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What changed in Progyny, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Progyny, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+299 added−302 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in Progyny, Inc.'s 2023 10-K

299 paragraphs added · 302 removed · 270 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThese 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 5.4 million covered lives under contract represents a mid-single digit percent of our initial market opportunity.
Biggest changeAs such, we estimate that our current member base of 6.4 million covered lives under contract represents a mid-single digit percent of our total market opportunity. Regardless of whether or not these employers currently provide a fertility benefit, we believe they are prospective clients of Progyny.
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.
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.
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.
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 continue to do so in the future.
We currently have contracts to provide coverage to approximately 5.4 million employees and their partners (known in our industry as covered lives), whom we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction.
We currently have contracts to provide coverage to approximately 6.4 million employees and their partners (known in our industry as covered lives), whom we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction.
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.
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 20 different Smart Cycle treatment bundles, which may be used independently or in combination depending on the member’s need.
In the 2022 sales cycle, more clients, with benefits going live in 2023, 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.
In the 2023 sales cycle, more clients, with benefits going live in 2024, 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.
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 370 employers, each with at least 1,000 covered lives.
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 450 employers, each with at least 1,000 covered lives.
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.
Sales and Marketing We sell our solutions through our sales organization and, in many cases, we leverage our relationships with top benefits consultants and channel partners 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.
We believe our account management services, including our detailed client reporting, play an important role in helping us maintain and strengthen our client relationships. 11 Table of Contents 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.
We believe our client success services, including our detailed client reporting, play an important role in helping us maintain and strengthen our client relationships. 11 Table of Contents 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.
(2) Calculated based on CDC, 2020 National Summary and Clinic Data Sets, published in 2022. (3) Calculated based on the 12-month period ended December 31, 2021. • Comprehensive Coverage. We provide all individuals with access to comprehensive coverage.
(2) Calculated based on CDC, 2021 National Summary and Clinic Data Sets, published in 2023. (3) Calculated based on the 12-month period ended December 31, 2022. • Comprehensive Coverage. We provide all individuals with access to comprehensive coverage.
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 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 family and ideal health.
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.
Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients’ employees are able to pursue the most effective treatment across life's milestones from the best physicians and achieve optimal outcomes. Progyny is a leading benefits management company specializing in fertility and family building benefits solutions in the United States.
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 6% in Japan (where there is more public health funding for fertility treatment).
Furthermore, when comparing the United States to other countries, the percentage of babies born utilizing ART is materially lower, at approximately 2% in the United States (where fertility treatment is not adequately covered), compared to approximately 10% in Denmark and more than 8% in Japan (where there is more public health funding for fertility treatment).
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.
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 6 Table of Contents medical insurance.
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.
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 Success We provide a dedicated client success team to ensure that we are delivering superior service.
Further, 37% of our current clients had no prior fertility coverage before adopting Progyny and 88% of our current clients enhanced their coverage when they switched to Progyny.
Further, 37% of our current clients had no prior fertility coverage before adopting Progyny and 90% of our current clients enhanced their coverage when they switched to Progyny.
Our solution provides members with access to the nation’s most desired fertility providers, including over 950 fertility specialists who practice at over 650 provider clinic locations throughout the United States. Our network includes 45 of the top 50 fertility practice groups by volume in the United States according to 2020 CDC data. • Integrated Pharmacy Benefits Solution.
Our solution provides members with access to the nation’s most desired fertility providers, including over 950 fertility specialists who practice at over 650 provider clinic locations throughout the United States. Our network includes 44 of the top 50 fertility practice groups by volume in the United States according to 2021 CDC data. • Integrated Pharmacy Benefits Solution.
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.
Our client success 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 client success teams work with our clients to create co-branded materials to support health fairs, open enrollment events and other employee communications.
The success and effectiveness of our sales team is evidenced by the over 105 new clients that we added in 2022, 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.
The success and effectiveness of our sales team is evidenced by the over 85 new clients that we added in 2023, 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.
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 +82 for our fertility benefits solution and +79 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2022.
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 +80 for our fertility benefits solution and +80 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2023.
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.
Our client success 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.
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.
The client success 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.
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.
We believe diversity, equity, inclusion and belonging result in business growth and encourage increased innovation, retention of talent and a more engaged workforce. We strive to create a workplace where all individuals feel valued, empowered and welcomed.
By comparison, medical conditions with a similar prevalence, such as diabetes and asthma, are 6 Table of Contents comprehensively covered by conventional health insurance carriers and employers.
By comparison, medical conditions with a similar prevalence, such as diabetes and asthma, are comprehensively covered by conventional health insurance carriers and employers.
Our network includes 45 of the top 50 fertility practice groups by volume in the United States according to 2020 CDC data, which was published in 2022 and is the most recent data available.
Our network includes 44 of the top 50 fertility practice groups by volume in the United States according to 2021 CDC data, which was published in 2023 and is the most recent data available.
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 offer paid parental leave for new parents with an extension of leave for those with an infant in the NICU 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 fertility procedure, adoption or surrogacy, for any employee.
“Risk Factors—Risks Related to Our Business and Industry—Our business experiences seasonality, which may cause fluctuations in our sales and results of operations” of this Annual Report on Form 10-K. Employees and Human Capital As of December 31, 2022, we had 400 employees, of which 393 were full-time.
“Risk Factors—Risks Related to Our Business and Industry—Our business experiences seasonality, which may cause fluctuations in our sales and results of operations” of this Annual Report on Form 10-K. 18 Table of Contents Employees and Human Capital As of December 31, 2023, we had 566 employees, of which 563 were full-time.
Our employees participate in pulse surveys that have deepened our perception of the workforce. We staffed a Vice President whose responsibility is to develop, enhance, and communicate our DEI Initiatives throughout the organization. For example, we highlight aspects of DEI, such as key events, celebrations, memorials and holidays, through recurring company wide communications.
We staffed a Vice President whose responsibility is to develop, enhance, and communicate our DEI Initiatives throughout the organization. For example, we highlight aspects of DEI, such as key events, celebrations, memorials and holidays, through recurring company wide communications.
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. 12 Table of Contents Outcome National Averages for All Provider Clinics Progyny In-Network Provider Clinic Averages for All Patients Progyny In-Network Provider Clinic Averages for Progyny Members Only (3) Single embryo transfer rate (1) 72.5 % 75.6 % 91.0 % Pregnancy rate per IVF transfer (1) 54.1 % 55.5 % 63.0 % Miscarriage rate (1) 18.6 % 18.3 % 13.9 % Live birth rate (2) 42.7 % 44.1 % 54.3 % IVF multiples rate (2) 7.4 % 6.5 % 2.5 % (1) Calculated based on the Society for Assisted Reproductive Technology, or SART, 2019 National Summary Report, finalized in 2022.
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. 12 Table of Contents Outcome National Averages for All Provider Clinics Progyny In-Network Provider Clinic Averages for All Patients Progyny In-Network Provider Clinic Averages for Progyny Members Only (3) Live birth rate per attempted retrieval (2) 35.5 % 37.4 % 44.4 % Single embryo transfer rate (1) 75.5 % 77.8 % 93.9 % Pregnancy rate per IVF transfer (1) 53.8 % 55.2 % 62.8 % Miscarriage rate (1) 18.4 % 18.2 % 15.8 % Live birth rate per transfer (2) 41.6 % 42.6 % 52.9 % IVF multiples rate (2) 6.9 % 6.2 % 1.9 % (1) Calculated based on the Society for Assisted Reproductive Technology, or SART, 2020 National Summary Report, finalized in 2023.
Our members receive access to our selective Center of Excellence network of high-quality providers that includes over 950 fertility specialists who practice at over 650 provider clinic locations throughout the United States.
Our members receive access to our selective Center of Excellence network of high-quality providers that includes over 950 fertility specialists who practice at over 650 provider clinic locations throughout the United States and over 1,050 specialists in total when including reproductive urologists.
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.
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.
While fertility treatments have been available for over 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.
While fertility treatments have been available for over 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.
Currently, 90% of our clients under contract are utilizing this solution, including 97% of the clients we signed in fiscal year 2022.
Currently, 91% of our clients under contract are utilizing this solution, including 98% of the clients we signed in fiscal year 2023.
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 further support our employees. 19 Table of Contents • Diversity, Equity and Inclusion .
We also offer additional paid leave to all employees to support other family health and care challenges. Additionally, we offer a number of different ways to access our mental health resources to further support our employees. • Diversity, Equity and Inclusion .
