Progyny, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 63 Financial Statements: Consolidated Balance Sheets 65 Consolidated Statements of Operations 66 Consolidated Statements Comprehensive Income 67 Consolidated Statements of Changes in Stockholders’ Equity 68 Consolidated Statements of Cash Flows 69 Notes to Consolidated Financial Statements 70 62 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Progyny, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Progyny, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, 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 3, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 63 Table of Contents Accrued Receivables and Accrued Claims Payable Description of the Matter As of December 31, 2024, accrued receivables and accrued claims payable were $ 45.6 million and $ 32.1 million, respectively. As discussed in Note 2 to the consolidated financial statements, the Company estimates accrued receivables for those fertility benefit services provided but for which a claim has not been received from the provider clinic based on historical claims experience. The estimated cost of the related services and accrued claims payable are determined based upon the amount to be paid to the provider clinic and expected gross margin on each related fertility benefit service estimated to have been provided. Auditing the Company’s estimates of accrued receivables and the related accrued claims payable was complex and required significant judgment as the estimates were sensitive to changes in the significant assumptions, including management’s assumptions regarding the lag between authorization date and service date, service changes and cancellations. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the Company’s process to estimate accrued receivables and the associated claims payable. For example, we tested controls over management’s review of the methodology, significant assumptions and the underlying data used to determine these estimates. To test the accrued receivables and the related claims payable, our audit procedures included, among others, assessing the methodology, evaluating the significant assumptions described above and testing the completeness and accuracy of the underlying data used in the Company’s analysis. For example, we tested the Company’s assumptions of the lag between the authorization date and service date, service changes and cancellations based on historical claims data, historical gross margin per service and tested the clerical accuracy of management’s analysis. Additionally, we evaluated the historical accuracy of management’s estimate by testing management’s retrospective review analysis that compared the prior period’s estimated accrued receivables and accrued claims payable to actual billing and claims data. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2012. New York, NY March 3, 2025 64 Table of Contents PROGYNY, INC. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 162,314 $ 97,296 Marketable securities 65,640 273,791 Accounts receivable, net of $ 56,355 and $ 46,636 of allowances at December 31, 2024 and 2023, respectively 235,324 241,869 Prepaid expenses and other current assets 9,443 27,451 Total current assets 472,721 640,407 Property and equipment, net 12,383 10,213 Operating lease right-of-use assets 17,251 17,605 Goodwill 15,534 11,880 Intangible assets, net 1,303 — Deferred tax assets 84,933 73,120 Other noncurrent assets 2,977 3,395 Total assets $ 607,102 $ 756,620 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 95,097 $ 125,426 Accrued expenses and other current liabilities 73,530 60,524 Total current liabilities 168,627 185,950 Operating lease noncurrent liabilities 16,413 17,241 Total liabilities 185,040 203,191 Commitments and Contingencies (Note 14) STOCKHOLDERS' EQUITY Common stock, $ 0.0001 par value; 1,000,000,000 shares authorized; at December 31, 2024 and 2023, respectively; 97,692,891 and 96,348,522 shares issued; 85,310,698 and 96,348,522 outstanding at December 31, 2024 and 2023, respectively 9 9 Additional paid-in capital 581,596 461,639 Treasury stock, at cost, $ 0.0001 par value; 12,998,173 and 615,980 shares at December 31, 2024 and 2023, respectively ( 303,889 ) ( 1,009 ) Accumulated earnings 144,307 89,971 Accumulated other comprehensive income 39 2,819 Total stockholders’ equity 422,062 553,429 Total liabilities and stockholders’ equity $ 607,102 $ 756,620 The accompanying notes are an integral part of these consolidated financial statements. 65 Table of Contents PROGYNY, INC. Consolidated Statements of Operations (in thousands, except share and per share amounts) Year Ended December 31, 2024 2023 2022 Revenue $ 1,167,221 $ 1,088,598 $ 786,913 Cost of services 913,858 849,799 619,588 Gross profit 253,363 238,799 167,325 Operating expenses: Sales and marketing 63,948 59,488 45,657 General and administrative 121,960 117,127 98,327 Total operating expenses 185,908 176,615 143,984 Income from operations 67,455 62,184 23,341 Interest and other income, net 15,747 8,507 1,100 Income before income taxes 83,202 70,691 24,441 Provision (benefit) for income taxes 28,866 8,654 ( 5,917 ) Net income $ 54,336 $ 62,037 $ 30,358 Net income per share: Basic $ 0.59 $ 0.65 $ 0.33 Diluted $ 0.57 $ 0.62 $ 0.30 Weighted-average shares used in computing net income per share: Basic 91,481,995 95,021,175 92,195,068 Diluted 95,448,357 100,672,399 99,957,173 The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents PROGYNY, INC. Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2024 2023 2022 Net income $ 54,336 $ 62,037 $ 30,358 Other comprehensive (loss) income, net of tax: Unrealized gain on marketable securities before reclassifications 4,500 6,143 884 Reclassification of gains on the sale of marketable securities into net income ( 7,311 ) ( 3,810 ) ( 295 ) Net change on unrealized gains on marketable securities ( 2,811 ) 2,333 589 Foreign currency translation gain (loss) 31 ( 15 ) 5 Total other comprehensive (loss) income, net of tax ( 2,780 ) 2,318 594 Total comprehensive income $ 51,556 $ 64,355 $ 30,952 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents PROGYNY, INC. Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share and per share amounts) Common Stock Treasury Stock Additional Paid in Capital Accumulated Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Shares Amount Balance at December 31, 2021 91,088,781 $ 9 $ ( 1,009 ) $ 255,339 $ ( 2,424 ) $ ( 93 ) $ 251,822 Issuance of employee equity awards, net of shares withheld 2,212,375 0 — ( 7,327 ) — — ( 7,327 ) Stock-based compensation — — — 101,521 — — 101,521 Other comprehensive income, net of tax — — — — — 594 594 Net income — — — — 30,358 — 30,358 Balance at December 31, 2022 93,301,156 $ 9 $ ( 1,009 ) $ 349,533 $ 27,934 $ 501 $ 376,968 Issuance of employee equity awards, net of shares withheld 2,799,694 0 — ( 11,102 ) — — ( 11,102 ) Stock-based compensation — — — 123,208 — — 123,208 Warrant exercise 247,672 0 — 0 — — 0 Other comprehensive income, net of tax — — — — — 2,318 2,318 Net income — — — — 62,037 — 62,037 Balance at December 31, 2023 96,348,522 $ 9 $ ( 1,009 ) $ 461,639 $ 89,971 $ 2,819 $ 553,429 Issuance of employee equity awards, net of shares withheld 1,064,502 0 — ( 9,587 ) — — ( 9,587 ) Stock-based compensation — — — 129,544 — — 129,544 Repurchase of common stock ( 12,382,193 ) — ( 302,880 ) — — — ( 302,880 ) Warrant exercise 279,867 0 — 0 — — 0 Other comprehensive loss, net of tax — — — — — ( 2,780 ) ( 2,780 ) Net income — — — — 54,336 — 54,336 Balances at December 31, 2024 85,310,698 9 ( 303,889 ) 581,596 144,307 39 422,062 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents PROGYNY, INC. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 OPERATING ACTIVITIES Net income $ 54,336 $ 62,037 $ 30,358 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax (benefit) expense ( 10,456 ) 3,745 ( 6,615 ) Non-cash interest income — ( 34 ) — Depreciation and amortization 3,175 2,281 1,601 Loss on disposal of property and equipment 1,414 — — Stock-based compensation expense 128,130 122,611 100,748 Bad debt expense 16,396 19,934 13,794 Net accretion of discounts on marketable securities ( 2,115 ) ( 4,328 ) — Foreign currency exchange rate loss — ( 8 ) — Changes in operating assets and liabilities: Accounts receivable ( 9,874 ) ( 21,738 ) ( 119,304 ) Prepaid expenses and other current assets 18,018 ( 22,930 ) 57 Accounts payable ( 30,268 ) 16,235 47,689 Accrued expenses and other current liabilities 9,924 10,361 13,147 Other noncurrent assets and liabilities 425 648 ( 1,080 ) Net cash provided by operating activities 179,105 188,814 80,395 INVESTING ACTIVITIES Purchase of property and equipment, net ( 5,405 ) ( 3,644 ) ( 3,241 ) Purchase of marketable securities ( 170,339 ) ( 429,694 ) ( 163,334 ) Sale of marketable securities 376,840 232,813 122,709 Acquisition of business, net of cash acquired ( 5,304 ) — — Net cash provided (used in) by investing activities 195,792 ( 200,525 ) ( 43,866 ) FINANCING ACTIVITIES Repurchase of common stock ( 300,278 ) — — Proceeds from exercise of stock options 1,099 4,850 3,073 Payment of employee taxes related to equity awards ( 12,001 ) ( 17,200 ) ( 12,089 ) Proceeds from contributions to employee stock purchase plan 1,300 1,278 1,152 Net cash used in financing activities ( 309,880 ) ( 11,072 ) ( 7,864 ) Effect of exchange rate changes on cash and cash equivalents 1 1 — Net increase (decrease) in cash and cash equivalents 65,018 ( 22,782 ) 28,665 Cash and cash equivalents, beginning of year 97,296 120,078 91,413 Cash and cash equivalents, end of year $ 162,314 $ 97,296 $ 120,078 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes, net of refunds received $ 40,449 $ 6,181 $ 133 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Additions of property and equipment, net included in accounts payable and accrued expenses $ 249 $ 421 $ 636 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents PROGYNY, INC. Notes to Consolidated Financial Statements 1. Business and Basis of Presentation Description of Business Progyny, Inc. (together