What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-01 · 145 added, 136 removed, 665 unchanged (30% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission “(2013 framework)” and our report dated March 1, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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We have served as the Company’s auditor since 2012.

March 1, 2023

February 29, 2024

PROGYNY, INC.

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( 1,009 ) ( 1,009 )

Accumulated earnings (deficit) 27,934 ( 2,424 )

Accumulated other comprehensive income (loss) 501 ( 93 )

Accumulated earnings 89,971 27,934

Accumulated other comprehensive income 2,819 501

Total stockholders’ equity 553,429 376,968

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Income before income taxes 70,691 24,441 32,435

Benefit for income taxes 5,917 33,334 37,780

Provision (benefit) for income taxes 8,654 ( 5,917 ) ( 33,334 )

Net income $ 62,037 $ 30,358 $ 65,769

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Net income $ 62,037 $ 30,358 $ 65,769

Other comprehensive income (loss):

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on marketable securities 2,333 594 ( 94 )

Total other comprehensive income (loss) 594 ( 94 ) 1

Foreign currency translation loss ( 15 ) — —

Total other comprehensive income (loss), net of tax 2,318 594 ( 94 )

Total comprehensive income $ 64,355 $ 30,952 $ 65,675

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(in thousands, except share and per share amounts)

Common Stock Treasury Stock Additional Paid in Capital Accumulated Earnings (Deficit) Other Comprehensive Income (Loss) Total

Common Stock Treasury Stock Additional Paid in Capital Accumulated Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total

Shares Amount

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Warrant exercise 824,991 0 — 0 — — 0

Reduction in initial public offering costs — — 14 — — 14

Impact of adoption of ASU 2016-13 — — — — ( 1,169 ) — ( 1,169 )

Other comprehensive income — — — — — 1 1

Other comprehensive loss, net of tax — — — — — ( 94 ) ( 94 )

Net income — — — — 65,769 — 65,769

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Stock-based compensation — — — 101,521 — — 101,521

Warrant exercise 824,991 — — 0 — — 0

Other comprehensive loss — — — — — ( 94 ) ( 94 )

Other comprehensive income, net of tax — — — — — 594 594

Net income — — — — 30,358 — 30,358

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Stock-based compensation — — — 123,208 — — 123,208

Other comprehensive income — — — — — 594 594

Warrant exercise 247,672 0 — — — — —

Other comprehensive income, net of tax — — — — — 2,318 2,318

Net income — — — — 62,037 — 62,037

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Adjustments to reconcile net income to net cash provided by operating activities:

Deferred tax benefit ( 6,615 ) ( 33,303 ) ( 37,971 )

Non-cash interest expense — 38 75

Deferred tax expense (benefit) 3,745 ( 6,615 ) ( 33,303 )

Non-cash interest income ( 34 ) — 38

Depreciation and amortization 2,281 1,601 1,301

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Bad debt expense 19,934 13,794 9,783

Realized gain on sale of marketable securities ( 4,328 ) — —

Foreign currency exchange rate loss ( 8 ) — —

Changes in operating assets and liabilities:

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Sale of marketable securities 232,813 122,709 122,372

Net cash provided by (used in) investing activities ( 43,866 ) 8,766 ( 40,031 )

Net cash (used in) provided by investing activities ( 200,525 ) ( 43,866 ) 8,766

FINANCING ACTIVITIES

Payment of initial public offering costs — — ( 892 )

Proceeds from exercise of stock options 4,850 3,073 2,924

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Net cash used in financing activities ( 11,072 ) ( 7,864 ) ( 13,695 )

Net increase (decrease) in cash and cash equivalents 28,665 21,108 ( 10,077 )

Effect of exchange rate changes on cash and cash equivalents 1 — —

Net (decrease) increase in cash and cash equivalents ( 22,782 ) 28,665 21,108

Cash and cash equivalents, beginning of year 120,078 91,413 70,305

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The fertility benefits solution consists of a significant service that integrates:

(1) the treatment services (“Smart Cycles”) that the Company has designed, (2) access to the Progyny network of high-quality fertility specialists that perform the Smart Cycle treatments and (3) active management of the selective network of high-quality provider clinics, real-time member eligibility and treatment authorization, member-facing digital tools and detailed quarterly reporting supported by the Company’s dedicated account management teams, and end-to-end comprehensive concierge member support provided by Progyny’s in-house staff of Patient Care Advocates (“PCAs”) (collectively, the “care management services”).

(1) the treatment services (“Smart Cycles”) that the Company has designed, (2) access to the Progyny network of high-quality fertility specialists that perform the Smart Cycle treatments and (3) active management of the selective network of high-quality provider clinics, real-time member eligibility and treatment authorization, member-facing digital tools and detailed quarterly reporting supported by the Company’s dedicated client success teams, and end-to-end comprehensive concierge member support provided by Progyny’s in-house staff of Patient Care Advocates (“PCAs”) (collectively, the “care management services”).