Our current clients, who are industry leaders across both high-growth and mature industries and range in size from at least 1,000 to 600,000 employees, represent approximately 5.4 million covered lives under contract.
Our Clients We currently have contracts to serve over 450 employers in the United States across more than 40 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 600,000 employees, represent approximately 6.4 million covered lives under contract.
Specifically, as shown in the table above, the in-network average live birth rate for Progyny members is 54.3%, as compared to the 44.1% average live birth rate for all of the patients at those same clinics. • Eliminating Financial Risk Associated With Collections.
Specifically, as shown in the table above, the in-network average live birth rate per attempted retrieval for Progyny members is 44.4%, as compared to the 37.4% average live birth rate per attempted retrieval for all of the patients at those same clinics.
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 are in the process of updating our corporate sustainability report on our website, which highlights our approach to diversity and inclusion, and we also publish EEO-1 reports on our website.
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. Our employees participate in pulse surveys that have deepened our perception of the workforce and we also publish EEO-1 reports on our website.
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.
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.
To date, we have identified several ways we believe we can potentially expand our comprehensive family building 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 370 employers in the United States across more than 40 industries.
To date, we have identified several ways we believe we can potentially expand our comprehensive family building offering, our addressable market, and our client base in the future, including the new preconception, maternity and postpartum, and menopause offerings. We will continue to evaluate opportunities as our platform continues to expand.
We believe we have an initial addressable market of approximately 8,000 potential self-insured employer clients in the United States (excluding but not limited to 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 370 clients under contract, are still in the early stages of our growth trajectory.
We believe we have a total addressable market of approximately 8,000 potential employer clients in the United States, who have a minimum of 1,000 employees, as well as Taft-Hartley labor populations, and federal government populations and, with our base of over 450 clients under contract, are still in the early stages of our growth trajectory.
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.
We allow flexible work hours to accommodate employee volunteer opportunities, provide corporate sponsored charitable events and continue to develop partnerships with community organizations that align with our priorities in fertility, family building and equity in healthcare. 19 Table of Contents Our Corporate Information We were incorporated in Delaware in 2008 under the name Auxogen Bioscience, Inc.
For example, it was not until 2017 that infertility was first recognized as a disease by the American Medical Association and, as of June 2022, only 20 states have mandated insurance coverage for infertility. For the states that do mandate coverage, the mandates vary greatly and may leave patients with inadequate coverage or unable to pursue care at all.
For example, it was not until 2017 that infertility was first recognized as a disease by the American Medical Association and, as of February 2024, only 21 states and the District of Columbia have mandated insurance coverage for infertility.
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.
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 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.
We work with our clients to determine what expenses related to adoption or surrogacy or any other elected benefit will be covered under their plan, thereby alleviating their administrative burden.
We contract with employers to provide fertility and family building benefits to their employees and covered dependents. We believe our initial addressable market consists of the approximately 8,000 self-insured employers in the United States (excluding but not limited to quasi-governmental entities, such as universities, school systems, and labor unions).
We contract with employers to provide fertility and family building benefits to their employees and covered dependents. We believe our addressable market primarily consists of large self-insured employers as well as labor populations under the Labor Management Relations Act of 1947 (also known as the Taft-Hartley Act), and federal government populations.
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.
ITEM 1. BUSINESS Overview We believe in a world where everyone can realize dreams of family and ideal health. Our mission is to empower healthier, supported journeys through transformative fertility, family building and women's health benefits.
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If we were to include quasi-governmental entities in our potential addressable market, we believe our market penetration is even lower. Regardless of whether or not these self-insured employers currently provide a fertility benefit, we believe they are prospective clients of Progyny.
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We have also begun to offer additional supported benefits for those considering conception, for maternity and postpartum care, and during menopause. We have demonstrated our ability to drive better outcomes for our clients, members and provider clinics across multiple metrics.
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Examples of reimbursement expenses typically include agency fees, surrogacy fees, travel expenses and healthcare expenses for the surrogate.
Added
For the states that do mandate coverage, the mandates vary greatly and may leave patients with inadequate coverage or unable to pursue care at all.
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Cybersecurity In the normal course of business, we may collect and store personal information and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, information regarding trial participants in connection with clinical trials, sensitive third-party information and employee information.
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There are approximately 8,000 employers in the United States who have a minimum of 1,000 employees, who together with the Taft-Hartley populations and federal government populations, represent approximately 106 million potential covered lives in total.
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To protect this information, our existing cybersecurity policies require monitoring and detection programs, network security measures, encryption of critical data, and security assessment of vendors. We maintain various protections designed to safeguard against cyberattacks, including firewalls and virus detection software.
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Assistance Service Reimbursement Programs We also offer an assistance service program where certain services can be offered through a reimbursement program, including adoption, surrogacy, doula, and travel reimbursement when travel is required to receive medical services. We can manage the reimbursement of these expenses for those clients who offer such reimbursement benefits.
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We have established and test our disaster recovery plan and we protect against business interruption by backing up our major systems. In addition, we periodically scan our environment for any vulnerabilities, perform penetration testing and engage third parties to assess effectiveness of our data security practices. A third party security consultant conducts regular network security reviews, scans and audits.
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For these programs, employers designate a specific lifetime dollar amount toward the elected assistance service for their employees. We then administer the expense reimbursement to employees up to this dollar amount.
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In addition, we maintain insurance that includes cybersecurity coverage. Our cybersecurity program is led by our chief information security officer and a team of highly skilled cybersecurity professionals . The program incorporates industry-standard frameworks, policies and practices designed to protect the privacy and security of our sensitive information.
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This results in the typical Progyny member undergoing 2.2 retrievals for a live birth as compared to the national average of 3.5 retrievals. This difference of more than one retrieval represents substantial cost avoidance for our clients, as well as significantly less physical and emotional stress on the member. • Eliminating Financial Risk Associated With Collections.
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As needed, our cybersecurity team reports to the Audit Committee of our Board of Directors on information security and cybersecurity matters. The Audit Committee has oversight responsibility for our information security policies and practices. Despite the implementation of our cybersecurity program, our security measures cannot guarantee that a significant cyberattack will not occur.
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A successful attack on our information technology systems could have significant consequences to the business. While we devote resources to our security measures to protect our systems and information, these measures cannot provide absolute security.
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See “Risk Factors – Risks Related to Our Business and Industry” for 18 Table of Contents additional information about the risks to our business associated with a breach or compromise to our information technology systems.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny 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 . 47 Table of Contents 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.
Biggest changeOur 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.
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 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.
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, or otherwise make our operations vulnerable if 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.
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 .
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 incur as a public company or the specific timing of such costs .
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.
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, may experience unauthorized access to data and/or breaches of confidential information due to a variety of causes.
In addition, other competitors include specialty fertility-focused solutions owned or sponsored by the health insurance companies to provide more comprehensive support to fertility patients than their general medical coverage provides, such as case management or educational support, and the venture capital or private equity-backed companies who focus on maternity and reproductive health services more broadly, or who provide fertility-specific benefits solutions.
In addition, other competitors include specialty fertility-focused solutions owned or sponsored by the health insurance companies to provide more comprehensive support to fertility patients than their general medical coverage provides, such as case management or educational support, and the venture capital or private equity-backed companies that focus on maternity and reproductive health services more broadly, or who provide fertility-specific benefits solutions.
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 have some form of legislation affecting our payor clients’ ability to limit access to a provider network or remove a provider from the network.
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.
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; • publications of research or other reports about us or our industry, including those which may contain inaccurate or misleading information, financial estimates about us, changes in recommendations or withdrawal of research coverage by securities analysts; • changes in the pricing of our solutions and services; • changes in our projected operating and financial results; • general economic, industry, and market conditions; • 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; • rumors and market speculation involving us or other companies in our industry; • significant data breaches of our company, providers, vendors or pharmacies; • our involvement in litigation or threats of litigation against us; • 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; • war, incidents of terrorism, or responses to these events; and • changes in the anticipated future size and growth rate of our market.
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; • publications of research or other reports about us or our industry, including those which may contain inaccurate or misleading information, financial estimates about us, changes in recommendations or withdrawal of research coverage by securities analysts; • changes in the pricing of our solutions and services; • changes in our projected operating and financial results; • general economic, industry, and market conditions; • 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; 43 Table of Contents • rumors and market speculation involving us or other companies in our industry; • significant data breaches of our company, providers, vendors or pharmacies; • our involvement in litigation or threats of litigation against us; • 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; • war, incidents of terrorism, or responses to these events; and • changes in the anticipated future size and growth rate of our market.
