth. Our data is used to understand the utilization of our benefits, our provider clinics’ adherence to best practices and the
outcomes produced by each clinic and across our network. This data informs decisions across our platform, from services
covered to our fertility network standards. The insights from our data also enable us to actively manage our fertility
specialist network and ensure that our fertility specialists are utilizing best practices and optimizing outcomes. The data
collection process also includes extensive member surveys, which allow us to understand and improve our member
satisfaction. Finally, our data allows us to provide our clients with unique and detailed quarterly reports in order to provide
full transparency into the utilization of their benefit program, their expenditures and the outcomes delivered and value
created. We believe that we effectively utilize our thorough data collection and analysis process and our unique and robust
data set to continuously improve the client and member experience across our platform.
Prestigious Medical Advisory Board
Our Medical Advisory Board is comprised of nationally recognized fertility specialists who are advancing fertility
science and research. They are responsible for oversight of key clinical issues, including evaluating new fertility treatment
diagnostics and procedures to ensure that our benefits design and overall program is comprehensive and designed to drive
to the best outcomes. This review ensures that we are evaluating and covering the latest and most effective fertility
treatments and identifying opportunities to improve our plan design, member experience and fertility specialists network
standards.
Full Service Client Account Management
We provide a dedicated account management team to ensure that we are delivering superior service. Our account
managers support our clients’ day-to-day needs and resolve issues that arise. For example, to help our clients ensure that
their employees are fully aware of the Progyny program, our account management teams work with our clients to create
co-branded materials to support health fairs, open enrollment events and other employee communications. The account
management team also attends open enrollment benefits fairs and other health fairs throughout the year and hosts virtual
open enrollment webinars for members to attend live or on-demand. Our account management team also reviews all
quarterly and annual program reports with our clients to reinforce the transparency we provide to clients into their
expenditures and outcomes and to review and quantify the value created by our solutions. We believe our account
management services, including our detailed client reporting, play an important role in helping us maintain and strengthen
our client relationships.
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Ease of Integration for Our Clients
Once we are selected by an employer to manage their fertility and family building benefit, our solution is easy to
implement as part of their broader pre-tax medical benefits package. Integrating our solution involves only a small
commitment of our client's time (typically only six to ten hours over the course of six weeks). Facilitating the ease of
integration is the fact that we have developed multiple integration solutions that allow us to integrate with any health plan
or health insurance carrier, reducing significant time and expense for our clients. Our ability to integrate our solution with
our clients' health insurance coverage allows our benefit to be offered to employees on a pre-tax basis, providing our
members with significant savings in comparison to a post-tax reimbursement. We believe our ability to integrate our
benefits solutions with all of the large national health insurance carriers is a differentiating factor within the industry.
Surrogacy and Adoption Reimbursement Program
We also offer a surrogacy and adoption reimbursement program. We can manage the reimbursement of surrogacy
and adoption expenses for those clients who offer such reimbursement benefits. For these programs, employers designate a
specific lifetime dollar amount toward surrogacy and/or adoption services for their employees. We then administer the
expense reimbursement to employees up to this dollar amount. We work with our clients to determine what expenses
related to adoption and/or surrogacy will be covered under their plan, thereby alleviating their administrative burden.
Examples of reimbursement expenses typically include agency fees, surrogacy fees, travel expenses and healthcare
expenses for the surrogate.
Our Value Proposition
We believe that our competitive success is a function of our ability to concurrently: (1) provide tangible financial
value to our clients; (2) deliver a better and more supported fertility journey to our members; and (3) provide value to, and
work collaboratively with, the nation’s finest fertility specialists.
We Provide Measurable Value to Our Employer Clients
● Substantial and Measurable Financial Value. Our superior clinical outcomes drive savings in both upfront
fertility treatment costs (due to our higher live birth rates) as well as subsequent maternity and NICU
expenses for our clients (due to our lower multiple birth rates).
● Progyny Rx Savings. Progyny Rx delivers unit cost savings to our clients based on a reduction in
unnecessary quantities of medication dispensed.
● Employee Productivity and Retention. Our solution addresses employee absenteeism, poor productivity, and
the lack of employee retention driven by the stress of suffering from infertility (and undergoing fertility
treatment) as well as the back-to-work issues related to multiple births. Our members are able to receive the
most effective treatments more quickly and have access to high-touch member support services through our
PCAs, thereby reducing the physical and emotional rigors of infertility and its treatment.
● Appeal to Existing and Prospective Employees. Better fertility benefits programs can be a key component of
enhancing a company’s overall benefits and an important tool in its recruiting efforts and in helping retain
key talent. An appealing feature of the Progyny benefit from an employee retention perspective is that the
benefit is both comprehensive and is accessible by all groups across an employee population. The level of
employee satisfaction we provide is important for any employer focused on employee retention.
We Provide Meaningful Value to Our Members
● Superior Clinical Outcomes. Our members experience healthier pregnancies (with significantly increased
utilization of single embryo transfer) 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.
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Outcome
Single embryo transfer rate(1)
Pregnancy rate per IVF transfer(1)
Miscarriage rate(1)
Live birth rate(2)
IVF multiples rate(2)
National Averages
for All Provider
Clinics
Progyny In‑Network
Provider Clinic
Averages
for All Patients
64.0 %
53.0 %
18.6 %
42.2 %
9.9 %
67.1 %
54.7 %
18.4 %
43.6 %
9.1 %
Progyny In‑Network
Provider Clinic
Averages
for Progyny
Members Only(3)
90.1 %
61.4 %
13.8 %
52.9 %
2.8 %
(1) Calculated based on the Society for Assisted Reproductive Technology, or SART, 2018 National Summary Report,
finalized in 2021.
(2) Calculated based on CDC, 2019 National Summary and Clinic Data Sets, published in 2021.
(3) Calculated based on the 12-month period ended December 31, 2020.
● Comprehensive Coverage. We provide all individuals with access to comprehensive coverage. Our Smart
Cycle design ensures that members always have coverage for a full treatment cycle as their access to
treatment is not limited by a dollar maximum that could be exhausted mid-treatment. Additionally, members
have access to the latest technologies and procedures, which are reviewed and approved by our Medical
Advisory Board.
● Access for All Members and Dependents. Smart Cycles are available to be utilized across all employee
groups, including populations not typically covered, such as LGBTQ+ individuals and single mothers by
choice.
● Equitable Access to Care. Our Smart Cycle design ensures members receive fair and balanced access to care
that is not dependent on where members live, how expensive a fertility specialist is or which specific
treatments are required.
● High-Touch Concierge Member Experience. We provide our members with high-touch, end-to-end concierge
support, including logistical assistance, clinical guidance and emotional support through our PCAs and our
in-house clinical staff.
● Access to Selective, Premier Fertility Specialist Network. Our solution provides members with access to the
nation’s most desired fertility providers, including approximately 900 fertility specialists who practice at
approximately 650 provider clinic locations throughout the United States. Our network includes 46 of the top
50 fertility practice groups by volume in the United States according to 2019 CDC data.
● Integrated Pharmacy Benefits Solution. Progyny Rx provides members with a simplified authorization
process, timely medication delivery and member support from pharmacy clinicians seven days a week.
We Provide Meaningful Value to Our Fertility Specialists
● Members Supported With a Comprehensive Benefit. Our solutions allow our members to arrive at their
fertility specialist with a fully-covered course of treatment and the flexibility to utilize the latest approved
technologies and best practices via our comprehensive Smart Cycle benefits plan design. These members are
also educated on the use of best practices and are supported by PCAs along their fertility journey.
● Eliminate Step Therapy Protocols. Our network of fertility specialists have access to the latest science and
technologies through our innovative Smart Cycles, which free our fertility specialists from having to follow
the ineffective protocols common to conventional coverage and allow them to pursue the most effective
treatments first, thereby saving time and money.
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● Simplified Administration. Once a Smart Cycle treatment is authorized, fertility specialists within our
network are able to prescribe the optimal treatment plan without any need for pre-certification or pre-
authorization.
● Superior Clinical Outcomes. Outcomes for Progyny members across our fertility specialist network are
superior to the average outcomes that the same provider clinics report to the CDC for all of their patients.
Specifically, as shown in the table above, the in-network average live birth rate for Progyny members is
52.9%, as compared to the 43.6 % average live birth rate for all of the patients at those same clinics.
● Eliminating Financial Risk Associated With Collections. We assume full responsibility for the collection of
all members’ deductibles and coinsurance, thereby eliminating the burden and cost of collection (and bad
debt expense) for member payments that our provider clinics otherwise would experience.
● Data Sharing and Reporting. We produce clinic scorecards quarterly with key performance indicators that
allow fertility specialists to compare their results with peer averages.
● Higher Volumes and Improved Financial Performance. Fertility specialists in our network often experience
an increase in patient volume, and because of our comprehensive benefits design, an increase in the number
of patients who progress from consultation to treatment.
Our Growth Strategy
Expand Our Client Base
We intend to continue increasing our client base of self-insured employers throughout the United States by
leveraging our experienced salesforce and strong relationships with benefits consultants. We believe we have an
addressable market of approximately 8,000 potential self-insured employer clients in the United States (excluding quasi-
governmental entities, such as universities, school systems, and labor unions), who have a minimum of 1,000 employees
and, with our base of over 265 clients under contract, are still in the early stages of our growth trajectory. Importantly, as
we have continued to grow, we have meaningfully diversified our client base across an array of different industries. We are
expanding our client base within each industry that we serve, and have an industry-specific strategy, which enables us to
most effectively target our addressable market. Additionally, we believe that our expanding presence has resulted in a
heightened awareness of fertility benefits and has informed the market of the value we provide to our employer clients and
our members, which we believe also helps facilitate growth.
Capitalize on Embedded Growth Potential within Our Existing Client Base
Because of how our revenue model is structured, we believe we are positioned to realize organic revenue growth
as our clients and their respective employee bases grow and utilize more fertility treatment services as a result. A
meaningful portion of our clients have grown, and we believe many of them will continue to grow. In addition, we have
historically realized similar utilization trends of fertility services for new members compared with existing members on a
same client basis. We believe the combination of these factors results in meaningful and sustainable embedded growth
potential well into the future.
Expansion of Progyny Benefits Solutions within Our Existing Client Base
We expect to see further growth from existing clients that add incremental services to their fertility benefits
program. For example, a client can expand the fertility benefits they offer to their employees by increasing the number of
Smart Cycles they contract for. In addition, our fertility benefits solution clients can purchase our add-on Progyny Rx
solution. We introduced Progyny Rx in the third quarter of 2017 and went live with a select number of clients in January
2018. Currently, 81% of our clients under contract are utilizing this solution, including 93% of the clients we signed in
2021. We believe our sales and marketing capabilities play an important role in informing and educating clients about the
additional value and impact we can provide to them and their members by enhancing their benefit program.
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New Services and Addressable Markets to Enhance the Depth and Breadth of Our Comprehensive Fertility
Offering
As we continue to grow and expand our client base, we are continuously evaluating the latest evolving trends to
find ways we can better serve the needs of existing and new potential clients and their employees. We believe we are
uniquely positioned to do this for several reasons. First, we believe the combination of our Medical Advisory Board and
our selective network of high-quality fertility specialists, as well as the data we collect and analyze, provides us with
differentiated insights into fertility care delivery and support. In addition, we believe we have positive and collaborative
relationships with our clients that offer us additional insights into their needs. We believe the combination of these factors,
coupled with our demonstrated track record of adding more services to our benefits design, highlights that we are well
positioned to do so in the future. To date, we have identified several ways we believe we can potentially expand our
offering, our addressable market, and our client base in the future. We will continue to evaluate opportunities as our
platform continues to expand.
Our Clients
We currently have contracts to serve over 265 employers in the United States across more than 30 industries. Our
current clients, who are industry leaders across both high-growth and mature industries and range in size from at least
1,000 to 500,000 employees, represent approximately 4.0 million covered lives under contract. For the year ended
December 31, 2021, two clients accounted for 19% and 15%, or a combined 34%, of our total revenue. No other clients
accounted for more than 10% for the year ended December 31, 2021.
We believe that our employer clients are thought leaders in their respective industries and are creating a network
effect that is helping to drive more widespread adoption of fertility benefits in their specific industries. We have clients in
the technology, consumer retail, industrial, healthcare, media, insurance, legal, food and beverage, financial services, life
sciences, professional services, government services, energy, manufacturing, logistics, transportation, real estate, nonprofit
and hospitality sectors.
Substantially all of our clients have renewed their benefits management contracts since our initial benefits
offerings launched in 2016. The majority of our clients have signed multi-year contracts or contracts that renew
automatically on an annual basis.
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 the 2021 sales cycle, more clients have opted for
comprehensive coverage, with substantially all of our new clients electing for Progyny Rx, multiple Smart Cycles and/or
egg-freezing.
Our Competitive Landscape
We believe we are the leader in the market for employer-sponsored fertility benefits and family building solutions.
We believe we compete favorably based on the following competitive factors:
● the value and comprehensiveness of the benefits solution and superior outcomes for employees;
● benefits plan design;
● access for all employees and their covered dependents, including LGBTQ+ and single mothers by choice;
● equitable access to care across geographies;
● treatment plans that maximize effectiveness and achieve desired outcomes;
● member experience, including unlimited dedicated patient education, clinical guidance and emotional
support;
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● access to a network of high-quality fertility specialists;
● data reporting and sharing; and
● access to an integrated pharmacy solution.
While we do not believe any single competitor offers a comparably robust, integrated fertility and family building
benefits solution, we compete primarily with health insurance companies and benefits administrators that also provide
fertility benefits management services as part of their overall healthcare coverage. These competitors include conventional
health insurance carriers, such as UnitedHealthcare, Cigna, Aetna and members of the Blue Cross Blue Shield Association.
Other competitors who currently provide fertility benefits management services to employers include WIN Fertility and
Optum Fertility Solutions as well as emerging companies such as Carrot Fertility and Maven Clinic, among others.
Our solutions are structured as a pre-tax benefit program integrated into employers’ overall employee medical
insurance, which is unique compared to the offerings of benefits managers new to the industry that do not have integrated
health insurance carrier solutions. In addition to our unique plan design, member support and fertility specialist network,
one of the key structural differences between our pre-tax benefit and their post-tax reimbursement programs is that the
individual receiving reimbursement for fertility treatments must pay income taxes on the amount of that reimbursement for
the post-tax programs.
Sales and Marketing
We sell our solutions through our sales organization and, in many cases, we leverage our relationships with top
benefits consultants to establish relationships with potential clients. Our sales team has broad experience in health benefits
management and extensive long-term relationships with industry participants and benefits executives at large employers.
Our sales team is organized principally by geography and account size and is responsible for identifying potential clients
and managing the overall sales process. The success and effectiveness of our sales team is evidenced by the approximately
85 new clients that we added in 2021, and the fact that a majority of our current clients terminated their existing fertility
coverage to switch to Progyny.
We generate client leads, accelerate sales opportunities and build brand awareness through our marketing
programs. Our marketing programs target human resource, benefits and finance executives in addition to health
professionals and senior business leaders. Our principal marketing programs include learning opportunities for potential
members, demand generation, field marketing events, integrated marketing campaigns (including direct email and online
advertising) and participation in industry events, trade shows and conferences. We also benefit from strong referrals as
several of our prominent clients have publicly endorsed Progyny and discussed the value they and their members receive.
Government Regulation
As a participant in the healthcare industry, we are required to comply with extensive and complex U.S. laws and
regulations at the federal and state levels. Although many regulatory and governmental requirements do not directly apply
to our business, our clients are required to comply with a variety of U.S. laws, and we may be affected by these laws as a
result of our contractual obligations. We have attempted to structure our operations to comply with laws, regulations and
other requirements applicable to us directly and to our clients, members, fertility specialists and specialty pharmacies, but
there can be no assurance that our operations will not be challenged or impacted by enforcement initiatives.
Healthcare Reform
It is uncertain how our operations will be affected by the changing political, legislative, and regulatory landscapes,
as well as other influences impacting the healthcare industry. While the most salient vehicle for healthcare reform, the
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or
collectively the ACA, does not directly regulate our business, it does affect the coverage and plan designs that are or will
be provided by certain insurance carriers and certain of our clients, as well as the overall reimbursement environment for
healthcare providers. Since its enactment in March 2010, there have been judicial, executive and Congressional challenges
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to certain aspects of the ACA, and on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge
to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Other health reform
efforts have been proposed by members of Congress, such as measures that would expand the role of government-
sponsored coverage, including further reform to the ACA, as well as single payer or so-called “Medicare-for-All”
proposals, which could have far-reaching implications for the healthcare industry if enacted. In October 2020, the
Departments of Health and Human Services (“HHS”), Labor (“DOL”) and the Treasury issued a final rule that requires
most group health plans and health insurance issuers in the individual and group markets to disclose certain price and cost-
sharing information for all covered healthcare items and services, including prescription drugs to participants, beneficiaries
and enrollees (the “Rule”). The Rule also requires plans and issuers to disclose in-network negotiated rates, historical out-
of-network allowed amounts, and drug pricing information through three publicly available machine-readable files. On
August 20, 2021, the agencies jointly released guidance regarding the implementation of the Rule. Importantly, the
guidance announced that the agencies will (i) indefinitely defer enforcement of the Rule’s requirement that plans and
issuers publish machine-readable files relating to prescription drug pricing pending further rulemaking and (ii) defer
enforcement of the Rule’s requirement to publish the remaining machine-readable files until July 1, 2022. The cost-sharing
information requirements under the Rule take effect in a phased approach beginning January 1, 2023. On January 28, 2021,
President Joe Biden issued an Executive Order directing federal agencies to examine all existing regulations, orders,
guidance documents, policies and similar agency actions to determine if any such actions are inconsistent with the policy
set forth in the Executive Order to protect and strengthen the ACA and make high-quality healthcare accessible and
affordable for every American. As another example of recent healthcare legislative changes, the Consolidated
Appropriations Act, or CAA, effective as of December 27, 2021, contains provisions impacting group health plans,
including protections for plan participants from surprise medical bills and ensuring health plan price transparency.
Several items pertain to disclosure. The CAA prohibits plans from entering into services agreements that directly
or indirectly restrict the plans from disclosing provider-specific costs and quality of care information. It also requires
disclosure by health insurance brokers and consultants to plan sponsors regarding reasonably expected direct and indirect
compensation for referral of services to group health plans. Additionally, the CAA requires plans to submit reports to the
DOL or HHS and the Internal Revenue Services, or the IRS, with certain information on pharmacy benefits and drug costs
for participants and beneficiaries and the application of in-network rates to out of network services. The CAA also requires
certain service providers for health plans to comply with certain ERISA fee disclosure rules. In addition, effective January
1, 2022, the No Surprises Act (enacted as part of the CAA) provides protection against surprise medical bills by prohibiting
plans and providers from balance billing patients for emergency care performed by out-of-network providers as well as
non-emergency and ancillary services performed by out-of-network providers at in-network facilities, subject to certain
notice and consent exceptions for non-emergency and ancillary services. The new law also grants additional patient
protections, including requiring providers to send a good faith estimate of the expected charges for furnishing items or
services to an insured patient’s health plan (or directly to an uninsured patient) before such items or services are delivered
(including items or services reasonably expected to be provided in conjunction with scheduled items or services or that are
reasonably expected to be delivered by another provider). The No Surprises Act also provides a dispute resolution process
in the event the actual charges for such items and services are substantially higher than the plan’s estimate, and prohibits
providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-
network providers, subject to certain exceptions. Many states have also enacted comprehensive balance billing or surprise
billing laws and the CAA defers to existing state requirements with respect to state-established payment amounts. Such
state laws vary in their approach, resulting in different impacts on the healthcare system as a whole.
We are unable to predict how these changes to the ACA and other healthcare reform initiatives from new
legislation, regulation, judicial action and/or executive action, including the CAA and No Surprises Act and state laws, will
ultimately impact the healthcare industry and what the potential impact may be on our business and on our relationships
with current and future clients, insurance carriers, and healthcare providers.
Licensing and Other Legal Requirements
Many states have licensure or registration requirements for entities providing third-party administrator, or TPA, or
pharmacy benefit management, or PBM, services. Given the nature and scope of the solutions and services that we provide,
we are required to maintain TPA and/or PBM licenses and registrations in certain jurisdictions and to ensure that such
licenses and registrations are in good standing on an annual basis. These licenses require us to comply with the rules and
regulations of the governmental bodies that issued such licenses, including maintaining certain solvency or bond
requirements. Our failure to comply with such rules and regulations could result in administrative penalties, the suspension
of a license, or the loss of a license, all of which could negatively impact our business.
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Separately, states impose licensing requirements on insurers, risk-bearing entities, and insurance agents, as well as
those entities that provide utilization review services. We do not believe that our services require us to be licensed under
these state laws. We are unable to predict, however, how our services may be viewed by regulators over time, how these
laws and regulations will be interpreted, or the full extent of their application. If a regulatory authority in any state
determines that the nature of our business requires that we be licensed under such state laws, we may need to restructure
our business to comply with any related requirements.
Fraud and Abuse Laws. Many of our clients, insurance carriers, and network healthcare providers are impacted
directly and indirectly by certain fraud and abuse laws, including the federal anti-kickback and false claims laws. Because
the solutions we provide are not reimbursed by government healthcare payors, such fraud and abuse laws generally do not
directly apply to our business. However, many states have similar laws and regulations that may differ from each other and
federal law in significant ways, thus complicating compliance efforts. For example, certain states have anti-kickback and
false claims laws that may be broader in scope than analogous federal laws and may apply regardless of payor.
ERISA. The Employee Retirement Income Security Act of 1974, or ERISA, regulates certain aspects of
employee health benefits plans, which includes both insured and self-funded health plans sponsored by our clients, with
which we have agreements to provide TPA services. Although health plans and their fiduciaries are subject to the fiduciary
obligations of ERISA, we believe that we are not fiduciaries in the conduct of our business vis-a-vis these plans. However,
there can be no assurance the DOL, which is the agency that enforces ERISA, would not in the future assert that the
fiduciary obligations imposed by ERISA apply to certain aspects of our operations or courts would not reach such a ruling
in private ERISA litigation.
ERISA also imposes civil and criminal liability on service providers and certain other persons with relationships
to health plans subject to ERISA if certain forms of illegal or prohibited remuneration are made or received by such service
providers or other persons. These provisions of ERISA are similar, but not identical, to the healthcare anti-kickback laws
described above, although ERISA lacks the statutory and regulatory “safe harbor” exceptions incorporated into the
healthcare anti-kickback laws. Like the healthcare anti-kickback laws, the corresponding provisions of ERISA are broadly
written and their application to particular cases can be uncertain.
Employee benefits plans subject to ERISA are subject to certain rules, published by the DOL, including certain
reporting requirements for direct and indirect compensation received by plan service providers. Finally, although ERISA
has broad preemptive effect with respect to certain state laws that “relate” to benefit plans, it does not preempt state laws
imposing transparency requirements on PBMs.
Prompt Pay Laws. Certain states have laws regulating the amount of time that may elapse from when a third-
party payor receives a claim for services rendered to when those services are paid. Many of these state laws do not apply to
our business as these laws are preempted by ERISA or otherwise exempt entities like us that provide TPA-only services.
Network Adequacy and Access. Certain states and government programs have laws regulating healthcare
provider networks in order to ensure adequacy and access for beneficiaries and providers. These laws may affect us and our
payor clients in network design and management. If we do not comply, we could face enforcement action or other
penalties.
Requirements Regarding the Privacy and Security of Personal Information
HIPAA Privacy and Security Requirements. Regulations promulgated pursuant to the Health Insurance
Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical
Health Act, or collectively referred to as HIPAA, establish privacy and security standards that limit the use and disclosure
of certain individually identifiable health information (known as “protected health information”) and require the
implementation of administrative, physical and technological organizational safeguards to protect the privacy of protected
health information and ensure the confidentiality, integrity and availability of electronic protected health information.
As a provider of services to entities subject to HIPAA, we are directly subject to certain provisions of the
regulations as a “Business Associate.” When acting as a Business Associate under HIPAA, we are permitted to use and
disclose protected health information to perform our services and for other limited purposes, but other uses and
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disclosures, such as marketing communications, require written authorization from the patient or must meet an exception
specified under the privacy regulations.
Other Privacy and Security Requirements. In addition to HIPAA, there are various federal and state laws that
govern the collection, dissemination, use, access to and confidentiality of personal information, some of which may be
applicable to our business. Certain federal and state laws protect types of personal information that may be viewed as
particularly sensitive. For example, New York’s Public Health Law, Article 27-F protects information that could reveal
confidential HIV-related information about an individual. State laws are contributing to increased enforcement activity and
may also be subject to interpretation by various courts and other governmental authorities. Further, California recently
enacted the California Consumer Privacy Act, or CCPA, which went into operation on January 1, 2020. The CCPA gives
California residents expanded rights to access and delete their personal information, opt out of certain personal information
sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil
penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach
litigation. Further, the California Privacy Rights Act, or the CPRA, recently passed in California. The CPRA will impose
additional data protection obligations on covered businesses, including additional consumer rights processes, limitations of
data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a
new California data protection agency authorized to issue substantive regulations and could result in increased privacy and
information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional
compliance investment and potential business process changes may be required. Similar laws have passed in Virginia and
Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy
legislation in the United States. The majority of these laws have express exemptions relating to any data handled pursuant
to HIPAA, so many of these state laws do not supersede or conflict with any rules and requirements of HIPAA. However,
the enactment of some state laws could still have potentially conflicting requirements that would make compliance
challenging.
Data Protection and Breaches. Laws in all 50 states require businesses to provide notice to clients whose
personally identifiable information has been disclosed as a result of a data breach. Most states require holders of personal
information to maintain safeguards and take certain actions in response to a data breach, such as providing prompt
notification of the breach to affected individuals or the state’s attorney general. A non-permitted use or disclosure of
protected health information is presumed to be a breach under HIPAA unless the Covered Entity or Business Associate
establishes that there is a low probability the information has been compromised consistent with requirements enumerated
in HIPAA. As a Business Associate under HIPAA, we are required to report breaches of unsecured protected health
information to Covered Entities within 60 days of discovery of the breach or such shorter period as set forth in the
applicable Business Associate Agreement.
HIPAA Transaction and Identifier Standards. HIPAA and its implementing regulations mandate format and data
content standards and provider identifier standards (known as the National Provider Identifier) that must be used in certain
electronic transactions, such as claims, payment advice and eligibility inquiries. HHS now requires the use of updated
standard code sets for diagnoses and procedures known as the ICD-10 code sets. Enforcement of compliance with these
standards falls under HHS and is carried out by CMS. In the event new requirements are imposed, we will be required to
modify our systems and processes to accommodate these changes.
Consumer Protection Laws. Federal and state consumer protection laws are being applied increasingly by the
Federal Trade Commission, or FTC, Federal Communications Commission, or FCC, and states’ attorneys general to
regulate the collection, use, storage and disclosure of personal or health information, through websites or otherwise, and to
regulate the presentation of website content. Courts may also adopt the standards for fair information practices
promulgated by the FTC, which concern consumer notice, choice, security and access. Consumer protection laws require
us to publish statements to our members that describe how we handle personal information and choices members may have
about the way we handle personal information. If such information that we publish is considered untrue, we may be subject
to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
Restrictions on Communication. Communications with our members increasingly may be subject to and
restricted by laws and regulations governing communications via telephone, fax, text, and email. We also use email and
social media platforms as marketing tools. For example, we maintain social media accounts. As laws and regulations,
including FTC enforcement, rapidly evolve to govern the use of these platforms and devices, the failure by us, our
employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these
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platforms and devices could adversely impact our business, financial condition and results of operations or subject us to
fines or other penalties.
Intellectual Property
We rely on trademarks, copyrights, trade secrets, intellectual property assignment agreements, confidentiality
procedures, non-disclosure agreements, and employee non-disclosure and invention assignment agreements to establish
and protect our proprietary rights. Though we rely in part upon these legal and contractual protections, we believe that
factors such as our relationships with providers and clients, unique benefits model, ability to track outcomes and creation of
resources for all constituents, along with the skills and ingenuity of our employees, are larger contributors to our success
our company. Other than the trademark Progyny (and design), Smart Cycle and UnPack It, which are not subject to any
known rights of others, including any impairments, assignments or pledges, we do not believe our business is dependent to
a material degree on trademarks, patents, copyrights or trade secrets.
Seasonality
Given that the majority of our clients contract with us for a January 1st benefits plan start date, the first quarter has
historically been the strongest in terms of sequential quarterly growth. We have in the past and expect in the future to
experience seasonal fluctuations in our revenue as more members choose to start their fertility journey while also seeking
to minimize their out-of-pocket costs as the calendar year progresses.