with its subsidiaries referred to as “Progyny” or the “Company”) was incorporated in the state of Delaware on April 3, 2008, and maintains its corporate headquarters in New York, NY. Progyny is a benefits management company specializing in fertility, family building and women's health benefits solutions and operates and manages in one operating segment. The fertility benefits solution consists of a significant service that integrates: (1) the treatment services (“Smart Cycles”) that the Company has designed, (2) access to the Progyny network of high-quality fertility specialists that perform the Smart Cycle treatments and (3) active management of the selective network of high-quality provider clinics, real-time member eligibility and treatment authorization, member-facing digital tools and detailed quarterly reporting supported by the Company’s dedicated client success teams, and end-to-end comprehensive concierge member support provided by Progyny’s in-house staff of Patient Care Advocates (“PCAs”) (collectively, the “care management services”). The Company enhanced its benefits solution offerings with the launch of its pharmacy benefits solution, Progyny Rx, effective January 1, 2018. Progyny Rx provides the Company's members with access to the medications needed during their fertility treatment. As part of this solution, the Company provides care management services, which include formulary plan design, simplified authorization, assistance with prescription fulfillment, and timely delivery of the medications by the Company’s network of specialty pharmacies, as well as medication administration training, pharmacy support services, and continuing PCA support. As a pharmacy benefits solution provider, Progyny manages the dispensing of pharmaceuticals through the Company’s specialty pharmacy contracts. Progyny Rx is only available as an add-on service to the fertility benefits solution. Basis of Presentation The accompanying consolidated financial statements include those of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in United Sates (“U.S. GAAP”). Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP generally requires management to make estimates and assumptions that affect the reported amount of certain assets, liabilities, revenue, and expenses, and the related disclosure of contingent assets and liabilities. Such estimates include, but are not limited to, the determination of accrued receivables related to revenue recognition, accrued claims payable, allowance for doubtful accounts, stock-based compensation expense, lease liabilities, and accounting for income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 2. Summary of Significant Accounting Policies Cash and Cash Equivalents and Marketable Securities Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Marketable securities, primarily consisting of U.S. Government and agency securities with original maturities greater than three months but less than one year when purchased, are classified as available-for-sale, and are stated at fair value. Unrealized gains and losses on marketable securities are excluded from earnings and reported as a component of other comprehensive income (loss). 70 Table of Contents Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to clients in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company applies the following five-step model to recognize revenue from contracts with clients: • Identification of the contract, or contracts, with a client • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when, or as, a performance obligation is satisfied Progyny’s contracts typically have a stated term of three years and include contractual termination options after the first year, allowing the client to terminate the contract with 30 to 90 days’ notice. Fertility Benefits Solution Revenue Progyny primarily generates revenue through its fertility benefits solution, in which Progyny provides self-insured enterprise entities (‘‘clients’’) and their employees and partners (together, ‘‘members’’) with fertility benefits. As part of the fertility benefits solution, Progyny provides access to effective and cost-efficient fertility treatments, referred to as Smart Cycles, as well as other related services. Smart Cycles are proprietary treatment bundles that include certain medical services available to members through Progyny’s proprietary, credentialed network of provider clinics. In addition to access to Progyny’s Smart Cycle treatment bundles and access to Progyny’s network of provider clinics, the fertility benefits solution includes other comprehensive services, which Progyny refers to as care management services, such as active management of the provider clinic network, real-time member eligibility and treatment authorization, member-facing digital tools throughout the Smart Cycle and detailed quarterly reporting all supported by client facing account management and end-to-end comprehensive member support provided by Progyny’s in house staff of PCAs. The promises within Progyny’s