Also, our failure, or perceived failure, to meet the standards included in 48 Table of Contents any ESG disclosure could negatively impact our reputation, employee recruiting and retention, and the willingness of our customers and suppliers to do business with us. 49 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Also, our failure, or perceived failure, to meet the standards included in any ESG disclosure could negatively impact our reputation, employee recruiting and retention, and the willingness of our customers and suppliers to do business with us. 48 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
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.
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.
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; • 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 amended and restated bylaws and certain provisions of our amended and restated certificate of incorporation.
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; 46 Table of Contents • 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; • 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 amended and restated bylaws and certain provisions of our amended and restated certificate of incorporation.
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 expense, 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 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.
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 expense, goodwill impairments and other non-cash charges; 44 Table of Contents • 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 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.
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 requires the use of updated standard code sets for diagnoses and procedures known as the ICD-10 code sets.
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.
The COVID-19 pandemic continues to evolve, with pockets of resurgence and the emergence of variant strains contributing to continued uncertainty about its scope, duration, severity, trajectory and lasting impact. The pandemic has adversely impacted, and may continue to adversely impact, many aspects of our business.
The COVID-19 pandemic continues to evolve, with pockets of resurgence and the emergence of variant strains contributing to continued uncertainty about its scope, duration, severity, trajectory and lasting impact. The pandemic adversely impacted, and may continue to adversely impact, many aspects of our business.
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; • our ability to offer complementary solutions and services that will enhance our comprehensive family building offering; • changes in healthcare laws, regulations or the enforcement of such laws and regulations, or trends; 23 Table of Contents • any material increase in unemployment rate; • global economic conditions and the business environment of our clients and, in particular, slowing growth or 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.
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; • our ability to offer complementary solutions and services that will enhance our comprehensive family building offering; • changes in healthcare laws, regulations or the enforcement of such laws and regulations, or trends; • any material increase in unemployment rate; • global economic conditions and the business environment of our clients and, in particular, slowing growth or 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.
In developing this guidance, our management must make certain assumptions and judgments, including but not limited to, our business strategy, plans, goals, expectations concerning our market position, future operations and other financial and operating information, as well as the impact of events outside of our control (such as the COVID-19 pandemic or shortages of fertility medications) that are or were at this time inherently difficult to predict.
In developing this guidance, our management must make certain assumptions and judgments, including but not limited to, our business strategy, plans, goals, expectations concerning our market position, future operations and other financial and operating information, as well as the impact of events outside of our control (such as macroeconomic conditions) the COVID-19 pandemic or shortages of fertility medications) that are or were at this time inherently difficult to predict.
Unfavorable changes in our industry, including reductions in general healthcare spending, or in the United States economy could have a negative effect on our and our clients’ and potential clients’ results of operations.
Unfavorable changes in our industry, including reductions in general healthcare spending, or in the United States and global economy could have a negative effect on our and our clients’ and potential clients’ 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 (such as the recent Inflation Reduction Act which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations); • 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; 42 Table of Contents • limitations or adverse findings regarding our ability to do business in some jurisdictions; and • discrete impact tax items, including such items resulting from the amount and timing of equity exercises and our share price.
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 (such as the recent Inflation Reduction Act which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations); • 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 • discrete impact tax items, including such items resulting from the amount and timing of equity exercises and our stock price.
Our future growth will depend, in part, on our ability to: • continue to attract new clients and maintain existing clients; 27 Table of Contents • 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.
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.
While we do not believe any single competitor offers a similarly robust and integrated fertility and family building benefits solution as to what we provide, there are alternative solutions in the market such as the health insurance companies who are able to provide fertility benefits management services as part of their overall administration of a company's health plan and who are our primary competition.
While we do not believe any single competitor offers a similarly robust and integrated fertility and family building benefits solution as to what we provide, there are alternative solutions in the market such as the health insurance companies that are able to provide fertility benefits management services as part of their overall administration of a company's health plan and that are our primary competition.
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.
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 or network partners to violate, applicable laws, regulations or other requirements could subject us or our clients to significant administrative, civil or criminal penalties.
Any determination by a federal or state regulatory authority that any of our activities or those of our clients or 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.
Any determination by a federal or state regulatory authority that any of our activities or those of our clients or 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 36 Table of Contents 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.
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.
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 terminations 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.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, 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.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“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.
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.
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 33 Table of Contents 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.
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.
Fertility specialists and our other network providers could refuse to contract with us, 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.
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.
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 35 Table of Contents other sensitive client, member, or employee data, including HIPAA-regulated protected health information, may occur.
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 . Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders .
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 . 45 Table of Contents Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders .
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.
On January 28, 2021, President Biden issued an Executive Order that reiterates the policy of the Administration to protect and strengthen the ACA, making high-quality healthcare accessible and affordable to all Americans.
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 31 Table of Contents products and estimate our costs, which might require us to incur costs to change our operations.
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.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches has increased the likelihood, and risks associated with data breach litigation. Further, the California Privacy Rights Act, or the CPRA generally went into effect on January 1, 2023 and significantly amends the CCPA.
The CCPA provides for civil penalties for 34 Table of Contents violations, as well as a private right of action for data breaches has increased the likelihood, and risks associated with data breach litigation. Further, the California Privacy Rights Act, or the CPRA generally went into effect on January 1, 2023 and significantly amends the CCPA.
Our revenue growth for the twelve months ended December 31, 2022 and 2021 was 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 delayed and may in the future delay new fertility cycles because they operate in areas acutely affected by the COVID-19 pandemic.
Our revenue growth in past periods, including the twelve months ended December 31, 2022, was 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 delayed and may in the future delay new fertility cycles because they operate in areas acutely affected by the COVID-19 pandemic.
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.
The specialty pharmacies in our network could refuse to contract with us, demand higher drug pricing or take other actions that could result in higher medical costs or less attractive services for our members.
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.
The failure to maintain our selective network of high-quality fertility specialists and other healthcare providers or the failure of 31 Table of Contents 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.
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies. 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 .
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies. 28 Table of Contents 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 .
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 37 Table of Contents provisions of ERISA are broadly written and their application to particular cases can be uncertain.
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.
The 28 Table of Contents 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.
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.
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 us being required to offer increased salaries or other benefits.
Competition for these personnel is intense, especially for experienced sales and client success personnel. There is no guarantee we will be able to attract such personnel or that competition among potential employers will not result in us being required to offer increased salaries or other benefits.
Our results of operations may be adversely 43 Table of Contents 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.
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.
The COVID-19 pandemic, including variants and resurgences, 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 COVID-19 pandemic, including variants and resurgences, has had and may continue to have, and similar health epidemics or pandemics could in the future have, an adverse impact on our business, operations, and the markets and communities in which we and our clients, members and providers operate.
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 45 Table of Contents requirements.
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.
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 34 Table of Contents proactively enforce the HIPAA privacy and security standards.
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.
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.
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 41 Table of Contents are completed, and may result in unforeseen operating difficulties and expenditures.
Enforcement of compliance with these standards falls under HHS and is carried out by CMS . 36 Table of Contents In the event new requirements are imposed, we will be required to modify our systems and processes to accommodate these changes.
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.
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.
Such a determination also could require us to change or terminate portions of our business, disqualify us from serving clients in certain states, or clients that do business with government entities, or cause us to refund some or all of our service fees or otherwise compensate our clients.
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.
Our clients rely on our client success 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.
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.
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 success and member services personnel to serve our growing client base.
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, inflation, consumer confidence, international trade relations, political turmoil, natural catastrophes, resurgences or 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.
Negative conditions in the general economy in the United States and elsewhere, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, consumer confidence, international trade relations, geopolitical 21 Table of Contents conflict, political turmoil, natural catastrophes, resurgences or outbreaks of contagious diseases or the worsening thereof, including the COVID-19 pandemic, warfare and terrorist attacks, could cause a decrease in business investments, including spending on employee benefits, and negatively affect the growth of our business.
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 long-term 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.
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 long-term impact of the COVID-19 pandemic could result in adverse changes in our results of operations for an unknown period of time.
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 33 Table of Contents attract clients.
Even an unsuccessful challenge by regulatory, judicial 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.
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 32 Table of Contents under favorable terms enabling us to service our members profitably.
We also cannot provide any assurance that we will be able to continue to renew our existing contracts, maintain our 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 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.
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.