Employees and Human Capital
As of December 31, 2021, we had 313 employees, of which 311 are full-time. Our employees are our most
important asset and our culture is a key to our success. In response to the COVID-19 pandemic, we implemented
significant changes designed to ensure the safety and well-being of our employees as well as the communities in which we
operate. For instance, we implemented a remote working policy for all of our employees. We have recently re-opened our
corporate offices to employees on a hybrid basis, while implementing additional safety measures and protocols. We are
committed to creating and maintaining a healthy and safe workplace for our employees. We have not furloughed or laid off
any employees due to the ongoing pandemic.
We are united around our mission and committed to our shared values of Passion, Collaboration, Innovation, Integrity
and Growth. Our people strategy is focused on employee culture and engagement, competitive compensation and
development, diversity, equity and inclusion, and community outreach and support.
● Culture and Engagement. Our benefits are designed to help employees and their families stay healthy, meet their
financial goals, protect their income and help them balance their work and personal lives. These include access to
mental health services, life and financial planning workshops, wellness initiatives, employee assistance programs,
and new parent and return to work benefits. We also measure employee engagement on an ongoing basis,
including through broad employee satisfaction surveys and pulse surveys on specific issues, intended to assess
our success in promoting an environment where employees are engaged, satisfied, productive and possess a
strong understanding of our business goals. The results from engagement surveys are used to implement
programs and processes designed to enhance employee engagement and improve the employee experience or
modify existing programs and benefits offerings.
● Competitive Compensation and Development. We invest in our workforce by offering competitive salaries,
attractive incentives and innovative benefits. We focus on creating opportunities for employee growth,
development and training, including opportunities to cultivate talent and identify candidates for new roles from
within the company, management and leadership development programs, technical skill building initiatives and
mentoring programs. We include the Progyny benefit in our own health plan, allowing Progyny employees to
realize their dreams of parenthood. We offer paid parental leave for new parents and offer a pregnancy loss leave
benefit as an enhancement to our bereavement leave policy, explicitly recognizing the physical, emotional, and
mental health impact of a pregnancy loss, or failed adoption or surrogacy, for any employee. We also offer
additional paid leave to all employees to support other family health and care challenges. Additionally, we
expanded our mental health resources to assist our employees with managing the stresses and uncertainties
associated with COVID-19.
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● Diversity, Equity and Inclusion. We believe diversity, equity and inclusion results in business growth and
encourages increased innovation, retention of talent and a more engaged workforce. We strive to create a
workplace where all individuals feel valued, empowered and welcomed. Our key initiatives focus on recruiting
outreach, internal resource groups representing employees and allies from historically underrepresented and/or
marginalized communities, mentoring programs and career development ladders. We published our first corporate
sustainability report on our website, which further highlights our approach to diversity and inclusion, and we also
publish EEO-1 reports on our website. Nothing on our website shall be deemed incorporated by reference into
this Annual Report on Form 10-K.
● Community Outreach and Support. We believe it is important to give back and promote community outreach and
support through corporate giving, charitable matching, and employee volunteerism in the communities in which
we live and work. We allow flexible work hours to accommodate employee volunteer opportunities, provide
corporate sponsored charitable events and have designed initiatives in the fertility and maternal health space to
include corporate matching of employee charitable donations.
Our Corporate Information
We were incorporated in Delaware in 2008 under the name Auxogen Bioscience, Inc. In 2010, we changed our
name to Auxogen, Inc. and in 2015 we changed our name to Progyny, Inc. Our principal executive offices are located at
1359 Broadway, New York, New York 10018, and our telephone number is (212) 888-3124. Our website address is
www.progyny.com. Information contained on, or that can be accessed through, our website is not incorporated by reference
into this Annual Report on Form 10-K, and should not consider information on our website to be part of this Annual Report
on Form 10-K.
Available Information
We file electronically with the SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K (including amendments to those reports), proxy statements, and other information. Our SEC filings
are available to the public over the Internet at the SEC’s website at http://www.sec.gov. We make available on our website
at investors.progyny.com, under “Financials—SEC Filings,” free of charge, copies of these reports as soon as reasonably
practicable after filing or furnishing these reports with the SEC. The information contained on the websites referenced in
this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs
are intended to be inactive textual references only.
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.
ITEM 1A.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider all of the information
in this Annual Report on Form 10-K, including the sections titled “Cautionary Note Regarding Forward-Looking
Statements,” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operation” and our consolidated financial statements and the accompanying notes included elsewhere in this Annual
Report on Form 10-K. The risks described below are not the only ones we face. Any of the following risks could materially
and adversely affect our business, financial condition and results of operations, the actual outcome of matters as to which
forward-looking statements are made in this Annual Report on Form 10-K and could cause the trading price of our
common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition
and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do
not believe are material.
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Risks Related to Our Business and Industry
The ongoing COVID-19 pandemic, including variants, has had and is expected to 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.
The ongoing COVID-19 pandemic, including variants, has adversely impacted, and may continue to adversely
impact, many aspects of our business. Our revenue growth for the years ended December 31, 2021 and 2020 were
negatively impacted by COVID-19, including variants, and our revenue growth in future periods may continue to be
adversely impacted by COVID-19. Our providers have and may in the future delay new fertility cycles because they
operate in areas acutely affected by the COVID-19 pandemic, on account of executive orders to postpone non-emergent
surgeries or other medical treatments, or in order to conserve medical resources for non-fertility related medical treatments.
Many of our members live in communities that have been acutely affected by the COVID-19 pandemic and have delayed
and may not want to continue or begin new fertility cycles during the pandemic. Emerging research and the lack of
consumer information on the impact of COVID-19 vaccines on pregnancy may also affect member behavior and
utilization. Furthermore, as certain of our potential clients experience downturns or uncertainty in their own business
operations and revenue because of the economic effects resulting from the spread of COVID-19, they have and may
continue to decrease their spending on health benefits, which may disproportionately impact fertility benefits, and delay or
cancel implementation of fertility benefits. Each of these factors could affect member behavior, our utilization rates and the
number of members enrolled in our clients’ benefit plans.
In response to the COVID-19 pandemic, governments may at any time choose to impose and/or fully reinstate
quarantines, executive orders, shelter-in-place orders, and similar government orders, restrictions and public health and
safety measures in order to control the spread of the disease. Such orders, restrictions or measures, or the perception that
such orders, restrictions or measures could occur or reoccur, could result in business closures, work stoppages, slowdowns
and delays, work-from-home policies, travel restrictions, and cancellation or postponement of events, among other effects
that could negatively impact productivity and disrupt our operations and those of our clients and providers and could
negatively impact member behavior.
In addition to the potential direct impacts to our business, the economy may continue to be impacted as a result of
the actions taken in response to COVID-19. To the extent a weakened economy impacts clients’ or members’ ability or
willingness to pay for our benefit, or our vendors’, including any pharmacy program partners’, ability to provide services to
us, we could see our business and results of operations negatively impacted.
We implemented a work-from-home policy for all of our employees in March 2020 and have recently re-opened
our corporate offices to employees on a hybrid basis, while implementing additional safety measures and protocols. We
may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we
determine are in the best interests of our business, our employees and the communities we serve. While most of our
operations can be performed remotely, there is no guarantee that we will be as effective while working partially remotely
because our team is dispersed, many employees may have additional personal needs to attend to (such as looking after
children as a result of school closures or family who become sick), and employees may become sick themselves and be
unable to work. Decreased effectiveness of our team could adversely affect our results due to our inability to meet in
person with potential clients, and in some cases, relative to our previous expectations, delays in onboarding new clients,
responding to members, data collection and review, and a corresponding reduction in growth, or other decreases in
productivity that could seriously harm our business. In addition, working remotely could increase our cybersecurity risk
and make us more susceptible to communication disruptions, which could adversely impact our business operations or
delay necessary interactions with our clients, member, providers and other third parties. Furthermore, we may decide to
postpone or cancel planned investments in our business in response to changes in our business as a result of the spread of
COVID-19, which may impact our member utilization and rate of growth, either of which could seriously harm our
business.
In addition, while the potential impact and duration of the COVID-19 pandemic on the global economy and our
business in particular may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in,
significant disruption of global financial markets, which could reduce our ability to access capital and could negatively
affect our liquidity in the future. Moreover, to the extent the COVID-19 pandemic adversely affects our business, financial
condition and results of operations, it may also have the effect of heightening many of the other risks described in this
“Risk Factors” section, including but not limited to, those related to our ability to expand our customer base and develop
and expand our sales and marketing capabilities.
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The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation
closely. We do not yet know the full extent of potential delays or impacts on our business, operations, or the global
economy as a whole. The ultimate impact of the COVID-19 pandemic or a similar health epidemic or pandemic is highly
uncertain and subject to change; and will depend on numerous evolving factors that we may not be able to accurately
predict, including without limitation: the trajectory, duration, scope, severity, and any resurgences of the COVID-19
pandemic; the effectiveness of vaccine rollout plans, including any mandates; the public’s perception of the safety of the
vaccines and other treatments and their willingness to take the vaccines or other treatments; the existence and prevalence of
new variants of the virus; the continued impact on worldwide macroeconomic conditions, including interest rates,
employment rates and consumer confidence; governmental, business, and individuals’ actions that have been, and continue
to be, taken in response to the pandemic; the effect on our providers, clients and members; changes in demand for our
services; our ability to sell and provide our services; the ability of our clients and members to pay for our services; the
health of, and the effect on, our workforce; and the potential effects on our internal control, including those over financial
reporting, as a result of changes in working environments for our employees and business partners. While the spread of
COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak of this or any other
widespread epidemics or pandemics will not occur, or that the global economy will recover, either of which could seriously
harm our business.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating
results, which would cause our stock price to decline.
We have provided and may continue to provide guidance about our business and future operating results. On
February 28, 2022, we issued guidance for the first quarter of 2022 and full year 2022. In developing this guidance, our
management must make certain assumptions and judgments about its future performance. Some of those key assumptions
relate to the impact of the COVID-19 pandemic and the associated economic uncertainty on our business and the timing
and scope of economic recovery globally and how long it will take both clinics and members to return to normal practice
volumes and behavior, which are inherently difficult to predict. This guidance, which consists of forward-looking
statements, is qualified by, and subject to, such assumptions, estimates and expectations as of the date such guidance is
given and may be revised at a later time, solely in our discretion, as we learn more information. While presented with
numerical specificity, this guidance is necessarily speculative in nature, and is inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon
specific assumptions with respect to future business decisions, economic conditions or member behavior, some of which
may change. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of
release of such guidance. Furthermore, analysts and investors may develop and publish their own projections of our
business, which may form a consensus about our future performance. Our actual business results may vary significantly
from such guidance or that consensus due to a number of factors, many of which are outside of our control, including due
to the global economic uncertainty, financial market conditions and member behavior caused by the COVID-19 pandemic,
and which could adversely affect our business and future operating results. There are no comparable recent events that
provide insights as to the probable effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-
19 outbreak is highly uncertain and subject to change. We are relying on the reports and models of economic and medical
experts in making assumptions relating to the duration of this crisis and predictions as to timing and pace of any future
economic recovery. If these models are incorrect or incomplete, or if we fail to accurately predict the full impact that the
COVID-19 pandemic will have on all aspects of our business, the guidance and other forward-looking statements we
provide may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced
guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts,
investors or other interested parties, the price of our common stock would 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.
The market for our solutions is competitive and is likely to attract increased competition, which could make it
hard for us to succeed. We compete on the basis of several factors, including the comprehensiveness of our benefits
solutions and the Smart Cycle (our unique approach to benefits plan design which ensures that members always have
coverage for a full treatment cycle as their access to treatment is not limited by a dollar maximum that could be exhausted
mid-treatment), superior clinical outcomes, access for all employee groups (including LGBTQ+ and single mothers by
choice), equitable access to care across geographies, quality of the member experience and comprehensive member
support, access to our selective Center of Excellence (our proprietary, credentialed network of high-quality fertility
specialists), data reporting and sharing and access to an integrated pharmacy solution. While we do not believe
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any single competitor offers a similarly robust and integrated fertility and family building benefits solution, we compete
primarily with health insurance companies and benefits administrators that also provide fertility benefits management
services as part of their overall healthcare coverage. These competitors include all conventional health insurers, such as
UnitedHealthcare, Cigna, Aetna and members of the Blue Cross Blue Shield Association. Other competitors that currently
provide fertility benefits management services to employers include WIN Fertility and Optum Fertility Solutions. We also
compete with benefits managers that are new to the industry that do not have integrated health insurance carrier solutions,
such as Carrot Fertility and Maven Clinic, which currently offer employees post-tax reimbursement programs for fertility
benefits.
As we market our solutions to potential clients that currently utilize other vendors to manage their employees’
fertility benefits, we may fail to convince their internal stakeholders that our offerings and our model are superior to their
current solutions. Some of our competitors are more established, benefit from greater brand recognition and have
substantially greater financial, technical and marketing resources. Our competitors may seek to develop or integrate
solutions and services that may become more efficient or appealing to our existing and potential clients. For example,
fertility-focused pharmacy benefits managers, or PBMs, could emerge that would compete with Progyny Rx. In addition,
we believe one of our key competitive advantages is our purpose-built, data-driven platform. While we do not believe any
competitors have developed a similarly robust data collection, analysis and reporting process at this time, current or future
competitors may be successful in doing so in the future. In addition, we believe that there is growing awareness of the
demand for fertility benefits. As the fertility benefits field gains more attention, more competitors may be drawn into the
market. We also could be adversely affected if we fail to identify or effectively respond to changes in market dynamics. As
a result of any of these factors, we may not be able to continue to compete successfully against our current or future
competitors, and this competition could result in the failure of our platform to continue to maintain market acceptance,
which would harm our business, financial condition and results of operations.
Many healthcare industry participants are consolidating to create larger and more integrated healthcare delivery
systems with greater market power and we expect regulatory and economic conditions to result in additional consolidation
in the healthcare industry. Additionally, financial investors are acquiring fertility practices and this may accelerate
consolidation within the industry. Although comprehensive, our solution is a standalone fertility benefit. Clients may prefer
a single healthcare solution, which could adversely affect our ability to retain existing clients or grow our client base. In
addition, we work with partner organizations to market our benefit to potential clients. As consolidation accelerates, the
economies of scale of our partners’ organizations may grow. If a partner experiences sizable growth following
consolidation, it may determine that it no longer needs to rely on us and may reduce its demand for our services. In
addition, as healthcare providers consolidate to create larger and more integrated healthcare delivery systems with greater
market power, these providers may try to use their market power to negotiate fee increases for their services. Finally,
consolidation may also result in the acquisition of our partners by competitors or development by our partners of products
and services that compete with our products and services. Any of these potential results of consolidation could have a
material adverse effect on our business, financial condition and 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.
As part of our growth strategy, we are focused on retaining and expanding our services within our existing client
base. A client can expand the fertility benefits they offer to their employees a number of ways, including by adding egg
freezing or increasing the number of Smart Cycle units under their benefits plan (i.e., from two to three Smart Cycles per
household). In addition, our fertility benefits solution clients can purchase our add-on Progyny Rx solution. We went live
with Progyny Rx in 2018 and 81% of our current clients under contract are utilizing this solution, including approximately
93% of the clients we signed in 2021.
Factors that may affect our ability to retain our existing clients and sell additional solutions to them include, but
are not limited to, the following:
● the price, timeliness and outcomes of our solutions;
● the availability, price, timeliness, outcome, performance and functionality of competing solutions;
● our ability to maintain and appropriately expand our Center of Excellence network of high-quality fertility
specialists;
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● our ability to offer complementary solutions and services that will enhance our comprehensive fertility offering;
● changes in healthcare laws, regulations or the enforcement of such laws and regulations, or trends;
● any material increase in unemployment rate;
● the business environment of our clients and, in particular, reduction in our clients’ headcount; and
● consolidation of our clients, resulting in a change to their benefits program or a shift to one of our competitors.
Any of the above factors, alone or together, could negatively affect our ability to retain existing clients and sell
additional solutions to them, which would have an adverse effect on our business, revenue growth 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.
We currently have contracts to serve over 265 employers with at least 1,000 covered lives in the United States
across more than 30 industries. For the year ended December 31, 2021, two of our clients accounted for 19% and 15%,
respectively, or a combined 34%, of our total revenue. For the year ended December 31, 2020, two clients accounted for
18% and 17%, or a combined 35%, of our total revenue. No other clients accounted for more than 10% for the years ended
December 31, 2021 and 2020. Engagement with these clients is generally covered through contracts that are multi-year in
duration. One or both of these clients may terminate early or decline to renew their existing contracts with us upon
expiration and any such termination or failure to renew could have a negative impact on our revenue and compromise our
growth strategy. Clients, including our two largest clients, could also renegotiate pricing terms at the time of renewal,
which could have a negative impact on our revenue. In addition, we generate a significant portion of our revenue from
clients in the technology industry. Any of a variety of changes in that industry, including changes in economic conditions,
mergers or consolidations, reduced spending on benefits programs and other factors, could adversely affect 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.
To increase our revenue, we must continue to attract new clients. Our ability to do so depends in large part on the
success of our sales and marketing efforts, and the success of attracting industry leaders in diversified sectors, which could
prompt others in the same sectors to follow suit to remain competitive. Potential clients may seek out other options;
therefore, we must demonstrate that our solutions are valuable and superior to alternatives. If we fail to provide high-
quality solutions and convince clients of the benefits of our model and value proposition, we may not be able to attract new
clients. The market for our solutions could decline or grow more slowly than we expect due to general economic
conditions, outbreaks of contagious diseases or worsening thereof, including the COVID-19 pandemic, a decrease in
business investments, including spending on employee benefits, and other factors. If the markets for our solutions decline
or grow more slowly than we expect, or if the number of clients that contract with us for our solutions declines or fails to
increase as we expect, our financial results could be harmed. As the markets in which we participate mature, fertility
solutions and services evolve and competitors begin to enter into the market and introduce differentiated solutions or
services that are perceived to compete with our solutions, particularly if such competing solutions are adopted by an
industry leader in a particular sector, our ability to sell our solutions could be impaired. As a result of these and other
factors, we may be unable to attract new clients, which would have an adverse effect on our business, financial condition
and results of operations.
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 do not control nor can we impact the level of utilization of our solutions or the mix of utilization of our
solutions for each of our clients, in particular for newer clients. A significant reduction in the number of members using our
solutions could adversely affect our business, financial condition and results of operations. Factors that have and could
continue to contribute to a reduction in the use of our solutions include: reductions in workforce by existing clients; general
economic downturn that results in business failures and high unemployment rates; outbreaks of contagious diseases or the
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worsening thereof, including the COVID-19 pandemic; employers no longer offering comprehensive health coverage or
offering alternative solutions such as coverage on a voluntary, employee-funded basis; labor shortages at our clinics;
federal and state regulatory changes; changes to taxability of medical benefits; failure to adapt and respond effectively to
the changing medical landscape, changing laws, regulations and government enforcement priorities, changing client needs,
requirements or preferences; premium increases and benefits changes; negative publicity, through social media or
otherwise and news coverage.
It is also difficult for us to predict the level or mix of utilization of our services at the member level nor do we
have any control over the level or mix of utilization of our services. If the actual utilization of our services by members is
significantly greater than budgeted, the client may be responsible for corresponding costs that exceed its planned
expenditure. If we cannot help our clients accurately predict the level of utilization by their employees, our clients may turn
to alternative solutions, and our business and profitability would be adversely impacted.
We have a limited operating history with our current platform of solutions, which makes it difficult to predict our future
results of operations.
We went live with our fertility benefits solution in 2016 and Progyny Rx in 2018. As a result of our limited
operating history with the current platform of solutions, as well as a limited amount of time serving a majority of our client
base, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties,
including our ability to plan for and model future growth. Our historical revenue growth should not be considered
indicative of our future performance. Further, in future periods, our revenue growth could slow or decline for a number of
reasons, including slowing demand for our solutions and fertility benefits in general, change in utilization trends by our
members, general economic slowdown, an increase in unemployment, an increase in competition, changes to healthcare
trends and regulations, changes to science relating to the fertility market, a decrease in the growth of the fertility market, or
our failure, for any reason, to continue to take advantage of growth opportunities. If our assumptions regarding these risks
and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully,
our operating and financial results could differ materially from our expectations, and our business could suffer.
We have a history of operating losses and may not sustain profitability in the future.
We experienced net losses from 2015 to 2019. Our net loss from continuing operations was $8.6 million for the
year ended December 31, 2019. While we have experienced significant revenue growth since 2016, achieved profitability
starting in 2020 and currently project future profitability, we cannot guarantee whether we will obtain sufficient levels of
sales to sustain our growth or maintain profitability in the future. We also expect our costs and expenses to increase in
future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular,
we intend to continue to incrementally expand our sales and client account management teams to educate potential clients
and drive new client adoption, as well as enhance the scope of Progyny benefits within our existing client base. We also
expect to incur additional costs as we introduce new solutions and services to enhance our comprehensive fertility offering.
We will also face increased compliance costs associated with growth, the expansion of our client base. In addition, we
incur significant legal, accounting and other expenses related to being a public company. Our efforts to grow our business
may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating
expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein,
and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to sustain
profitability, the value of our business and common stock may significantly decrease.
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 materially and adversely harm our
business and operating results.
Our business operates within the public and private sectors of the U.S. health insurance system, which are
evolving quickly and subject to a changing regulatory environment, and our future financial performance will depend in
part on growth in the market for private health insurance, as our solutions are integrated with health insurance plans offered
by insurance carriers for our clients or our clients’ self-insured plans, as well as our ability to adapt to regulatory
developments. Changes and developments in the health insurance system in the United States could reduce demand for our
services and harm our business. For example, there has been an ongoing national debate relating to the health insurance
system in the United States. Certain elected officials have introduced proposals that would create a new single-payer
national health insurance program for all United States residents, replacing virtually all other sources of public and private
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insurance, to more incremental approaches, or creating a new public health insurance option that would compete with
private insurers. Additionally, proposals to establish a single-payer or government-run healthcare system at the state level
are regularly introduced, such as in New York and California. At the federal level, President Biden and Congress may
consider other legislation and/or executive orders to change elements of the ACA. In December 2019, a federal appeals
court held that the individual mandate portion of the ACA was unconstitutional and left open the question whether the
remaining provisions of the ACA would be valid without the individual mandate. On November 10, 2020, the U.S.
Supreme Court heard oral arguments in this matter, and issued its decision in June 2021, ruling that the plaintiffs lacked
standing to challenge the individual mandate provision, thus leaving the ACA in effect without ruling on the
constitutionality of the individual mandate.
On January 28, 2021, President Biden issued an Executive Order that iterates the policy of the Administration to
protect and strengthen the ACA, making high-quality healthcare accessible and affordable to all Americans. The Executive
Order directed federal agencies to examine agency actions to determine whether they are consistent with the
Administration’s commitment regarding the ACA, and begin rulemaking to suspend, revise, or rescind any inconsistent
actions. Areas of focus include policies or practices that may reduce affordability of coverage, present unnecessary barriers
to coverage, or undermine protections for people with preexisting conditions. We continue to evaluate the effect that the
ACA and its possible modifications, repeal and replacement has on our business.
In the event that laws, regulations or rules that eliminate or reduce private sources of health insurance or require
such benefits to be taxable are adopted, the subsequent impact on the insurance carriers and/or self-insured plans may in
turn adversely impact our ability to accurately forecast future results and harm our business, financial condition 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.
The health benefits industry may be subject to negative publicity, which can arise from, among other things,
increases in premium rates, industry consolidation, cost of care initiatives, drug prices and the ongoing debate over the
ACA. In addition, negative publicity may result in increased regulation and legislative review of industry practices, which
may further increase our costs of doing business and adversely affect our profitability. For example, PBM programs and
drug rebates have recently been criticized as leading to a lack of transparency about the true cost of a drug, and certain
members of Congress as well as HHS’s Office of Inspector General, or OIG, have proposed regulatory changes that could
potentially affect our business and operations. Negative public perception or publicity of the health benefits industry in
general, the insurance carriers with whom we integrate our solutions, our self-insured employer clients, or us could
adversely affect our business, financial condition and results of operations.
If our computer systems, or those of our provider clinics, specialty pharmacies or other downstream 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 is increasingly dependent on critical, complex and interdependent information technology systems,
including cloud-based systems, to support business processes as well as internal and external communications. Our success
therefore is dependent in part on our ability to secure, integrate, develop, redesign and enhance our (or contract with
vendors to provide) technology systems that support our business strategy initiatives and processes in a compliant, secure,
and cost and resource efficient manner. If we or our provider clinics, specialty pharmacies or other downstream vendors
have an issue with our or their respective technology systems, it may result in a disruption to our operations or downstream
disruption to our relationships with our clients or our selective network of high-quality fertility specialists. Additionally, if
we choose to insource any of the services currently handled by a third party, it may result in technological or operational
disruptions.
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal
hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological
error. High-profile security breaches at other companies and in government agencies have increased in recent years. There
is possibility of targeted cyber-attacks by foreign countries or entities that could impact United States government and
private companies’ technological infrastructures, some of which we utilize to provide our services. The healthcare industry
has seen a shift to an accelerated use of digital and technological platforms, especially due to the ongoing COVID-19
pandemic. As a result of such shift, there have been and may continue to be more targeted cybersecurity attacks and threats
on us, our vendors, provider clinics and specialty pharmacies. Despite the implementation
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of security measures, including steps designed to secure our technology infrastructure and sensitive data, we can provide
no assurance that our current technology system or any updates or upgrades thereto, the current or future technology
systems of our provider clinics, specialty pharmacies or other downstream vendors, are fully protected against malicious
intrusion, malware, computer viruses, unauthorized access, natural disasters, terrorism, war, telecommunication and
electrical failures, information or data theft or other similar risks.
We have experienced in the past and expect to continue to experience actual and attempted cyber-attacks of our IT
networks, such as through email phishing scams, spoofing attempts and malicious attachments. Although none of these
actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot
guarantee that such incidents will not have such an impact in the future. In addition, to the extent that any disruption or
security breach were to result in a loss or inappropriate disclosure of confidential information, we could incur liability. We
have access to sensitive information relating to members, our employees and our business partners in the ordinary course
of our business. Any failure or perceived failure by us, or our third-party contractors on our behalf, to comply with local
and foreign laws regarding privacy and data security, as well as contractual commitments in this respect, may result in
governmental enforcement claims, fines, or litigation, which could have an adverse effect on our reputation and business. If
a significant data breach occurred, our reputation could be materially and adversely affected, confidence among our clients
and members may be diminished, or we may be subject to legal claims, any of which may contribute to the loss of
customers and have a material adverse effect on us. To the extent such disruptions or uncertainties result in the theft,
destruction, loss or misappropriation or release of our confidential data or our intellectual property, our business and results
of operations could be materially and adversely affected. See “—Risks Related to Government Regulation—We operate in
a highly regulated industry and must comply with a significant number of complex and evolving legal and regulatory
requirements—Data Protection and Breaches.”
If we fail to offer high-quality support, our reputation could suffer.
Our clients rely on our client account management personnel and our members rely on our PCAs to resolve issues
and realize the full benefits that our solutions and services provide. High-quality support is also important for the renewal
and expansion of our services to existing clients. The importance of our support functions will increase as we expand our
business and pursue new clients. If we do not help our clients quickly resolve issues and provide effective ongoing support,
our ability to maintain and expand our offerings to existing and new clients could suffer, and our reputation with existing or
potential clients could suffer. Further, to the extent that we are unsuccessful in hiring, training and retaining adequate PCAs
and client account management personnel, our ability to provide adequate and timely support to our members and clients
would be negatively impacted, and our members’ and clients’ satisfaction with our solutions and services would be
adversely affected.
Our marketing efforts depend significantly on our ability to receive positive references from our existing clients,
channel partners and benefit consultants.
Our marketing efforts depend significantly on our ability to call on our current clients, channel partners and
benefit consultants to provide positive references to new, potential clients. Given our limited number of long-term clients,
the loss or dissatisfaction of any client, channel partnership or benefit consulting relationship could substantially harm our
brand and reputation, inhibit the market adoption of our offering and impair our ability to attract new clients and maintain
existing clients. Any of these consequences could have an adverse effect on our business, financial condition and results of
operations.
Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our
client base and achieve broader market acceptance of solutions we provide.
Our ability to increase our client base and achieve broader market acceptance of solutions we provide will depend
to a significant extent on our ability to expand our marketing and sales capabilities. We plan to continue expanding our
direct sales force and to dedicate significant resources to sales and marketing programs, including direct sales, inside sales,
targeted direct marketing, advertising, digital marketing, e-newsletter and conference sponsorships. All of these efforts will
require us to invest significant financial and other resources. Our business and results of operations could be harmed if our
sales and marketing efforts do not generate significant increases in revenue. We may not achieve anticipated revenue
growth from expanding our sales and marketing efforts if we are unable to hire, develop, integrate and retain talented and
effective sales personnel, if our new and existing sales personnel, on the whole, are unable to achieve desired productivity
levels in a reasonable period of time, or if our sales and marketing programs are not effective.
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Our future revenue may not grow at the rates they historically have, or at all.