The Company enhanced its fertility benefits solution with the launch of Progyny Rx, its pharmacy benefits solution, effective January 1, 2018.

As part of this solution, the Company provides formulary plan design, simplified authorization, assistance with prescription fulfillment, and timely delivery of the medications by the Company’s network of specialty pharmacies, as well as medication administration training, pharmacy support services, and continuing PCA support.

Progyny Rx provides the Company's members with access to the medications needed during their fertility treatment.

As part of this solution, the Company provides care management services, which include formulary plan design, simplified authorization, assistance with prescription fulfillment, and timely delivery of the medications by the Company’s network of specialty pharmacies, as well as medication administration training, pharmacy support services, and continuing PCA support.

As a pharmacy benefits solution provider, Progyny manages the dispensing of pharmaceuticals through the Company’s specialty pharmacy contracts.

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The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in United Sates (“U.S.

Additionally, there are many uncertainties regarding the ongoing coronavirus (“COVID-19”) pandemic, including variants, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it has impacted and may continue to impact its customers and members, provider network, specialty pharmacy partners, employees, suppliers, vendors, and other business partners.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, future results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and variants, the actions taken to contain it or treat its impact, vaccine roll-out efforts and impact, including vaccine hesitancy, break-through cases and the economic impact on local, regional and national markets.

The overall disruption of the healthcare and fertility markets and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.

Additionally, the coronavirus (“COVID-19”) pandemic continues to evolve and due to uncertainty of the pandemic, including variants, the Company's customers and members, provider network, specialty pharmacy partners, employees, suppliers, vendors, and other business partners may continue to be impacted in future periods.

A resurgence of COVID-19 could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company will continue to assess these potential impacts to its business and will make adjustments to its operations as necessary.

Segment Information

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The Company defines its CODM as its Chief Executive Officer.

All long-lived assets are located in the United States and all revenue is attributed to the United States.

All long-lived assets are located in the United States and substantially all revenue is attributed to the United States.

Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S.

The preparation of consolidated financial statements in conformity with U.S.

GAAP generally requires management to make estimates and assumptions that affect the reported amount of certain assets, liabilities, revenue, and expenses, and the related disclosure of contingent assets and liabilities.

Such estimates include, but are not limited to, the determination of accrued receivables related to revenue recognition, accrued claims payable, allowance for doubtful accounts, stock-based compensation, lease liabilities, and accounting for income taxes.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Such estimates include, but are not limited to, the determination of accrued receivables related to revenue recognition, accrued claims payable, allowance for doubtful accounts, stock-based compensation expense, lease liabilities, and accounting for income taxes.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the

circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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In addition to access to Progyny’s Smart Cycle treatment bundles and access to Progyny’s network of provider clinics, the fertility benefits solution includes other comprehensive services, which Progyny refers to as care management services, such as active management of the provider clinic network, real-time member eligibility and treatment authorization, member-facing digital tools throughout the Smart Cycle and detailed quarterly reporting all supported by client facing account management and end-to-end comprehensive member support provided by Progyny’s in house staff of PCAs.

treatment services provided by provider clinics with the other comprehensive services into the combined fertility benefits solution that the client contracted to receive.

The promises within Progyny’s fertility benefits contract with a client represent a single performance obligation because Progyny provides a significant service of integrating the Progyny designed Smart Cycles and access to the fertility treatment services provided by provider clinics with the other comprehensive services into the combined fertility benefits solution that the client contracted to receive.

Progyny’s fertility benefits solution is a stand-ready obligation that is satisfied over the contract term.

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The PEPM administration fee is allocated between the fertility benefits solution and the pharmacy benefits solution based on standalone selling price, estimated using an expected cost-plus margin method.

The Company allocates the variable consideration related to the fixed rate per Smart Cycle to the distinct period during which the related services were performed as those fees relate specifically to the Company’s efforts to provide its fertility benefits solution to its clients in the period and represents the consideration the Company is entitled to for the fertility benefit services provided.

in the period and represents the consideration the Company is entitled to for the fertility benefits services provided.

As a result, the fixed rate per Smart Cycle is included in the transaction price and recognized in the period in which the Smart Cycle is provided to the member.

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The Company estimates the variable consideration related to the total PEPM administration fee, less estimated refunds related to service level agreements, and recognizes the amounts allocated to the fertility benefits solution ratably over the contract term.

Progyny’s estimate of service level agreement refunds, have not historically resulted in significant adjustments to the transaction price.

Progyny’s estimates of service level agreement refunds, have not historically resulted in significant adjustments to the transaction price.

Clients are typically invoiced on a monthly basis for the PEPM administration fee.