An inactive market may also impair our ability to raise 44 Table of Contents 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.
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.
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 contracting requirements may change and in doing so restrict our ability to sell into the 40 Table of Contents government sector until we have attained the revised certification.
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, or any willing provider” legislation, or may provide that a provider may not be removed from a network except in compliance with certain procedures, or due process” legislation.
Such legislation may require our clients to 37 Table of Contents 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.
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.
Changes and developments in the health insurance system or pharmacy benefit management practices 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.
Although President Biden issued executive orders and federal agencies have issued guidance intended to protect access to reproductive healthcare services, the enactment of certain state laws restricting abortion care may conflict with, and ultimately limit, the covered benefits offered by a company to its employees and the types of fertility treatment services available at provider clinics.
Although President Biden issued executive orders and federal agencies have issued guidance intended to protect access to reproductive healthcare services, the enactment of certain state laws restricting abortion care and other changes in laws, or in interpretation of laws through court decisions, affecting fertility benefits may conflict with, and ultimately limit, the covered benefits offered by a company to its employees and the types of fertility treatment services available at provider clinics.
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.
Further, to the extent that we are unsuccessful in hiring, training and retaining adequate PCAs and client success personnel, our ability to provide adequate and timely support to our members and clients would be 26 Table of Contents negatively impacted, and our members’ and clients’ satisfaction with our solutions and services would be adversely affected.
Additional compliance investment and potential business process changes may be required. Similar laws have passed in Virginia, Colorado, Connecticut and Utah, 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 enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
Additional compliance investment and potential business process changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and at the federal 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.
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; impacts related to outbreaks and resurgence of contagious diseases and or the 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 legal and/or 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. 24 Table of Contents 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.
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; impacts related to outbreaks and resurgence of contagious diseases and or the 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 legal and/or 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.
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 . 38 Table of Contents The healthcare regulatory and political framework is uncertain and evolving.
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 .
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.
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.
Economic conditions including inflation, interest rate fluctuations, changes in capital market conditions and regulatory changes, such as the taxability of medical benefits like ours, may affect our ability to obtain necessary financing on acceptable terms.
Economic conditions including inflation, interest rate fluctuations, changes in capital market conditions, disruptions in the banking industry and other parts of the financial services sector, and regulatory changes, such as the taxability of medical benefits like ours, may affect our ability to obtain necessary financing on acceptable terms.
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.
On February 27, 2024, we issued guidance for the first quarter of 2024 and full year 2024. 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.
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.
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.
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, 2022, there were an aggregate of 18,808,026 and 2,416,162 shares of our common stock subject to outstanding options and unvested restricted stock units, respectively.
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, 2023, there were an aggregate of 17,228,415 and 2,561,213 shares of our common stock subject to outstanding options and unvested restricted stock units, respectively.
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.
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. These 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.
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.
In addition, we expect to continue to expend substantial financial and other resources on: • sales and marketing; 27 Table of Contents • 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.
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.
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.
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.
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.
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.
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.
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.
Further, the consolidation of pharmaceutical manufacturers, the shortages of drugs provided by such manufacturers, the termination or material alteration of our contractual 32 Table of Contents relationships, or our failure to renew such contracts on favorable terms could have a material adverse effect on our business and results of operations.
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.
Several states have proposed separate PBM bills, and at least 18 states have adopted 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.
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.
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. In addition, Progyny seeks to continue to expand its offerings in preconception, maternity and postpartum, menopause and related offerings.
We went live with Progyny Rx in 2018 and 90% of our current clients under contract have now launched this solution, including approximately 97% of the clients we signed in 2022.
We went live with Progyny Rx in 2018 and 91% of our current clients have now launched this solution, including approximately 98% of the clients we signed in 2023.
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.
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.
While the effects of the COVID-19 pandemic may eventually be contained or mitigated, there is no guarantee that any future resurgences or future outbreaks 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.
There is no guarantee that any future resurgences or future outbreaks of this or any other widespread epidemics or pandemics will not occur, or that the global economy will fully recover, either of which could seriously harm our business.
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.
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. 23 Table of Contents The global impact of COVID-19, due to variants and resurgences of infections, continues to evolve, and we will continue to monitor the situation closely.
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.
Additionally, the CAA requires 38 Table of Contents 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.
An increase in the cost of obtaining fertility medication or general medical cost inflation could also 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.
An increase in the cost of obtaining fertility medication or general medical cost inflation could also 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. Many economists believe the global economy will likely experience a recessionary environment in the near future.
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.
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 39 Table of Contents pharmacies pay in purchasing medications from a wholesaler, was not preempted by the federal ERISA statute.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor additional information, please refer to Part II, Item 8 "Financial Statements and Supplementary Data — Note 7 — Leases" in this Annual Report on Form 10-K. ITEM 3. LEGAL PROCEEDINGS See Part II, Item 8 “Financial Statements and Supplementary Data — Note 14 — Commitments and Contingencies — Arbitration/Litigation.”
Biggest changeFor additional information, please refer to Part II, Item 8 “Financial Statements and Supplementary Data — Note 7 — Leases” in this Annual Report on Form 10-K. 49 Table of Contents ITEM 3. LEGAL PROCEEDINGS See Part II, Item 8 “Financial Statements and Supplementary Data — Note 14 — Commitments and Contingencies — Arbitration/Litigation.”
In February 2022, we entered into a lease, which is expected to expire 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 our headquarters for administration, sales and marketing and client support.
In February 2022, we entered into a lease, which is expected to expire in the fourth 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 our headquarters for administration, sales and marketing and client support.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePark served from April 2019 until April 2022 as the Chairman and Chief Executive Officer of WellDyneRx, an independent pharmacy benefits manager. Mr. Park has served as a member of the board of directors for WellDyne Rx since April 2019. He has served as a member of the board of directors for P3 Health Partners since December 2021.
Biggest changePark has served as the President of Waltz Health, a digital health business that helps patients and payers save costs on prescription drugs. Mr. Park served from April 2019 until April 2022 as the Chairman and Chief Executive Officer of WellDyneRx, an independent pharmacy benefits manager.
Swartz holds a B.S. in History from the University of Maryland and received her J.D. from the University of Maryland. 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.
Swartz holds a B.A. in History from the University of Maryland and received her J.D. from the University of Maryland. 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.
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.
Payson is qualified to serve on our board of directors because of his 40-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.
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. Allison Swartz has served as our Executive Vice President, General Counsel since November 2022.
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. 50 Table of Contents Allison Swartz has served as our Executive Vice President, General Counsel since November 2022.
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.
Park holds a B.S. in Accounting from Brock 52 Table of Contents 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.
Dean Institute for Humankindness and Health Justice. We believe that Mr. Dean is qualified to serve on our board of directors because of his extensive knowledge and experience in healthcare. Fred E. Cohen, M.D. D.Phil . has served on our board of directors since March 2015. Dr.
Dean Institute for Humankindness and Health Justice. We believe that Mr. Dean is qualified to serve on our board of directors because of his extensive knowledge and experience in healthcare. 51 Table of Contents Fred E. Cohen, M.D. D.Phil . has served on our board of directors since March 2015. Dr.
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 50 Table of Contents qualified to serve on our board of directors because of his extensive experience at healthcare companies and in executive management.
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 qualified to serve on our board of directors because of his extensive experience at healthcare companies and in executive management.
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.
Payson is also on the board of Elia Philanthropies (formerly 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.
Dean worked at Dignity Health (f/k/a Catholic 51 Table of Contents Healthcare West) from 2000 to 2019, where he most recently served as Chief Executive Officer and President. Mr. Dean worked at Advocate Health Care as Chief Operating Officer from 1997 to 2000, and as Executive Vice President from 1995 to 1997. Mr.
Dean worked at Dignity Health (f/k/a Catholic Healthcare West) from 2000 to 2019, where he most recently served as Chief Executive Officer and President. Mr. Dean worked at Advocate Health Care as Chief Operating Officer from 1997 to 2000, and as Executive Vice President from 1995 to 1997. Mr.
Holstein is qualified to serve on our board of directors because of his extensive leadership and healthcare experience . 52 Table of Contents Jeff Park has served as a member of our board of directors since October 2019. 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. Since November 2023, Mr.
Cohen, D.Phil. 66 Director Kevin Gordon 60 Director Roger Holstein 70 Director Jeff Park 51 Director Norman Payson, M.D. 74 Director Cheryl Scott 73 Director Executive Officers David Schlanger has served as our Executive Chairman since January 2022 and on our board of directors since March 2017. Mr.