We have experienced significant growth since the launch of our fertility benefits solution in 2016. Revenue and
our client base may not grow at the same rates they historically have, or they may decline in the future. Our future growth
will depend, in part, on our ability to:
● continue to attract new clients and maintain existing clients;
● price our solutions and services effectively so that we are able to attract new clients, expand sales to our existing
clients and maintain profitability;
● provide our clients and members with client support that meets their needs, including through dedicated PCAs;
● maintain successful collection of member cost shares and other applicable receivable balances directly from
members;
● retain and maintain relationships with high-quality and respected fertility specialists;
● attract and retain highly qualified personnel to support all clients and members;
● maintain satisfactory relationships with insurance carriers; and
● increase awareness of our brand and successfully compete with other companies.
We may not successfully accomplish all or any of these objectives, which may affect our future revenue, and
which makes it difficult for us to forecast our future results of operations. In addition, if the assumptions that we use to plan
our business are incorrect or change in reaction to changes in our market, it may be difficult for us to maintain profitability.
You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or
revenue growth.
In addition, we expect to continue to expend substantial financial and other resources on:
● sales and marketing;
● our technology infrastructure, including systems architecture, scalability, availability, performance and security;
and
● general administration, including increased legal and accounting expenses associated with being a public
company.
These investments may not result in increased revenue growth in our business. If we are unable to increase our
revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of
operations will be harmed, and we may not be able to maintain profitability over the long term. Additionally, we may
encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in
losses in future periods.
If our revenue growth does not meet our expectations in future periods, we may not maintain profitability in the
future, our business, financial position and results of operations may be harmed.
If the estimates and assumptions we use to determine the size of the target markets for our services are inaccurate, our
future growth rate may be impacted and our business would be harmed.
Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on
assumptions and estimates that may not prove to be accurate. Furthermore, the healthcare industry is rapidly evolving and
the markets for fertility benefits management and the related fertility pharmacy benefits management are relatively
immature. Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to
significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including the risks
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described herein. Even if the markets in which we compete achieve the forecasted growth, our business could fail to grow
at similar rates, if at all.
Our estimates of the market opportunity for our services are based on the assumption that the purpose-built, data-
driven and disruptive fertility benefits platform with the Smart Cycle plan design we offer will be attractive to employers.
Employers may pursue alternatives or may not see the value in providing enhanced fertility-related coverage and services
to their employees. In addition, we believe we are expanding the size of the fertility market as we enhance demand and
increase awareness for fertility benefits. If these assumptions prove inaccurate, or if the increase in awareness of fertility
benefits attracts potential competitors to enter the market and results in greater competition, our business, financial
condition and results of operations could be adversely affected.
It is difficult to predict member utilization rates and demand for our solutions, the entry of competitive solutions
or the future growth rate and size of the fertility market, and more specifically the fertility benefits management market and
the pharmacy benefits management market. The expansion of the fertility market depends on a number of factors,
including, but not limited to: the continued trend of individuals starting families later in life, increase in number of single
mothers by choice, adoption of non-traditional paths to parenthood and continued de-stigmatization of infertility. Further,
the expansion of the fertility benefits management market and the pharmacy benefits market both depend on a number of
factors, including, but not limited to: the continued trends of a competitive workforce with employers competing for talent
based on benefits that they provide and employers’ focus on benefits to attract and retain top talent.
If fertility benefits management or pharmacy benefits management do not continue to achieve market acceptance,
or if there is a reduction in demand caused by a lack of client or member acceptance, a reduction in employers’ focus on
enhancing benefits to employees, weakening economic conditions, data security or privacy concerns, governmental
regulation, competing offerings or otherwise, the market for our solutions and services might not continue to develop or
might develop more slowly than we expect, which would adversely affect our business, financial condition and results of
operations.
We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business,
financial condition and results of operations could be harmed.
As usage of our solutions grows, we will need to devote additional resources to improving and maintaining our
infrastructure. In addition, we will need to appropriately scale our internal business systems and our client account
management and member services personnel to serve our growing client base. Any failure of or delay in these efforts could
result in reduced client and member satisfaction, resulting in decreased sales to new clients and lower renewal and
utilization rates by existing clients, which could hurt our revenue growth and our reputation. Even if we are successful in
these efforts, they will require the dedication of management time and attention. We could also face inefficiencies or
service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion and
improvements to our internal infrastructure will be effectively implemented on a timely basis, and such failures could harm
our business, financial condition and results of operations.
Reductions in employee benefits spending or price pressures due to unfavorable conditions in our industry or the United
States economy could limit our ability to grow our business and negatively affect our results of operations.
Market volatility and uncertainty related to general economic conditions remain widespread, making it very
difficult for our clients and us to accurately forecast and plan future business activities. Negative conditions in the general
economy in the United States, including conditions resulting from changes in gross domestic product growth, financial and
credit market fluctuations, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious
diseases or the worsening thereof, including the COVID-19 pandemic, warfare and terrorist attacks on the United States,
could cause a decrease in business investments, including spending on employee benefits, and negatively affect the growth
of our business. Unfavorable economic conditions could result in the delay or cancellation by certain clients especially if
purchases of our solution are perceived by clients and potential clients to be discretionary, or if they experience a reduction
in their number of employees or there are material defaults by members on past amounts due. To the extent purchases of
our solution are perceived by clients and potential clients to be discretionary, our revenue may be disproportionately
affected by delays or reductions in general healthcare spending.
Unfavorable changes in our industry or in the United States economy could have a negative effect on our and our
clients’ and potential clients’ results of operations. Further, economic conditions including inflation, interest rate
fluctuations, changes in capital market conditions and regulatory changes, such as the taxability of medical benefits like
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ours, may affect our ability to obtain necessary financing on acceptable terms. An increase in the cost of obtaining fertility
medication or general medical cost inflation could negatively impact our results of operation. In addition, the increased
pace of consolidation in the healthcare industry may result in competitors with greater market power. We cannot predict the
timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular
industry.
Our business experiences seasonality, which may cause fluctuations in our sales and results of operations.
Our business experiences moderate seasonality in revenue with a slightly higher proportion of revenue during the
second half of the year as compared with the first half. Given that the majority of our clients contract with us for a January
1st benefits plan start date and that the average cost of treatments earlier in the overall treatment process is somewhat lower
than the average cost as treatment progresses, our revenue from treatment services tend to grow as the year continues,
particularly for new clients. In addition, as with most medical benefits plans, members will typically seek to maximize the
use of their benefits once they have reached their annual deductible and/or annual out-of-pocket maximums, thereby
increasing treatments in the latter part of the year. We expect that this seasonality will continue to affect our revenue and
results of operations in the future as we continue to target larger enterprise clients.
In addition, the seasonality of our businesses could create cash flow management risks if we do not adequately
anticipate and plan for periods of comparatively decreased cash flow, which could negatively impact our ability to execute
on our strategy, which in turn could harm our results of operations. Accordingly, our results for any particular quarter may
vary for a number of reasons, and we caution investors to evaluate our quarterly results in light of these factors.
If our new solutions and services are not adopted by our clients or members, or if we fail to innovate and develop new
offerings that are adopted by our clients, our revenue and results of operations may be adversely affected.
To date, we have derived a substantial majority of our revenue from sales of our fertility benefits and Progyny Rx
solutions. As we operate in an evolving industry and new markets, our long-term results of operations and continued
growth will depend on our ability to successfully develop and market new successful solutions and services to our clients.
If our existing clients and members do not value and/or are not willing to make additional payments for such new solutions
or services, it could adversely affect our business, financial condition and results of operations. If we are unable to predict
clients’ or members’ preferences, if the markets in which we participate change, including in response to government
regulation, or if we are unable to modify our solutions and services on a timely basis, we may lose clients. Our results of
operations would also suffer if our innovations are not responsive to the needs of the members, appropriately timed with
market opportunity or effectively brought to market.
If we fail to adapt and respond effectively to the changing medical landscape, changing laws, regulations and
government enforcement priorities, changing client needs, requirements or preferences, our offerings may become less
competitive.
The market in which we compete is subject to a changing medical landscape and changing laws, regulations and
government enforcement priorities, as well as changing client needs, requirements and preferences. The success of our
business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Our
business strategy may not effectively respond to these changes, and we may fail to recognize and position ourselves to
capitalize upon market opportunities. We may not have sufficient advance notice and resources to develop and effectively
implement an alternative strategy. There may be scientific or clinical changes that require us to change our solutions or that
make our solutions, including the Smart Cycles, less competitive in the marketplace. If there are sensitivities to our model
or our existing competitors and new entrants create new disruptive business models and/or develop new solutions that
clients and members prefer to our solutions, we may lose clients and members, and our results of operations, cash flows
and/or prospects may be adversely affected. The future performance of our business will depend in large part on our ability
to design and implement market appropriate strategic initiatives, some of which will occur over several years in a dynamic
industry. If these initiatives do not achieve their objectives, our results of operations could be adversely affected.
If we fail to maintain and enhance our brand, our ability to expand our client base will be impaired and our business,
financial condition and results of operations may suffer.
We believe that maintaining and enhancing the Progyny brand is important to support the marketing and sale of
our existing and future solutions to new clients and expand sales of our solutions to existing clients. We also believe that
the importance of brand recognition will increase as competition in our market increases. Successfully maintaining and
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enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable
services that continue to meet the needs of our clients at competitive prices, our ability to maintain our clients’ trust, our
ability to continue to develop new solutions, and our ability to successfully differentiate our platform from competitive
solutions and services. Our brand promotion activities may not generate client awareness or yield increased revenue, and
even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully
promote and maintain our brand, our business, financial condition and results of operations may suffer.
If we fail to retain and motivate members of our management team or other key employees, or fail to attract additional
qualified personnel to support our operations, our business and future growth prospects could be harmed.
Our success and future growth depend largely upon the continued services of our management team and our other
key employees. From time to time, there may be changes in our executive management team or other key employees
resulting from the hiring or departure of these personnel. Our executive officers and other key employees are employed on
an at-will basis, which means that these personnel could terminate their employment with us at any time. The loss of one or
more of our executive officers, or the failure by our executive team to effectively work with our employees and lead our
company, could harm our business.
In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for
these personnel is intense, especially for experienced sales and client account management personnel. There is no
guarantee we will be able to attract such personnel or that competition among potential employers will not result in
increased salaries or other benefits. From time to time, we have experienced, and we expect to continue to experience,
difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we
compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other
companies, their former employers may attempt to assert that these employees or we have breached their legal obligations,
resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value
of the equity awards they receive in connection with their employment. If the perceived value of our equity awards
declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to
the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. If we fail to attract
new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be
harmed. Further, if members of our management and other key personnel in critical functions across our organization are
unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business
strategy and/or our operations may be negatively impacted.
If we cannot maintain our company culture as we grow, our success and our business and competitive position may be
harmed.
We believe our culture has been a key contributor to our success to date and that the critical nature of the mission
we are pursuing promotes a sense of greater purpose and fulfillment in our employees. Any failure to preserve our culture
could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on
and pursue our corporate objectives. As we grow and develop the infrastructure of a public company, we may find it
difficult to maintain these important aspects of our culture. If we fail to maintain our company culture, our business and
competitive position may be harmed.
Risks Related to Our Relationships with Third Parties
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 success is dependent upon our continued ability to maintain a selective Center of Excellence, our proprietary,
credentialed network of high-quality fertility specialists. Fertility specialists and our other network providers could refuse
to contract, demand higher payments or take other actions that could result in higher medical costs, less attractive service
for our members or difficulty meeting regulatory or accreditation requirements. Identifying high-quality fertility specialists
and other healthcare providers, credentialing and negotiating contracts with them and evaluating, monitoring and
maintaining our network, requires significant time and resources. Our network provider arrangements generally may be
terminated or not renewed by either party without cause upon prior written notice. We cannot provide any assurance that
we will be able to continue to renew our existing contracts or enter into new contracts on a timely basis or under favorable
terms enabling us to service our members profitably. If we are not successful in maintaining our relationships with top
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fertility specialists, these fertility specialists may refuse to renew their contracts with us, and potential competitors may be
effective in onboarding these or other high-quality fertility specialists to create a similarly high-quality network. Any of
these events could have a material adverse effect on the provision of services to our members and our operations.
There may be additional shifts in the fertility specialty provider space as the fertility market matures, and high-
quality fertility specialists may become more demanding in re-negotiating to remain in our network. Our ability to develop
and maintain satisfactory relationships with high-quality fertility specialists and other healthcare providers also may be
negatively impacted by other factors not associated with us, such as legal and regulatory changes, including changes in
government enforcement priorities, impacting providers or consolidation activity among hospitals, physician groups and
healthcare providers. In addition, in some markets and geographies, certain organizations of physicians or healthcare
providers, such as practice management companies (which group together physician practices for administrative efficiency
and marketing leverage), accountable care organizations, clinically integrated networks, independent practice associations,
and other organizational structures that physicians and other healthcare providers choose may change the way in which
these providers do business with us, and may change the competitive landscape. Such organizations or groups of
healthcare providers may compete directly with us, which could adversely affect our operations, and our results of
operations, financial position, and cash flows by impacting our relationships with these providers or affecting the way that
we price our products and estimate our costs, which might require us to incur costs to change our operations. Healthcare
providers in our network may consolidate or merge into other groups or healthcare systems, resulting in a reduction of
providers in our network and in the competitive environment. In addition, if these providers refuse to contract with us, use
their market position to negotiate contracts unfavorable to us or place us at a competitive disadvantage, our ability to
market our solutions or to be profitable in those areas could be materially and adversely affected.
From time to time, our network providers may assert, or threaten to assert, claims seeking to terminate our
contractual arrangements. If enough provider agreements were terminated, such termination could adversely impact the
adequacy of our network to service our members, and may put us at risk of non-compliance with applicable federal and
state laws. If we are unable to retain our current provider contract terms or enter into new provider contracts timely or on
favorable terms, our profitability may be harmed. In addition, from time to time, we may in the future be subject to class
action or other lawsuits by healthcare providers with respect to claims payment procedures, reimbursement policies,
network participation, or similar matters. In addition, regardless of whether any such lawsuits brought against us are
successful or have merit, they will be time-consuming and costly, and could have an adverse impact on our reputation. As a
result, under such circumstances, we may be unable to operate our business effectively.
In addition, the perceived value of our solutions and our reputation may be negatively impacted if the services
provided by one or more of our fertility specialists or another network healthcare provider are not satisfactory to our
members, including as a result of provider error that could result in litigation. For example, if a provider within our
network experiences an issue with their cryopreservation techniques or releases sensitive information of our members, we
could incur additional expenses and it could give rise to litigation against us. Any such issue with one of our providers may
expose us to public scrutiny, adversely affect our brand and reputation, expose us to litigation and/or regulatory action, and
otherwise make our operations vulnerable. Further, if a fertility specialist provides services that result in less than favorable
outcomes, this could cause us to fail to meet our contractually guaranteed specified service metrics, and we could be
obligated to provide the client with a fee reduction. The failure to maintain our selective network of high-quality fertility
specialists and other healthcare providers or the failure of those providers to meet and exceed our members’ expectations,
may result in a loss of or inability to grow or maintain our client base, which could adversely affect our business, financial
condition and results of operations.
Our growth depends in part on the success of our strategic relationships with, and monitoring of, third parties,
including channel partners, vendors and insurance carriers.
In order to grow our business, we anticipate that we will continue to depend on our relationships with third
parties, including channel partners, vendors and insurance carriers among others. As the fertility management market and
our client base grow, if we do not successfully maintain our relationships with insurance carriers, they may make
integration more difficult or expensive, such as implementing an onerous fee structure in exchange for our ability to
continue to integrate our solutions with their platforms. If we are unsuccessful in establishing or maintaining our
relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our
results of operations may suffer.
In addition, our arrangements with these third parties may expose us to public scrutiny, adversely affect our brand
and reputation, expose us to litigation and/or regulatory action, and otherwise make our operations vulnerable if
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we fail to adequately monitor their performance or if they fail to meet their contractual obligations to us or to comply with
applicable laws or regulations.
If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our network of specialty
pharmacies, our business, financial condition and results of operations could suffer.
The timely delivery of fertility prescriptions is essential for fertility treatments. If prescriptions are delivered late,
the delay may result in postponement of a member’s treatment cycle and member dissatisfaction with our solutions. We
believe that our ability to maintain and grow the adoption of Progyny Rx is highly dependent on our success in maintaining
an efficient pharmacy distribution network and our record of on-time delivery. The specialty pharmacies in our network
could refuse to contract, demand higher drug pricing or take other actions that could result in higher medical costs or less
attractive services for our members. Specialty pharmacies could face supply chain issues that could result in higher
medical costs or negatively impact our rebates and results of operations. We do not control the pricing strategies of our
specialty pharmacy partners, each of whom may be motivated by general economic considerations including inflation and
other independent considerations and drivers that are outside our control and has the ability to set or impact market price
for different prescription medications. We also cannot provide any assurance that we will be able to continue to renew our
existing contracts, current negotiated pricing or discounts, or enter into new contracts on a timely basis or under favorable
terms enabling us to service our members profitably. If we are not successful in maintaining our relationships with the
specialty pharmacies in our network, are otherwise unable to maintain an efficient pharmacy distribution network, or if a
significant disruption thereto should occur, the use of Progyny Rx may decline due to the inability to timely deliver
prescription or offer competitive drug pricing to members, which could cause our business, financial condition and results
of operations to suffer.
If we lose our relationship with one or more key pharmacy program partners, or if the rebates provided by pharmacy
program partners decline, our business and results of operations could be adversely affected.
We maintain contractual relationships with select pharmacy program partners, which provide us with access to
limited distribution specialty pharmaceutical rebates for drugs we purchase. While we have contractual relationships with
such pharmacy program partners, they in turn often negotiate complex and multi-party pricing structures with other
industry participants, and we have no control over the policies and strategies implemented in negotiating these pricing
structures, and such structures may set or significantly impact market prices for prescription drugs we purchase and
associated rebates for such drugs. Pharmacy program partners generally direct medication pricing by setting medication list
prices and offering rebates and/or discounts for their medications. Various market considerations—such as the number of
competitor medications, the availability of alternative treatment options, and negotiated rates among industry participants
—impact the list prices for medications. Our ability to obtain and maintain specialty pharmaceutical rebates, our relative
bargaining power, the value of any such rebates and our ability to generate revenue are directly affected by the pricing
structures in place among the various industry participants, and changes in medication pricing and in the general pricing
structures, whether due to regulatory requirements, competitive pressures or otherwise, could have an adverse effect on our
business, financial condition and results of operations. Further, the consolidation of pharmaceutical manufacturers, the
shortages of drugs provided by such manufacturers, the termination or material alteration of our contractual relationships,
or our failure to renew such contracts on favorable terms could have a material adverse effect on our business and results of
operations.
Our marketing efforts depend on our ability to maintain our relationship with benefits consultants.
We sell our solutions through our sales organization and, in many cases, we leverage our relationships with top
benefits consultants to establish relationships with potential clients. Our sales team has broad experience in health benefits
management and extensive pre-existing long-term relationships with industry participants and benefits executives at large
employers. If we fail to maintain our relationship with the benefits consultants, our marketing efforts, business and
profitability would be adversely impacted.
We are exposed to credit risk from our members.
We collect copayments, coinsurance and deductibles directly from members. We do not require collateral for such
receivables. Our failure to collect a significant portion of the amount due on such receivables directly from members could
adversely affect our business, financial condition and results of operations.
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Risks Related to Government Regulation
We operate in a highly regulated industry and must comply with a significant number of complex and evolving legal
and regulatory requirements.
We have attempted to structure our operations to comply with laws, regulations and other requirements applicable
to us directly and to our clients and vendors, but there can be no assurance that our operations will not be challenged or
impacted by regulatory authorities or enforcement initiatives. We have been, and in the future may become, involved in
governmental investigations, audits, reviews and assessments. Any determination by a court or agency that our corporate
structure, solutions or services violate, or cause our clients to violate, applicable laws, regulations or other requirements
could subject us or our clients to significant administrative, civil or criminal penalties. Such a determination also could
require us to change or terminate portions of our business, disqualify us from serving clients that do business with
government entities, or cause us to refund some or all of our service fees or otherwise compensate our clients. In addition,
failure to satisfy laws, regulations or other requirements could adversely affect demand for our solutions and could force us
to expend significant capital, research and development and other resources to address the failure. Even an unsuccessful
challenge by regulatory and other authorities or parties could be expensive and time-consuming, could result in loss of
business, exposure to adverse publicity, and injury to our reputation and could adversely affect our ability to retain and
attract clients. If we fail to comply with applicable laws, regulations and other requirements, our business, financial
condition and results of operations could be adversely affected. Such non-compliance could also require significant
investment to address and may prove costly. There are several additional federal and state statutes, regulations, guidance
and contractual provisions related to or impacting the healthcare industry that may apply to our business activities directly
or indirectly, including, but not limited to:
● Licensing and Licensed Personnel. Many states have licensure or registration requirements for entities
acting as a third-party administrator, or TPA, and/or PBMs. The scope of these laws differs from state to
state, and the application of such laws to the activities of TPAs and/or PBMs is often unclear. Given the
nature and scope of the solutions and services that we provide, we are required to maintain TPA and PBM
licenses and registrations in certain jurisdictions and to ensure that such licenses and registrations are in good
standing on an annual basis. We are licensed, have licensure applications pending before appropriate
regulatory bodies, are exempt from licensure or registration, or believe that we are otherwise authorized
under such laws in those states in which we provide our TPA and PBM services. These licenses require us to
comply with the rules and regulations of the governmental bodies that issued such licenses, including
maintaining certain solvency or bonds requirements. Our failure to comply with such rules and regulations
could result in significant administrative penalties, the suspension of a license, or the loss of a license, all of
which could negatively impact our business. Additionally, from time to time, legislation is considered that
would purport to declare a PBM a fiduciary with respect to its clients. While the validity of such laws is
questionable and we do not believe any such laws are currently in effect, we cannot predict what effect, if
any, such statutes, if enacted, may have on our business and financial results.
Separately, states impose licensing requirements on insurers, risk-bearing entities, and insurance agents, as
well as those entities that provide utilization review services. We do not believe that the nature of our services
requires us to be licensed under applicable state law. We are unable to predict, however, how our services
may be viewed by regulators over time, how these laws and regulations will be interpreted and enforced, or
the full extent of their application. If a regulatory authority in any state determines that the nature of our
business requires that we be licensed under applicable state laws, we may need to restructure our business to
comply with any related requirements, such as maintaining adequate reserves, creating new compliance
processes, hiring additional personnel to manage regulatory compliance, and paying additional regulatory fees
or penalties, which could adversely affect our results of operation. Additionally, we may need to cease
operations until we are able to obtain appropriate licensure, which may adversely affect our revenue for a
period of time that we cannot estimate.
In addition, we employ PCAs to support and guide our members as part of our fertility benefits management
services. The PCAs do not provide any licensed healthcare services, and in turn, are not licensed by any
regulatory body to provide these services. We otherwise do not employ individuals to provide any healthcare
services requiring licensure. If a professional board in any state determines that the services provided by our
employed PCAs require a license to be provided, we may need to conduct additional training and
credentialing, replace staff, obtain additional insurance, and pay increased salaries, which could adversely
affect our results of operation. We may additionally need to suspend the PCA services we provide while our
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personnel obtains the necessary licensure, which may adversely affect our relationships with our clients and
members and cause us to be in breach of our contracts.
● HIPAA Privacy and Security Requirements. Regulations promulgated pursuant to HIPAA establish privacy
and security standards that limit the use and disclosure of certain individually identifiable health information
(known as “protected health information”) and require the implementation of administrative, physical and
technological organizational safeguards to protect the privacy of protected health information and ensure the
confidentiality, integrity and availability of electronic protected health information. The privacy regulations
established under HIPAA also provide patients with rights related to understanding and controlling how their
protected health information is used and disclosed. As a provider of services to entities subject to HIPAA, we
are directly subject to certain provisions of the regulations as a “Business Associate.” When acting as a
Business Associate under HIPAA, to the extent permitted by applicable privacy regulations and contracts and
associated Business Associate Agreements with our clients, we are permitted to use and disclose protected
health information to perform our services and for other limited purposes, but other uses and disclosures,
such as marketing communications, require written authorization from the patient or must meet an exception
specified under the privacy regulations. We also have downstream Business Associates, which provide us
with services and are also subject to HIPAA regulations.
If we, or any of our downstream Business Associates, are unable to properly protect the privacy and security
of protected health information entrusted to us, we could be found to have breached our contracts with our
clients and be subject to investigation by HHS, Office for Civil Rights, or OCR. In the event OCR finds that
we have failed to comply with applicable HIPAA privacy and security standards, we could face civil and
criminal penalties. In addition, OCR performs compliance audits of Covered Entities and Business Associates
in order to proactively enforce the HIPAA privacy and security standards. OCR has become an increasingly
active regulator and has signaled its intention to continue this trend. OCR has the discretion to impose
penalties and may require companies to enter into resolution agreements and corrective action plans which
impose ongoing compliance requirements. OCR enforcement activity, or a third-party audit related to a
HIPAA incident regarding us or a third-party vendor, can result in financial liability and reputational harm,
and responses to such enforcement activity can consume significant internal resources. In addition to
enforcement by OCR, state attorneys general are authorized to bring civil actions under either HIPAA or
relevant state laws seeking either injunctions or damages in response to violations that threaten the privacy of
state residents. Although we have implemented and maintain policies, processes and compliance program
infrastructure to assist us in complying with these laws and regulations and our contractual obligations, we
cannot provide assurance regarding how these laws and regulations will be interpreted, enforced or applied to
our operations. In addition to the risks associated with enforcement activities and potential contractual
liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state levels
also might require us to make costly system purchases and/or modifications or otherwise divert significant
resources to HIPAA compliance initiatives from time to time.
● Other Privacy and Security Requirements. In addition to HIPAA, numerous other federal and state laws
govern the collection, dissemination, use, access to and confidentiality of personal information, some of
which may be applicable to our business. Certain federal and state laws protect types of personal information
that may be viewed as particularly sensitive. For example, New York’s Public Health Law, Article 27-F
protects information that could reveal confidential HIV-related information about an individual. In many
cases, state laws are more restrictive than, and not preempted by, HIPAA, and may allow personal rights of
action with respect to privacy or security breaches, as well as fines. State laws are contributing to increased
enforcement activity and may also be subject to interpretation by various courts and other governmental
authorities. Further, California recently enacted the CCPA, which went into effect on January 1, 2020. The
CCPA gives California residents certain rights to access and delete their personal information, opt out of
certain personal information sharing, and receive detailed information about how their personal information
is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data
breaches that is expected to increase data breach litigation. Further, the California Privacy Rights Act, or the
CPRA, recently passed in California. The CPRA will impose additional data protection obligations on
covered businesses, including additional consumer rights processes, limitations on data uses, new audit
requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new
California data protection agency authorized to issue substantive regulations and could result in increased
privacy and information security enforcement. The majority of the provisions will go into effect on January
1, 2023 and additional compliance investment and potential business process changes may be required.
Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal
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level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such
laws could have potentially conflicting requirements that would make compliance challenging.
Certain of our solutions and services involve the transmission and storage of client and member data in
various jurisdictions, which subjects the operation of those solutions and services to privacy or data protection
laws and regulations in those jurisdictions. While we believe these solutions and services comply with current
regulatory and security requirements in the jurisdictions in which we provide these solutions and services,
there can be no assurance that such requirements will not change or that we will not otherwise be subject to
legal or regulatory actions. These laws and regulations are rapidly evolving and changing, and could have an
adverse impact on our operations. These laws and regulations are subject to uncertainty in how they may be
interpreted and enforced by government authorities and regulators. The costs of compliance with, and the
other burdens imposed by, these and other laws or regulatory actions may increase our operational costs,
prevent us from providing our solutions, and/or impact our ability to invest in or jointly develop our solutions.
We also may face audits or investigations by one or more government agencies relating to our compliance
with these laws and regulations. An adverse outcome under any such investigation or audit could result in
fines, penalties, other liability, or could result in adverse publicity or a loss of reputation, and adversely affect
our business. Any failure or perceived failure by us or by our solutions to comply with these laws and
regulations may subject us to legal or regulatory actions, damage our reputation or adversely affect our ability
to provide our solutions in the jurisdiction that has enacted the applicable law or regulation. Moreover, if
these laws and regulations change, or are interpreted and applied in a manner that is inconsistent with our
policies and processes or the operation of our solutions, we may need to expend resources in order to change
our business operations, policies and processes or the manner in which we provide our solutions. This could
adversely affect our business, financial condition and results of operations.