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As described above, the PEPM administration fee, less estimated refunds related to service level agreements, is allocated to the pharmacy benefits solution and recognized ratably over the contract term.

The Company allocates the variable consideration related to the fixed fee per fertility drug to the distinct period during which the related services were performed, as those fees relate specifically to the Company’s efforts to provide its pharmacy benefits solution to clients in the period and represents the consideration the Company is entitled to for the pharmacy benefit services provided.

As a result, the fixed fee per fertility drug is included in the transaction price and recognized in the period in which the Company is entitled to consideration from a client, which is when a prescription is filled and delivered to the members.

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Progyny controls the specified service (the pharmacy benefits solution) before it is transferred to the client.

Progyny integrates the prescription fulfillment and clinical services provided by the pharmacies and PCAs into the overall pharmacy benefits solution that the client contracted to receive.

Progyny integrates the prescription fulfillment and clinical services provided by the pharmacies and PCAs into the overall pharmacy

benefits solution that the client contracted to receive.

In addition, Progyny defines the scope of the potential services to be performed by the specialty pharmacies and monitors the performance of the specialty pharmacies.

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The remaining contract term is typically less than one year , due to the client’s contractual termination options.

Accrued Receivable and Accrued Claims Payable

Accrued receivables are estimated based on historical experience for those fertility benefit services provided but for which a claim has not been received from the provider clinic at the end of the reporting period, which includes assumptions regarding the lag between authorization date and service date as well as estimates for changes and cancellations of services.

At the same time, cost of services and accrued claims payables are estimated based on the amount to be paid to the provider clinic and expected gross margin on fertility benefit services.

There were no material contract asset or contract liability balances as of December 31, 2023 and 2022.

Accrued Receivables and Accrued Claims Payable

Accrued receivables are estimated based on historical experience for those fertility benefits services provided but for which a claim has not been received from the provider clinic at the end of the reporting period, which includes assumptions regarding the lag between authorization date and service date as well as estimates for changes and cancellations of services.

At the same time, cost of services and accrued claims payables are estimated based on the amount to be paid to the provider clinic and expected gross margin on fertility benefits services.

Estimates are adjusted to actual at the time of billing.

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The accounts receivable balance primarily includes amounts due from clients and members.

As a result of the adoption of ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326) , beginning January 1, 2020, the Company estimates the allowance for doubtful accounts based on the lifetime expected credit losses for the client and member receivable pools, respectively.

The Company estimates the allowance for doubtful accounts based on the lifetime expected credit losses for the client and member receivable pools, respectively.

Under this current expected credit losses model, the Company determines the allowance for doubtful accounts based on factors such as the age of the receivable balance, historical experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions.

The new standard required a change in timing of loss recognition where an allowance for credit losses is now applied at the time the asset is recognized.

Prior to the adoption of ASU 2016-13, credit losses were determined based upon historical bad debts, current receivables balances, and the age of the receivables balances.

Expected credit losses are recorded as general and administrative expenses on the statements of operations.

The Company adopted ASU 2016-13 as of January 1, 2020, using the modified retrospective transition method, which resulted in a cumulative-effect adjustment to accumulated deficit of $ 1.2 million.

An allowance for credit losses is applied at the time the asset is recognized.

Expected credit losses are recorded as general and administrative expenses on the consolidated statements of operations.

The following table provides a summary of the activity in this allowance (in thousands):

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December 31, 2023 Balance at

ASU 2016-13 Adoption Adjustment Charged

Write-offs Balance

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Cost of Services

Fertility Benefit Services

Fertility benefit services costs include:

Fertility Benefits Services

Fertility benefits services costs include:

(1) fees paid to provider clinics within the Company’s network, labs and anesthesiologists;

(2) costs incurred (including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of general overhead, depreciation and amortization) for those employees associated with care management service functions:

(2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of the Company's general overhead, depreciation and amortization) for those employees associated with care management service functions:

Provider Account Management, PCA, Provider Relations and Claims Processing teams;

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Contracts with provider clinics are typically for a term of one to two years .

Pharmacy Benefit Services

Pharmacy benefit services costs include:

Pharmacy Benefits Services

Pharmacy benefits services costs include:

(1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by specialty pharmacy partners;

PCA, Provider Relations and Claims Processing teams;

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The Company receives a rebate on formulations purchased and dispensed by the Company’s specialty pharmacies.

The Company’s contractual arrangements with pharmacy program partners provide for the Company to receive a discount (or rebate) from established list prices paid subsequent to dispensing when products are purchased indirectly from a pharmacy program partners (such as through a specialty pharmacy).

These rebates are recognized as a reduction of cost of services when prescriptions are dispensed and are generally estimated and billed to manufacturers within 20 days after the end of each month.

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The Company invests its cash and cash equivalents and marketable securities with highly rated financial institutions and management believes that the financial risks associated with its cash equivalents are minimal.