Cohen, D.Phil. 67 Director Kevin Gordon 61 Director Roger Holstein 71 Director Jeff Park 52 Director Norman Payson, M.D. 75 Director Cheryl Scott 74 Director Executive Officers David Schlanger has served as our Executive Chairman since January 2022 and on our board of directors since March 2017. Mr.
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 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.
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.
He 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.
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.
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 October 2016 to November 2023, Dr. Payson was a board member of Smile Brands.
Dr. Seidenberg has served on the board of directors of Atara Biotherapeutics since August 2012 and Vera Therapeutics, Inc. since June 2016. 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 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.
Name Age Position Executive Officers : David Schlanger 63 Executive Chairman Peter Anevski 55 Chief Executive Officer Allison Swartz 33 Executive Vice President, General Counsel and Secretary Mark Livingston 57 Chief Financial Officer Michael Sturmer 46 President Non- Employee Directors: Beth Seidenberg, M.D. 65 Lead Independent Director Lloyd Dean 72 Director Fred E.
Name Age Position Executive Officers : David Schlanger 64 Executive Chairman Peter Anevski 56 Chief Executive Officer Allison Swartz 34 Executive Vice President, General Counsel and Secretary Mark Livingston 58 Chief Financial Officer Michael Sturmer 47 President Non- Employee Directors: Beth Seidenberg, M.D. 66 Lead Independent Director Lloyd Dean 73 Director Fred E.
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 Friday Health Plans. From 1997 to 2005, Mr.
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 Nox Health. From 1997 to 2005, Mr.
Gordon has also served 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, and Cirtec Medical Corp. Mr. Gordon served on the board of directors of Veracyte, Inc., a genomic diagnostics company, from December 2016 until June 2022.
Gordon has also served on the board of directors of privately held Worldwide Clinical Trials, a global contract research organization, since December 2023 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, and Cirtec Medical Corp. Mr.
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.
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.
Gordon served as Executive Vice President and Chief Financial Officer of Teleflex Incorporated, a medical device company, from March 2007 until January 2010 and he held various senior corporate development positions there 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.
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 and he held various senior corporate development positions there from 1997 to 2007.
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.
Prior thereto he held various positions at Package Machinery Company and 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.
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(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.
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Dr. Seidenberg has served on the board of directors of Atara Biotherapeutics since August 2012 and Vera Therapeutics, Inc. since June 2016 and Acelyrin since 2020. Dr.
Added
Gordon served on the board of directors of Veracyte, Inc., a genomic diagnostics company, from December 2016 until June 2022. From January 2018 until March 2019, he was the President and Chief Financial Officer of Liquidia Technologies Inc., a clinical biopharmaceutical company. Mr.
Added
From June 2021 to July 2022 Dr. Payson was Chairman of Implantable Provider Group. From May 2017 to August 2019 Dr. Payson was a board member of Healthcare Outcomes Performance Company ("HOPCo") a subsidiary of The Center for Orthopaedic and Research Excellence, Inc. Dr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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, 2022: 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, 2022 through October 31, 2022 3,825 $ 38.46 — $ — November 1, 2022 through November 30, 2022 79,821 39.62 — — December 1, 2022 through December 31, 2022 12,323 33.17 — — Total shares repurchased 95,969 38.75 — $ — (1) Represents shares withheld on net settlements of restricted stock units that vested under our equity incentive plans.
Biggest changeThe 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, 2023: 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, 2023 through October 31, 2023 36,223 33.18 — $ — November 1, 2023 through November 30, 2023 121,827 32.49 — — December 1, 2023 through December 31, 2023 13,725 35.62 — — Total shares repurchased 171,775 32.89 — — (1) Represents shares withheld on net settlements of restricted stock units that vested under our equity incentive plans.
Measurement points are from October 24, 2019 (the date our common stock began trading on Nasdaq) through December 31, 2022. 54 Table of Contents Cumulative Total Returns since Initial Public Offering Company/Index 10/24/2019 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Progyny, Inc. $100.00 $211.15 $ 326.08 $ 394.54 $ 239.62 S&P 500 Health Care $100.00 $111.78 $ 124.56 $ 155.27 $ 149.16 NASDAQ Composite $100.00 $109.61 $ 157.45 $ 192.30 $ 127.86 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.
Measurement points are from October 24, 2019 (the date our common stock began trading on Nasdaq) through December 31, 2023. 54 Table of Contents Cumulative Total Returns since Initial Public Offering Company/Index 10/24/2019 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Progyny, Inc. $100.00 $211.15 $ 326.08 $ 394.54 $ 239.62 $ 286.00 S&P 500 Health Care $100.00 $111.78 $ 124.56 $ 155.27 $ 149.16 $ 149.62 NASDAQ Composite $100.00 $109.61 $ 157.45 $ 192.30 $ 127.86 $ 183.38 Use of Proceeds On October 29, 2019, in connection with our initial public offering (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.
In the fourth quarter of 2022, 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.
In the fourth quarter of 2023, 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.
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, 2023, there were approximately 56 stockholders of record of our common stock.
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, 2024, there were approximately 51 stockholders of record of our common stock.
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.
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe line of credit matured on June 8, 2021. 65 Table of Contents The following table summarizes our cash flows from continuing operations for the periods presented: Year Ended December 31, 2022 2021 (in thousands) Cash provided by operating activities $ 80,395 $ 26,037 Cash (used in) provided by investing activities (43,866) 8,766 Cash used in financing activities (7,864) (13,695) Net increase in cash and cash equivalents $ 28,665 $ 21,108 Operating Activities Net cash provided by operating activities was $80.4 million for the year ended December 31, 2022, primarily consisting of net income of $30.4 million adjusted for certain non-cash items, which included $100.7 million of stock-based compensation expense, $13.8 million of bad debt expense, $6.6 million of deferred tax benefits, and $1.6 million of depreciation and amortization.
Biggest changeIf 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. 65 Table of Contents The following table summarizes our cash flows from operations for the periods presented: Year Ended December 31, 2023 2022 (in thousands) Cash provided by operating activities $ 188,814 $ 80,395 Cash used in investing activities (200,525) (43,866) Cash used in financing activities (11,072) (7,864) Effect of exchange rate changes on cash and cash equivalents 1 — Net (decrease) increase in cash and cash equivalents $ (22,782) $ 28,665 Operating Activities Net cash provided by operating activities was $188.8 million for the year ended December 31, 2023, primarily consisting of net income of $62.0 million adjusted for certain non-cash items, which included $122.6 million of stock-based compensation expense, $19.9 million of bad debt expense, $3.7 million of deferred tax expense, and $2.3 million of depreciation and amortization.
As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and 56 Table of Contents 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.
As part of this solution, we provide care 56 Table of Contents 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.
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.
Sales and Marketing Expense Sales and marketing expense consists primarily of employee related costs, including salaries, bonuses, commissions, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization for those employees associated with sales and marketing. These expenses also include third-party consulting services, advertising, marketing, promotional events, and brand awareness activities.
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.
General and Administrative Expense General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization for those employees associated with general and administrative services such as executive, legal, human resources, information technology, accounting, and finance.
Financing Activities Net cash used in financing activities was $7.9 million for the year ended December 31, 2022, consisting of payments of $12.1 million for employee taxes related to equity awards, partially offset by $3.1 million in proceeds from stock option exercises and $1.2 million in proceeds from contributions to our employee stock purchase plan.
Net cash used in financing activities was $7.9 million for the year ended December 31, 2022, consisting of payments of $12.1 million for employee taxes related to equity awards, partially offset by $3.1 million in proceeds from stock option exercises and $1.2 million in proceeds from contributions to our employee stock purchase plan.
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.
Pharmacy Benefits Services Pharmacy benefits services costs include: (1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by our specialty pharmacy partners; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization) for those employees associated with our care management service functions: PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs.
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, 59 Table of Contents 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.
Fertility Benefits Services Fertility benefits services costs include: (1) fees paid to provider clinics within our network, labs and anesthesiologists; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of our general overhead, depreciation and amortization) for those employees associated with 59 Table of Contents our care management service functions: Provider Account Management, PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs.
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.
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 significantly impacted various markets around the world, including the United States.
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.
We believe that the assumptions and estimates associated with our accrued receivables related to revenue recognition, accrued claims payable, stock-based compensation expense, and accounting for income taxes have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting estimates.
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 on our revenue.