● Data Protection and Breaches. In recent years, there have been a number of well-publicized data breaches
involving the improper dissemination of personal information of individuals both within and outside of the
healthcare industry. Laws in all 50 states require businesses to provide notice to clients whose personally
identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and
compliance in the event of a widespread data breach is costly. States are also constantly amending existing
laws, requiring attention to frequently changing regulatory requirements. Most states require holders of
personal information to maintain safeguards and take certain actions in response to a data breach, such as
providing prompt notification of the breach to affected individuals or the state’s attorney general. In some
states, these laws are limited to electronic data, but states increasingly are enacting or considering stricter and
broader requirements.
Additionally, under HIPAA, Covered Entities must report breaches of unsecured protected health information
to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach
by a Covered Entity or its agents. Notification also must be made to OCR and, in certain circumstances
involving large breaches, to the media. Business Associates must report breaches of unsecured protected
health information to Covered Entities within 60 days of discovery of the breach by the Business Associate or
its agents or such shorter period as set forth in the applicable Business Associate Agreement. A non-permitted
use or disclosure of protected health information is presumed to be a breach under HIPAA unless the Covered
Entity or Business Associate establishes that there is a low probability the information has been compromised
consistent with requirements enumerated in HIPAA.
Despite our security management efforts with respect to physical and technological safeguards, employee
training, vendor (and sub-vendor) controls and contractual relationships, our infrastructure, data or other
operation centers and systems used in our business operations, including the internet and related systems of
our vendors (including vendors to whom we outsource data hosting, storage and processing functions) are
vulnerable to, and from time to time experience, unauthorized access to data and/or breaches of confidential
information due to a variety of causes. Techniques used to obtain unauthorized access to or compromise
systems change frequently, are becoming increasingly sophisticated and complex, and are often not detected
until after an incident has occurred. As a result, we might not be able to anticipate these techniques,
implement adequate preventive measures, or immediately detect a potential compromise. If our security
measures, some of which are managed by third parties, or the security measures of our service providers or
vendors, are breached or fail, it is possible that unauthorized or illegal access to or acquisition, disclosure, use
or processing of personal information, confidential information, or other sensitive client, member, or
employee data, including HIPAA-regulated protected health information, may occur. A security breach or
failure could result from a variety of circumstances and events, including third-party action, human
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negligence or error, malfeasance, employee theft or misuse, phishing and other social engineering schemes,
computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing
software, databases or components thereof, power outages, hardware failures, telecommunication failures,
and catastrophic events.
If our security measures, or those of our service providers or vendors, were to be breached or fail, our
reputation could be severely damaged, adversely affecting client or investor confidence. As a result, clients
may curtail their use of or stop using our offering and our business may suffer. In addition, we could face
litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other
laws or regulations applicable to data protection and significant costs for remediation and for measures to
prevent future occurrences. In addition, any potential security breach could result in increased costs
associated with liability for stolen assets or information, repairing system damage that may have been caused
by such breaches, incentives offered to clients or other business partners in an effort to maintain the business
relationships after a breach and implementing measures to prevent future occurrences, including
organizational changes, deploying additional personnel and protection technologies, training employees and
engaging third-party experts and consultants. Negative publicity may also result from real, threatened or
perceived security breaches affecting us or our industry or clients, which could cause us to lose clients or
partners and adversely affect our operations and future prospects. While we maintain cyber insurance
covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain
coverage sufficient to compensate for all liability and such insurance may not be available for renewal on
acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage
that could result from a security incident.
● HIPAA Transaction and Identifier Standards. HIPAA and its implementing regulations mandate format and
data content standards and provider identifier standards (known as the National Provider Identifier) that must
be used in certain electronic transactions, such as claims, payment advice and eligibility inquiries. HHS has
established standards that health plans must use for electronic fund transfers with providers, has established
operating rules for certain transactions, and is in the process of establishing operating rules to promote
uniformity in the implementation of the remaining types of covered transactions. The ACA also requires
HHS to establish standards for health claims attachment transactions. HHS has modified the standards for
electronic healthcare transactions (such as, eligibility, claims submission and payment and electronic
remittance) from Version 4010/4010A to Version 5010. Further, HHS now requires the use of updated
standard code sets for diagnoses and procedures known as the ICD-10 code sets. Enforcement of compliance
with these standards falls under HHS and is carried out by CMS.
In the event new requirements are imposed, we will be required to modify our systems and processes to
accommodate these changes. We will seek to modify our systems and processes as needed to prepare for and
implement changes to the transaction standards, code sets operating rules and identifier requirements;
however, we may not be successful in responding to these changes, and any responsive changes we make to
our systems and processes may result in errors or otherwise negatively impact our service levels. In addition,
the compliance dates for new or modified transaction standards, operating rules and identifiers may overlap,
which may further burden our resources.
● Fraud and Abuse Laws. Many of our clients, insurance carriers, and network healthcare providers are
impacted directly and indirectly by certain fraud and abuse laws, including the federal Anti-Kickback Statute,
the Physician Self-Referral Law, commonly referred to as the Stark Law, and the False Claims Act, as well as
their state equivalents. Because the solutions and services we provide are not reimbursed by government
healthcare payors, such fraud and abuse laws generally do not directly apply to our business, however, some
laws may be applicable to us. For example, certain states have anti-kickback and false claims laws that may
be broader in scope than analogous federal laws and may apply to items and services reimbursed by any
third-party payor, including private insurers, self-insured employers and on a cash basis by patients.
The laws, regulations and other requirements in this area are both broad and complex and judicial and
regulatory interpretation can also be inconsistent. We review our practices with regulatory experts in an effort
to comply with all applicable laws, regulatory and other requirements. However, we are unable to predict how
these laws, regulations and other requirements will be interpreted or the full extent of their application,
particularly to services that are not directly reimbursed by federal and state healthcare programs. Any
determination by a federal or state regulatory authority that any of our activities or those of our clients or
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vendors violate any of these laws or regulations could subject us to significant administrative, civil or
criminal penalties, damages, disgorgement, monetary fines or imprisonment, require us to enter into corporate
integrity agreements or similar agreements with ongoing compliance obligations, disqualify us from
providing services to clients that are, or do business with, government healthcare programs and/or have an
adverse impact on our business, financial condition and results of operations. Even an unsuccessful challenge
by a regulatory authority of our activities could result in adverse publicity and could require a costly response
from us.
● State Corporate Practice and Fee-Splitting Prohibitions. There is a risk that regulatory authorities in some
jurisdictions may find that our contractual relationships with our fertility specialists violate laws prohibiting
the corporate practice of medicine and/or fee-splitting. These laws generally prohibit non-physician entities
from practicing medicine, exercising control over physicians or engaging in certain practices such as fee-
splitting with physicians. Although we believe all of our arrangements with our network providers are in
compliance with such laws, where applicable, there can be no assurance that these laws will be interpreted in
a manner consistent with our practices or that other laws or regulations will not be enacted in the future that
could have a material and adverse effect on our business, results of operations, and financial condition.
Regulatory authorities, state medical boards, state attorneys general and other parties, including our network
physicians, may assert that we are engaged in the prohibited corporate practice of medicine, and/or that our
arrangement with our network providers constitutes unlawful fee-splitting. If a state’s prohibition on
corporate practice of medicine or fee-splitting law is interpreted in a manner that is inconsistent with our
practices, we would be required to restructure or terminate our contractual relationship with our network
providers to bring our activities into compliance with such laws, disciplinary action, penalties, damages,
fines, and/or a loss of revenue, any of which could have a material and adverse effect on our business, results
of operations, and financial condition. State corporate practice of medicine doctrines and fee-splitting
prohibitions also often impose penalties on physicians themselves for aiding the corporate practice of
medicine or unlawful fee-splitting, which could discourage physicians from participating in our network of
providers.
● ERISA Regulation. The Employee Retirement Income Security Act of 1974, or ERISA, regulates
certain aspects of employee health plans, including both insured and self-funded health plans sponsored by
our clients, with which we have agreements to provide TPA services. As part of our agreements with a
number of these clients, we offer PBM services through Progyny Rx. Because we believe the conduct of our
business vis-à-vis these plans is not of a fiduciary nature, it is not generally subject to the fiduciary
obligations of ERISA. However, there can be no assurance the United States Department of Labor, or the
DOL, which is the agency that enforces ERISA, would not in the future assert that the fiduciary obligations
imposed by ERISA apply to certain aspects of our operations or courts would not reach such a ruling in
private ERISA litigation. ERISA also imposes civil and criminal liability on service providers to health
plans subject to ERISA and certain other persons with relationships to such plans if certain forms of illegal or
prohibited remuneration are made or received by such service providers or other persons. These provisions of
ERISA are similar, but not identical, to the healthcare anti-kickback laws described above, although ERISA
lacks the statutory and regulatory “safe harbor” exceptions incorporated into the healthcare anti-kickback
laws. Like the healthcare anti-kickback laws, the corresponding provisions of ERISA are broadly written and
their application to particular cases can be uncertain. ERISA plans are subject to certain rules, published by
the DOL, including certain reporting requirements for direct and indirect compensation received by plan
service providers. Separately, although ERISA generally preempts state laws that relate to ERISA plans, the
recent Supreme Court ruling in Rutledge v. Pharm. Care Mgmt. Ass’n established that ERISA does not
preempt all state laws imposing transparency or other requirements on PBMs.
● Prompt Pay Laws. Certain states have laws regulating the amount of time that may elapse from when a third-
party payor receives a claim for services rendered to when those services are paid. These “prompt pay” laws
may impact us as well as our self-insured clients and insurance carriers. Under these “prompt pay” laws, we
may be obligated to pay healthcare providers within established time periods, and such time periods may be
shorter than existing contracted terms and/or via electronic transfer. In many states, we are deemed to be
exempt from the prompt pay laws, however, we seek to comply with them in each state in which we do
business to the extent applicable, and our efforts include the use of controls such as policies and processing
systems that ensure we pay claims as quickly as possible and contract language related to timeframes
permitted by applicable law. If we do not make payments to healthcare providers in a timely fashion
consistent with prompt pay laws, we may be required to pay interest in addition to any amounts owed to such
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providers. In addition, our reputation may be harmed and our contractual obligations to certain clients may be
breached, causing us to lose revenue or otherwise pay penalties under such contracts.
● Network Adequacy and Access Requirements. Network adequacy and access laws require health plans to
maintain a network of healthcare providers sufficient to deliver the benefits they contract to provide to their
enrollees. In light of the increase in “narrow networks,” there has been a legislative push to ensure that
commercial payors contract with a sufficient number of healthcare providers to create an “adequate
network.” Additionally, a majority of states now have some form of legislation affecting our payor clients’
ability to limit access to a provider network or remove a provider from the network. Such legislation may
require our clients to admit any healthcare provider including any pharmacy provider willing to meet the
plan’s price and other terms for network participation (“any willing provider” legislation) or may provide that
a provider may not be removed from a network except in compliance with certain procedures (“due process”
legislation). Further, to ensure network adequacy and quality, a network may seek to accredit its healthcare
providers through any number of accrediting bodies, such as the National Committee for Quality Assurance,
or NCQA, and the Utilization Review Accreditation Commission. We follow NCQA standards to credential
the health providers with whom we contract to provide services within our network, and engage Council for
Affordable Quality Healthcare to conduct provider credentialing where required. Should any of the states we
operate in determine that our network of providers does not meet adequacy or access requirements, we may
be subject to administrative penalties and other administrative actions, as well as private litigation. In
addition, if we are unable to contract with a sufficient number of providers, we may become subject to
administrative penalties or enforcement actions from state regulatory agencies, litigation from consumers,
and may be in breach of certain contractual covenants with our partners.
● Consumer Protection Laws. Federal and state consumer protection laws are being applied increasingly by
the Federal Trade Commission, or FTC, Federal Communications Commission, or FCC, and states’ attorneys
general to regulate the collection, use, storage and disclosure of personal or health information, through
websites or otherwise, and to regulate the presentation of website content. Courts may also adopt the
standards for fair information practices promulgated by the FTC, which concern consumer notice, choice,
security and access. Consumer protection laws require us to publish statements to users of our services that
describe how we handle personal information and choices consumers may have about the way we handle
personal information. If such information that we publish is considered untrue, we may be subject to claims
of unfair or deceptive trade practices, which could lead to significant liabilities and consequences, including,
costs of defending against litigation, settling claims and loss of willingness of current and future clients to
work with us.
● Restrictions on Communication. Communications with our members increasingly may be subject to and
restricted by laws and regulations governing communications via telephone, fax, text, and email. We also use
email and social media platforms as marketing tools. For example, we maintain social media accounts. As
laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these platforms and
devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws
and regulations in the use of these platforms and devices could adversely impact our business, financial
condition and results of operations or subject us to fines or other penalties.
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.
All of our revenue is derived from the healthcare industry, which is highly regulated and subject to changing
political, legislative, regulatory and other influences. Healthcare laws and regulations are rapidly evolving and may change
significantly in the future. For example, the ACA may affect the coverage and plan designs that are or will be provided by
certain insurance carriers and certain of our clients with self-insured plans, taxability of benefits under such plans, as well
as the overall reimbursement and drug pricing environment for healthcare providers. Since its enactment, there have been
judicial, executive and Congressional challenges to certain aspects of the ACA as well as efforts to repeal or replace certain
aspects of the ACA, which may continue in the future. For example, on June 17, 2021, the U.S. Supreme Court dismissed
the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality
of the ACA. Other health reform efforts have been proposed by members of Congress, such as measures that would expand
the role of government-sponsored coverage, including further reform to the ACA, which could have far-reaching
implications for the healthcare industry if enacted. On January 28, 2021, President Joe Biden issued an Executive Order
directing federal agencies to examine all existing regulations, orders, guidance documents, policies and similar agency
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actions to determine if any such actions are inconsistent with the policy set forth in the Executive Order to protect and
strengthen the ACA and make high-quality healthcare accessible and affordable for every American. As another example
of recent healthcare legislative changes, the Consolidated Appropriations Act, or CAA, effective December 27, 2021,
contains provisions impacting group health plans, including protections for plan participants from surprise medical bills
and ensuring health plan price transparency. The CAA prohibits plans from entering into services agreements that directly
or indirectly restrict the plans from disclosing provider-specific costs and quality of care information. It also requires
disclosure by health insurance brokers and consultants to plan sponsors regarding reasonably expected direct and indirect
compensation for referral of services to group health plans. Additionally, the CAA requires plans to submit reports to the
Department of Labor, HHS and IRS with certain information on pharmacy benefits and drug costs for participants and
beneficiaries and the application of in-network rates to out of network services. The CAA also requires certain service
providers for health plans to comply with certain ERISA fee disclosure rules. In addition, effective January 1, 2022, the No
Surprises Act (enacted as part of the CAA) provides protection against surprise medical bills by prohibiting plans and
providers from balance billing patients for emergency care performed by out-of-network providers as well as non-
emergency and ancillary services performed by out-of-network providers at in-network facilities, subject to certain notice
and consent exceptions for non-emergency and ancillary services. The new law also grants additional patient protections,
including requiring providers to send a good faith estimate of the expected charges for furnishing items or services to an
insured patient’s health plan (or directly to an uninsured patient) before such items or services are delivered (including
items or services reasonably expected to be provided in conjunction with scheduled items or services or that are reasonably
expected to be delivered by another provider). The No Surprises Act also provides a dispute resolution process in the event
the actual charges for such items and services are substantially higher than the plan’s estimate, and will prohibit providers
from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network
providers, subject to certain exceptions. Several states have also enacted comprehensive balance billing or surprise billing
laws and the CAA defers to existing state requirements with respect to state-established payment amounts. Such state laws
vary in their approach, resulting in different impacts on the health care system as a whole.
We are unable to predict how these changes to the ACA and other healthcare reform initiatives from new
legislation, regulation, judicial action and/or executive action, including the CAA and No Surprises Act and state laws, will
ultimately impact the healthcare industry and what the potential impact may be on our business or on our business and on
our relationships with future clients, insurance carriers, and healthcare providers. If we are unable to comply with these
laws or regulations or provide adequate assistance to our clients subject to these laws or regulations, it is reasonably
possible that our business operations and operating results could be materially adversely affected.
We are subject to potential changes in laws, regulations, government enforcement priorities, public policy, industry
standards and other requirements, including with respect to Progyny Rx’s PBM practices, which create risks and
challenges with respect to our compliance efforts and our business strategies, and may adversely affect our business.
The healthcare industry is highly regulated and subject to frequently changing laws, regulations, government
enforcement priorities, public policies, industry standards and other requirements. Many healthcare laws and regulations
are complex, and their application to specific solutions, services and relationships may not be clear. Because our clients are
subject to various requirements, we may be impacted as a result of our contractual obligations even when we are not
directly subject to such requirements. In particular, many existing healthcare laws and regulations, when enacted, did not
anticipate the solutions and services that we provide, and these laws and regulations may be applied to our solutions and
services in ways that we do not anticipate. The ACA, efforts to revise, expand or materially change the ACA, and other
federal and state efforts to reform or revise aspects of the healthcare industry or to revise or create additional legal or and
regulatory requirements could impact our operations, the use of our solutions and services, and our ability to market new
solutions and services, or could create unexpected liabilities for us. We also may be impacted by laws, industry standards
and other requirements that are not specific to the healthcare industry, such as consumer protection laws and payment card
industry standards. These requirements may impact our operations and, if not followed, could result in fines, penalties and
other liabilities and adverse publicity and injury to our reputation.
In recent years, there have been a number of reform efforts, including from federal and state legislatures as well as
the HHS OIG, around PBM program pricing and transparency that could affect our business. Current PBM laws and
regulations govern, and proposed legislation and regulations may govern and/or further restrict critical PBM practices,
including, among other things, disclosure, receipt and retention of rebates and other payments received from
pharmaceutical manufacturers or pharmacy program partners, rules governing contractual provisions between PBMs and
their contracted payers and/or pharmacies, and registration or licensing of PBMs. For example, in 2019, the U.S. Senate
and House of Representatives proposed a number of bills that would, among other things, require PBMs to submit
information on their costs, fees and rebates, requiring 100% of the rebates to be passed on to consumers, and/or impose
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rebates on manufacturers that chose to increase their drug prices more rapidly than inflation. Further, the U.S. Supreme
Court’s decision in Rutledge v. Pharm. Care Mgmt. Ass’n on December 10, 2020, which held that an Arkansas state law
requiring PBMs to reimburse pharmacies at a price equal to or greater than the price pharmacies pay in purchasing
medications from a wholesaler, was not preempted by the federal ERISA statute. The Supreme Court’s ruling solidifies the
legality of state-level legislation regulating PBMs, which may encourage a new wave of legislation aimed at controlling
prescription drug costs and providing pricing transparency. In the wake of the Rutledge ruling, for example, New York
reintroduced previously vetoed PBM legislation and Governor Andrew Cuomo issued an Executive Budget for 2022 that
highlights the need for PBM accountability. States proposed over 100 separate PBM bills in 2021 alone, and at least 18
states adopted new PBM oversight laws. A number of these proposed laws would require PBMs to submit annual
transparency reports or otherwise disclose contractual arrangements with health benefit plans or health insurance issuers, or
allow regulators to conduct audits of PBM operations. Additionally, certain quasi-regulatory organizations, including the
National Association of Boards of Pharmacy and the National Association of Insurance Commissioners, have issued model
regulations or may propose future model regulations concerning PBM operations. PBM credentialing organizations may
also establish voluntary standards regarding PBM activities. While the model regulations and standards of these quasi-
regulatory or credentialing organizations are not legal requirements, federal and state lawmakers may be influenced to
adopt similar legislation and such model regulations and standards may also impact client expectations or requirements
for PBM services. PBM operations may also be subject to federal and state fraud and abuse laws. We do not believe our
operations are directly subject to such laws (including regulations under the federal anti-kickback statute directly
applicable to PBMs) as the PBM solutions and services we provide are not reimbursed by government healthcare payors.
Some states’ anti-kickback and false claims laws may be broader in scope than analogous federal laws and may apply to
items and services reimbursed by any third-party payor, including private insurers, self-insured employers and on a cash
basis by patients, and may be applicable to us.
Accordingly, it is reasonably possible that our business operations and operating results could be materially
adversely affected by legislative, regulatory and public policy changes at the federal or state level, increased government
involvement in drug reimbursement and pricing, and/or increased regulation of PBMs. Adoption of new laws, rules or
regulations or changes in government enforcement priorities of or new interpretations of, existing laws, rules or regulations
relating to PBMs could materially adversely affect our business and results of operations with respect to Progyny Rx.
Additionally, such legal and regulatory changes may adversely affect our ability to conduct business on commercially
reasonable terms in states where PBM legislation is in effect and the Company’s ability to standardize its Progyny Rx
PBM products and services across state lines. Further, failure by the Company to comply with these laws or regulations
could result in material fines and/or sanctions and could have a material adverse effect on the Company’s operating results
and/or cash flows.
We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such
laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations.
While we operate only in the United States, we remain subject to the U.S. Foreign Corrupt Practices Act, U.S.
domestic bribery laws, and other anti-corruption and anti-money laundering laws in the countries in which we conduct
activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted
broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or
providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. If we expand
our business and sales outside the United States and to the public sector, we may engage with business partners and third-
party intermediaries to market our services and to obtain for us the necessary permits, licenses, and other regulatory
approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and
employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other
illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even
if we do not explicitly authorize such activities.
Detecting, investigating, and resolving actual or alleged violations of anti-corruption laws can require a significant
diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-
bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, prosecution,
enforcement actions, sanctions, settlements, fines, damages, other civil or criminal penalties or injunctions, suspension or
debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral
consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do
not prevail in any possible civil or criminal proceeding, our business, financial condition and results of operations could be
harmed. In addition, responding to any action will likely result in a materially significant diversion of
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management’s attention and resources and significant defense costs and other professional fees, which could adversely
affect our business, financial condition and results of operations.
Any potential sales to government entities are subject to a number of challenges and risks.
We may sell our services or solutions to U.S. federal, state, and local government, and agency, clients. Sales to
such entities are subject to a number of challenges and risks. Selling to such entities can be highly competitive, expensive,
and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will
generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the
government sector until we have attained the revised certification. Government demand and payment for our offerings is
dependent on many factors outside our control, including general economic conditions, public sector budgetary constraints
and funding authorizations, and general political priorities, with funding reductions or delays adversely affecting public
sector demand for our offerings.
Further, governmental and highly regulated entities may demand contract terms that differ from our standard
arrangements. Such entities may have statutory, contractual, or other legal rights to terminate contracts with us or our
partners due to a default or for other reasons. Any such termination may adversely affect our reputation, business, financial
condition and results of operations.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and
our brand.
Our success depends in part on our ability to protect our brand and proprietary trade secret and confidential
information, including unpatented know-how, technology and other proprietary information, maintaining, defending and
enforcing our intellectual property rights. We rely on our agreements with our clients, and non-disclosure and
confidentiality agreements with employees and third parties, and our trademarks, trade secrets, and copyrights to protect
our intellectual property rights. However, any of these parties may breach such agreements and disclose our proprietary
information, and we may not be able to obtain adequate remedies for such breaches. There is no assurance that we will be
able to obtain, maintain, defend and enforce our intellectual property rights, or that such intellectual property rights will not
be challenged, narrowed, held unenforceable or circumvented. Therefore, these legal protections and precautions may not
prevent infringement, misappropriation or other violations of our intellectual property. Any litigation and any infringement,
misappropriation or other violations of our intellectual property could hinder our ability to market and sell our solutions,
and our business, financial condition and results of operations could be adversely affected.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third
party, we would have no right to prevent them from using that technology or information to compete with us and our
competitive position would be harmed.
Third parties may allege that our products and services, or the conduct of our business, infringe, misappropriate or
otherwise violate such third party’s intellectual property rights. Even if such claims are without merit, defending such
claims would cause us to incur substantial expenses and could cause us to pay substantial damages or seek a costly license
if we are found to be infringing, misappropriating, or otherwise violating a third party’s intellectual property rights. If we
are unable to enter into a license on acceptable terms or at all, we could be forced to cease some aspect of our business
operations or be forced to redesign our products or services so that we no longer infringe the third-party intellectual
property rights, which may result in significant cost and delay to us, or which redesign could be technically infeasible.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to
incur significant expenses and could distract our employees and management personnel from their normal responsibilities.
Moreover, although we try to ensure that our employees do not use the proprietary information or know-how of
others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual
property, including trade secrets or other proprietary information, of any third parties, including such individual’s former
employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result
in substantial costs and be a distraction to management.
Furthermore, we currently own registered trademarks. In addition, any of our trademarks or trade names, whether
registered or unregistered, may be challenged, opposed, infringed, cancelled, circumvented or declared generic, or
determined to be infringing on other marks, as applicable. We may not be able to protect our rights to these trademarks
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and trade names, which we will need to build name recognition by potential collaborators or clients in our markets of
interest.
Any litigation against us could be costly and time-consuming to defend and could harm our business, financial
condition and results of operations.
We have in the past and may in the future become subject to legal proceedings and claims that arise in the
ordinary course of business, such as claims brought by our clients or vendors in connection with commercial disputes or
employment claims made by our current or former employees. We are unable to predict the outcome of any legal
proceedings. Such proceedings might result in substantial costs, regardless of the outcome, and may divert management’s
attention and resources, which might seriously harm our business, financial condition and results of operations. As
discussed in Part I, Item 3 of this Annual Report on Form 10-K, we were subject to a vendor arbitration that was settled in
December 2020. As part of our settlement and to avoid further costs, we agreed to pay the vendor a total of $5.75 million.
Insurance might not cover litigation claims, might not provide sufficient payments to cover all the costs to resolve one or
more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is
uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial condition and
results of operations. See Note 14 – Commitments and Contingencies – in the notes to the consolidated financial statements
included in Part II, Item 8, of this Annual Report on Form 10-K.
Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges,
divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business,
financial condition and results of operations.
We may in the future seek to acquire or invest in businesses, joint ventures, products and services, or technologies
that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth
opportunities. Any such acquisition or investment may divert the attention of management and cause us to incur various
expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed,
and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties
assimilating or integrating the businesses, technologies, products and services, personnel or operations of the acquired
companies, particularly if the key personnel of the acquired company choose not to work for us, they are operationally
difficult to integrate, or we have difficulty retaining the clients of any acquired business due to changes in ownership,
management or otherwise. These transactions may also disrupt our business, divert our resources, and require significant
management attention that would otherwise be available for development of our existing business. Any such transactions
that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could
result in impairment charges that could be substantial. In addition, we may not be able to find and identify desirable
acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic
partner. These transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could
adversely affect our results of operations. In addition, if the resulting business from such a transaction fails to meet our
expectations, or we fail to successfully integrate such businesses into our own, our business, financial condition and results
of operations may be adversely affected or we may be exposed to unknown risks or liabilities.
Changes in our effective tax rate or tax liabilities may have an adverse effect on our results of operations.
Our effective tax rate could be impacted due to several factors, including, but not limited to:
● changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have
differing statutory tax rates;
● changes in tax laws, tax treaties, and regulations or the interpretation of them;
● changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our
future results, the prudence and feasibility of possible tax planning strategies, and the economic and political
environments in which we do business;
● the outcome of future tax audits, examinations, or administrative appeals;
● limitations or adverse findings regarding our ability to do business in some jurisdictions; and
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● discrete impact tax items, including such items resulting from the amount and timing of equity exercises and our
share price.
Any of these developments could have an adverse effect on our results of operations.
Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local taxes which
could adversely affect our results of operations.
We currently file state tax returns in certain states. There is a risk that certain state tax authorities, where we do not
currently file a state tax return, could assert that we are liable for state and local taxes based upon income or gross receipts
allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state tax purposes. We could
be subject to state and local taxation, including penalties and interest attributable to prior periods, if a state tax authority in
which we do not currently file a state tax return successfully asserts that our activities give rise to a taxable nexus. Such tax
assessments, penalties and interest may adversely affect our results of operations.
We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which
could adversely affect our profitability.
Under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss
carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section
382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of
our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a
rolling three-year period. Similar rules may apply under state tax laws. Future issuances of our stock could cause an
“ownership change.” Any future ownership change, which could be outside of our control, could also have a material effect
on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the
United States.
Accounting principles generally accepted in the United States are subject to interpretation by the Financial
Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate
accounting principles. As of January 1, 2021, we adopted ASC No. 2019-12, Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes, which did not have a material impact on our consolidated financial statements. As of January
1, 2020, we adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective transition method and
recorded a right-of-use asset and lease liabilities of $9.5 million and $9.9 million, respectively. In addition, as of January 1,
2020, we also adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) using the modified retrospective
transition method, which resulted in a cumulative-effect adjustment to accumulated deficit of $1.2 million and impacted
our methodology for calculating and estimating our allowance for doubtful accounts. See Note 2 – Summary of Significant
Accounting Policies, in the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-
K for additional information on recently adopted accounting standards. A change in accounting principles or interpretations
could have a significant effect on our reported results of operations and could affect the reporting of transactions already
completed before the announcement of a change. The adoption of new or revised accounting principles may require us to
make changes to our systems, processes and control, which could have a significant effect on our reported financial results,
cause unexpected financial reporting fluctuations, retroactively affect previously reported results or require us to make
costly changes to our operational processes and accounting systems upon or following the adoption of these standards.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations
could be adversely affected.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in our
consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. We
base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances, as provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results
of Operations-Critical Accounting Policies and Estimates” of this Annual Report on Form 10-K. The results of these
estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the
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amount of revenue and expenses that are not readily apparent from other sources. We believe that the assumptions and
estimates associated with our accrued receivables related to revenue recognition, accrued claims payable, stock-based
compensation, and accounting for income taxes have the greatest potential impact on our consolidated financial statements
and therefore, we consider these to be our critical accounting policies and estimates. Our results of operations may be
adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could
cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in
the market price of our common stock.