Substantially all of the Company’s cash is maintained with one financial institution with a high credit standing.

Substantially all of the Company’s cash is maintained with two financial institutions with high credit standings.

From time to time, such deposits may exceed federally insured limits.

The Company regularly reviews the outstanding account receivable balances and makes estimates of the lifetime expected credit losses based upon consideration of factors such as the age of the receivable balance, historical experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions.

In addition, the Company periodically evaluates the financial condition of its clients to manage credit risk related to accounts receivable.

As of December 31, 2022, one vendor accounted for 30 % of total receivables.

One vendor accounted for 24 % and one client accounted for 11 %, or a combined 35 % total receivables, as of December 31, 2021.

The Company regularly reviews the outstanding accounts receivable balances and makes estimates of the lifetime expected credit losses based upon consideration of factors such as the age of the receivable balance, historical experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions.

In addition, the Company periodically evaluates the financial condition of its clients and other parties to manage credit risk related to accounts receivable.

As of December 31, 2023 and 2022, one vendor accounted for 22 % and 30 %, respectively, of total receivables.

Property and Equipment

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There were no impairments recorded for the years ended December 31, 2023, 2022 and 2021.

On January 1, 2020, the Company adopted ASU 2016-02, Leases (Topic 842) using the modified retrospective transition method, which applies the provisions of the standard at the effective date without adjusting comparative periods presented.

The Company elected the package of practical expedients permitted under the transition guidance within the

new standard, which allowed the Company not to reassess (i) whether any expired or existing contracts contained leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for existing leases.

The Company also elected not to reassess lease terms for existing leases using hindsight and to account for each separate lease and non-lease component as a single lease component.

As a result of the adoption of the new leasing guidance, the Company recorded right-of-use assets and lease liabilities of $ 9.5 million and $ 9.9 million, respectively.

The adoption of the standard did not materially impact the Company’s statement of operations or statement of cash flows for the year ended December 31, 2020.

The Company determines if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use assets, accrued expenses and other current liabilities, and operating lease noncurrent liabilities on the consolidated balance sheets.

The Company elects to account for each separate lease and non-lease component as a single lease component.

As of December 31, 2023 and 2022, the Company has no financing lease arrangements.

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ASC 718 requires all stock-based payments, including restricted stock units and grants of stock options, to be recognized in the consolidated statements of operations based on their respective fair values.

For non-employee awards, a measurement date is normally reached when performance is completed, and the fair value is remeasured as the awards vest.

The fair value of the Company’s restricted stock units has been determined utilizing the closing market price of the Company’s common stock on the date of the grant, including those with performance-based vesting criteria.

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Due to the lack of historical and implied volatility data of the Company’s common stock, the expected stock price volatility has been estimated based on the historical volatilities of the daily closing prices of a specified group of companies in Progyny’s industry for a period equal to the expected term of the option.

Progyny selected companies with comparable characteristics to the Company, including enterprise value, risk profiles and position within the industry, that have historical share price information sufficient to meet the expected term of the stock options.

Progyny selected companies with comparable characteristics to the 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 options.

The expected term of the options granted represents the period of time that options granted are expected to be outstanding and is calculated using the simplified method, which is the mid-point between the vesting date and the end of the contractual term for each option.

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Simplifying the Accounting for Income Taxes , which the Company adopted as of January 1, 2021.

Deferred income taxes are recorded for the expected tax consequences of

temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes.

Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes.

The Company periodically reviews the recoverability of deferred tax assets recorded on the consolidated balance sheet and provides valuation allowances as deemed necessary to reduce such deferred tax assets to the amount that will, more likely than not, be realized.

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Basic net income per share is calculated by dividing the net income by the weighted-average number of shares of common stock outstanding for the period.

Diluted net income per share is computed by dividing the diluted net income by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares assuming dilutive effect of outstanding common stock options, restricted stock units, shares issuable under the employee stock purchase program and

common stock warrants.

In periods when the Company has incurred a net loss, diluted net loss per share is the same as basic net loss per share because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

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In May 2021, the FASB issued ASU No.

2021-04 (“ASU 2021-04”) “ Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation- Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40) ” which provides guidance on modifications or exchanges of a freestanding equity-classified written call options that are not within the scope of another Topic, such as warrants.

2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation- Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40), which provides guidance on modifications or exchanges of a freestanding equity-classified written call options that are not within the scope of another Topic, such as warrants.

The Company adopted this standard as of January 1, 2022 on a prospective basis to modifications or exchanges occurring on or after this date.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The standard is intended to provide a better understanding of an entity's overall performance and business activities through improved disclosure about an entity's reportable segments, including more detailed information about reportable segment expenses.

The new standard will be effective for the Company for the fiscal year beginning January 1, 2024.