fertility benefits contract with a client represent a single performance obligation because Progyny provides a significant service of integrating the Progyny designed Smart Cycles and access to the fertility treatment services provided by provider clinics with the other comprehensive services into the combined fertility benefits solution that the client contracted to receive. Progyny’s fertility benefits solution is a stand-ready obligation that is satisfied over the contract term. Progyny’s contracts include the following sources of consideration, which are all variable: a per employee per month (‘‘PEPM’’) administration fee (in most, but not all contracts) and a fixed rate per Smart Cycle. The PEPM administration fee is allocated between the fertility benefits solution and the pharmacy benefits solution based on standalone selling price, estimated using an expected cost-plus margin method. The Company allocates the variable consideration related to the fixed rate per Smart Cycle to the distinct period during which the related services were performed as those fees relate specifically to the Company’s efforts to provide its fertility benefits solution to its clients in the period and represents the consideration the Company is entitled to for the fertility benefits services provided. As a result, the fixed rate per Smart Cycle is included in the transaction price and recognized in the period in which the Smart Cycle is provided to the member. Progyny’s contracts also include potential service level agreement refunds related to outcome-based service metrics. These service level refunds, which are determined based on results of a full plan year, if met, are based on a percentage of the PEPM fee paid by clients. The Company estimates the variable consideration related to the total PEPM administration fee, less estimated refunds related to service level agreements, and recognizes the amounts allocated to the fertility benefits solution ratably over the contract term. Progyny’s estimates of service level agreement refunds, have not historically resulted in significant adjustments to the transaction price. Clients are typically invoiced on a monthly basis for the PEPM administration fee. Progyny invoices its clients and members for their respective portions of the fixed rate per Smart Cycle bundle when all treatment services within a Smart Cycle are completed by the provider clinic. Once an invoice is issued, payment terms are typically between 30 to 60 days. 71 Table of Contents The Company assesses whether it is the principal or the agent for each arrangement with a client, since fertility treatment services are provided by a third party—the provider clinics. The Company is the principal in its arrangements with clients and therefore presents revenue gross of the amounts paid to the provider clinics because Progyny controls the specified service (the fertility benefits solution) before it is transferred to the client. Progyny integrates the fertility treatment services provided by the provider clinics into the overall fertility benefits solution that the client contracted to receive. In addition, Progyny defines the scope of the potential services to be performed by the provider clinics and monitors the performance of the provider clinics. Furthermore, Progyny is primarily responsible for fulfilling the promise to the client and has discretion in setting the pricing, as Progyny separately negotiates agreements with the provider clinics, which establish pricing for each treatment service. Pricing of services from provider clinics is independent from the fees charged to clients. Pharmacy Benefits Solution Revenue For clients that have the fertility benefits solution, Progyny offers, as an add-on, its pharmacy benefits solution, which is a separate, fully integrated pharmacy benefit. As part of the pharmacy benefits solution, Progyny provides care management services, which include Progyny’s formulary plan design, prescription fulfillment, simplified authorization and timely delivery of the medications used during treatment through Progyny’s network of specialty pharmacies, and clinical services consisting of member assessments, UnPack It calls, telephone support, online education, medication administration training, pharmacy support services and continuing PCA support. The pharmacy-related promises represent a single performance obligation because Progyny provides a significant service of integrating the formulary plan design, prescription fulfillment, clinical services and PCA support into the combined pharmacy benefits solution that the client contracted to receive. The pharmacy benefits solution is a stand-ready obligation that is satisfied over the contract term. Progyny’s contracts include the following sources of consideration, all of which are variable: a PEPM administration fee (in most, but not all contracts) and a fixed fee per fertility drug. As described above, the PEPM administration fee, less estimated refunds related to service level agreements, is allocated to