Risks Related to Ownership of Our Common Stock
Our stock price may be volatile, and the value of our common stock may decline.
As tenured investors look to monetize their positions, we have seen large blocks of shares enter the public market
over a short period of time. The market price of our common stock may be highly volatile and may fluctuate or decline
substantially as a result of this and a variety of factors, some of which are beyond our control, including, but not limited to:
● high volume of direct sales into the market by large investors;
● actual or anticipated fluctuations in our financial condition or results of operations;
● variance in our financial performance from expectations of securities analysts;
● changes in the pricing of our solutions and services;
● changes in our projected operating and financial results;
● changes in laws or regulations applicable to our products and solutions;
● announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
● significant data breaches of our company, providers, vendors or pharmacies;
● our involvement in litigation;
● future sales of our common stock by us or our stockholders;
● changes in senior management or key personnel;
● the trading volume of our common stock;
● changes in the anticipated future size and growth rate of our market; and
● general economic, industry, and market conditions.
Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions,
including those related to the ongoing COVID-19 pandemic, may also negatively impact the market price of our common
stock. Fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in
the current economic environment due to the uncertainty caused by and the unprecedented nature of the current COVID-19
pandemic. These and other factors may cause the market price and demand for our common stock to fluctuate substantially,
which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively
affect the liquidity of our common stock. In the past, companies that have experienced volatility in the market price of their
securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future,
which could result in substantial expenses and divert our management’s attention.
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An active trading market for our common stock may not be sustained.
An active public trading market for our common stock may not be sustained. The lack of an active market may
impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack
of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise
capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or
technologies by using our shares as consideration.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the
expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of
your investment could decline.
Our results of operations may fluctuate in the future due to a variety of factors, many of which are outside of our
control. As a result, our past results may not be indicative of our future performance. In addition to the other risks
described herein, factors that may affect our results of operations include the following:
● fluctuations in demand for or pricing of our solutions;
● level and mix of utilization of our solutions by members;
● our ability to attract new clients;
● our ability to retain our existing clients;
● client expansion rates;
● changes in clients’ budgets and in the timing of their budget cycles and purchasing decisions;
● our ability to control costs, including our operating expenses and healthcare costs;
● the amount and timing of payment for operating expenses, particularly sales and marketing expenses;
● the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and
other non-cash charges;
● the amount and timing of costs associated with recruiting, training and integrating new employees and retaining
and motivating existing employees;
● general economic conditions, as well as economic conditions specifically affecting industries in which our clients
participate, including those related to the ongoing COVID-19 pandemic;
● the impact of new accounting pronouncements;
● changes in the competitive dynamics of our market, including consolidation among competitors or clients; and
● significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our
solutions and services.
Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of
operations to vary significantly. For example, the full impact of the COVID-19 pandemic is unknown at this time, but
could result in adverse changes in our results of operations for an unknown period of time as the virus and its related
political, social and economic impacts spread. If our quarterly results of operations fall below the expectations of investors
and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face
costly lawsuits, including securities class action suits.
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As a result of being a public company, we are obligated to develop and maintain proper and effective internal control
over financial reporting, and any failure to maintain the adequacy of these internal control may adversely affect
investor confidence in our company and, as a result, the value of our common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by
management on, among other things, the effectiveness of our internal control over financial reporting and our independent
registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting. To
maintain compliance with Section 404, we perform system and process evaluation and testing of our internal control over
financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our
Annual Report on Form 10-K filing for each year, as required by Section 404 of SOX. Our existing management team has
and will continue to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional
accounting and financial staff with appropriate public company experience to assist us in ongoing compliance with these
requirements. Moreover, these rules and regulations have increased and will continue to increase our legal and financial
compliance costs and will make some activities more time consuming and costly.
During the evaluation and testing process of our internal control, if we identify one or more material weaknesses
in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting
is effective. For example, in connection with our audit of the fiscal year 2018 consolidated financial statements, we and our
independent registered public accounting firm identified one material weakness in our controls related to the lack of review
and oversight over financial reporting, which we determined we had remediated as of December 31, 2019. We cannot
assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial
reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to
accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over
financial reporting is effective, or if our independent registered public accounting firm determines we have a material
weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the
accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be
subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness
in our internal control over financial reporting, or to implement or maintain other effective control systems required of
public companies, could also restrict our future access to the capital markets.
Future sales of our common stock in the public market could cause the market price of our common stock to decline.
Future sales of a substantial number of shares of our common stock in the public market by us or our
stockholders, or the perception that these sales might occur, could depress the market price of our common stock and could
impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that
such sales may have on the prevailing market price of our common stock.
In addition, as of December 31, 2021, there were an aggregate of 14,924,013 and 1,765,518 shares of our common
stock subject to outstanding options and unvested restricted stock units, respectively. We have registered all of the shares of
common stock issuable upon exercise of outstanding options or other equity awards we may grant in the future, for public
resale under the Securities Act. Accordingly, these shares will be eligible for sale in the public market to the extent such
options are exercised and restricted stock units are vested, in compliance with applicable securities laws.
Further, holders of a substantial number of shares of our common stock have rights, subject to certain conditions,
to require us to file registration statements covering the sale of their shares or to include their shares in registration
statements that we may file for ourselves or other stockholders.
Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive
plans or otherwise will dilute all other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We
expect to grant equity awards to employees, directors and consultants under our equity incentive plans. We may also raise
capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in
businesses, joint ventures, products and services, or technologies and issue equity securities to pay for any such acquisition
or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of
their ownership interests and the per share value of our common stock to decline.
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If securities or industry analysts do not publish research, or publish unfavorable or inaccurate research, about our
business, the market price and trading volume of our common stock could decline.
The market price and trading volume of our common stock will be heavily influenced by the way analysts
interpret our financial information and other disclosures. We do not have control over these analysts. If few securities
analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively
affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common
stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts
cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might
cause our stock price to decline and could decrease the trading volume of our common stock. We have experienced and
may in the future experience analyst coverage reduction due to analysts leaving firms, changing firms or going on
temporary leaves of absences. Such reduction in analyst coverage, even if temporary, could lead to volatility in our stock
price.
We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your
investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash
dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board
of Directors. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never
occur, as the only way to realize any future gains on your investment.
We incur increased costs as a result of operating as a public company, and our management is required to devote
substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we have incurred and will continue to incur significant legal, accounting, and other
expenses that we did not incur prior to our initial public offering. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market, or Nasdaq, and other
applicable securities rules and regulations impose various requirements on public companies. Our management and other
personnel devote a substantial amount of time to compliance with these requirements. Effective January 1, 2021, we
became a “large accelerated filer” under SEC reporting rules and are required to file our annual report and quarterly reports
more quickly than we previously had been required to file them, which may require us to dedicate additional resources to
the timely filing of such reports. Moreover, these rules and regulations have increased and will continue to increase our
legal and financial compliance costs and make some activities more time-consuming and costly. We cannot predict or
estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company
more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market
price of our common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have
the effect of delaying or preventing a change of control or changes in our management. Our amended and restated
certificate of incorporation and amended and restated bylaws include provisions that:
● authorize our Board of Directors to issue, without further action by the stockholders, shares of undesignated
preferred stock with terms, rights, and preferences determined by our Board of Directors that may be senior to our
common stock;
● require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and
not by written consent;
● specify that special meetings of our stockholders can be called only by our Board of Directors, the chairperson of
our Board of Directors, or our chief executive officer;
● establish an advance notice procedure for stockholder proposals to be brought before an annual meeting,
including proposed nominations of persons for election to our Board of Directors;
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● establish that our Board of Directors is divided into three classes, with each class serving three-year staggered
terms;
● prohibit cumulative voting in the election of directors;
● provide that our directors may be removed for cause only upon the vote of at least 66 and 2/3% of our outstanding
shares of voting stock;
● provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even
though less than a quorum; and
● require the approval of our Board of Directors or the holders of at least 66 and 2/3% of our outstanding shares of
voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace members of our Board of Directors, which is
responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any
“interested” stockholder for a period of three years following the date on which the stockholder became an “interested”
stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for
shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that
you would receive a premium for your shares of our common stock in an acquisition.
Our amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state
court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and
exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could
discourage lawsuits against us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, unless
we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the
Court of Chancery does not have jurisdiction, any state court located within the State of Delaware, or if all such state courts
lack jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the
following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or
proceeding brought on our behalf; (2) any action asserting a breach of a fiduciary duty owed by any current or former
director, officer or other employee, to us or our stockholders; (3) any action or proceeding asserting a claim against us or
any of our current or former directors, officers or other employees, arising out of or pursuant to any provisions of the
Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated
bylaws; (4) or any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated
certificate of incorporation or our amended and restated bylaws; (5) any action or proceeding as to which the Delaware
General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; or (6) any action
asserting a claim against us, or any of our directors, officers or other employees, that is governed by the internal affairs
doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the
indispensable parties named as defendants. For the avoidance of doubt, these choice of forum provisions will not apply to
suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the
federal courts have exclusive jurisdiction. In particular, Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts over all such Securities Act actions.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. A
stockholder may, nevertheless, seek to bring a claim in a venue other than that designated in our amended and restated
certificate of incorporation. In such instance we would expect to vigorously assert the validity and enforceability of the
exclusive forum provisions, which may require significant additional costs. Furthermore, if a court were to find the choice
of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
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ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our corporate headquarters is located at 1359 Broadway, New York, New York 10018, under a sublease that
commenced in September 2019 and expires in May 2029. In February 2022, we entered into a lease, which expires in the
first quarter of 2035, for additional space in the same location and also for continued occupancy of our current space after
the current sublease expires. We use this space for administration, sales and marketing and client support.
ITEM 3.
LEGAL PROCEEDINGS
See Part II, Item 8 “Financial Statements and Supplementary Data — Note 14 — Commitments and
Contingencies — Arbitration/Litigation.”
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding our executive officers and directors as of the date of
this Annual Report on Form 10-K.
Name
Age
Position
Executive Officers:
David Schlanger
Peter Anevski
Jennifer Bealer
Mark Livingston
Michael Sturmer
Non- Employee Directors:
Beth Seidenberg, M.D.
Malissia Clinton
Fred E. Cohen, D.Phil.
Kevin Gordon
Roger Holstein
Jeff Park
Norman Payson, M.D.
Cheryl Scott
Executive Officers
62
54
41
56
45
64
53
65
59
69
50
73
72
Executive Chairman
Chief Executive Officer
Executive Vice President, General
Counsel and Secretary
Chief Financial Officer
President
Lead Independent Director
Director
Director
Director
Director
Director
Director
Director
David Schlanger has served as our Executive Chairman since January 2022 and on our board of directors since
March 2017. Mr. Schlanger was previously our Chief Executive Officer from January 2017 to December 2021. From
August 2013 until September 2016, he served as the Chief Executive Officer of WebMD, an online provider of information
relating to health and well-being. Prior to that, he served as the Interim Chief Executive Officer and in various other senior
executive positions at WebMD and predecessor companies for more than 15 years, including as Senior Vice President,
Strategic and Corporate Development and Senior Vice President, Corporate Development. Mr. Schlanger received his B.S.
from Georgetown University and his J.D. from the University of Michigan Law School. We believe that Mr. Schlanger is
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qualified to serve on our board of directors because of his extensive experience at healthcare companies and in executive
management.
Peter Anevski has served as our Chief Executive Officer and on our board of directors since January 2022. He
previously served as our Chief Operating Officer from January 2017 to December 2021 and our President from June 2019
to December 2021. From January 2017 to September 2020, he also served as our Chief Financial Officer. Mr. Anevski has
extensive experience managing financial functions for public companies. From May 2013 until September 2016, he served
as the Executive Vice President and Chief Financial Officer of WebMD. Prior to that, Mr. Anevski served in senior finance
and operations roles at WebMD and predecessor companies for 14 years, including as Senior Vice President, Finance.
Mr. Anevski received his B.A. in Accounting from Montclair State University. We believe that Mr. Anevski is qualified to
serve on our board of directors because of his significant experience at healthcare companies and as a member of our
executive management team.
Jennifer Bealer has served as our Executive Vice President, General Counsel and Secretary since October 2017.
Prior to that, she was an Associate at the law firm Ropes & Gray’s nationally-ranked healthcare practice from
November 2010 to October 2017, where she gained extensive expertise in providing healthcare clients with strategic,
regulatory, compliance and transaction advice. Ms. Bealer holds a B.S. in Biology and Psychology from the Pennsylvania
State University and received her J.D. from the University of Pennsylvania Law School, A.L.M from Harvard University,
and Master of Bioethics from University of Pennsylvania School of Medicine.
Mark Livingston has served as our Chief Financial Officer since September 2020. Previously, Mr. Livingston had
served as our Executive Vice President of Finance from May 2019 to September 2020. Prior to that, he served as Chief
Financial Officer of the International Business at Scripps Network Interactive, a media company, where he worked from
August 2010 to April 2018, and as Chief Financial Officer of Emerson, Reid & Company, an employee benefits
wholesaler, from June 2007 to August 2010. Previously, Mr. Livingston has held senior financial leadership roles at
WebMD and Hess Corporation. Mr. Livingston received his B.S. from Tulane University and is a licensed Certified Public
Accountant.
Michael Sturmer has served as our President since January 1, 2022 and was previously Executive Vice President,
Chief Growth and Strategy Officer from February 2021 to December 2021. Mr. Sturmer has over two decades of
operations, sales and strategic experience in the healthcare industry. From September 2016 to February 2021, he was
Senior Vice President of Health Services at Livongo. Prior to that, Mr. Sturmer held several senior positions at Cigna,
including Chief Operating Officer for the New York/New Jersey Health Plan. Mr. Sturmer received his B.A. degree in
Health Administration from Quinnipiac University.
Non-Employee Directors
Beth Seidenberg, M.D. has served on our board of directors since May 2010 and as Lead Independent Director
since January 2022. Previously, Dr. Seidenberg served as Chair of our board of directors from June 2015 to December
2021. Dr. Seidenberg has been a partner at Kleiner Perkins, a venture capital firm, since May 2005, where she primarily
focuses on life sciences investing. She has also served as the Managing Director of Westlake Village BioPartners, another
venture capital firm, since August 2018. Prior to joining Kleiner Perkins, Dr. Seidenberg was the Senior Vice President,
Head of Global Development and Chief Medical Officer at Amgen, Inc., a biotechnology company. In addition,
Dr. Seidenberg was a senior executive in research and development at Bristol Myers Squibb Company, a biopharmaceutical
company, and Merck. Dr. Seidenberg has served on the board of directors of Atara Biotherapeutics since August 2012.
Dr. Seidenberg previously served on the boards of directors of Epizyme, Inc., from February 2008 to September 2019,
Tesaro, Inc., from June 2011 to February 2019, and ARMO BioSciences, Inc. from December 2012 until June 2018.
Dr. Seidenberg received a B.S. from Barnard College and an M.D. from the University of Miami School of Medicine and
completed her post-graduate training at the Johns Hopkins University, George Washington University and the National
Institutes of Health. We believe that Dr. Seidenberg is qualified to serve on our board of directors because of her extensive
experience in the life sciences industry as a senior executive and venture capitalist, as well as her training as a physician.
Malissia Clinton has served as a member of our board of directors since November 2020. Ms. Clinton has served
as Senior Vice President, General Counsel and Secretary at The Aerospace Corporation, a non-profit corporation that
provides technical guidance on space missions, since 2009. She previously worked at Northrop Grumman from 2002 to
2009, including her role as Senior Counsel for Special Projects beginning in 2007. Ms. Clinton joined TRW Space
Technology, a division of TRW, Inc., in 1998 as Counsel in its Telecommunication Programs and Avionic Systems
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division. She began her career as an Associate at Tuttle & Taylor. Additionally, Ms. Clinton has served on the board of
directors of 3D Systems Corporation since 2019 and on the board of directors of City of Hope Medical Center since 2016.
Ms. Clinton holds a B.S. in Political Science and Government from Arizona State University and received her J.D. from
Stanford Law School. We believe that Ms. Clinton is qualified to serve on our board of directors because of her strong legal
background and extensive experience in corporate governance.
Fred E. Cohen, M.D. D.Phil. has served on our board of directors since March 2015. Dr. Cohen is currently a
Senior Advisor to TPG Capital, where he previously served for over 15 years as a Partner, and founder of TPG
Biotechnology, a life science focused venture capital fund. Beginning in July 2021, Dr. Cohen has served as a co-founder
and Chairman of Monograph Capital Partners, a biotechnology venture capital fund. Beginning in November 2017, Dr.
Cohen has served as a co-founder and senior managing director of Vida Ventures, LLC, a biotechnology venture capital
fund. In addition, for three decades throughout his career, Dr. Cohen has been affiliated with University of California, San
Francisco where he held various clinical responsibilities, including as a research scientist, an internist for hospitalized
patients, a consulting endocrinologist, and the Chief of the Division of Endocrinology and Metabolism. Dr. Cohen
currently serves on the boards of directors of the following public companies: Urogen Pharma Ltd. (since May 2017),
CareDx, Inc. (since January 2003), and lntellia Therapeutics, Inc. (since January 2019). Dr. Cohen also serves on the board
of directors of several privately-held companies and previously served on the board of directors of BioCryst
Pharmaceuticals, Inc. from July 2013 until January 2019, Quintiles Transnational Holdings, Inc. from May 2007 to
November 2015, Roka Bioscience, Inc. from September 2009 to October 2017, Five Prime Therapeutics, Inc. from May
2002 until May 2018, Tandem Diabetes Care, Inc. from June 2013 until June 2019, Genomic Health Inc. from April 2002
until November 2019 and Veracyte, Inc. from 2007 until June 2021. Dr. Cohen received his B.S. in Molecular Biophysics
and Biochemistry from Yale University, his D.Phil. in Molecular Biophysics from Oxford on a Rhodes Scholarship, and his
M.D. from Stanford. He is a member of the National Academy of Medicine and the American Academy of Arts and
Sciences. Dr. Cohen is a California licensed physician. We believe that Dr. Cohen is qualified to serve on our board of
directors because of his financial and medical knowledge and experience.
Kevin Gordon has served as a member of our board of directors since October 2019. Mr. Gordon has also served
on the board of directors of Veracyte, Inc., a genomic diagnostics company, since December 2016 and as an advisor to 3i
Group’s North American healthcare portfolio companies since January 2022, including currently as a director of privately
held Q Holdco Limited, Sanisure, Cirtec Medical Corp. and ten23 health. From January 2018 until March 2019, he was the
President and Chief Financial Officer of Liquidia Technologies Inc., a clinical biopharmaceutical company. Mr. Gordon
served as Executive Vice President and Chief Operating Officer of Quintiles Transnational Holdings Inc., or Quintiles, a
research, clinical trial and pharmaceutical consulting company, from October 2015 until its merger with IMS Health
Holdings, Inc. (forming IQVIA Holdings, Inc.) in October 2016. Prior to that, he was the Executive Vice President and
Chief Financial Officer of Quintiles from July 2010 until December 2015. Mr. Gordon served as Executive Vice President
and Chief Financial Officer of Teleflex Incorporated, a medical device company, from March 2007 until January 2010.
Mr. Gordon held various senior corporate development positions at Teleflex Incorporated from 1997 to 2007. Prior thereto
he held various senior positions, including Chief Financial Officer, at Package Machinery Company and senior manager
and other positions at KPMG LLP. Mr. Gordon holds a B.S. in Accounting from the University of Connecticut. We believe
that Mr. Gordon is qualified to serve on our board of directors because of his extensive accounting experience and
leadership experience in healthcare companies.
Roger Holstein has served as a member of our board of directors since November 2020. He has been a Managing
Director at Vestar Capital Partners, a private equity firm, since 2006. He currently serves on the boards of Quest Analytics,
and Mercury Healthcare. From 1997 to 2005, Mr. Holstein served as Chief Executive Officer, President or Director of
WebMD Health Corp., or WebMD, and helped establish it as the leading source of healthcare information for consumers
and professionals. From 1991 to 1996, Mr. Holstein was a member of the Office of the President at Medco, where he
helped create the business of prescription benefit management. Prior to that, Mr. Holstein held executive positions at MCI,
Warner Amex Cable and Grey Advertising. He began his career in marketing with the Spirits of St. Louis basketball team
in the American Basketball Association. Mr. Holstein holds a B.A. with distinction, from Swarthmore College. We believe
that Mr. Holstein is qualified to serve on our board of directors because of his extensive leadership and healthcare
experience.
Jeff Park has served as a member of our board of directors since October 2019. Mr. Park has served since
April 2019 as the Chairman and Chief Executive Officer of WellDyneRx, an independent pharmacy benefits manager and
has served as a member of the board of directors for P3 Health Partners since December 2021. From January 2018 until
May 2018, he was the Interim Chief Executive Officer of Diplomat Pharmacy, Inc., or Diplomat, a provider of specialty
pharmacy services. Additionally, from June 2017 to February 2019, he served on the board of directors of Diplomat. Prior
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to that, from July 2015 until July 2016, he was the Chief Operating Officer of OptumRX, the entity resulting from the
merger of Catamaran Corporation, or Catamaran, and OptumRX, UnitedHealthcare Group’s free-standing pharmacy care
services business. Before the merger, from March 2014 until July 2015, he was Catamaran’s Executive Vice President,
Operations, and previously served as Catamaran’s Chief Financial Officer, beginning in 2006. Mr. Park served as a member
of the board of directors for Ray Graham Assoc. Illinois Disability not for profit from January 2010 to June 2016. Mr. Park
holds a B.S. in Accounting from Brock University. We believe that Mr. Park is qualified to serve on our board of directors
because of his extensive leadership experience in the pharmaceutical industry.
Norman Payson, M.D. has served on our board of directors since December 2016. Dr. Payson was co-founder of
Healthsource and its Chief Executive Officer from 1985 to 1997, Chief Executive Officer of Oxford Health Plans from
1998 to 2002, Chairman of Concentra from 2005 to 2008 and Chief Executive Officer of Apria Healthcare Group Inc. from
2008 to 2012, where he is currently a member of the board of directors. In February of 2021 Apria Healthcare Group, Inc.
completed a public offering and is publicly traded. Since 1997, Dr. Payson has served as President and a director of NCP,
Inc., his family office, through which he engages in consulting and personal investment activities. Additionally, Dr. Payson
served as a strategic advisor for Evolent Health, Inc., or Evolent, from March 2014 through December 2020 and previously
served on its board of directors from December 2013 to June 2019. Dr. Payson is currently serving on the board of
directors of various private and not-for-profit companies including Access Clinical Partners, Smile Brands, Implantable
Provider Group, HPM National Advisory Board at the Mailman School of Public Health at Columbia, USC Schaeffer
Center Advisory Board and Executive Services Corporation of Southern California. Dr. Payson is also on the board of Kiva
Foundation, a private charitable foundation organized by Dr. Payson and his wife in June 1998. Until June 2020, Dr.
Payson served on the board for City of Hope, where he now serves as director emeritus. He continues to serve on the
boards of AccessHope and Beckman Research Institute which are subsidiaries of City of Hope. Until June 2019,
Dr. Payson served as a director at Geisel School of Medicine at Dartmouth, where he now serves as director emeritus.
From May 2017 to August 2019 Dr. Payson was a board member of The Center for Orthopaedic and Research Excellence,
Inc. Dr. Payson holds a B.S. in Earth and Planetary Sciences from the Massachusetts Institute of Technology and received
his M.D. from Dartmouth Medical School. Dr. Payson is a California licensed physician. We believe that Dr. Payson is
qualified to serve on our board of directors because of his 30-year career as chief executive officer or chairman of multiple
healthcare organizations, including publicly-traded companies.
Cheryl Scott has served as a member of our board of directors since October 2019. Since July 2016, Ms. Scott has
served as the Main Principal of the McClintock Scott Group. From June 2006 to July 2016, Ms. Scott served as Senior
Advisor to the Bill & Melinda Gates Foundation. Previously, she served as President and Chief Executive Officer of the
Seattle-based Group Health Cooperative for eight years. Ms. Scott has served as a member of the board of directors of
Evolent since November 2015. She also currently serves on a variety of private company and not-for-profit boards. She
was a member of the board of directors of Recreational Equipment Incorporated (REI) from 2005 to 2017, and served as
the board chairperson from 2015 to 2017. Ms. Scott received her B.A. in Journalism and M.H.A. from the University of
Washington, and is currently a Clinical Professor of Health Services at the University of Washington. We believe that
Ms. Scott is qualified to serve on our board of directors because of her extensive career in healthcare, leadership and
corporate governance, including her tenure as the Chief Executive Officer of Group Health Cooperative.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is listed on the Nasdaq Global Select Market under the symbol “PGNY”.
Holders of Record
As of January 31, 2022, there were approximately 59 stockholders of record of our common stock. Because many
of our shares of common stock are held in “street name” by brokers and other institutions on behalf of stockholders, we are
unable to estimate the total number of stockholders represented by these record holders.
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Dividend Policy
We have never declared or paid cash dividends on our capital stock. We intend to retain any future earnings and
do not expect to pay cash dividends in the foreseeable future.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Our restricted stock units are subject to vesting and the underlying shares of common stock are issued when the
restricted stock units vest.
In the fourth quarter of 2021, we withheld shares through net settlements (where the award holder receives the net
of the shares vested, after surrendering a portion of the shares back to the Company for tax withholding) for certain
restricted stock units that vested.
The following table provides a summary of shares surrendered back to the Company for tax withholding on
restricted stock units that vested under our equity incentive plans in the three months ended December 31, 2021:
Period
Total Number of
Shares
Repurchased (1)
Average Price
Paid per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Dollar
Amount of
Shares That May
Yet Be Purchased
Under the
Program
October 1, 2021 through October 31, 2021
November 1, 2021 through November 30, 2021
December 1, 2021 through December 31, 2021
Total shares repurchased
5,442 $
2,499
8,758
16,699 $
59.32
61.35
50.13
54.80
— $
—
—
— $
—
—
—
—
(1) Represents shares withheld on net settlements of restricted stock units that vested under our equity incentive plans.
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Stock Performance Graph
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of
Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be
incorporated by reference into any filing of Progyny, Inc. under the Securities Act or the Exchange Act.
The graph set forth below compares cumulative total return on our common stock with the cumulative total return
of the (i) S&P Health Care (Sector) and (ii) the Nasdaq Composite Index resulting from an initial investment of $100 in
each and, assuming the reinvestment of any dividends, based on closing prices. Measurement points are from October 24,
2019 (the date our common stock began trading on Nasdaq) through December 31, 2021.
Cumulative Total Returns since Initial Public Offering
10/24/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021
Company/Index
394.54
Progyny, Inc.
$ 100.00
155.27
S&P 500 Health Care $ 100.00
192.30
NASDAQ Composite $ 100.00
$ 326.08 $ 198.54 $ 226.38 $ 326.08 $ 342.38 $ 453.85 $ 430.77 $
$ 124.56 $ 109.86 $ 115.81 $ 124.56 $ 127.98 $ 138.19 $ 139.61 $
$ 157.45 $ 122.88 $ 136.43 $ 157.45 $ 161.83 $ 177.18 $ 176.51 $
$ 211.15
$ 111.78
$ 109.61
Use of Proceeds
On October 29, 2019, in connection with our IPO, we issued and sold 6,700,000 shares of our common stock and
certain of our selling stockholders offered and sold 4,800,000 shares of our common stock at a price to the public of $13.00
per share resulting in net proceeds to us of $77.6 million, after deducting the underwriting discount of $5.9 million and
offering expenses of $3.6 million. All of the shares issued and sold in our IPO were registered under the Securities Act
pursuant to a registration statement on Form S-1 (File No. 333-233965), which was declared effective by the SEC on
October 24, 2019. The net proceeds of $77.6 million from our IPO have been invested in investment grade, interest-bearing
instruments. There has been no material change in the expected use of the net proceeds from our IPO as described in our
final prospectus, filed with the SEC on October 25, 2019 pursuant to Rule 424(b) relating to our Registration Statement.
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ITEM 6.
[RESERVED]
ITEM 7.
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 Annual Report on Form 10-K. In addition to historical consolidated 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 Part I, Item 1A.