While the new standard does require additional footnote disclosure, the Company currently does not expect the adoption of the new standard to have a material effect on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The standard is intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information.

The new standard will be effective for the Company for the fiscal year beginning January 1, 2025.

While the new standard does require further disaggregation of the income tax footnote, the Company currently does not expect the adoption of the new standard to have a material effect on its consolidated financial statements.

Disaggregated revenue

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Concentration of Major Clients

For the year ended December 31, 2022, two clients accounted for 16 % and 10 %, or a combined 26 %, of total revenue.

For the year ended December 31, 2023, one client accounted for 13 % of total revenue.

Two clients accounted for 16 % and 10 %, or a combined 26 %, of total revenue for the year ended December 31, 2022.

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The Company classified these assets as Level 1 because the values of these assets are determined using unadjusted quoted prices in active markets for identical assets.

During the year ended December 31, 2022, the Company had gross realized gains and losses related to marketable securities and money market accounts of $ 0.4 million and $ 0.1 million, respectively, included within earnings.

The gross realized losses included within earnings for the year ended December 31, 2021 was $ 0.4 million.

The gross realized gains for the year ended December 31, 2021 as well as the gross realized gains and losses for the year ended December 31, 2020 were not significant.

The Company reclassified $ 0.3 million of net unrealized holding gains and $ 0.4 million of net unrealized holding losses out of other comprehensive income (loss) and into earnings for the years ended December 31, 2022 and 2021, respectively.

The amount reclassified out of other comprehensive income for the year ended December 31, 2020 was not significant.

The total gains for marketable securities and money market accounts with net gains in other comprehensive income as of December 31, 2022 was $ 0.5 million.

The total losses for the period as well as the total gains and losses for marketable securities and money market accounts in other comprehensive income (loss) as of December 31, 2021 and 2020 were not significant.

During the years ended December 31, 2022 and December 31, 2021, the Company did not maintain any assets or liabilities classified as Level 2 or Level 3 in the fair value hierarchy.

During the year ended December 31, 2023, the Company had $ 5.2 million of gross realized gains related to marketable securities and money market accounts included within earnings.

There were no related gross realized losses included within earnings for this period.

The gross realized gains and losses included within earnings for marketable securities and money market accounts for the year ended December 31, 2022 were $ 0.4 million and $ 0.1 million, respectively.

The gross realized losses included within earnings for the year ended December 31, 2021 were $ 0.4 million.

The gross realized gains for the year ended December 31, 2021 were not significant.

The Company reclassified $ 3.9 million and $ 0.3 million of net unrealized holding gains out of other comprehensive income and into earnings for the years ended December 31, 2023 and 2022, respectively.

The amount of net unrealized holding losses reclassified out of other comprehensive loss into earnings for the year ended December 31, 2021 was $ 0.4 million.

These amounts were reclassified into other income (expense), net line per the consolidated statement of operations.

The total gains for marketable securities and money market accounts with net gains in other comprehensive income as of December 31, 2023 and December 31, 2022 was $ 3.9 million and $ 0.5 million, respectively.

The total losses for the period as well as the total gains and losses for marketable securities and money market accounts in other comprehensive loss as of December 31, 2021 was not significant.

During the years ended December 31, 2023, 2022, and 2021, the Company did not maintain any assets or liabilities classified as Level 2 or Level 3 in the fair value hierarchy.

Property and Equipment, Net

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Total property and equipment, net $ 10,213 $ 8,371

Depreciation expense was approximately $ 1.1 million for the year ended December 31, 2022.

For the years ended December 31, 2021 and 2020, depreciation expense was approximately $ 0.7 million.

During the years ended December 31, 2022 and December 31, 2021, the Company capitalized $ 0.8 million and $ 0.1 million, respectively, in stock-based compensation expense related to the development of internal-use software.

Depreciation expense was approximately $ 2.2 million, $ 1.1 million and $ 0.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

During the years ended December 31, 2023, 2022, and 2021, the Company capitalized $ 0.6 million, $ 0.8 million, and $ 0.1 million respectively, in stock-based compensation expense related to the development of internal-use software.

Intangible Assets, Net

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Amortization expense was $ 0.1 million, $ 0.5 million, and $ 0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2022, the future amortization expense of other intangible assets is as follows (in thousands):

Year ending December 31:

As of December 31, 2023, there was no future amortization expense of other intangible assets remaining.

In September 2019, the Company’s sublease agreement for its corporate headquarters in New York, NY commenced and is scheduled to expire in May 2029.

Pursuant to the sublease, the Company will pay the base rent of approximately $ 1.3 million per annum through the end of the fifth lease year and approximately $ 1.4 million per annum thereafter through the expiration date.

In February 2023, the Company's lease agreement for the additional 24,099 square foot office in its corporate offices commenced in New York, NY and is expected to expire in the fourth quarter of 2035.