Restrictions related to COVID-19, including variants, and our responses to them significantly impacted and may continue to impact how our members use our services, access our providers, and how our employees work and provide services to our clients and members, resulting in an impact on our revenue.
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.
Provision (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.
GAAP results. 62 Table of Contents We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income (expense), net, interest income, net, and benefit for income taxes.
GAAP results. 62 Table of Contents We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income, net, interest income, net, and provision (benefit) for income taxes.
We currently have contracts to provide coverage to approximately 5.4 million employees and their partners (known in our industry as covered lives), whom we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction.
We currently have contracts to provide coverage to approximately 6.4 million employees and their partners (known in our industry as covered lives), whom we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction.
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 expected expiration date. Critical Accounting Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
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 fourth quarter of 2035, the expected expiration date. Critical Accounting Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
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.
We currently offer 20 different Smart Cycle treatment bundles, which may be used in various combinations depending on the member’s need. Each Smart Cycle treatment bundle has a separate unit value (i.e., some have fractional values and some have whole values). Our clients contract to purchase a cumulative Smart Cycle unit value per eligible member.
PEPM fees represented 1% of our total revenue for the years ended December 31, 2022 and 2021, 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.
PEPM fees represented 1% of our total revenue for the years ended December 31, 2023 and 2022, 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.
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 when the drugs are dispensed.
The contractual fees agreed to with our clients are inclusive of the cost of the prescription drug from our specialty providers, less any applicable discounts (or rebates), as well as the related clinical and care management services. Revenue from these arrangements is recognized when the drugs are dispensed.
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.
In addition, we provide care management services as part of our fertility benefits solution, which include active management of our selective network of high-quality fertility specialists, real-time member eligibility and treatment authorization, member-facing digital solutions, detailed quarterly reporting for our clients supported by our dedicated client success teams and end-to-end comprehensive concierge member support provided by our in-house staff of PCAs.
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 expected expiration date.
For the 21,262 square foot office, we will pay the base rent of approximately $1.3 million starting in the fourth quarter of 2025 for five years and approximately $1.4 million per year thereafter through the fourth quarter of 2035, the expected expiration date.
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, including those with performance-based vesting criteria.
We estimate the fair value of each stock-based award on the measurement 67 Table of Contents 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, including those with performance-based vesting criteria.
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 370 with at least 1,000 covered lives.
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 450 with at least 1,000 covered lives.
Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period. We believe that our existing cash and cash equivalents, including the proceeds from our IPO, and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period. We believe that our existing cash and cash equivalents, including the proceeds from our marketable securities, and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
We currently serve over 370 employers with at least 1,000 covered lives in the United States across more than 40 industries. Our current clients, who are industry leaders across both high-growth and mature industries and who range in size from approximately 1,000 to 600,000 employees, represent approximately 5.4 million covered lives under contract.
We currently serve over 450 employers with at least 1,000 covered lives in the United States across more than 40 industries. Our current clients, who are industry leaders across both high-growth and mature industries and who range in size from approximately 1,000 to 600,000 employees, represent approximately 6.4 million covered lives under contract.
We will continue to evaluate the nature and extent of these potential impacts to our business, results of operations and liquidity. For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part I, Item 1A. "Risk Factors" included in this Annual Report on Form 10-K.
We will continue to evaluate the nature and extent of these potential impacts to our business, results of operations and liquidity. For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part I, Item 1A. “Risk Factors” included in this Annual Report on Form 10-K.
The remainder of the activity for the years ended December 31, 2022 and 2021 consisted of purchases of computers, software, including capitalized software development costs, and leasehold improvements, including leasehold improvements.
The remainder of the activity for the years ended December 31, 2023 and 2022 consisted of purchases of computers, software, including capitalized software development costs, and leasehold improvements.
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 4.6 million members as of December 31, 2022.
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 5.4 million members as of December 31, 2023.
For the 24,099 square foot office, we will pay the base rent of approximately $1.4 million per year starting in March 2024 for five years and approximately $1.5 million per year thereafter through the first quarter of 2035, the expected expiration date.
For the 24,099 square foot office, we will pay the base rent of approximately $1.4 million per year starting in April 2024 for five years and approximately $1.5 million per year thereafter through the fourth quarter of 2035, the expected expiration date.
Cost of Services Our cost of services has three primary components: (1) fertility benefit services; (2) pharmacy benefit services; and (3) vendor rebates.
Cost of Services Our cost of services has three primary components: (1) fertility benefits services; (2) pharmacy benefits services; and (3) vendor rebates.
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 67 Table of Contents meet the expected term of the stock option.
We selected companies with comparable characteristics to our Company, including enterprise value, risk profiles and position within the industry, that have historical stock price information sufficient to meet the expected term of the stock option.
We include accrued receivables within accounts receivable on our consolidated balance sheet. As of December 31, 2022 and 2021, accrued receivables were $54.6 million and $30.2 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.
We include accrued receivables within accounts receivable on our consolidated balance sheet. As of December 31, 2023 and 2022, accrued receivables were $45.8 million and $54.6 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.
The following assumptions were used to calculate the fair value of stock options granted to employees: Year Ended December 31, 2022 2021 Expected volatility 49.3% - 53.3% 52.4% - 59.5% Expected term (years) 4.61 - 6.11 3.00 - 6.11 Risk‑free interest rate 1.4% - 4.4% 0.6% - 1.4% Expected dividend yield — — Our outstanding stock-based awards as of December 31, 2022 are subject to service-based or performance-based vesting.
The following assumptions were used to calculate the fair value of stock options granted to employees: Year Ended December 31, 2023 2022 Expected volatility 52.0% - 54.0% 49.3% - 53.3% Expected term (years) 5.50 - 6.11 4.61 - 6.11 Risk‑free interest rate 3.5% - 4.8% 1.4% - 4.4% Expected dividend yield — — Our outstanding stock-based awards as of December 31, 2023 are subject to service-based or performance-based vesting.
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, 2022 was $21.84.
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, 2023 was $19.10.
Accrued claims payable of $31.1 million and $20.0 million as of December 31, 2022 and 2021, 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.
Accrued claims payable of $30.3 million and $31.1 million as of December 31, 2023 and 2022, 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.
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 +82 for our fertility benefits solution and +79 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2022.
We have retained substantially all of our clients since inception, and our member satisfaction over that same time period is evidenced by our industry-leading Net Promoter Score, or NPS, of +80 for our fertility benefits solution and +80 for our integrated pharmacy benefits solution, Progyny Rx as of December 31, 2023.
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, net includes investment income and losses as well as interest income and expense.
These expenses also include third-party consulting services and facilities costs. We anticipate that we will incur additional general and administrative expenses on an ongoing basis to support the growth of our business. Other Income, net Other income, net primarily includes interest income and expense, as well as investment income and losses.
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.
Financing Activities Net cash used in financing activities was $11.1 million for the year ended December 31, 2023, consisting of payments of $17.2 million for employee taxes related to equity awards, partially offset by $4.9 million in proceeds from stock option exercises and $1.3 million in proceeds from contributions to our employee stock purchase plan.
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.
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.
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.
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.
For the years ended December 31, 2022 and 2021, stock-based compensation expense was $100.7 million and $33.7 million, respectively.
For the years ended December 31, 2023 and 2022, stock-based compensation expense was $122.6 million and $100.7 million, respectively.
This increase was primarily due to a $23.4 million increase in personnel-related costs attributable to an increase in stock-based compensation expense of $15.7 million, incremental headcount and an increase in sales commissions, as well as a $2.1 million increase in other related sales and marketing expenses.
This increase was primarily due to an $11.3 million increase in personnel-related costs attributable to an increase in stock-based compensation expense of $5.9 million, incremental headcount and an increase in sales commissions, as well as a $2.5 million increase in other related sales and marketing expenses.
Cost of Services Year Ended December 31, 2022 2021 % Change (dollars in thousands) Cost of services $ 619,588 $ 388,486 59 % Cost of services increased by $231.1 million, or 59%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatments delivered.
Cost of Services Year Ended December 31, 2023 2022 % Change (dollars in thousands) Cost of services $ 849,799 $ 619,588 37 % Cost of services increased by $230.2 million, or 37%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatments delivered.
A discussion of the fiscal year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022 (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, 2021 and 2020 .” Overview We envision a world where anyone who wants to have a child can do so.
A discussion of the fiscal year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023 (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, 2022 and 2021 .” Overview We believe in a world where everyone can realize dreams of family and ideal health.
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.
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.
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.