“Risk Factors” of this Annual Report on Form 10-K. A discussion of the year ended December 31, 2020 compared to the
year ended December 31, 2019 has been reported previously in our Annual Report on Form 10-K for the year ended
December 31, 2020 filed with the SEC on March 1, 2021 (File No. 001-39100) under the heading “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Years Ended December 31,
2020 and 2019.”
Overview
We envision a world where anyone who wants to have a child can do so. Our mission is to make dreams of
parenthood come true through healthy, timely and supported fertility journeys. 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 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 265 with at least 1,000 covered lives. We currently have contracts to provide coverage to approximately
4.0 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 most recent industry-leading Net Promoter Score, or NPS, of +81 for our fertility benefits solution and
+79 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2021. 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.
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
vitro fertilization, or IVF, preimplantation genetic testing). We currently offer 19 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 Patient Care Advocates, or 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
account management 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
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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 have contracts to serve over 265 employers with at least 1,000 covered lives in the
United States across more than 30 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 500,000 employees, represent approximately 4.0
million covered lives under contract.
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% and
2% of our total revenue for the years ended December 31, 2021 and 2020, 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.
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. There are
approximately 8,000 employers in the United States (excluding quasi-governmental entities, such as universities, school
systems, and labor unions) who have a minimum of 1,000 employees, representing approximately 75 million potential
covered lives in total. Our current member base of approximately 4.0 million covered lives under contract represents a low
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
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more than 2,500 covered lives. As of December 31, 2021 and 2020, we served 191 and 135 clients, respectively,
representing 2,935,000 and 2,335,000 members, respectively.
Importantly, as we have continued to grow, we have meaningfully diversified our client base across more than 30
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.
As of December 31,
2021
2020
Client Tier (Members)
Up to 2,500
2,501 - 10,000
10,001 - 50,000
Greater than 50,000
Total
Clients Members
44
93
45
9
191
79,000
473,000
957,000
1,426,000
2,935,000
Clients Members
38,000
393,000
645,000
1,259,000
2,335,000
23
74
30
8
135
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 2.9 million members as of December 31, 2021.
The following table highlights the number of ART cycles performed for Progyny members and the member
utilization rates for each of the periods presented.
Assisted Reproductive Treatment (ART) Cycles(1)
Utilization - All Members(2)
Utilization - Female Only(2)
Average Members
Three Months Ended
December 31,
Year Ended
December 31,
2021
7,623
0.52%
0.46%
2,899,000
2020
5,719
0.50%
0.45%
2,305,000
2021
28,413
1.30%
1.07%
2,812,000
2020
19,003
1.16%
0.97%
2,191,000
(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
the number of unique members utilizing the benefit for that period. Individual periods cannot be combined as member
treatments may span multiple periods.
Impact of COVID-19 on our Business
The COVID-19 pandemic has significantly impacted various markets around the world, including the United
States. As described below, restrictions related to COVID-19, including variants, and our responses to them have
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 to our revenue.
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Employee safety is our first priority, and as a result, we had implemented a remote working policy for all of our
employees. We have recently re-opened our corporate offices to employees on a hybrid basis, while implementing
additional safety measures and protocols. We are also working closely with all of our clients, members, providers and other
external business partners. We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to
monitor liquidity, as necessary, and ensure that our business can continue to operate during these uncertain times.
The outbreak and preventative measures taken to contain COVID-19, especially in the first half of 2020,
negatively impacted our members’ access to care due to a temporary unavailability of the full range of fertility treatments
at our provider clinics. In March 2020, the American Society for Reproductive Medicine, or ASRM, issued guidelines
recommending suspension of fertility services. Those guidelines were lifted in May 2020, which has enabled our clinics to
resume care with enhanced safety protocols for patient safety. COVID-19, including variants, and related restrictions
continued to have a negative impact on our revenue growth for the three months and year ended December 31, 2021.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, future results of
operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately
predicted, including, without limitation, new information that may emerge concerning COVID-19 and variants, the timing,
extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines as well as
vaccine hesitancy; the imposition of protective public safety measures; and the economic impact on local, regional and
national markets. To the extent that the markets we serve experience increased cases of COVID-19, state or local
governments may reinstitute measures to control its spread, which could again negatively impact our members’ access to
care. 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 read Part I, Item 1A.
Risk Factors included in this Annual Report on Form 10-K.
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, as well as the related clinical and care management services. Revenue from these arrangements is recognized
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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
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 benefit services; (2) pharmacy benefit 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, 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, 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 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.
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Sales and Marketing Expense
Sales and marketing expense consists primarily of employee related costs, including salaries, bonuses,
commissions, benefits, stock-based compensation, 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, other related costs, and an allocation of our general overhead, depreciation 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 as
a public company and to support growth in the business.
Other Income, net
Other income (expense) includes investment income as well as interest income and expense.
Benefit 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. As of
December 31, 2020, in part because we had achieved three years of cumulative income, along with our projections of
profitability, management determined that there was sufficient positive evidence to conclude that it was more likely than
not that the net deferred tax assets of $38.0 million were realizable and therefore released substantially all of our valuation
allowance. We continue to maintain this position as of December 31, 2021.
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:
Consolidated Statements of Operations Data:
Revenue
Cost of services(1)
Gross profit
Operating expenses:
Sales and marketing(1)
General and administrative(1)
Total operating expenses
Income from operations
Other income, net
Income before income taxes
Benefit for income taxes
Net income
Adjusted EBITDA(2)
(1)
Includes stock-based compensation expense as follows:
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Year Ended
December 31,
(in thousands)
2020
2021
$
$
$
500,621
388,486
112,135
20,179
59,616
79,795
32,340
95
32,435
33,334
65,769
67,347
$
$
$
344,858
274,799
70,059
15,006
46,705
61,711
8,348
331
8,679
37,780
46,459
32,393
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Cost of services
Sales and marketing
General and administrative
Total stock‑based compensation expense
Year Ended
December 31,
2021
8,969
5,462
19,275
33,706
$
$
2020
3,056
2,066
7,699
12,821
$
$
(2) Adjusted EBITDA is a non-GAAP financial measure defined by us as net income, adjusted to exclude depreciation
and amortization, stock-based compensation expense, other income (expense), net, interest income, net, benefit for
income taxes, and settlement cost and legal fees associated with a vendor arbitration. See “Management’s Discussion
and Analysis of Financial Condition and Result of Operations – Non-GAAP Financial Measure – Adjusted EBITDA’
below for a reconciliation of Adjusted EBITDA to net income, the most directly comparable measure calculated in
accordance with GAAP.
Consolidated Statements of Operations Data, as a percentage of revenue:
Revenue
Cost of services
Gross profit
Operating expenses:
Sales and marketing
General and administrative
Total operating expenses
Income from operations
Other income, net
Income before income taxes
Benefit for income taxes
Net income
Adjusted EBITDA
Year Ended
December 31,
2021
2020
100 %
78
22
100 %
80
20
4
12
16
6
0
6
7
13 %
13 %
4
14
18
2
0
2
11
13 %
9 %
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 other income
(expense), net and interest income (expense), net; (5) it does not reflect tax payments that may represent a reduction in cash
available to us; and (6) it does not include settlement cost and legal fees associated with a vendor arbitration. 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 from continuing operations and other U.S. GAAP results.
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We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based
compensation expense, other income (expense), net, interest income, net, benefit for income taxes, and settlement cost and
legal fees associated with a vendor arbitration. The following table presents a reconciliation of Adjusted EBITDA to net
income for each of the periods indicated:
Net income
Add:
Depreciation and amortization
Stock‑based compensation expense
Other (income) expense, net
Interest income, net
Benefit for income taxes
Settlement cost and legal fees associated with a vendor arbitration
Adjusted EBITDA
Comparison of Years Ended December 31, 2021 and 2020
Revenue
Revenue
Year Ended
December 31,
(in thousands)
2020
2021
$
65,769
$
46,459
1,301
33,706
366
(461)
(33,334)
—
$
67,347
$
1,906
12,821
(210)
(121)
(37,780)
9,318
32,393
Year Ended
December 31,
2021
2020
(dollars in thousands)
% Change
$ 500,621
$ 344,858
45%
Revenue increased by $155.8 million, or 45%, for the year ended December 31, 2021 compared to the year ended
December 31, 2020. This increase is primarily due to a $102.1 million, or 40% increase, in revenue from our fertility
benefits solution and a $53.7 million or 59% increase in revenue from our Progyny Rx solution. The increase in revenue
from our fertility benefits solution was primarily due to the increase in the number of clients and covered lives. The
increase in revenue from our pharmacy benefits solution was also driven by the number of clients and covered lives that
added the Progyny Rx benefit. Progyny Rx went live with only a select number of clients on January 1, 2018 and has
continued to add both new and existing fertility benefit solution clients since its initial launch. Our revenue growth for the
years ended December 31, 2021 and 2020 was negatively impacted by COVID-19.
Cost of Services
Cost of services
Year Ended
December 31,
2021
2020
(dollars in thousands)
% Change
$ 388,486
$ 274,799
41%
Cost of services increased by $113.7 million, or 41%, for the year ended December 31, 2021 compared to the year
ended December 31, 2020 primarily due to an increase in medical treatment and pharmacy prescription costs associated
with fertility treatments delivered as well as increases in personnel-related costs, including stock-based compensation.
Gross Profit and Gross Margin
Gross profit
Gross margin
Year Ended
December 31,
2021
(dollars in thousands)
2020
$ 112,135
22.4%
$ 70,059
20.3%
% Change
60%
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Gross profit increased by $42.1 million, or 60%, for the year ended December 31, 2021 compared to the year
ended December 31, 2020.
Gross margin increased 210 basis points for the year ended December 31, 2021 compared to year ended
December 31, 2020, primarily due to favorable new terms with our pharmacy program partners, the net impact of regular
contract renewals with our providers as well as continued efficiencies gained across our care management services.
Operating Expenses
Sales and Marketing Expense
Sales and marketing
Year Ended
December 31,
2021
2020
% Change
(dollars in thousands)
$ 20,179
$ 15,006
34%
Sales and marketing expense increased by $5.2 million, or 34%, for the year ended December 31, 2021 compared
to the year ended December 31, 2020. This increase was primarily due to a $4.4 million increase in personnel-related costs
(including a $3.4 million increase in stock-based compensation) relating to additional headcount, employee equity grants,
and commissions for sales and marketing functions, and a $0.8 million increase in other related sales and marketing
expenses.
General and Administrative Expense
General and administrative
Year Ended
December 31,
2021
2020
% Change
(dollars in thousands)
$ 59,616
$ 46,705
28%
General and administrative expense increased by $12.9 million, or 28%, for the year ended December 31, 2021
compared to the year ended December 31, 2020. This increase was primarily due to a $16.9 million increase in personnel-
related costs (including a $11.6 million increase in stock-based compensation) as a result of additional headcount and
employee equity grants, a $4.2 million increase in bad debt expense, and a $1.1 million increase in other related general
and administrative expenses, which was partially offset by a $9.3 million decrease in settlement cost and legal fees for a
vendor arbitration. See Note 14 – Commitments and Contingencies – in the notes to the consolidated financial statements
included in Part II, Item 8, of this Annual Report on Form 10-K for further details regarding the vendor arbitration.
Other Income, Net
Other income, net
Year Ended
December 31,
2021
2020
% Change
(dollars in thousands)
$ 331
95
$
(71)%
Other income, net decreased by $0.2 million, or 71%, for the year ended December 31, 2021 compared to the year
ended December 31, 2020, primarily due to decreases in income on investments.
Benefit for Income Taxes
Benefit for income taxes
Year Ended
December 31,
2021
2020
% Change
(dollars in thousands)
$ 33,334
$ 37,780
(12)%
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For the year ended December 31, 2021, we recorded a benefit for income taxes of $33.3 million, primarily due to
equity compensation activity that occurred during the period. During the year ended December 31, 2020, we recorded a
benefit for income taxes of $37.8 million, primarily as a result of the release of substantially all of our valuation allowance
on our deferred tax assets as we concluded there was sufficient positive evidence that it is more likely than not that the
deferred tax assets are realizable.
Liquidity and Capital Resources
As of December 31, 2021, we had $91.4 million of cash and cash equivalents and $28.0 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 as further detailed below. Our cash and cash equivalents and 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.
On October 29, 2019, we completed our IPO in which we issued and sold 6,700,000 shares of our common stock
at a public offering price of $13.00 per share. We received net proceeds of approximately $77.6 million from the IPO, after
deducting underwriters’ discounts and commissions of $5.9 million and offering costs of $3.6 million. For additional
information, See Note 1 – Business and Basis of Presentation to our financial statements included in Part II, Item 8 of this
Annual Report on Form 10-K.
We believe that our existing cash and cash equivalents, including the proceeds from our IPO, and cash flow from
operations will be sufficient to support working capital and capital expenditure requirements for at least the next
12 months. 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 continuing market adoption of our solutions.
Other than the impact on our revenue growth and the related cash flows resulting from the various restrictions on
activities due to the COVID-19 pandemic, our sources and uses of cash were not otherwise materially impacted by the
COVID-19 pandemic in the three months and year ended December 31, 2021 and, to date, we have not identified any
material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us,
we do not expect the COVID-19 pandemic to have a material impact on our liquidity. We will continue to monitor and
assess the impact the COVID-19 pandemic, including variants, may have on our business and financial results. In addition,
while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular
may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in, significant disruption of
global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity in the
future. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in
the future negatively affect our operations. For additional information on the various risks posed by the COVID-19
pandemic, please read Part I, Item 1A. Risk Factors included in this Annual Report on Form 10-K.
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.
In June 2018, we entered into an agreement with Silicon Valley Bank to replace our then-outstanding term loan
with a revolving line of credit of up to $15.0 million, which was amended in April 2019, January 2020, June 2020 and
February 2021. The line of credit matured on June 8, 2021.
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The following table summarizes our cash flows from continuing operations for the periods presented:
Cash provided by operating activities
Cash provided by (used in) investing activities
Cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Operating Activities
Year Ended
December 31,
2021
2020
(in thousands)
$
$
26,037 $
8,766
(13,695)
21,108 $
36,203
(40,031)
(6,249)
(10,077)
Net cash provided by operating activities was $26.0 million for the year ended December 31, 2021, primarily
consisting of net income of $65.8 million adjusted for certain non-cash items, which include $33.7 million of stock-based
compensation expense, $33.3 million of deferred tax assets, $9.8 million of bad debt expense, and $1.3 million of
depreciation and amortization. Changes in operating assets and liabilities resulted in cash used in operating activities from
an increase in accounts receivable of $68.7 million and other noncurrent assets and liabilities of $3.3 million, partially
offset by cash provided by operating activities from increases in accounts payable of $17.8 million, accrued expenses and
other current liabilities of $2.2 million, and prepaid expenses and other current assets of $0.7 million. These changes are a
result of the impact of revenue growth and our operating results as well as the timing of payments to third party providers
and collections from customers.
Net cash provided by operating activities was $36.2 million for the year ended December 31, 2020, primarily
consisting of net income of $46.5 million adjusted for certain non-cash items, which include $38.0 million of deferred tax
assets, $12.8 million of stock-based compensation expense, $5.6 million of bad debt expense, and $1.9 million of
depreciation and amortization. Changes in operating assets and liabilities resulted in cash used in operating activities from
an increase in accounts receivable of $35.3 million and prepaid expenses and other current assets of $0.3 million, more
than offset by cash provided by operating activities from increases in accounts payable of $25.0 million, accrued expenses
and other current liabilities of $17.4 million, and other noncurrent assets and liabilities of $0.6 million. These changes are
a result of the impact of revenue growth and our operating results as well as the timing of payments to third party providers
and collections from customers. Net cash provided by operating activities for the year ended December 31, 2020 included
the impact of the settlement cost and legal fees associated with a vendor arbitration of $8.9 million.
Investing Activities
Net cash provided by investing activities was $8.8 million for the year ended December 31, 2021, which primarily
consisted of net proceeds of $10.9 million from marketable securities. For the year ended December 31, 2020, net cash
used in investing activities was $40.0 million, primarily consisting of net investments of $39.0 million in marketable
securities. The remainder of the activity for the years ended December 31, 2021 and 2020 consisted of purchases of
computers, software, including capitalized software development costs, and leasehold improvements, including leasehold
improvements associated with the buildout of our new corporate office which was occupied in February 2020.
Financing Activities
Net cash used in financing activities was $13.7 million for the year ended December 31, 2021, consisting of
payments of $18.0 million for employee taxes related to equity awards, partially offset by $2.9 million in proceeds from
stock option exercises and $1.3 million in proceeds from contributions to our employee stock purchase plan.
Net cash used in financing activities was $6.2 million for the year ended December 31, 2020, consisting of
payments of $8.9 million for employee taxes related to equity awards and $0.9 million for IPO costs, partially offset by
$2.3 million in proceeds from stock option exercises and $1.2 million in proceeds from contributions to our employee stock
purchase plan.
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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 starting in the fourth quarter of 2023 for five years and approximately $1.5
million per year thereafter through the first quarter of 2035, the expiration date. For the 21,262 square foot office, we will
pay the base rent of approximately $1.3 million starting in the first quarter of 2025 for five years and approximately $1.4
million per year thereafter through the first quarter of 2035, the expiration date. For our current 25,212 square foot office,
we will pay the base rent of approximately $1.6 million per year beginning in June 2029 through the first quarter of 2035,
the 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 amounts 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, 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 significant accounting policies and estimates, see Note 1 – Business and
Basis of Presentation and Note 2 - Summary of Significant Accounting Policies in the notes to the consolidated financial
statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Accrued Receivable and Accrued Claims Payable
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, which we refer to as accrued receivables, 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.
We estimate accrued receivables based on historical experience for those fertility benefit services provided but for
which a claim has not been received from the provider clinic, which includes assumptions regarding the lag between the
authorization date and service date as well as estimates for changes and cancellations of services. We include accrued
receivables within accounts receivable on our consolidated balance sheet. As of December 31, 2021 and 2020, accrued
receivables were $30.2 million and $28.2 million, respectively.
At the same time, we estimate cost of services and accrued claims payables based on the amount to be paid to the
provider clinic and expected gross margin on fertility benefit services. Accrued claims payable of $20.0 million and $22.8
million as of December 31, 2021 and 2020, respectively, are included within accrued expenses and other current liabilities
in the consolidated balance sheet.
Our estimates are adjusted to actual at the time of billing and these adjustments have historically not been
material.
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Stock-Based Compensation
We recognize stock-based compensation expense based on the fair value of stock-based awards granted to
employees and directors on the date of grant. We estimate the fair value of each stock-based award on the measurement
date using either the Black-Scholes option-pricing model for stock options and stock purchased under the employee stock
purchase plan or the closing market price of our common stock for restricted stock units.
The Black-Scholes option-pricing model requires the input of subjective assumptions, including (1) the expected
stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. Due to
the lack of historical and implied volatility data of our common stock, the expected stock price volatility is estimated based
on the historical volatilities of the daily closing prices of a specified group of companies in our industry for a period equal
to the expected term of the option. We selected companies with comparable characteristics to our Company, including
enterprise value, risk profiles and position within the industry, that have historical share price information sufficient to meet
the expected term of the stock option. The expected term of the award represents the period of time that options granted are
expected to be outstanding and is calculated utilizing the simplified method, which is the mid-point between the vesting
date and end of the contractual term for each option. The risk-free interest rate is based on the yield of zero-coupon U.S.
Treasury securities for the period that is consistent with the expected term of the stock option. The dividend yield is
assumed to be none as we have not paid dividends, nor do we anticipate paying dividends. The weighted-average estimated
fair value of stock option awards granted in the year ended December 31, 2021 was $30.60. Changes in these inputs could
result in a significant change in the fair value of stock options.
The following assumptions were used to calculate the fair value of stock options granted to employees:
Expected volatility
Expected term (years)
Risk‑free interest rate
Expected dividend yield
Year Ended
December 31,
2021
2020
52.4% - 59.5% 49.2% - 54.7%
5.50 - 6.11
0.3% - 1.7%
—
3.00 - 6.11
0.6% - 1.4%
—
Our outstanding stock-based awards as of December 31, 2021 are subject to service-based vesting and we
recognize compensation expense over the vesting period of the award on a straight-line basis. Forfeitures and cancellations
of awards are recognized as they occur. For the years ended December 31, 2021 and 2020, stock-based compensation
expense was $33.7 million and $12.8 million, respectively. As of December 31, 2021, we had $164.2 million and $86.5
million of unrecognized compensation costs related to unvested options and restricted stock units, respectively. Both are
expected to be expensed and vest over a weighted-average remaining period of approximately 3.6 years.
Income Taxes
We account for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). 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. We periodically review the
recoverability of deferred tax assets recorded on the consolidated balance sheet and provide valuation allowances as
deemed necessary to reduce such deferred tax assets to the amount that will, more likely than not, be realized. Income tax
expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local
tax rules.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In
assessing the need for a valuation allowance, we consider all available evidence for each jurisdiction including past
operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event we
change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation
allowance with a corresponding impact to income tax expense in the period in which such determination is made. As of
December 31, 2020, the Company achieved three years of cumulative income, along with projections of profitability, for
which management determined that there was sufficient positive evidence to conclude that it is more likely than not that
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substantially all of the deferred tax assets will be realized. As such, we released almost all of the valuation allowance on
our realizable deferred tax assets. Management maintains this position as of December 31, 2021.
The amount of deferred tax provided is calculated using tax rates enacted at the balance sheet date. The impact of
tax law changes is recognized in periods when the change is enacted.
As of December 31, 2021 and 2020, we had $71.3 million and $38.0 million of net deferred tax assets,
respectively. There was a valuation allowance of $0.2 million as of December 31, 2021 and 2020.
Recently Adopted Accounting Pronouncements
For a full discussion of recently adopted accounting pronouncements, see Note 2 – Summary of Significant
Accounting Policies, in the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-
K.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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
At December 31, 2021, we had cash and cash equivalents of $91.4 million and marketable securities of $28.0
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
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.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements Comprehensive Income (Loss)
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
71
73
74
75
76
77
78
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Progyny, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progyny, Inc. (the Company) as of
December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in
convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission “(2013 framework)” and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Description of the
Matter
Accrued Receivables and Accrued Claims Payable
As of December 31, 2021, accrued receivables and accrued claims payable were $30.2 million and
$20.0 million, respectively. As discussed in Note 2 to the consolidated financial statements, the
Company estimates accrued receivables for those fertility benefit services provided but for which a
claim has not been received from the provider clinic based on historical claims experience. The
estimated cost of the related services and accrued claims payable are determined based upon the
amount to be paid to the provider clinic and expected gross margin on each related fertility benefit
service estimated to have been provided.
Auditing the Company’s estimates of accrued receivables and the related accrued claims payable was
complex and required significant judgment as the estimates were sensitive to changes in the
significant assumptions, including management’s assumptions regarding the lag between
authorization date and service date, service changes and cancellations.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
controls over the Company’s process to estimate accrued receivables and the associated claims
payable. For example, we tested controls over management’s review of the methodology, significant
assumptions and the underlying data used to determine these estimates.
To test the accrued receivables and the related claims payable, our audit procedures included, among
others, assessing the methodology, evaluating the significant assumptions described above and testing
the completeness and accuracy of the underlying data used in the Company’s analysis. For example,
we tested the Company’s assumptions of the lag between the authorization date and service date,
service changes and cancellations based on historical claims data, historical gross margin per service
and tested the clerical accuracy of management’s analysis. Additionally, we evaluated the historical
accuracy of management’s estimate by testing management’s retrospective review analysis that
compared the prior period’s estimated accrued receivables and accrued claims payable to actual
billing and claims data.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
New York, NY
March 1, 2022
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PROGYNY, INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net of $17,379 and $9,502 of allowances at
December 31, 2021 and 2020, respectively
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Deferred tax assets
Other noncurrent assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Operating lease noncurrent liabilities
Other noncurrent liabilities
Total liabilities
Commitments and Contingencies (Note 14)
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at
December 31, 2021 and 2020, respectively; 91,088,781 and 87,054,329 shares
issued and outstanding at December 31, 2021 and 2020, respectively
Additional paid-in capital
Treasury stock, at cost, $0.0001 par value; 615,980 shares outstanding at
December 31, 2021 and 2020, respectively
Accumulated deficit
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2021
2020
$
$
$
$
91,413
28,005
$
134,557
4,564
258,539
5,027
7,805
11,880
599
71,274
2,941
358,065
61,399
37,425
98,824
7,419
—
106,243
9
255,339
(1,009)
(2,424)
(93)
251,822
358,065
$
$
$
70,305
38,994
75,664
5,259
190,222
3,400
8,668
11,880
1,213
37,971
573
253,927
43,514
34,272
77,786
8,318
876
86,980
9
236,139
(1,009)
(68,193)
1
166,947
253,927
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
Revenue
Cost of services
Gross profit
Operating expenses:
Sales and marketing
General and administrative
Total operating expenses
Income from operations
Other income (expense):
PROGYNY, INC.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
Year Ended
December 31,
2020
344,858
274,799
70,059
$
2021
500,621
388,486
112,135
20,179
59,616
79,795
32,340
(366)
461
—
95
32,435
33,334
65,769
0.74
0.66
$
$
$
15,006
46,705
61,711
8,348
210
121
—
331
8,679
37,780
46,459
0.54
0.47
$
$
$
$
$
$
$
$
2019
229,683
184,178
45,505
11,901
23,927
35,828
9,677
—
(58)
(18,176)
(18,234)
(8,557)
(12)
(8,569)
(0.41)
(0.41)
89,105,562 85,722,670
100,358,047 99,055,526
20,735,202
20,735,202
Other income (expense), net
Interest income (expense), net
Convertible preferred stock warrant valuation adjustment
Total other income (expense), net
Income (loss) before income taxes
Benefit (provision) for income taxes
Net income (loss)
Net income (loss) per share:
Basic
Diluted
Weighted-average shares used in computing net income (loss) per share:
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
PROGYNY, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities
Total other comprehensive income (loss)
Total comprehensive income (loss)
2021
Year Ended
December 31,
2020
2019
65,769
$
46,459
$
(8,569)
(94)
(94)
65,675
$
1
1
46,460
$
—
—
(8,569)
$
$
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share and per share amounts)
PROGYNY, INC.
Convertible
Preferred Stock
Shares
Amount Shares
Common Stock
Additional
Paid in
Treasury
Amount Stock Capital
Accumulated
Deficit
Other
Comprehensive
Income
Total
Balance at
December 31, 2018
Repurchase of
common stock
Stock option
exercise
Stock-based
compensation
Conversion of
convertible
preferred stock to
common stock
upon initial public
offering
Conversion of
convertible
preferred stock
warrants to
common stock
warrants upon
initial public
offering
Warrant exercise
Issuance of
common stock in
connection with
initial public
offering, net of
issuance costs of
$5.9 million and
$3.7 million in
offering costs
Net loss
Balance at
December 31, 2019
Issuance of
employee equity
awards, net of
shares withheld
Stock-based
compensation
Warrant exercise
Reduction in
initial public
offering costs
Impact of
adoption of ASU
2016-13
Other
comprehensive
income
Net income
Balance at
December 31, 2020
Issuance of
employee equity
awards, net of
shares withheld
Stock-based
compensation
Warrant exercise
Other
comprehensive
loss
Net income
Balance at
December 31, 2021
65,428,088
$ 106,237
5,155,407
$
1
$
(884)
$
10,622
$
(104,854)
$
— $ (95,115)
—
—
—
—
(26,659)
—
(125)
— 6,490,059
—
—
—
— —
—
—
6,536
5,061
(60)
—
—
—
(185)
—
6,536
—
5,061
(65,428,088)
(106,237)
65,428,088
7
—
106,230
—
— 106,237
—
—
—
—
—
441,307
—
—
—
—
22,765
62
—
—
—
—
22,765
62
—
—
—
—
6,700,000
—
— —
—
—
77,479
—
—
(8,569)
—
—
77,479
(8,569)
— $
— 84,188,202
$
8
$ (1,009)
$
228,755
$
(113,483)
$
— $ 114,271
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,688,273
—
177,854
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
(5,451)
12,821
(0)
14
—
—
—
—
—
—
—
(1,169)
—
46,459
—
—
—
—
—
1
—
(5,450)
12,821
(0)
14
(1,169)
1
46,459
— $
— 87,054,329
$
9
$ (1,009)
$
236,139
$
(68,193)
$
1
$166,947
—
—
—
—
—
—
—
—
—
—
3,209,461
—
824,991
—
—
—
—
—
—
—
—
—
—
—
—
(14,589)
33,789
0
—
—
—
—
—
—
(14,589)
33,789
0
—
—
—
65,769
(94)
—
(94)
65,769
— $
— 91,088,781
$
9
$ (1,009)
$
255,339
$
(2,424)
$
(93)
$251,822
The accompany notes are an integral part of these consolidated financial statements.
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Table of Contents
PROGYNY, INC.