In accordance with ASC 842, the Company recorded right-of-use assets and lease liabilities of $ 12.2 million and $ 12.1 million, respectively.

Pursuant to the lease, the Company is obligated to pay the base rent of approximately $ 1.4 million per annum beginning in April 2024 through the end of the fifth lease year and approximately $ 1.5 million per annum thereafter through the expiration date.

The Company recognizes lease expense on a straight-line basis over the lease term.

Lease expense for the Company’s operating leases was $ 1.3 million for the years ended December 31, 2022, 2021, and 2020.

Lease expense for the Company’s operating leases was $ 2.4 million for the year ended December 31, 2023.

For the years ended December 31, 2022 and 2021 lease expense for the Company's operating leases was $ 1.3 million.

Cash outflows from operating activities attributable to the operating leases for the years ended December 31, 2023, 2022, and 2021 was $ 1.3 million.

For the year ended December 31, 2020, cash outflows from operating activities attributable to the operating leases was $ 0.8 million.

Information related to the Company’s leases is as follows (in thousands):

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Operating Leases

Right-of-use asset Operating lease right-of-use assets $ 6,903

Right-of-use assets Operating lease right-of-use assets $ 17,605

Short-term lease liabilities Accrued expenses and other current liabilities $ 2,149

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Other information

Weighted average remaining lease term, operating lease 6.4

Weighted average remaining lease term, operating lease 9.6 years

Weighted average discount rate, operating lease 4.60 %

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February 2022 Lease Agreement

In February 2022, the Company entered into a lease agreement for additional space in its corporate offices in New York, New York, consisting of a 24,099 square foot office and a 21,262 square foot office, and also for continued occupancy of the 25,212 square foot office after the expiration of the current sublease.

The 24,099 square foot office became available to the Company for use in February 2023.

The Company is obligated to 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 21,262 square foot office, the lease commencement date, which is when the premises will become available to the Company for use, is expected to be in the first quarter of 2024.

The Company is obligated to 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 current expiration date.

For the current 25,212 square foot office, the Company will pay the base rent of approximately $ 1.6 million per year beginning in June 2029 through the first quarter of 2035, the current expiration date.

As noted above, the Company commenced its lease for the 24,099 square foot office in its corporate offices in New York, NY in February 2023, pursuant to a lease agreement entered into by the Company in February 2022.

The lease agreement also provides for additional space in the Company's corporate offices, including an additional 21,262 square foot office and continued occupancy of the 25,212 square foot office after the expiration of the current sublease.

For the 21,262 square foot office, the lease commencement date, which is when the premises will become available to the Company for use, is expected to be in the fourth quarter of 2024.

The Company is obligated to pay the base rent of approximately $ 1.3 million starting in the fourth quarter of 2025 for five years and approximately $ 1.4 million per year thereafter through the fourth quarter of 2035, the expected expiration date.

For the current 25,212 square foot office, the Company is obligated to pay the base rent of approximately $ 1.6 million per year beginning in June 2029 through the fourth quarter of 2035, the expected expiration date.

Accrued Expenses and Other Current Liabilities

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Professional fees 1,242 861

Other 6,480 2,172

Other accrued expenses 10,504 5,311

Other current liabilities 1,183 1,169

Total accrued expenses and other current liabilities $ 60,524 $ 50,249

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The financial covenant required the Company to achieve a specified minimum quarterly revenue as defined by the SVB Line of Credit.

The Company recorded interest expense on the SVB Line of Credit of $ 38,000 and $ 75,000 during the years ended December 31, 2021, and 2020, respectively.

The Company recorded interest expense on the SVB Line of Credit of $ 38,000 during the year ended December 31, 2021.

Stockholders’ Equity

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The Company had 615,980 shares of treasury stock as of December 31, 2023, 2022 and 2021.

Share Repurchase Program

In February 2024, the Company’s Board of Directors authorized a share repurchase program of up to $ 100 million in shares of common stock.

Repurchases may be made in the form of open market repurchases, including through plans

complying with Rule 10b5-1 under the Securities Exchange Act of 1934 as amended, depending on stock price, market conditions and other factors, as determined by the Company.

There can be no assurance as to the number of shares to be repurchased by us, if any.

Common Stock Warrants

In connection with the IPO on October 25, 2019, all outstanding convertible preferred warrants were converted to common stock warrants.

As of December 31, 2022 and 2021, the Company had 565,351 common stock warrants outstanding.

As of December 31, 2023 and 2022, the Company had 305,595 and 565,351 common stock warrants outstanding, respectively.

For the year ended December 31, 2023, 259,756 common stock warrants were exercised for 247,672 shares of common stock at a weighted-average exercise price of $ 1.73 .

No common stock warrants were exercised during the year ended December 31, 2022.