Changes in operating assets and liabilities resulted in cash used in operating activities from an increase in prepaid expenses and other current assets of $22.9 million and accounts receivable of $21.7 million, partially offset by cash provided by operating activities from increases in accounts payable of $16.2 million, accrued expenses and other current liabilities of $10.4 million and other noncurrent assets and liabilities of $0.6 million.
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.
Additionally, staffing levels and the related personnel costs, including stock-based compensation expense, and other costs necessary to deliver our care management services will continue to grow as we continue to add clients and their associated members. Operating Expenses Our operating expenses consist of sales and marketing and general and administrative expenses.
This increase in cost of services was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as a $16.9 million increase in stock-based compensation expense. 63 Table of Contents Gross Profit and Gross Margin Year Ended December 31, 2022 2021 % Change (dollars in thousands) Gross profit $ 167,325 $ 112,135 49 % Gross margin 21.3 % 22.4 % Gross profit increased by $55.2 million, or 49%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This increase in cost of services was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as an $8.6 million increase in stock-based compensation expense. 63 Table of Contents Gross Profit and Gross Margin Year Ended December 31, 2023 2022 % Change (dollars in thousands) Gross profit $ 238,799 $ 167,325 43 % Gross margin 21.9 % 21.3 % Gross profit increased by $71.5 million, or 43%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our revenue growth for the years ended December 31, 2022 and 2021 was negatively impacted by COVID-19.
Our revenue for the year ended December 31, 2022 was negatively impacted by COVID-19.
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 included $33.7 million of stock-based compensation expense, $33.3 million of deferred tax benefits, $9.8 million of bad debt expense, and $1.3 million of depreciation and amortization.
Net cash provided by operating activities was $80.4 million for the year ended December 31, 2022, primarily consisting of net income of $30.4 million adjusted for certain non-cash items, which included $100.7 million of stock-based compensation expense, $13.8 million of bad debt expense, $6.6 million of deferred tax benefits, and $1.6 million of depreciation and amortization.
This increase was primarily due to a $35.3 million increase in personnel-related costs including an increase in stock-based compensation expense of $34.4 million as well as a $4.0 million increase in bad debt expense, partially offset by $0.6 million decrease in other related general and administrative expenses.
This increase was primarily due to a $9.7 million increase in personnel-related costs including an increase in stock-based compensation expense of $7.4 million, a $6.1 million increase in bad debt expense driven by our revenue growth, as well as a $3.0 million increase in other related general and administrative expenses.
This increase is primarily due to a $154.5 million, or 43% increase, in revenue from our fertility benefits solution and a $131.8 million or 91% 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.
This increase is primarily due to a $166.2 million, or 33% increase, in revenue from our fertility benefits solution and a $135.5 million or 49% 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.
As of December 31, 2022, we had $228.4 million and $100.3 million of unrecognized compensation costs related to unvested options and restricted stock units, respectively, which are expected to be expensed and vest over a weighted-average remaining period of approximately 3.2 years and 2.8 years, respectively.
As of December 31, 2023, we had $165.1 million and $91.0 million of unrecognized compensation costs related to unvested options and restricted stock units, respectively, which are expected to be expensed and vest over a weighted-average remaining period of approximately 2.5 years and 2.6 years, respectively.
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, 2022 and, to date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic.
Other than the prior impact on our revenue growth and the related cash flows resulting from the various restrictions on activities due to the COVID-19 pandemic, as of December 31, 2023, our sources and uses of cash were not otherwise significantly impacted by the COVID-19 pandemic and, to date, based on the information currently available to us, we have not identified and do not expect any material liquidity deficiencies as a result of the COVID-19 pandemic.
Three Months Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Assisted Reproductive Treatment (ART) Cycles (1) 12,196 7,623 42,598 28,413 Utilization - All Members (2) 0.51% 0.52% 1.23% 1.30% Utilization - Female Only (2) 0.46% 0.46% 1.03% 1.07% Average Members 4,559,000 2,899,000 4,349,000 2,812,000 (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.
Three Months Ended December 31, Year Ended December 31, 2023 2022 2023 2022 Assisted Reproductive Treatment (ART) Cycles (1) 15,066 12,196 58,013 42,598 Utilization - All Members (2) 0.54% 0.51% 1.33% 1.23% Utilization - Female Only (2) 0.48% 0.46% 1.09% 1.03% Average Members 5,442,000 4,559,000 5,383,000 4,349,000 (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.
Liquidity and Capital Resources As of December 31, 2022, we had $120.1 million of cash and cash equivalents and $69.2 million of marketable securities. Since inception, we have financed our operations primarily through sales of our solutions and the net proceeds we have received from sales of equity securities, including our IPO.
Liquidity and Capital Resources As of December 31, 2023, we had $97.3 million of cash and cash equivalents and $273.8 million of marketable securities. Since inception, we have financed our operations primarily through sales of our solutions and the net proceeds we have received from sales of equity securities, including our initial public offering.
Operating Expenses Sales and Marketing Expense Year Ended December 31, 2022 2021 % Change (dollars in thousands) Sales and marketing $ 45,657 $ 20,179 126 % Sales and marketing expense increased by $25.5 million, or 126%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Operating Expenses Sales and Marketing Expense Year Ended December 31, 2023 2022 % Change (dollars in thousands) Sales and marketing $ 59,488 $ 45,657 30 % Sales and marketing expense increased by $13.8 million, or 30%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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.
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.
The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Net income $ 30,358 $ 65,769 Add: Depreciation and amortization 1,601 1,301 Stock‑based compensation expense 100,748 33,706 Other (income) expense, net (286) 366 Interest income, net (814) (461) Benefit for income taxes (5,917) (33,334) Adjusted EBITDA $ 125,690 $ 67,347 Comparison of Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 % Change (dollars in thousands) Revenue $ 786,913 $ 500,621 57 % Revenue increased by $286.3 million, or 57%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net income $ 62,037 $ 30,358 Add: Depreciation and amortization 2,281 1,601 Stock‑based compensation expense 122,611 100,748 Other income, net (5,203) (286) Interest income, net (3,304) (814) Provision (benefit) for income taxes 8,654 (5,917) Adjusted EBITDA $ 187,076 $ 125,690 Comparison of Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, 2023 2022 % Change (dollars in thousands) Revenue $ 1,088,598 $ 786,913 38 % Revenue increased by $301.7 million, or 38%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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.
Our mission is to empower healthier, supported journeys through transformative fertility, family building and women's health benefits. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients’ employees are able to pursue the most effective treatment across life's milestones from the best physicians and achieve optimal outcomes.
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.
There can be no assurance as to the number of shares to be repurchased by us, if any. 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.
General and Administrative Expense Year Ended December 31, 2022 2021 % Change (dollars in thousands) General and administrative $ 98,327 $ 59,616 65 % General and administrative expense increased by $38.7 million, or 65%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
General and Administrative Expense Year Ended December 31, 2023 2022 % Change (dollars in thousands) General and administrative $ 117,127 $ 98,327 19 % General and administrative expense increased by $18.8 million, or 19%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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: Year Ended December 31, 2022 2021 (in thousands) Consolidated Statements of Operations Data: Revenue $ 786,913 $ 500,621 Cost of services (1) 619,588 388,486 Gross profit 167,325 112,135 Operating expenses: Sales and marketing (1) 45,657 20,179 General and administrative (1) 98,327 59,616 Total operating expenses 143,984 79,795 Income from operations 23,341 32,340 Other income, net 1,100 95 Income before income taxes 24,441 32,435 Benefit for income taxes 5,917 33,334 Net income $ 30,358 $ 65,769 Adjusted EBITDA (2) $ 125,690 $ 67,347 (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 Cost of services $ 25,918 $ 8,969 Sales and marketing 21,135 5,462 General and administrative 53,695 19,275 Total stock‑based compensation expense $ 100,748 $ 33,706 (2) Adjusted EBITDA is a non-GAAP financial measure that we define as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income (expense), net, interest income, net, and benefit for income taxes.
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: Year Ended December 31, 2023 2022 (in thousands) Consolidated Statements of Operations Data: Revenue $ 1,088,598 $ 786,913 Cost of services (1) 849,799 619,588 Gross profit 238,799 167,325 Operating expenses: Sales and marketing (1) 59,488 45,657 General and administrative (1) 117,127 98,327 Total operating expenses 176,615 143,984 Income from operations 62,184 23,341 Other income, net 8,507 1,100 Income before income taxes 70,691 24,441 Provision (benefit) for income taxes 8,654 (5,917) Net income $ 62,037 $ 30,358 Adjusted EBITDA (2) $ 187,076 $ 125,690 (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 Cost of services $ 34,490 $ 25,918 Sales and marketing 27,015 21,135 General and administrative 61,106 53,695 Total stock‑based compensation expense $ 122,611 $ 100,748 (2) Adjusted EBITDA is a non-GAAP financial measure that we define as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income, net, interest income, net, and provision (benefit) for income taxes.