Consolidated Statements of Cash Flows
(in thousands)
OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred tax (benefit) expense
Non-cash interest expense
Depreciation and amortization
Stock-based compensation expense
Bad debt expense
Loss on disposal of property and equipment
Change in fair value of warrant liabilities
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Other noncurrent assets and liabilities
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES
Purchase of property and equipment, net
Purchase of marketable securities
Sale of marketable securities
Net cash provided by (used in) continuing operations
Net cash provided by discontinued operations
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Proceeds from issuance of common stock upon initial public offering
Payment of initial public offering costs
Proceeds from revolving line of credit
Repayments made against revolving line of credit
Repurchase of common stock
Proceeds from exercise of stock options
Payment of employee taxes related to equity awards
Proceeds from contributions to employee stock purchase plan
Proceeds from exercise of stock warrants
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest
Cash paid for income taxes, net of refunds received
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Additions of property and equipment, net included in accounts payable and accrued expenses
Deferred initial public offering costs in accounts payable and accrued expenses
Non-cash preferred stock warrant conversion to common stock warrant upon IPO
Year Ended
December 31,
2021
2020
2019
$
65,769
$
46,459
$
(8,569)
(33,303)
38
1,301
33,706
9,783
—
—
(68,676)
675
17,840
2,184
(3,280)
26,037
(2,129)
(111,477)
122,372
8,766
—
8,766
—
—
—
—
—
2,924
(17,966)
1,347
—
(13,695)
21,108
70,305
91,413
$
(37,971)
75
1,906
12,821
5,562
—
—
(35,336)
(326)
25,008
17,400
605
36,203
(1,037)
(103,964)
64,970
(40,031)
—
(40,031)
—
(892)
—
—
—
2,329
(8,930)
1,244
—
(6,249)
(10,077)
80,382
70,305
$
— $
$
97
204
$
— $
— $
— $
— $
24
$
— $
— $
12
—
2,133
5,061
1,606
1
18,176
(25,342)
(4,118)
3,501
6,385
(380)
(1,534)
(2,956)
—
—
(2,956)
200
(2,756)
81,220
(2,835)
182,025
(182,278)
(185)
6,536
—
—
62
84,545
80,255
127
80,382
176
—
—
906
(22,765)
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
77
Table of Contents
PROGYNY, INC.
Notes to Consolidated Financial Statements
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 account management 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. As part of this solution, the Company provides 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.
Reverse Stock Split
On October 14, 2019, the shareholders of Progyny approved a one-for-4.5454 reverse stock split of its common
and convertible preferred stock. The par value of the common stock and convertible preferred stock was not adjusted as a
result of the reverse stock split. Accordingly, the consolidated financial statements and notes retroactively reflect
Progyny’s capital structure after giving effect to the reverse stock split.
Initial Public Offering
On October 29, 2019, the Company completed its initial public offering (“IPO”) in which it issued and sold
6,700,000 shares of its common stock at a public offering price of $13.00 per share. As part of the IPO, certain selling
stockholders offered and sold an additional 4,800,000 shares (including 1,500,000 shares sold pursuant to the exercise of
the underwriters’ over-allotment option), at an equivalent public offering price of $13.00 per share. The Company received
net proceeds of $77.6 million from the IPO, after deducting underwriters’ discounts and commissions of $5.9 million and
offering costs of $3.6 million. Offering costs were initially capitalized and consisted of fees and expenses incurred in
connection with the sale of common stock in the IPO, including legal, accounting, printing and other IPO-related costs.
Upon completion of the IPO, these offering costs were reclassified to stockholders’ equity and offset against the proceeds
from the offering on the balance sheet. Immediately prior to the completion of the IPO, all shares of convertible preferred
stock then outstanding were converted into 65,428,088 shares of common stock on a one-to-one basis, $106.2 million of
convertible preferred stock was reclassified to additional paid-in-capital and $7,000 of convertible preferred stock was
reclassified to common stock on the Company’s balance sheet.
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Basis of Presentation
The accompanying consolidated financial statements include those of the Company and its wholly owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial
statements and accompanying notes were prepared in accordance with accounting principles generally accepted in United
Sates (“U.S. GAAP”).
Additionally, there are many uncertainties regarding the ongoing coronavirus (“COVID-19”) pandemic, including
variants, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it
has impacted and may continue to impact its customers and members, its provider network, specialty pharmacy partners,
employees, suppliers, vendors, and other business partners. The full extent to which the COVID-19 pandemic will directly
or indirectly impact the Company’s business, future results of operations and financial condition will depend on future
developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge
concerning COVID-19 and variants, the actions taken to contain it or treat its impact, vaccine roll-out efforts and impact,
including vaccine hesitancy, break-through cases and the economic impact on local, regional and national markets. The
overall disruption of the healthcare and fertility markets and the other risks and uncertainties associated with the pandemic
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 the evolving impact of the COVID-19 pandemic and will make
adjustments to its operations as necessary.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in
making decisions on how to allocate resources and assess performance. The Company operates and manages in one
operating segment, providing fertility and pharmacy benefits solutions. The Company defines its CODM as its Chief
Executive Officer and its President. All long-lived assets are located in the United States and all revenue is attributed to the
United States. Since the Company operates in one operating segment, all required financial segment information can be
found in the consolidated financial statements.
Use of Estimates
The preparation of 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, convertible preferred stock warrant liabilities, lease liabilities, and accounting for income taxes.
Management bases its 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. Summary of Significant Accounting Policies
Cash and Cash Equivalents and Marketable Securities
Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased
with original maturities of three months or less at the time of purchase to be cash equivalents. Marketable securities,
primarily consisting of U.S. Government and agency securities with original maturities greater than three months but less
than one year when purchased, are classified as available-for-sale, and are stated at fair value. Unrealized gains and losses
on marketable securities are excluded from earnings and reported as a component of other comprehensive income (loss).
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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
● 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 benefit 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.
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
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the fertility benefits solution ratably over the contract term. Progyny’s estimate 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 benefit 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
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pharmacies. 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 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.
Accrued Receivable and Accrued Claims Payable
Accrued receivables are estimated based on historical experience for those fertility benefit 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 benefit services. Estimates are adjusted to actual at
the time of billing. Adjustments to original estimates have not been material.
As of December 31, 2021 and 2020, accrued receivables were $30.2 million and $28.2 million, respectively.
Accrued receivables are included within accounts receivable in the consolidated balance sheet.
Accrued claims payable of $20.0 million and $22.8 million as of December 31, 2021 and 2020, 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 December 31, 2021 and December 31, 2020, unbilled receivables, which represent claims received and
approved but unbilled at the end of the reporting period, were $23.7 million and $16.4 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. As a result of the
adoption of ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326), beginning January 1, 2020, 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. The new standard required a change in
timing of loss recognition where an allowance for credit losses is now applied at the time the asset is recognized. Prior to
the adoption of ASU 2016-13, credit losses were determined based upon historical bad debts, current receivables balances,
and the age of the receivables balances. Expected credit losses are recorded as general and administrative expenses on the
statements of operations. The Company adopted ASU 2016-13 as of January 1, 2020, using the modified retrospective
transition method, which resulted in a cumulative-effect adjustment to accumulated deficit of $1.2 million. As a result,
periods prior to the adoption date continue to be reported under the historical accounting guidance. The following table
provides a summary of the activity in this allowance (in thousands):
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December 31, 2021
Allowance for doubtful accounts
December 31, 2020
Allowance for doubtful accounts
December 31, 2019
Allowance for doubtful accounts
Cost of Services
Fertility Benefit Services
Years Ended December 31, 2021, 2020 and 2019
Balance at
Beginning
of Period
ASU 2016-13
Adoption
Adjustment
Charged
to Costs
and Expenses
Write-offs
Balance
at End
of Period
$
9,502
$
$
2,771
1,175
$
$
$
— $
9,783 $
(1,906) $
17,379
1,169
$
5,562
— $
1,606
$
$
— $
9,502
(10)
$
2,771
Fertility benefit 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, other related costs,
and an allocation of 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.
Pharmacy Benefit Services
Pharmacy benefit 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, other related costs, and an allocation of 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 partners (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.
Concentration of Credit Risk and Off-Balance-Sheet Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consists primarily of
cash and cash equivalents, marketable securities, and accounts receivable.
The Company invests its cash and cash equivalents and marketable securities with highly rated financial
institutions and management believes that the financial risks associated with its cash equivalents are minimal.
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Substantially all of the Company’s cash is maintained with one financial institution with a high credit standing. From time
to time, such deposits may exceed federally insured limits.
The Company regularly reviews the outstanding account receivable balances and makes estimates of the lifetime
expected credit losses based upon consideration of factors such as the age of the receivable balance, historical experience,
current economic conditions, and reasonable and supportable forecasts of future economic conditions. In addition, the
Company periodically evaluates the financial condition of its clients to manage credit risk related to accounts receivable.
As of December 31, 2021, two entities accounted for 24% and 11% each, or a combined 35% of total receivables. Two
entities accounted for 14% each, or a combined 28% total receivables as of December 31, 2020.
Property and Equipment
Property and equipment consist of computer equipment, machinery and equipment, furniture and fixtures,
leasehold improvements, and capitalized software development costs. The assets are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method based on estimated useful lives and in the case of
leasehold improvements, the shorter of the useful life or the remaining term of the lease (see Note 5).
Goodwill and Intangible Assets
Goodwill represents the excess of the consideration transferred over the fair value of the assets acquired and
liabilities assumed in a business combination. Other intangible assets consist of trademarks, physician network, and the
websites acquired in the Fertility Authority acquisition. Goodwill, including other definite-lived intangible assets, are
carried at their initial acquisition date fair value less any impairment. Other intangible assets are recorded at fair value at
the date of acquisition, less accumulated amortization. Amortization is calculated using the straight-line method based on
estimated useful lives.
Goodwill is reviewed for impairment annually as of October 1st of each year or when an interim triggering event
has occurred indicating potential impairment. Events or changes in circumstances which could trigger an impairment
review, which are assessed at the reporting unit level, include significant changes in the manner of the Company’s use of
the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends,
significant underperformance relative to historical or projected future results of operations, a significant adverse change in
the business climate, an adverse action or assessment by a regulator, unanticipated competition or a loss of key personnel.
The Company has the option to first assess qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its
carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than
not that the fair value of the reporting unit is less than its carrying amount, then additional impairment testing is not
required. However, if an entity concludes otherwise, then it is required to perform the first of a two-step impairment test.
The first step involves comparing the estimated fair value of the reporting unit with its respective book value,
including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no
additional steps are necessary. If the carrying amount of goodwill exceeds the implied fair value of the goodwill, an
impairment loss is recognized in an amount equal to the excess.
The Company tests for goodwill impairment for each reporting unit, which is at the operating segment or one
level below the operating segment. This analysis requires us to make a series of assumptions to (1) evaluate whether any
impairment exists and (2) measure the amount of impairment. There was no impairment of goodwill or intangible assets for
the years ended December 31, 2021, 2020, and 2019.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets or asset groups may not be recoverable. In such instances, the recoverability of assets to be
held and used is measured first by a comparison of the carrying amount of an asset group to future undiscounted net
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cash flows expected to be generated by the assets. If such assets are considered to be impaired, an impairment loss would
be recognized if the carrying amount of the asset exceeds the fair value of the asset or asset group. The fair value is
determined based on valuation techniques such as a comparison to fair values of similar assets or using a discounted cash
flow analysis. There were no impairments recorded for the years ended December 31, 2021, 2020 and 2019.
Leases
On January 1, 2020, the Company adopted ASU 2016-02, Leases (Topic 842) using the modified retrospective
transition method, which applies the provisions of the standard at the effective date without adjusting comparative periods
presented. As a result, periods prior to the adoption date continue to be reported under the historical lease accounting
guidance. In addition, the Company elected the package of practical expedients permitted under the transition guidance
within the new standard, which allowed the Company not to reassess (i) whether any expired or existing contracts
contained leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for existing
leases. The Company also elected not to reassess lease terms for existing leases using hindsight and to account for each
separate lease and non-lease component as a single lease component. As a result of the adoption of the new leasing
guidance, the Company recorded right-of-use assets and lease liabilities of $9.5 million and $9.9 million, respectively. The
adoption of the standard did not materially impact the Company’s statement of operations or statement of cash flows for
the year ended December 31, 2020.
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease
right-of-use assets, accrued expenses and other current liabilities, and operating lease noncurrent liabilities on the
consolidated balance sheets. As of December 31, 2021 and 2020, the Company has no financing lease arrangements.
In accordance with ASC 842, the Company records a right-of-use asset (“ROU”) and lease liability in connection
with its operating leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present
value of the future minimum lease payments over the lease term at commencement date. To determine the present value of
lease payments, the Company utilizes the rate implicit in the lease, if available. If the rate implicit in the lease is not readily
determinable, the Company uses its secured incremental borrowing rate to determine the present value of the lease
payments. The determination of the Company’s incremental borrowing rate requires judgment and is primarily based on
publicly available information for companies within the same industry and with similar credit profiles. The rate is then
adjusted for the lease term and other specific terms included in the Company’s lease arrangements. The incremental
borrowing rate is subsequently reassessed upon a modification to the lease arrangement. The operating lease ROU asset
also includes any lease payments made prior to commencement date and excludes lease incentives and initial direct costs
incurred. ROU assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for
long-lived assets.
Stock-Based Compensation
The Company accounts for stock-based compensation awards in accordance with FASB ASC Topic 718,
Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments, including restricted stock
units and grants of stock options, to be recognized in the consolidated statements of operations based on their respective
fair values. For non-employee awards, a measurement date is normally reached when performance is completed, and the
fair value is remeasured as the awards vest. The fair value of the Company’s restricted stock units has been determined
utilizing the closing market price of the Company’s common stock on the date of the grant.
The fair value of the Company’s stock options and stock purchased under the employee stock purchase plan has
been determined using the Black-Scholes option-pricing model, which requires the input of subjective assumptions,
including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv)
expected dividends. Due to the lack of historical and implied volatility data of the Company’s common stock, the expected
stock price volatility has been estimated based on the historical volatilities of the daily closing prices of a specified group
of companies in Progyny’s industry for a period equal to the expected term of the option. Progyny selected companies with
comparable characteristics to the Company, including enterprise value, risk profiles and position within the industry, that
have historical share price information sufficient to meet the expected term of the stock
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options. The expected term of the options granted represents the period of time that options granted are expected to be
outstanding and is calculated using the simplified method, which is the mid-point between the vesting date and the end of
the contractual term for each option. For non-employee service-based and performance-based awards, the expected term is
estimated based on the remaining contractual term of such awards. The risk-free interest rate is based on the yield of zero-
coupon, U.S. Treasury securities for the period that is consistent with the expected term of the stock option. The Company
has not paid, and does not anticipate paying, cash dividends on its shares of common stock; therefore, the expected
dividend yield is zero.
The Company’s stock-based awards are subject to either service-based or performance-based vesting conditions.
The Company recognizes compensation expense for service-based awards over the vesting period of the award on a
straight-line basis. Compensation expense related to awards with performance-based vesting conditions is recognized when
achievement of the performance condition is considered probable over the requisite service period.
Common Stock Valuation
Prior to the Company’s IPO on October 29, 2019, the Company had historically granted stock options at exercise
prices equal to the fair value as determined by the Board of Directors on the date of grant. Prior to the IPO and in the
absence of a public trading market, the Board of Directors, with input from management, exercised significant judgement
and considered numerous objective and subjective factors to determine the fair value of the Company’s common stock as
of the date of each stock option grant, including:
● the Company’s financial performance
● the rights, preferences and privileges of the convertible preferred stock relative to those of the common
stock; and
● general economic and financial conditions, and the trends specific to the markets in which the Company
operates
In addition, the Board of Directors considered the independent valuations completed by a third-party valuation
consultant. The valuations of the Company’s common stock were determined in accordance with the guidelines outlined in
the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity
Securities Issued as Compensation. In performing these valuations, the Board of Directors considered a variety of relevant
factors and valuation methodologies in accordance with the guidelines. Following the IPO, the Board of Directors
determines the fair market value for all common stock grants based on the closing market price of the common stock, on
the date of grant, as reported by Nasdaq.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”),
including updates in ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which the
Company adopted as of January 1, 2021. 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. The Company periodically reviews the recoverability of deferred tax assets recorded
on the consolidated balance sheet and provides valuation allowances as deemed necessary to reduce such deferred tax
assets to the amount that will, more likely than not, be realized. Income tax expense consists of taxes currently payable and
changes in deferred tax assets and liabilities calculated according to local tax rules.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In
assessing the need for a valuation allowance, the Company considers all available evidence for each jurisdiction including
past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event
the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will
adjust its valuation allowance with a corresponding impact to income tax expense in the period in which such
determination is made.
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The amount of deferred tax provided is calculated using tax rates enacted at the balance sheet date. The impact of
tax law changes is recognized in periods when the change is enacted.
A two-step approach is applied pursuant to ASC 740 in the recognition and measurement of uncertain tax
positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence
indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related
appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement.
The Company’s policy is to recognize interest and penalty expenses associated with uncertain tax positions as a
component of income tax expense in the consolidated statements of operations and comprehensive (loss) income. As of
December 31, 2021, 2020 and 2019, the Company had no significant accrued interest or penalties related to uncertain tax
positions and no amounts have been recognized in the Company’s consolidated statements of operations.
Fair Value of Financial Instruments and Fair Value Measurements
The Company determines the fair value of financial assets and liabilities using the fair value hierarchy established
in the accounting standards. The hierarchy describes three levels of inputs that may be used to measure fair value, as
follows:
Level 1—Quoted prices in active markets for identical assets and liabilities.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is
significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair
value measurement in its entirety requires management to make judgments and consider factors specific to the asset or
liability.
The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, marketable
securities, accounts receivable and accounts payable approximate fair value due to their short maturities.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number
of shares of common stock outstanding for the period.
For the year ended December 31, 2019, the Company’s convertible preferred stock was entitled to receive
noncumulative dividends, prior and in preference to any declaration or payment of any dividend on common stock and
thereafter participate pro rata on an as-converted basis with the common stockholders in any distributions to common
stockholders and were therefore considered to be participating securities. As a result, the Company calculated the net loss
per share using the two-class method. Accordingly, the net loss attributable to common stockholders is derived from the net
loss for the period.
Diluted net income (loss) per share is computed by dividing the diluted net income (loss) 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, shares issuable under the employee stock purchase program
and common stock warrants. In periods when the Company has incurred a net loss, diluted net loss per
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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.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. The standard is intended to simplify the accounting for income taxes by removing certain exceptions to the
general principles in Topic 740, as well as improve consistent application of and simplify GAAP for other areas of Topic
740 by clarifying and amending existing guidance. The Company adopted this standard as of January 1, 2021. The
adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Accounting Pronouncements Issued but Not Yet Adopted
In May 2021, the FASB issued ASU No. 2021-04 (“ASU 2021-04”) “Earnings Per Share (Topic 260), Debt-
Modifications and Extinguishments (Subtopic 470-50), Compensation- Stock Compensation (Topic 718), and Derivatives
and Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40)” which provides guidance on modifications or
exchanges of a freestanding equity-classified written call options that are not within the scope of another Topic, such as
warrants. The new standard will be effective for the Company for the fiscal year beginning January 1, 2022 and should be
applied prospectively to modifications or exchanges occurring on or after this date. The Company currently does not expect
the adoption of the new standard to have a material effect on its consolidated financial statements, however, this impact
will depend on the terms of written call options, such as warrants, or financings issued or modified in the future.
3. Revenue
Disaggregated revenue
The following table disaggregates revenue by service (in thousands):
Revenue
Fertility benefit services revenue
Pharmacy benefit services revenue
Total revenue
Concentration of Major Clients
Year Ended
December 31,
2020
2019
2021
$ 355,616
145,005
$ 500,621
$ 253,556
91,302
$ 344,858
$ 189,618
40,065
$ 229,683
For the year ended December 31, 2021, two clients accounted for 19% and 15%, or a combined 34%, of total
revenue. For the year ended December 31, 2020, two clients accounted for 18% and 17%, or a combined 35%, of total
revenue. No other clients accounted for more than 10% for the years ended December 31, 2021 and 2020. For the year
ended December 31, 2019, three clients accounted for 16%, 15%, and 10%, or a combined 41%, of total revenue.
4. Fair Value of Financial Instruments
As of December 31, 2021 and 2020, the Company had $93.7 million and $66.3 million, respectively, in financial
assets held in money market accounts and $28.0 million and $39.0 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.
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During the year ended December 31, 2021, the Company had gross realized losses related to marketable securities
and money market accounts of $0.4 million included within earnings. The gross realized gains for the period as well as the
gross realized gains and losses for the year ended December 31, 2020 were not significant. During the year ended
December 31, 2021, the Company reclassified $0.4 million of net unrealized holding losses out of other comprehensive
loss and into earnings. The amount reclassified out of other comprehensive income for the year ended December 31, 2020
was not significant. The total gains and losses for marketable securities and money market accounts in other
comprehensive income (loss) as of December 31, 2021 and 2020 were not significant.
During the years ended December 31, 2021 and December 31, 2020, the Company did not maintain any assets or
liabilities classified as Level 2 or Level 3 in the fair value hierarchy.
5. Property and Equipment, Net
Property and equipment consist of the following (in thousands):
Machinery and equipment
Computers and hardware
Leasehold improvements
Furniture and fixtures
Capitalized software
Property and equipment, gross
Less: accumulated depreciation
Total property and equipment, net
Estimated
Useful Life
(in years)
3-5
3
lease term
7
3
December 31,
2021
2020
$
$
95
1,023
3,110
453
2,909
7,590
(2,563)
5,027
$
$
95
660
3,074
452
995
5,276
(1,876)
3,400
Depreciation expense was approximately $0.7 million for the years ended December 31, 2021, 2020 and 2019.
During the year ended December 31, 2021, the Company capitalized $0.1 million in stock-based compensation
expense related to the development of internal-use software.
6. Intangible Assets, Net
Intangible assets consist of the following (in thousands):
Trademarks
Physician Network
Website
Intangible assets, gross
Less: accumulated amortization
Total intangible assets, net
Estimated
Useful Life
(in years)
December 31,
2021
2020
8
6
5
$
$
4,000
3,500
2,000
9,500
(8,901)
599
$
$
4,000
3,500
2,000
9,500
(8,287)
1,213
Amortization expense was $0.6 million, $1.2 million, and $1.5 million for the years ended December 31, 2021,
2020 and 2019, respectively.
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As of December 31, 2021, the future amortization expense of other intangible assets is as follows (in thousands):
Year ending December 31:
2022
2023
Thereafter
Total
7. Leases
$
$
500
99
—
599
In September 2019, the Company’s sublease agreement for its corporate headquarters in New York, NY commenced
and will expire in May 2029. Pursuant to the sublease, the Company will 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.
The Company recognizes lease expense on a straight-line basis over the lease term. Lease expense for the Company’s
operating leases was $1.3 million for the years ended December 31, 2021 and 2020.
Cash outflows from operating activities attributable to the operating leases for the years ended December 31, 2021
and 2020 was $1.3 million and $0.8 million, respectively.
Information related to the Company’s leases is as follows (in thousands):
Balance Sheet Location
December 31, 2021
Operating Leases
Right-of-use asset
Short-term lease liabilities
Long-term lease liabilities
Operating lease right-of-use assets
Accrued expenses and other current liabilities
Operating lease noncurrent liabilities
$
$
$
Other information
Weighted average remaining lease term, operating lease
Weighted average discount rate, operating lease
Future minimum facility lease payments as of December 31, 2021, are as follows (in thousands):
Balance at December 31, 2021
Year Ending December 31:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Less: imputed interest
Present value of lease liabilities
Less: current portion of operating lease liabilities
Operating lease noncurrent liabilities
$
$
$
$
7,805
1,231
7,419
7.4 years
4.29%
1,286
1,286
1,326
1,407
1,407
3,400
10,112
1,462
8,650
1,231
7,419
Rent expense under the operating leases was approximately $1.2 million for the year ended December 31, 2019.
The terms of the facility lease provide for rental payments on a monthly basis and on a graduated scale.
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February 2022 Lease Agreement
In February 2022, the Company entered into a lease agreement for additional space in its 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,
the Company will pay the base rent of approximately $1.4 million per year starting in the fourth quarter of 2023 for five
years and approximately $1.5 million per year thereafter through the first quarter of 2035, the expiration date. For the
21,262 square foot office, the Company will pay the base rent of approximately $1.3 million starting in the first quarter of
2025 for five years and approximately $1.4 million per year thereafter through the first quarter of 2035, the expiration date.
For the current 25,212 square foot office, the Company will pay the base rent of approximately $1.6 million per year
beginning in June 2029 through the first quarter of 2035, the expiration date.
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
Accrued claims payable
Accrued compensation
Accrued commission
Operating lease current liabilities
Professional fees
Other
Total accrued expenses and other current liabilities
9. Debt
December 31,
2021
19,998
10,089
3,092
1,231
843
2,172
37,425
$
$
2020
22,799
5,087
1,334
1,231
1,216
2,605
34,272
$
$
In June 2018, the Company entered into a loan agreement with Silicon Valley Bank for a revolving line of credit
up to $15.0 million based upon an advance rate of 80% on “eligible” accounts receivable to fund its working capital and
other general corporate needs, which was amended in April 2019, January 2020, June 2020, and February 2021 (“SVB
Line of Credit”). Eligible accounts receivable was defined in the loan agreement as accounts billed with aging 90 days or
less and excluded accounts receivable due for member copayments, coinsurance, and deductibles. The SVB Line of Credit
matured in June 2021.
The Company was required to pay a revolving line commitment fee of $225,000 in three equal annual installments
of $75,000 starting on the one-year anniversary of the revolving line. The Company made the first installment payment of
$75,000 in June 2019 and accrued this cost monthly. When the Company held unrestricted cash balances greater than $5.0
million, interest accrued at a floating rate per annum equal to the greater of prime rate or 4.75%. If the unrestricted cash
balance was less than $5.0 million, interest accrued at a floating rate per annum equal to the greater of prime rate plus 0.5%
or 4.75%, with interest payable monthly. Interest was paid based upon the borrowed funds.
The SVB Line of Credit contained customary affirmative covenants, financial covenants, as well as negative
covenants that, among other things, restricted the Company’s ability to incur additional indebtedness (including guarantees
of certain obligations); create liens; engage in mergers, consolidations, liquidations and dissolutions; sell assets; maintain
collateral; pay dividends or make other payments in respect of capital stock; make acquisitions; make investments, loans
and advances; enter into transactions with affiliates; make payments with respect to or modify subordinated debt
instruments; and enter into agreements with negative pledge clauses or clauses restricting subsidiary distributions. The
financial covenant requires the Company to achieve a specified minimum quarterly revenue as defined by the SVB Line of
Credit. The Company was in compliance with all requirements and its covenant of the revolving credit facility as of
December 31, 2020.
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The Company had $0 drawn on the SVB Line of Credit as of December 31, 2020 and 2019. The Company
recorded interest expense on the SVB Line of Credit of $38,000, $75,000 and $213,000 during the years ended December
31, 2021, 2020 and 2019, respectively.
10. Stockholders’ Equity
Common Stock
The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders. The common stock confers upon its holders the right to receive dividends out of any assets legally
available, when and as declared by the Board of Directors.
In August 2019, the Company repurchased 26,659 shares of common stock at an average price per share of $6.91
pursuant to its contractual right of first refusal for offers made by third parties to acquire outstanding shares from existing
stockholders. The repurchased shares were recorded as treasury shares.
The Company had 615,980 shares of treasury stock as of December 31, 2021, 2020 and 2019.
Common Stock Warrants
In connection with the IPO on October 25, 2019, all outstanding convertible preferred warrants were converted to
common stock warrants. As of December 31, 2021 and 2020, the Company had 565,351 and 1,419,415 common stock
warrants outstanding, respectively.
For the year ended December 31, 2021, 854,065 common stock warrants were exercised for 824,991 shares at a
weighted average exercise price of $1.73. For the year ended December 31, 2020, 188,449 common stock warrants were
exercised for 177,854 shares of common stock at a weighted average exercise price of $1.73. The Company did not
recognize compensation expense relating to the common stock warrants for the years ended December 31, 2021, 2020 and
2019 as they were all fully vested.
Stock Incentive Plan
In October 2019, the Company’s Board of Directors and stockholders adopted and approved the 2019 Equity
Incentive Plan, as amended (the “2019 Plan”), as the successor to continuation of the Company’s 2017 Equity Incentive
Plan, as amended (the “2017 Plan”). No further grants were made under the 2017 Plan from the date that the 2019 Plan
became effective. Initially, the maximum number of shares issuable under the 2019 Plan will not exceed 19,198,875 shares
of common stock, which is the sum of 1) 2,640,031 new shares and 2) an additional number of shares not to exceed
16,558,844 consisting of (a) shares that remained available for the issuance of awards under the 2017 Plan immediately
prior to the effective date of the 2019 Plan and (b) shares of common stock subject to outstanding stock options or other
stock awards granted under the 2017 Plan that, on or after the date the 2019 Plan became effective, terminate, expire or are
cancelled prior to exercise or settlement; are forfeited or repurchased because of the failure to vest; or are reacquired or
withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares
become available from time to time.