the pharmacy benefits solution and recognized ratably over the contract term. The Company allocates the variable consideration related to the fixed fee per fertility drug to the distinct period during which the related services were performed, as those fees relate specifically to the Company’s efforts to provide its pharmacy benefits solution to clients in the period and represents the consideration the Company is entitled to for the pharmacy benefits services provided. As a result, the fixed fee per fertility drug is included in the transaction price and recognized in the period in which the Company is entitled to consideration from a client, which is when a prescription is filled and delivered to the members. As stated above, clients are invoiced on a monthly basis for the PEPM administration fee. Progyny invoices the client and the member for their respective portions of the fixed fee per fertility drug, when the prescription services are completed by the specialty pharmacies. Once an invoice is issued, payment terms are typically between 30 to 60 days. The Company assesses whether it is the principal or the agent for each arrangement with a client, as prescription fulfillment and clinical services are provided by a third party—the specialty pharmacies. The Company is the principal in its arrangements with clients, and therefore presents revenue gross of the amounts paid to the specialty pharmacies. Progyny controls the specified service (the pharmacy benefits solution) before it is transferred to the client. Progyny integrates the prescription fulfillment and clinical services provided by the pharmacies and PCAs into the overall pharmacy benefits solution that the client contracted to receive. In addition, Progyny defines the scope of the potential services to be performed by the specialty pharmacies and monitors the performance of the specialty pharmacies. Furthermore, Progyny is primarily responsible for fulfilling the promise to the client and has discretion in setting the pricing, as Progyny separately negotiates agreements with pharmacies, which establish pricing for each drug. Pricing of fertility drugs is independent from the fees charged to clients. The Company does not disclose the transaction price allocated to remaining performance obligations because all of the transaction price is variable and is allocated to the distinct periods to which the services relate, as discussed above. The remaining contract term is typically less than one year , due to the client’s contractual termination options. There were no material contract asset or contract liability balances as of December 31, 2024 and 2023. 72 Table of Contents Accrued Receivables and Accrued Claims Payable Accrued receivables are estimated based on historical experience for those fertility benefits services provided but for which a claim has not been received from the provider clinic at the end of the reporting period, which includes assumptions regarding the lag between authorization date and service date as well as estimates for changes and cancellations of services. At the same time, cost of services and accrued claims payables are estimated based on the amount to be paid to the provider clinic and expected gross margin on fertility benefits services. Estimates are adjusted to actual at the time of billing. Adjustments to original estimates have not been material. As of December 31, 2024 and 2023, accrued receivables were $ 45.6 million and $ 45.8 million, respectively. Accrued receivables are included within accounts receivable in the consolidated balance sheet. Accrued claims payable of $ 32.1 million and $ 30.3 million as of December 31, 2024 and 2023, respectively, are included within accrued expenses and other current liabilities in the consolidated balance sheet. Claims payable are generally paid within 30 days based on contractual terms. As of December 31, 2024 and December 31, 2023, unbilled receivables, which represent claims received and approved but unbilled at the end of the reporting period, were $ 47.0 million and $ 45.1 million, respectively. Unbilled receivables are typically billed to clients within 30 days of the approved claim based on the contractual billing schedule agreed upon with the client. Unbilled receivables are included in accounts receivable in the consolidated balance sheet. Accounts Receivable and Allowance for Doubtful Accounts The accounts receivable balance primarily includes amounts due from clients and members. The Company estimates the allowance for doubtful accounts based on the lifetime expected credit losses for the client and member receivable pools, respectively. Under this current expected credit losses model, the Company determines the allowance for doubtful accounts based on factors such as the age of the receivable balance, historical experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions. An allowance for credit losses is applied at the time the asset is recognized. Expected credit losses are recorded as general and administrative expenses on the