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Restricted Stock Units

During the year ended December 31, 2020, the Company began granting restricted stock units under the 2019 Plan.

Restricted stock units are subject to service-based or performance-based vesting criteria.

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If the targets have not been achieved prior to the fifth anniversary of the grant, the awards will be forfeited.

As of December 31, 2022, all of the performance-vesting awards remained unvested.

A summary of the Company’s restricted stock unit activity is as follows:

During the year ended December 31, 2023, the revenue targets associated with the first tranche of the performance-vesting awards were achieved, resulting in the vesting of 166,500 shares.

As of December 31, 2023, the second tranche of 166,500 shares of the performance-vesting awards remained unvested.

A summary of the Company’s restricted stock unit activity, including those with performance-based vesting criteria, is as follows:

Shares Weighted-Average

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The weighted-average grant date fair value of restricted stock units granted was $ 35.02 , $ 44.09 , and $ 58.13 for the years ended December 31, 2023, 2022, and 2021, respectively.

The total grant date fair value of restricted stock units vested was $ 28.5 million and $ 5.3 million for the years ended December 31, 2022 and December 31, 2021.

The total fair value of restricted stock units vested was not significant for the year ended December 31, 2020.

The total grant date fair value of restricted stock units vested was $ 45.5 million, $ 28.5 million and $ 5.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The total unrecognized compensation cost related to unvested restricted stock units was approximately $ 91.0 million at December 31, 2023.

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As of December 31, 2023 and December 31, 2022, 4,194,264 and 3,306,387 shares of common stock remained available to be issued under the ESPP, respectively.

The following table summarizes the purchases that were made for each purchase period of the ESPP through December 31, 2022 (in thousands, except for share amounts):

The following table summarizes the purchases that were made for each purchase period of the ESPP in the years ending December 31, 2023, 2022, and 2021 (in thousands, except for share amounts):

Purchase Period Proceeds used for purchase Shares purchased

October 25, 2019 to July 31, 2020 $ 1,146 103,677

August 1, 2020 to January 31, 2021 $ 481 21,125

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February 1, 2022 to July 31, 2022 412 15,888

August 1, 2022 to January 31, 2023 723 27,492

February 1, 2023 to July 31, 2023 528 17,642

The next purchase period commenced on August 1, 2023 and ended on January 31, 2024.

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Effect of dilutive securities:

Options to purchase common stock 4,813,004 6,981,512 10,103,473

Shares issuable under ESPP 804 3,292 1,104

Warrants to purchase common stock 458,537 539,702 799,844

Restricted stock units 378,879 237,599 348,064

Total effect of dilutive securities 5,651,224 7,762,105 11,252,485

Weighted-average shares used in computing diluted net income per share 100,672,399 99,957,173 100,358,047

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The Company incurred expenses related to employer contributions of $ 1.4 million, $ 1.0 million, and $ 0.9 million for the years ended December 31, 2023, 2022, and 2021 respectively.

A tax benefit of $ 5.9 million, $ 33.3 million, and $ 37.8 million was recorded for the years ended December 31, 2022, 2021, and 2020, respectively.

The benefit from income taxes is composed of the following (in thousands):

For the year ended December 31, 2023, a tax provision of $ 8.7 million was recorded.

A tax benefit of $ 5.9 million and $ 33.3 million was recorded for the years ended December 31, 2022, and 2021, respectively.

The provision (benefit) from income taxes is composed of the following (in thousands):

2023 2022 2021

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State 2,598 695 ( 31 )

Total current benefit (provision) from income taxes ( 695 ) 31 ( 191 )

Total current provision (benefit) from income taxes 4,909 695 ( 31 )

Federal 4,433 ( 6,880 ) ( 25,154 )

State ( 688 ) 268 ( 8,149 )

Total deferred benefit from income taxes 6,612 33,303 37,971

Total benefit from income taxes $ 5,917 $ 33,334 $ 37,780

Total deferred provision (benefit) from income taxes 3,745 ( 6,612 ) ( 33,303 )

Total provision (benefit) from income taxes $ 8,654 $ ( 5,917 ) $ ( 33,334 )

A reconciliation of the U.S.

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Stock-based compensation ( 18 ) ( 48 ) ( 99 )

Change in valuation allowance — — ( 317 )

Other — — ( 2 )

Section 162(m) compensation limitation 6 — —

Effective tax rate 12 % ( 24 ) % ( 103 ) %

The Company's effective tax rate for the years ended December 31, 2023, 2022, and 2021 was 12 %, ( 24 )%, and ( 103 )%, respectively.

For the year ended December 31, 2022 and 2021, the effective tax rate differs from the U.S.

federal statutory rate primarily due to permanent tax adjustments, including windfalls upon the exercise of stock options and

vesting of RSUs.