As of each reporting date, management considers new 60 Table of Contents evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.
As of each reporting date, management considers new 60 Table of Contents evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. We believe there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets are realizable.
Other Income, Net Year Ended December 31, 2022 2021 % Change (dollars in thousands) Other income, net $ 1,100 $ 95 NM Other income, net increased by $1.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in investment and interest income. 64 Table of Contents Benefit for Income Taxes Year Ended December 31, 2022 2021 % Change (dollars in thousands) Benefit for income taxes $ 5,917 $ 33,334 (82) % For the year ended December 31, 2022, we recorded a benefit for income taxes of $5.9 million, as compared to a benefit for income taxes of $33.3 million for the year ended December 31, 2021, primarily due to a decrease in discrete tax benefits related to equity compensation activity that occurred during the current year period.
Other Income, Net Year Ended December 31, 2023 2022 % Change (dollars in thousands) Other income, net $ 8,507 $ 1,100 673 % Other income, net increased by $7.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increases in investment and interest income. 64 Table of Contents Provision (Benefit) for Income Taxes Year Ended December 31, 2023 2022 % Change (dollars in thousands) Provision (benefit) for income taxes $ 8,654 $ (5,917) (246) % For the year ended December 31, 2023, we recorded a provision for income taxes of $8.7 million, as compared to a benefit for income taxes of $5.9 million for the year ended December 31, 2022, primarily due to higher operating profit as well as a decrease in tax benefits for equity compensation, including discrete tax benefits, in the current year period.
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. 66 Table of Contents 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.
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.
As of December 31, 2022 2021 Client Tier (Members) Clients Members Clients Members Up to 2,500 76 145,000 44 79,000 2,501 - 10,000 130 678,000 93 473,000 10,001 - 50,000 64 1,275,000 45 957,000 Greater than 50,000 18 2,487,000 9 1,426,000 Total 288 4,585,000 191 2,935,000 Benefits Utilization.
As of December 31, 2023 2022 Client Tier (Members) Clients Members Clients Members Up to 2,500 112 217,000 76 145,000 2,501 - 10,000 180 934,000 130 678,000 10,001 - 50,000 79 1,588,000 64 1,275,000 Greater than 50,000 21 2,679,000 18 2,487,000 Total 392 5,418,000 288 4,585,000 Benefits Utilization.
GAAP. 61 Table of Contents Year Ended December 31, 2022 2021 Consolidated Statements of Operations Data, as a percentage of revenue: Revenue 100.0 % 100.0 % Cost of services 78.7 % 77.6 % Gross profit 21.3 % 22.4 % Operating expenses: Sales and marketing 5.8 % 4.0 % General and administrative 12.5 % 11.9 % Total operating expenses 18.3 % 15.9 % Income from operations 3.0 % 6.5 % Other income, net 0.1 % 0.0 % Income before income taxes 3.1 % 6.5 % Benefit for income taxes 0.8 % 6.6 % Net income 3.9 % 13.1 % Adjusted EBITDA 16.0 % 13.4 % 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. 61 Table of Contents Year Ended December 31, 2023 2022 Consolidated Statements of Operations Data, as a percentage of revenue: Revenue 100.0 % 100.0 % Cost of services 78.1 % 78.7 % Gross profit 21.9 % 21.3 % Operating expenses: Sales and marketing 5.5 % 5.8 % General and administrative 10.8 % 12.5 % Total operating expenses 16.2 % 18.3 % Income from operations 5.7 % 3.0 % Other income, net 0.8 % 0.1 % Income before income taxes 6.5 % 3.1 % Provision (benefit) for income taxes 0.8 % (0.8) % Net income 5.7 % 3.9 % Adjusted EBITDA 17.2 % 16.0 % Note: percentages shown in the table may not foot due to rounding.
Investing Activities Net cash used by investing activities was $43.9 million for the year ended December 31, 2022, which primarily consisted of net cash used of $40.6 million for investments in marketable securities. For the year ended December 31, 2021, net cash provided by investing activities was $8.8 million, primarily consisting of net proceeds of $10.9 million from marketable securities.
Investing Activities Net cash used in investing activities was $200.5 million and $43.9 million for the years ended December 31, 2023 and 2022, respectively, which primarily consisted of net investments in marketable securities of $196.9 million and $40.6 million, respectively.
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.
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.
As of December 31, 2022 and 2021, we had $77.9 million and $71.3 million of net deferred tax assets, respectively. There was a valuation allowance of $0.2 million as of December 31, 2022 and 2021. 68 Table of Contents
The impact of tax law changes is recognized in periods when the change is enacted. 68 Table of Contents As of December 31, 2023 and 2022, we had $73.1 million and $77.9 million of net deferred tax assets, respectively. There was a valuation allowance of $0.5 million and $0.3 million as of December 31, 2023 and 2022, respectively.
Importantly, as we have continued to grow, we have meaningfully diversified our client base across more than 40 different industries currently from just two industries when we launched our fertility benefits solution in 2016.
As of December 31, 2023 and 2022, we served 392 and 288 clients, respectively, representing 5,418,000 and 4,585,000 members, respectively. 57 Table of Contents Importantly, as we have continued to grow, we have meaningfully diversified our client base across more than 40 different industries currently from just two industries when we launched our fertility benefits solution in 2016.
In particular, we are focused on expanding the number of clients with more than 2,500 covered lives. As of December 31, 2022 and 2021, we served 288 and 191 clients, respectively, representing 4,585,000 and 2,935,000 members, respectively.
In particular, we are focused on expanding the number of clients with more than 2,500 covered lives.
Gross margin decreased 110 basis points for the year ended December 31, 2022 compared to year ended December 31, 2021, primarily due to an increase in stock-based compensation expense for employees supporting our care management service functions, partially offset by ongoing efficiencies realized in the delivery of our care management services.
Gross margin increased 60 basis points for the year ended December 31, 2023 compared to year ended December 31, 2022, primarily due to ongoing efficiencies realized in the delivery of our care management services, partially offset by the impact of planned cost containment efforts that were shared with our clients.
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 refer to Part I, Item 1A. "Risk Factors" included in this Annual Report on Form 10-K.
For additional information on the various risks posed by the COVID-19 pandemic, please refer to 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.
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 58 Table of Contents to operate during these uncertain times. COVID-19, including variants, and related restrictions continued to have a negative impact on our revenue growth for the twelve months ended December 31, 2022.
COVID-19, including variants, and related restrictions had 58 Table of Contents a negative impact on our revenue growth in the past, including for the twelve months ended December 31, 2022.
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.
Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. 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.
There are approximately 8,000 employers in the United States (excluding but not limited to 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.
There are approximately 8,000 employers in the United States who have a minimum of 1,000 employees, who together with Taft-Hartley labor populations and federal government populations, represents approximately 106 million potential covered lives in total. Our current member base of approximately 6.4 million covered lives under contract represents a mid-single digit percent of our total market opportunity.
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.
These changes are a result of the impact of revenue growth and our operating results as well as new agreements with our pharmacy program partners, which include more favorable payment receipt terms and resulted in an additional receipt in the year ended December 31, 2023, and the timing of cash collections and payments to third parties, including a $20.0 million prepayment on the dispensing of certain medications from one of our pharmacy program partners in the year ended December 31, 2023.
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 believe there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets were realizable as of December 31, 2023. The amount of deferred tax provided is calculated using tax rates enacted at the balance sheet date.
Removed
Our current member base of approximately 5.4 million covered lives under contract represents a mid-single digit percent of our initial market opportunity. If we were to include quasi-governmental entities in our potential addressable market, we believe our market penetration is even lower.
Added
Our addressable market is primarily large self-insured employers, as well as labor populations under the Labor Management Relations Act of 1947 (also known as the Taft-Hartley Act) and federal government populations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022, we had cash and cash equivalents of $120.1 million and marketable securities of $69.2 million. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Biggest changeAt December 31, 2023, we had cash and cash equivalents of $97.3 million and marketable securities of $273.8 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.

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