Under the Company’s 2017 Plan and consistent with the Company’s prior 2008 Equity Incentive Plan, options and
other stock awards to purchase shares of common stock may be granted to employees, directors, and consultants. Incentive
stock options are granted to employees and non-statutory stock options are granted to consultants and directors at an
exercise price not less than 100% of the fair value (as determined by the Board of Directors) of the Company’s common
stock on the date of grant. The exercise price of options granted to stockholders who hold 10% or more of the Company’s
common stock on the option grant date shall not be less than 110% of the fair value of the Company’s common stock on
the date of grant for both incentive and non-qualified stock option grants. These options generally vest over four years and
expire ten years from the date of grant. Stock option grants may be exercisable upon grant, and any unvested shares
purchased are subject to repurchase. There were no unvested shares subject to repurchase as of December 31, 2021 and
2020.
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As of December 31, 2021 and 2020, 4,160,618 and 5,287,341 shares of common stock, respectively, remained
available for future grants under the 2019 Plan. Under the 2019 Plan, subject to any adjustments necessary to implement
any capitalization adjustments, an annual increase to the number of shares issuable is automatically added on January 1 of
each year for a period of ten years commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an
amount equal to 4% of the total number of shares of common stock outstanding on December 31 of the preceding year.
Stock Options
Stock options are exercisable based on the terms and conditions outlined in the applicable award agreement. Stock
options generally vest over four years and typically expire ten years from the date of grant. A summary of the Company’s
stock option activity for the year ended December 31, 2021 is as follows:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Cancelled
Outstanding at December 31, 2021
Exercisable at December 31, 2020
Exercisable at December 31, 2021
Weighted
Average
Weighted
Average
Remaining
Grant Date Contractual
Life (Years)
Fair Value
7.7
$
5.03
30.60
2.93
13.56
9.15
Aggregate
Intrinsic
Value
(In thousands)
$ 500,053
$ 25.11
7.9
$ 439,557
Number of
Shares
13,384,301
5,290,216
(3,440,937)
(303,639)
(5,928)
14,924,013
7,343,948
6,694,592
$
$
2.02
7.1
$ 396,496
4.21
6.6
$ 308,893
The total intrinsic value of options exercised was $175.0 million, $79.6 million, and $50.8 million for the years
ended December 31, 2021, 2020, and 2019, respectively.
The weighted average grant date fair value of options granted was $30.60, $26.56, and $2.68 in the years ended
December 31, 2021, 2020, and 2019, respectively.
The total grant date fair value of options vested was $16.0 million, $9.3 million, and $2.8 million in the years
ended December 31, 2021, 2020, and 2019, respectively.
The total unrecognized compensation cost related to unvested options was approximately $164.2 million at
December 31, 2021. The weighted-average remaining recognition period is approximately 3.6 years.
Certain assumptions used in the option-pricing model for options granted to employees, directors, and non-
employees are as follows:
Expected term (in years)
Risk-free interest rate
Expected volatility
Expected dividend rate
Year Ended December 31
2020
5.50 - 6.11
0.3% - 1.7%
52.4% - 59.5% 49.2% - 54.7%
2021
3.00 - 6.11
0.6% - 1.4%
2019
5.63 - 6.28
1.5% - 2.5%
48.6% - 49.0%
—
—
—
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Restricted Stock Units
During the year ended December 31, 2020, the Company began granting restricted stock units under the 2019
Equity Incentive Plan. Restricted stock units vest based on the terms outlined in the applicable award agreement, which is
generally over a period of 4 years. A summary of the Company’s restricted stock unit activity is as follows:
Outstanding at December 31, 2020
Granted
Vested
Forfeited
Outstanding at December 31, 2021
Number
of
Shares
489,067
1,517,075
(201,916)
(38,708)
1,765,518
$
$
$
$
$
Weighted
Average
Grant Date
Fair Value
25.47
58.13
26.48
32.75
53.25
The total intrinsic value of restricted stock units vested was $11.1 million and $1.4 million for the years ended
December 31, 2021 and 2020, respectively.
The weighted-average grant date fair value of restricted stock units granted was $58.13 and $25.46 for the years
ended December 31, 2021 and 2020, respectively.
The total fair value of restricted stock units vested was $0.2 million for the year ended December 31, 2021. For
the year ended December 31, 2020, the total fair value of restricted stock units vested was not significant.
The total unrecognized compensation cost related to unvested restricted stock units was approximately $86.5
million at December 31, 2021. The weighted-average remaining recognition period is approximately 3.6 years.
January 2022 Executive Equity Grants
On November 4, 2021, the Company announced that David Schlanger will transition to the role of Executive
Chairman, effective as of January 1, 2022, and will continue to serve as a director. In connection with this transition, the
Company entered into an amended and restated employment agreement with Mr. Schlanger, effective as of January 1,
2022. Pursuant to this agreement, Mr. Schlanger received an equity award for fiscal year 2022 comprised of 333,000 non-
qualified stock options and 84,000 restricted stock units, in each case vesting as to 25% on the first anniversary of the
vesting commencement date with the remaining 75% of such award vesting in equal quarterly installments thereafter over
the next three years, as well as a performance stock unit award with respect to a maximum number of 83,000 shares that
are eligible to be earned based on the achievement of specified revenue targets.
Peter Anevski, who served as President and Chief Operating Officer, succeeded Mr. Schlanger as Chief Executive
Officer, effective as of January 1, 2022. In connection with this transition, the Company entered into an amended and
restated employment agreement with Mr. Anevski, effective as of January 1, 2022. Pursuant to this agreement, Mr. Anevski
received an equity award for fiscal year 2022 comprised of 1,000,000 non-qualified stock options and 250,000 restricted
stock units, in each case vesting as to 25% on the first anniversary of the vesting commencement date with the remaining
75% of such award vesting in equal quarterly installments thereafter over the next three years, as well as a performance
stock unit award with respect to a maximum number of 250,000 shares that are eligible to be earned based on the
achievement of specified revenue targets.
Employee Stock Purchase Plan
In October 2019, the Board of Directors and stockholders also adopted and approved the 2019 Employee Stock
Purchase Plan (the “ESPP”). Following the IPO, the ESPP authorized the issuance of 1,700,000 shares of common stock
to purchase rights granted to the Company’s employees or to employees of the Company’s designated affiliates. As of
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December 31, 2021, 1,560,693 shares of common stock remained available to be issued under the ESPP. The following
table summarizes the purchases that were made for each purchase period of the ESPP through December 31, 2021 (in
thousands, except for share amounts):
Purchase Period
Proceeds used for purchase
Shares purchased
October 25, 2019 to July 31, 2020
August 1, 2020 to January 31, 2021
February 1, 2021 to July 31, 2021
$
1,146
481
595
103,677
21,125
14,505
The next purchase period commenced on August 1, 2021 and ended on January 31, 2022.
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense for employees, which was included in the
statements of operations and comprehensive loss as follows (in thousands):
Cost of services
Sales and marketing
General and administrative
Total stock-based compensation expense
11. Net Income (Loss) Per Share
2021
8,969
5,462
19,275
33,706
$
$
Year Ended
December 31
2020
$
$
3,056
2,066
7,699
12,821
$
$
2019
537
900
3,624
5,061
A reconciliation of net income (loss) and the number of shares in the calculation of basic and diluted net income
(loss) per share is as follows (in thousands, except share and per share amounts):
Basic net income (loss) per common share:
Numerator:
Net income (loss)
Denominator:
Weighted-average shares used in computing basic net income (loss) per
share
Basic net income (loss) per share
Diluted net income (loss) per common share:
Numerator:
Net income (loss)
Denominator:
Year Ended
December 31,
2020
2021
2019
65,769 $
46,459 $
(8,569)
89,105,562
85,722,670
0.74 $
0.54 $
20,735,202
(0.41)
65,769 $
46,459 $
(8,569)
$
$
$
Weighted-average shares used in computing basic net income (loss) per
share
Effect of dilutive securities
Weighted-average shares used in computing diluted net income (loss) per
share
Diluted net income (loss) per share
89,105,562
11,252,485
85,722,670
13,332,856
20,735,202
—
100,358,047
99,055,526
$
0.66 $
0.47 $
20,735,202
(0.41)
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The following weighted-average outstanding shares of potentially dilutive securities were excluded from the
computation of diluted net income (loss) per share for the periods presented because including them would have been
antidilutive:
Options to purchase common stock
Shares issuable under ESPP
Warrants to purchase common stock
Restricted stock units
Total potential dilutive shares
12. 401(k) Plan
Year Ended
December 31,
2020
699,233
70,184
—
—
769,417
2019
13,610,441
—
122,882
—
13,733,323
2021
1,562,029
—
—
186,547
1,748,576
The Company sponsors a 401(k) defined contribution plan covering all employees and began employer
contributions in 2018. The Company incurred expenses of $0.9 million, $0.5 million, and $0.4 million for the years ended
December 31, 2021, 2020, and 2019 respectively.
13. Income Taxes
A tax benefit of $33.3 million and $37.8 million was recorded for the years ended December 31, 2021 and 2020.
A tax provision of $12,000 was recorded for the year ended December 31, 2019.
The provision/(benefit) from income taxes is composed of the following (in thousands):
Current
Federal
State
Total Current
Deferred:
Federal
State
Total Deferred
Total provision/(benefit) from income taxes
2021
December 31,
2020
2019
$
$
— $
(31)
(31)
— $
191
191
(25,154)
(8,149)
(33,303)
(33,334)
$
(28,852)
(9,119)
(37,971)
(37,780)
$
—
12
12
—
—
—
12
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows:
Income tax provision at statutory rate
State income taxes, net of federal benefit
Stock-based compensation
Warrant valuation
Change in valuation allowance
Other
Effective tax rate
2021
December 31,
2020
2019
21 %
(25)
(99)
—
—
—
(103)%
21 %
(38)
(100)
—
(317)
(2)
(436)%
21 %
6
56
(45)
(35)
(3)
— %
The Company’s effective tax rate for the years ended December 31, 2021, 2020, and 2019 was (103%), (436%),
and 0%, respectively. For the year ended December 31, 2021, the effective tax rate differs from the U.S. federal statutory
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rate primarily due to permanent tax adjustments, including windfalls upon the exercise of stock options and vesting of
RSUs. For the year ended December 31, 2020, the effective tax rate differs from the U.S. federal statutory rate primarily
due to the release of the valuation allowance in this period, in addition to permanent tax adjustments, including windfalls
upon the exercise of options and vesting of RSUs. For the year ended December 31, 2019, the effective tax rate differs
from the U.S. federal statutory rate due to the increase in valuation allowance.
Deferred Tax Balances
The components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Capitalized start‑up costs
Research and development credits
Stock-based compensation
Accruals and reserves
Operating lease liabilities
Property and equipment
Intangibles
Indirect tax
Total deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities:
Goodwill
Operating lease right-of-use assets
Total deferred tax liabilities
Net deferred tax assets
December 31,
2021
2020
$ 55,180
8
1,039
9,133
5,916
2,297
164
414
—
74,151
(224)
$ 73,927
$ 29,291
11
1,039
3,241
4,116
2,475
154
195
313
40,835
(225)
$ 40,610
(581)
(2,072)
(2,653)
$ 71,274
(392)
(2,247)
(2,639)
$ 37,971
Assessing the realizability of deferred tax assets requires the determination of whether it is more-likely-than-not
that some portion or all the deferred tax assets will not be realized. In assessing the need for a valuation allowance, the
Company considers all available positive and negative evidence, including future reversals of existing taxable temporary
differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to
objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to
overcome. As of December 31, 2020, the Company achieved three years of cumulative income, along with projections of
profitability, for which management determined that there is sufficient positive evidence to conclude that it is more likely
than not that substantially all of the deferred tax assets will be realized. As such, $28.5 million of the valuation allowance
had been released. Management continues to maintain this position as of December 31, 2021. During the year ended
December 31, 2021, the net change in the valuation allowance was not significant.
As of December 31, 2021, the Company has net operating loss carryforwards for federal and state income tax
purposes of approximately $86.2 million and $167.8 million, respectively, which expire beginning in the year 2027. In
addition to the above federal net operating losses, the Company has net operating losses of $112.7 million with an
indefinite carryforward period. There are certain state net operating losses that follow the federal carryforward period and
are indefinite in nature. The federal and California research and development tax credits are approximately $0.7 million
and $0.8 million, respectively. The federal research credits will begin to expire in 2030 and the California research and
development credits have no expiration date. Utilization of the net operating loss carryforwards and credits may be subject
to a substantial annual limitation due to ownership changes that may occur, as provided by Section 382 of the Internal
Revenue Code of 1986, as well as similar state provisions. Such annual limitation could result in the expiration of net
operating losses and credits before their utilization.
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Table of Contents
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
December 31,
2020
2019
2021
Balance at the beginning of the year
Reductions based upon tax positions related to the current year
Balance at the end of the year
390
390
$
$
$
— —
$
$
$
390
390
397
(7)
390
In order for these unrecognized tax benefits to be realized, the net operating loss carryforwards must be utilized
first. The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months.
The Company files U.S. federal and state income tax returns with varying statutes of limitations. All tax years
since inception remain open to examination due to the carryover of unused net operating losses and tax credits.
14. Commitments and Contingencies
Arbitration/Litigation
On January 14, 2019, a vendor filed a Demand for Arbitration and Statement of Claim against the Company
(“Demand”) for alleged breach of the November 10, 2017 Preferred Specialty Pharmacy Agreement (“Agreement”)
between the Company and the vendor. On March 13, 2019, the Company terminated the Agreement for material breach
with the vendor. On April 3, 2019, the vendor filed a Second Amended Demand for Arbitration (“SAD”) for breach of the
Agreement. The vendor was seeking $25.0 million in damages, fees, interest and cost. Pursuant to a schedule set forth by
the Arbitration Panel, on May 3, 2019, the Company filed a Motion to Dismiss the SAD. That Motion was fully briefed on
June 14, 2019 and was decided on July 31, 2019. The Arbitration Panel dismissed two of the vendor’s four claims. The
Arbitration Panel held additional hearings for the two remaining claims between August 17, 2020 and August 26, 2020.
Final arguments were held on October 20, 2020. Based on a willingness to expeditiously resolve the matter, the parties
proposed settlement to the panel on November 16, 2020. In December 2020, the Company finalized and settled the
arbitration for $5.75 million without admission of liability to avoid further legal costs.
The Company believes there is no other litigation pending that could have, individually or in the aggregate, a
material adverse effect on the Company’s financial position, results of operations, or cash flows.
Indemnifications
The Company indemnifies each of its officers and directors for certain events or occurrences, subject to certain
limits, while the officer or director is or was serving at the Company’s request in such capacity, as permitted under
Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period
lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or
director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company
currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the
Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair
value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities relating to these
obligations for any period presented.
15. Unaudited Quarterly Results of Operations Data
The following table sets forth the unaudited quarterly consolidated results of operations for each of the eight
quarterly periods in the period ended December 31, 2021. The unaudited quarterly results of operations have been
prepared on the same basis as the audited consolidated financial statements, and we believe they reflect all normal
recurring adjustments necessary for the fair statement of the Company’s results of operations for these periods. This
98
Table of Contents
information should be read in conjunction with the consolidated financial statements and related notes included elsewhere
in this Annual Report. The Company’s historical operating data may not be indicative of the Company’s future
performance.
Mar. 31,
2020 (1)
Jun. 30,
2020 (1)
Sep. 30,
2020 (1)
Three Months Ended
Mar. 31,
2021
Dec. 31,
2020
(in thousands)
Jun. 30,
2021
Sep. 30,
2021
Dec. 31,
2021
$
81,024 $
64,422
16,602
64,605 $
52,650
11,955
98,928 $
78,092
20,836
100,301 $
79,635
20,666
122,133 $
93,226
28,907
128,651 $
99,030
29,621
122,284 $
93,792
28,492
3,267
3,608
3,355
4,776
4,014
4,028
4,441
9,904
13,171
9,419
13,027
12,653
16,008
14,729
19,505
13,086
17,100
13,937
17,965
14,986
19,427
3,431
(1,072)
4,828
1,161
11,807
11,656
9,065
164
150
314
3
5
8
11
(17)
(6)
32
(17)
15
7
(18)
(11)
12
252
264
(92)
144
52
3,745
(1,064)
4,822
1,176
11,796
11,920
9,117
127,553
102,438
25,115
7,696
17,607
25,303
(188)
(293)
83
(210)
(398)
(116)
3,629 $
—
(1,064) $
—
4,822 $
37,896
39,072 $
3,370
15,166 $
6,807
18,727 $
7,679
16,796 $
15,478
15,080
0.04 $
0.04 $
(0.01) $
(0.01) $
0.06 $
0.05 $
0.45 $
0.39 $
0.17 $
0.15 $
0.21 $
0.19 $
0.19 $
0.17 $
0.17
0.15
$
$
$
84,537,538
99,665,158
85,281,151
85,281,151
86,265,297
98,969,588
86,514,619
99,021,233
87,404,287
100,106,497
88,165,158
99,808,085
89,571,226
100,370,331
90,537,077
100,321,297
Revenue
Cost of services
Gross profit
Operating expenses:
Sales and marketing
General and
administrative
Total operating expenses
Income (loss) from
operations
Other income
(expense), net
Interest income
(expense), net
Total other income
(expense), net
Income (loss) before
income taxes
Benefit (provision) for
income taxes
Net income (loss)
Net income (loss) per
share:
Basic
Diluted
Weighted-average shares
used in computing net
income (loss) per share:
Basic
Diluted
(1) In the fourth quarter of 2020, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” with an
adoption date of January 1, 2020. As such, quarterly financial information for the interim periods of 2020 has been recast with resulting
impacts to the previously disclosed general and administrative expense of $0.4 million, $(0.7) million, and $0.5 million for the three-
month periods ended March 31, 2020, June 30, 2020, and September 30, 2020, respectively.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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Table of Contents
ITEM 9A.
CONTROLS AND PROCEDURES
Limitations on Effectiveness of Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that
information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls
and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls
and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment
in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has
evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure
controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this
evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of December 31, 2021.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as that term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Because of its inherent limitations, internal
control over financial reporting may not prevent or detect material misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and
with the participation of the Company’s principal executive officer and principal financial officer, our management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the criteria set
forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on the assessment, our management concluded that our internal control over
financial reporting was effective as of December 31, 2021.
Attestation Report of the Independent Registered Public Accounting Firm
Ernst & Young LLP, an independent registered public accounting firm, has audited the consolidated financial
statements included in the Annual Report on Form 10-K and has issued an attestation report on our internal control over
financial reporting, which is included in this Item 9A below.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2021 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Progyny, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Progyny, Inc.’s internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Progyny, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related
consolidated statements of operations, comprehensive income (loss), changes in convertible preferred stock and
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the
related notes and our report dated March 1, 2022, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
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Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ Ernst & Young LLP
New York, NY
March 1, 2022
102
Table of Contents
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Code of Conduct
Our Board of Directors has adopted a Code of Conduct applicable to all officers, directors and employees,
including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy of our Code of Conduct is available at the Investor Relations section of our website,
located at investors.progyny.com, under “Governance—Documents & Charters.” We intend to make all disclosures
required by law or Nasdaq Stock Market rules regarding any amendments to, or waivers from, any provisions of the code at
the same location of our website. Our website is not incorporated by reference into this Annual Report on Form 10-K, and
you should not consider information on our website to be part of this Annual Report on Form 10-K.
Other Information
The remaining information required by this item will be included under the headings “Proposal 1—Election of
Directors,” “Information Regarding Director Nominees and Current Directors,” “Information Regarding the Board of
Directors and Corporate Governance,” and, if applicable, “Delinquent Section 16(a) Reports” in our definitive proxy
statement relating to the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year
ended December 31, 2021, which we refer to as our 2022 Proxy Statement, and such required information is incorporated
herein by reference into this Annual Report on Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item will be included under the headings “Executive Compensation,” “Director
Compensation,” and “Information Regarding the Board of Directors and Corporate Governance” in our 2022 Proxy
Statement and is hereby incorporated by reference into this Annual Report on Form 10-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required by this item will be included under the heading “Equity Compensation Plan
Information” and “Security Ownership of Certain Beneficial Owners and Management” in our 2022 Proxy Statement and
is hereby incorporated by reference into this Annual Report on Form 10 K.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item will be included under the headings “Transactions with Related Persons,”
and “Information Regarding the Board of Directors and Corporate Governance” in our 2022 Proxy Statement and is hereby
incorporated by reference into this Annual Report on Form 10-K.
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Table of Contents
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be included under the heading “Principal Accountant Fees and
Services” in our 2022 Proxy Statement and is hereby incorporated by reference into this Annual Report on Form 10-K.
PART IV
ITEM 15.
EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES.
(a)
Documents filed as part of this report:
1. List of Financial Statements
The following financial statements are included in Item 8 “Financial Statements and Supplementary Data” herein.
Report of Independent Registered Public Accounting Firm
Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. List of Financial Statement Schedules
Page
71
73
74
75
76
77
78
All schedules are omitted because they are not applicable, not required or the required information is shown in the
consolidated financial statements or notes thereto.
3. List of Exhibits
The exhibits to this report are listed below.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
Description
Amended and Restated
Certificate of Incorporation of
Progyny, Inc.
Amended and Restated By-laws
of Progyny, Inc.
Form of common stock
certificate.
Form of 2013 Preferred Stock
Warrant.
Form of 2014 Preferred Stock
Warrant.
Form of 2015 Preferred Stock
Warrant.
Warrant to Purchase Stock issued
to Silicon Valley Bank dated
October 9, 2013.
Description of Capital Stock.
Incorporated by Reference
Form
8-K
File No.
001-39100
Exhibit
3.2
Filing
Date
Filed/Furnished
Herewith
10/31/2019
S-1
333-233965
3.4
9/27/2019
S-1/A
333-233965
4.1
10/15/2019
S-1/A
333-233965
4.2
10/15/2019
S-1/A
333-233965
4.3
10/15/2019
S-1/A
333-233965
4.4
10/15/2019
S-1/A
333-233965
4.5
10/15/2019
10-K
001-39100
4.6
3/10/2020
104
Table of Contents
10.1
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13
10.14
Amended and Restated Investor
Rights Agreement, dated as of
March 4, 2015, by and among
Progyny, Inc. and certain of its
stockholders.
Progyny, Inc. 2008 Stock Plan, as
amended, and forms of
agreements thereunder.
Progyny, Inc. 2017 Equity
Incentive Plan and forms of
agreements thereunder.
Amendment No. 1 to the
Progyny, Inc. 2017 Equity
Incentive Plan.
Progyny, Inc. 2019 Equity
Incentive Plan and forms of
agreements thereunder.
Amendment No. 1 to the
Progyny, Inc. 2019 Equity
Incentive Plan.
Progyny, Inc. 2019 Employee
Stock Purchase Plan.
Form of Indemnification
Agreement.
Amended and Restated
Employment Agreement between
Progyny, Inc. and David
Schlanger, dated September 23,
2019.
Amended and Restated
Employment Agreement between
Progyny, Inc. and Peter Anevski,
dated September 25, 2019.
Amended and Restated
Employment Agreement between
Progyny, Inc. and Mark
Livingston dated September 15,
2020.
Employment Agreement between
Progyny, Inc. and Jennifer Bealer
dated September 8, 2017.
Sublease Agreement, dated as of
July 29, 2019 by and between
IPREO Holdings, LLC and
Progyny, Inc.
Loan and Security Agreement,
dated as of June 8, 2018, between
Silicon Valley Bank and
Registrant.
S-1
333-233965
10.1
9/27/2019
S-1
333-233965
10.2
9/27/2019
S-8
333-233965
99.2
10/25/2019
10-K
001-39100
10.4
3/10/2020
S-1/A
333-233965
10.4
10/15/2019
10-K
001-3910
10.6
3/10/2020
S-1/A
333-233965
10.5
10/15/2019
S-1
S-1
333-233965
10.6
9/27/2019
333-233965
10.7
9/27/2019
S-1
333-233965
10.8
9/27/2019
10-K
001-39100
10.11
3/10/2021
10-K
001-39100
10.12
3/10/2021
S-1
333-233965
10.11
9/27/2019
S-1
333-233965
10.10
9/27/2019
105
10-Q
001-39100
10.1
8/7/2020
Table of Contents
10.15
21.1
23.1
24.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Amendments to Loan and
Security Agreement, dated as of
June 8, 2018, between Silicon
Valley Bank and Registrant.
List of Subsidiaries.
Consent of Ernst & Young LLP
Power of Attorney (incorporated
by reference to the signature
pages of this Annual Report on
Form 10-K).
Certification of Chief Executive
Officer pursuant to Exchange Act
Rule 13a-14(a).
Certification of Chief Financial
Officer pursuant to Exchange Act
Rule 13a-14(a).
Certification of Principal
Executive Officer pursuant to 18
U.S.C. Section 1350.
Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350.
Inline XBRL Instance Document.
Inline XBRL Taxonomy
Extension Schema Document.
Inline XBRL Taxonomy
Extension Calculation Linkbase
Document.
Inline XBRL Taxonomy
Extension Definition Linkbase
Document.
Inline XBRL Taxonomy
Extension Label Linkbase
Document.
Inline XBRL Taxonomy
Extension Presentation Linkbase
Document.
Cover Page Interactive Data File
(embedded within the Inline
XBRL document).
* Filed herewith.
** Furnished herewith.
† Indicates management contract or compensatory plan.
106
*
*
*
*
*
**
**
*
*
*
*
*
*
Table of Contents
ITEM 16.
FORM 10-K SUMMARY
None.
107
Table of Contents
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
PROGYNY, INC.
Date: March 1, 2022
By:
/s/ PETER ANEVSKI
Peter Anevski
Chief Executive Officer
(Principal Executive Officer)
108
Table of Contents
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Peter Anevski and Mark Livingston, and each one of them, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and in their name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated as of March 1, 2022.
Signature
/s/ PETER ANEVSKI
Peter Anevski
/s/ MARK LIVINGSTON
Mark Livingston
/s/ DAVID SCHLANGER
David Schlanger
/s/ BETH SEIDENBERG
Beth Seidenberg, M.D.
/s/ MALISSIA CLINTON
Malissia Clinton
/s/ FRED COHEN
Fred Cohen, M.D., D.Phil.
/s/ KEVIN GORDON
Kevin Gordon
/s/ ROGER HOLSTEIN
Roger Holstein
/s/ JEFFREY PARK
Jeffrey Park
/s/ NORMAN PAYSON
Norman Payson, M.D.
/s/ CHERYL SCOTT
Cheryl Scott
Title
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer
(principal financial and accounting officer)
Executive Chairman
Lead Independent Director
Director
Director
Director
Director
Director
Director
Director
109
SUBSIDIARIES OF THE COMPANY
EXHIBIT 21.1
Name
Progyny, Inc.
Jurisdiction of Organization
Delaware, U.S.A
The following is a list of significant subsidiaries of Progyny, Inc.:
Name
Jurisdiction of Organization
Progyny Fertility Purchasing, LLC
Delaware, U.S.A
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
● Registration Statement on Form S-8 (No. 333-253787) pertaining to the following plans:
● 2019 Equity Incentive Plan, as amended
● 2019 Employee Stock Purchase Plan
● Registration Statement on Form S-8 (No. 333-237072) pertaining to the following plans:
● 2019 Equity Incentive Plan
● Registration Statement on Form S-8 (No. 333-234342) pertaining to the following plans:
● 2019 Equity Incentive Plan
● 2019 Employee Stock Purchase Plan
● 2017 Equity Incentive Plan
● 2008 Stock Plan
of our reports dated March 1, 2022, with respect to the consolidated financial statements of Progyny, Inc.
and the effectiveness of internal controls over financial reporting of Progyny, Inc. included in this Annual
Report (Form 10-K) of Progyny, Inc. for the year ended December 31, 2021.
/s/ Ernst & Young LLP
New York, New York
March 1, 2022
Exhibit 31.1
CERTIFICATION
I, Peter Anevski, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Progyny, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 1, 2022
By:
/s/ Peter Anevski
Peter Anevski
Chief Executive Officer
(principal executive officer)
Exhibit 31.2
I, Mark Livingston, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Progyny, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 1, 2022
By:
/s/ Mark Livingston
Mark Livingston
Chief Financial Officer
(principal financial officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Progyny, Inc. (the “Company”) for the period ended
December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 1, 2022
By:
/s/ Peter Anevski
Peter Anevski
Chief Executive Officer
(principal executive officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Progyny, Inc. (the “Company”) for the period ended
December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 1, 2022
By:
/s/ Mark Livingston
Mark Livingston
Chief Financial Officer
(principal financial officer)