For the year ended December 31, 2023, the effective tax rate differs from the U.S.

federal statutory rate primarily due to the release of the valuation allowance in this period, in addition to permanent tax adjustments, including windfalls upon the exercise of options and vesting of RSUs.

federal statutory rate primarily due to permanent tax adjustments, including windfalls upon the exercise of stock options and vesting of RSUs as well as the disallowance of certain compensation deductions based on Section 162(m) of the Internal Revenue Code, which limits the compensation deduction of certain highly compensated employees.

For the years ended December 31, 2022, and 2021, the effective tax rate differs from the U.S.

federal statutory rate primarily due to permanent tax adjustments, including windfalls upon the exercise of stock options and vesting of RSUs.

Deferred Tax Balances

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Operating lease liabilities 5,171 2,062

Property and equipment — 164

Intangibles 568 547

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Operating lease right-of-use assets ( 4,695 ) ( 1,846 )

Unrealized gain on marketable securities ( 1,025 ) —

Capitalized research and development costs ( 28 ) —

Total deferred tax liabilities ( 6,684 ) ( 3,016 )

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In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies.

Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome.

As of December 31, 2020, the Company achieved three years of cumulative income, along with projections of profitability, for which management determined that there is sufficient positive evidence to conclude that it is more likely than not that substantially all of the deferred tax assets will be realized.

As such, $ 28.5 million of the valuation allowance had been released.

Management continues to maintain this position as of December 31, 2022.

During the years ended December 31, 2022 and December 31, 2021, the net change in the valuation allowance was not significant.

The valuation allowance increased by $ 0.3 million during the year ended December 31, 2023.

As of December 31, 2023, management believes there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets were realizable.

During the year ended December 31, 2022, the net change in the valuation allowance was not significant.

As of December 31, 2023, the Company has net operating loss carryforwards for federal and state income tax purposes of approximately$ 1.2 million and $ 67.6 million, respectively, which expire beginning in the year 2027.

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There are certain state net operating losses that follow the federal carryforward period and are indefinite in nature.

The federal and California research and development tax credits are approximately $ 0.7 million and $ 0.8 million, respectively.

The federal research credits will begin to expire in 2030 and the California research and development credits have no expiration date.

In addition, the Company has research and development tax credits in California of approximately $ 0.8 million that have no expiration date.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to ownership changes that may occur, as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state provisions.

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Arbitration/Litigation

On January 14, 2019, a vendor filed a Demand for Arbitration and Statement of Claim against the Company (“Demand”) for alleged breach of the November 10, 2017 Preferred Specialty Pharmacy Agreement (“Agreement”) between the Company and the vendor.

On March 13, 2019, the Company terminated the Agreement for material breach with the vendor.

On April 3, 2019, the vendor filed a Second Amended Demand for Arbitration (“SAD”) for breach of the Agreement.

The vendor was seeking $ 25.0 million in damages, fees, interest and cost.

Pursuant to a schedule set forth by the Arbitration Panel, on May 3, 2019, the Company filed a Motion to Dismiss the SAD.

That Motion was fully briefed on June 14, 2019 and was decided on July 31, 2019.

The Arbitration Panel dismissed two of the vendor’s four claims.

The Arbitration Panel held additional hearings for the two remaining claims between August 17, 2020 and August 26, 2020.

Final arguments were held on October 20, 2020.

Based on a willingness to expeditiously resolve the matter, the parties proposed settlement to the panel on November 16, 2020.

In December 2020, the Company finalized and settled the arbitration for $ 5.75 million without admission of liability to avoid further legal costs.

The Company believes there is no other litigation pending that could have, individually or in the aggregate, a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The Company records accruals for loss contingencies when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated.

If the Company determines that a loss is reasonably possible, the Company discloses the matter, and the amount or range of the possible loss, if estimable, in the notes to the consolidated financial statements.

From time to time, the Company is involved in certain claims and litigation arising in the normal course of business.

The Company is not aware of any legal proceedings or claims, that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or results of operations.

Indemnifications

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Other income (expense), net ( 96 ) 25 82 275 498 1,277 1,708 1,720

Interest income (expense), net ( 18 ) 252 144 83 12 40 202 560

Interest income, net 12 40 202 560 822 706 1,034 742

Total other income (expense), net ( 84 ) 65 284 835 1,320 1,983 2,742 2,462

Income (loss) before income taxes ( 142 ) 8,903 11,539 4,141 16,331 17,167 20,931 16,262

Benefit (provision) for income taxes 3,370 6,807 7,679 15,478 5,113 ( 135 ) 1,672 ( 733 )

Provision (benefit) for income taxes ( 5,113 ) 135 ( 1,672 ) 733 ( 1,347 ) 2,176 5,033 2,792

Net income $ 4,971 $ 8,768 $ 13,211 $ 3,408 $ 17,678 $ 14,991 $ 15,898 $ 13,470

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data