consolidated statements of operations. The following table provides a summary of the activity in this allowance (in thousands): Years Ended December 31, 2024, 2023 and 2022 December 31, 2024 Balance at Beginning of Period Charged to Costs and Expenses Write-offs Balance at End of Period Allowance for doubtful accounts $ 46,636 $ 16,396 $ ( 6,677 ) $ 56,355 December 31, 2023 Allowance for doubtful accounts $ 28,328 $ 19,934 $ ( 1,626 ) $ 46,636 December 31, 2022 Allowance for doubtful accounts $ 17,379 $ 13,794 $ ( 2,845 ) $ 28,328 Cost of Services Fertility Benefits Services Fertility benefits services costs include: (1) fees paid to provider clinics within the Company’s network, labs and anesthesiologists; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of the Company's general overhead, depreciation and amortization) for those employees associated with care management service functions: Provider Account Management, PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Contracts with provider clinics are typically for a term of one to two years . 73 Table of Contents Pharmacy Benefits Services Pharmacy benefits services costs include: (1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by specialty pharmacy partners; (2) costs incurred (including salaries, bonuses, benefits, stock-based compensation expense, other related costs, and an allocation of the Company's general overhead, depreciation and amortization) for those employees associated with care management service functions: PCA, Provider Relations and Claims Processing teams; and (3) related information technology support costs. Contracts with the specialty pharmacies are typically for a term of one year . In the specialty pharmacy contracts, the contractual fees of prescription drugs sold includes the cost of the prescription drugs purchased and shipped to members by the Company’s specialty mail service dispensing pharmacies, net of any volume-related or other discounts. Vendor Rebates The Company receives a rebate on formulations purchased and dispensed by the Company’s specialty pharmacies. The Company’s contractual arrangements with pharmacy program partners provide for the Company to receive a discount (or rebate) from established list prices paid subsequent to dispensing when products are purchased indirectly from a pharmacy program partner (such as through a specialty pharmacy). These rebates are recognized as a reduction of cost of services when prescriptions are dispensed and are generally estimated and billed to manufacturers within 20 days after the end of each month. Vendor rebates are included within accounts receivable in the consolidated balance sheet. The effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected has not been material to the Company’s results of operations. Concentration of Credit Risk and Off-Balance-Sheet Risk Financial instruments that potentially subject the Company to concentrations of credit risk consists primarily of cash and cash equivalents, marketable securities, and accounts receivable. The Company invests its cash and cash equivalents and marketable securities with highly rated financial institutions and management believes that the financial risks associated with its cash equivalents are minimal. Substantially all of the Company’s cash is maintained with two financial institutions with high credit standings. Such deposits may exceed federally insured limits. 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, 2024 and 2023, one vendor accounted for 24 % and 22 %, respectively, of total receivables. Property and Equipment Property and equipment consist of computer equipment, machinery and equipment, furniture and fixtures, leasehold improvements, and capitalized software development costs. The assets are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method based on estimated useful lives and in the case of leasehold improvements, the shorter of the useful life or the remaining term of the lease (see Note 5). Goodwill and Intangible Assets Goodwill represents the excess of the consideration transferred over the fair value of the assets acquired and liabilities assumed in a business combination. Other intangible assets consist of trademarks, physician network, and the websites acquired in the Fertility Authority acquisition. Goodwill, including other definite-lived intangible assets, are carried at their initial acquisition date fair value less any impairment. Other intangible assets are recorded at fair value at the date of acquisition, less accumulated amortization. Amortization is calculated using the straight-line method based on estimated useful lives. Goodwill is reviewed for impairment annually as of October 1st of each year or when an interim triggering event has occurred indicating potential impairment. Events or changes in circumstances which could trigger an impairment 74 Table of Contents review, which are assessed at the reporting unit level, include significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, significant underperformance relative to historical or projected future results of operations, a significant adverse change in the business climate, an adverse action or assessment by a regulator, unanticipated competition or a loss of key personnel. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform the first of a two-step impairment test. The first step involves comparing the estimated fair value of the reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If the carrying amount of goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. The Company tests for goodwill impairment for each reporting unit, which is at the operating segment or one level below the operating segment. This analysis requires us to make a series of assumptions to (1) evaluate whether any impairment exists and (2) measure the amount of impairment. There was no impairment of goodwill or intangible assets for the years ended December 31, 2024, 2023, and 2022. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable. In such instances, the recoverability of assets to be held and used is measured first by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, an impairment loss would be recognized if the carrying amount of the asset exceeds the fair value of the asset or asset group. The fair value is determined based on valuation techniques such as a comparison to fair values of similar assets or using a discounted cash flow analysis. The Company recorded a $ 1.4 million loss on disposal of property and equipment for the year ended December 31, 2024. There were no other significant impairments recorded for the years ended December 31, 2024, 2023 and 2022. Leases 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, 2024 and 2023, the Company has no financing lease arrangements. In accordance with ASC 842, the Company records a right-of-use asset (“ROU”) and lease liability in connection with its operating leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. To determine the present value of lease payments, the Company utilizes the rate implicit in the lease, if available. If the rate implicit in the lease is not readily determinable, the Company uses its secured incremental borrowing rate to determine the present value of the lease payments. The determination of the Company’s incremental borrowing rate requires judgment and is primarily based on publicly available information for companies within the same industry and with similar credit profiles. The rate is then adjusted for the lease term and other specific terms included in the Company’s lease arrangements. The incremental borrowing rate is subsequently reassessed upon a modification to the lease arrangement. The operating lease ROU asset also includes any lease payments made prior to commencement date and excludes lease incentives and initial direct costs incurred. ROU assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for long-lived assets. Stock-Based Compensation The Company accounts for stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments, including restricted stock units and grants of stock options, to be recognized in the consolidated statements of operations based on their respective fair values. 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. 75 Table of Contents The fair value of the Company’s stock options and stock purchased under the employee stock purchase plan has been determined using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of historical and implied volatility data of the Company’s common stock, the expected stock price volatility has been estimated based on the historical volatilities of the daily closing prices of a specified group of companies in Progyny’s industry for a period equal to the expected term of the option. Progyny selected companies with comparable characteristics to the Company, including enterprise value, risk profiles and position within the industry, that have historical 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. For non-employee service-based awards, the expected term is estimated based on the remaining contractual term of such awards. The risk-free interest rate is based on the yield of zero-coupon, U.S. Treasury securities for the period that is consistent with the expected term of the stock option. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock; therefore, the expected dividend yield is zero . The Company’s stock-based awards are subject to service-based or performance-based vesting conditions. The Company recognizes compensation expense for service-based awards over the vesting period of the award on a straight-line basis. Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period when achievement of the performance condition is considered probable. Income Taxes The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. The Company periodically reviews the recoverability of deferred tax assets recorded on the consolidated balance sheet and provides valuation allowances as deemed necessary to reduce such deferred tax assets to the amount that will, more likely than not, be realized. Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will adjust its valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made. The amount of deferred tax provided is calculated using tax rates enacted at the balance sheet date. The impact of tax law changes is recognized in periods when the change is enacted. A two-step approach is applied pursuant to ASC 740 in the recognition and measurement of uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company’s policy is to recognize interest and penalty expenses associated with uncertain tax positions, if any, as a component of income tax expense in the consolidated statements of operations and comprehensive income. Global Intangible Low-Taxed Income (“GILTI”) is described as the excess of a U.S. Shareholder's total net foreign income over a deemed return on tangible assets. The Company's policy is to recognize GILTI taxes as a current period expense, as a component of income tax expense, in the consolidated statements of operations and comprehensive income. Fair Value of Financial Instruments and Fair Value Measurements The Company determines the fair value of financial assets and liabilities using the fair value hierarchy established in the accounting standards. The hierarchy describes three levels of inputs that may be used to measure fair value, as follows: 76 Table of Contents Level 1—Quoted prices in active markets for identical assets and liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, marketable securities, accounts receivable and accounts payable approximate fair value due to their short maturities. Net Income per Share Basic net income per share is calculated by dividing the net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed by dividing the diluted net income by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares assuming dilutive effect of outstanding common stock options, restricted stock units, shares issuable under the employee stock purchase program and common stock warrants using the treasury stock method. 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. Recently Adopted Accounting Pronouncements In May 2021, the FASB issued ASU No. 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. 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 Company adopted this standard in the annual period beginning January 1, 2024 and applied the disclosure requirements retrospectively to all prior periods presented in the financial statements. 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 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. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The standard is intended to provide enhanced transparency into the nature of expenses and requires more detailed information on specific 77 Table of Contents expense categories (purchases of inventory, employee compensation, depreciation, and intangible asset amortization) included in certain expense captions presented on the face of the income statement. The new standard will be effective for the Company for the fiscal year beginning January 1, 2027, and for interim periods within the fiscal year beginning January 1, 2028. Early adoption is permitted. The amendments may be applied either 1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or 2) retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact of the new standard including the impact on its disclosures. 3. Revenue Disaggregated revenue The following table disaggregates revenue by service (in thousands): Year Ended December 31, 2024 2023 2022 Revenue Fertility benefit services revenue $ 729,551 $ 676,295 $ 510,145 Pharmacy benefit services revenue 437,670 412,303 276,768 Total revenue $ 1,167,221 $ 1,088,598 $ 786,913 Concentration of Major Clients For the year ended December 31, 2024, one client accounted for 12 % of total revenue. For the year ended December 31, 2023, that same client accounted for 13 % of total revenue. For the year ended December 31, 2022, two clients accounted for 16 %, and 10 %, or a combined 26 % of total revenue. No other clients accounted for more than 10% of total revenue for the years ended December 31, 2024, 2023, and 2022. 4. Fair Value of Financial Instruments As of December 31, 2024 and 2023, the Company had $ 167.7 million and $ 35.2 million, respectively, in financial assets held in money market accounts and $ 65.6 million and $ 273.8 million, respectively, held in marketable securities, including U.S. treasury bills. All were classified as Level 1 in the fair value hierarchy. The Company measured these assets at fair value. The Company classified these assets as Level 1 because the values of these assets are determined using unadjusted quoted prices in active markets for identical assets. For the years ended December 31, 2024, 2023, and 2022, interest income on cash and cash equivalents and marketable securities, including the accretion of discounts on investments, was $ 12.4 million, $ 3.3 million, and $ 0.8 million, respectively. During the year ended December 31, 2024 and 2023, the Company had $ 10.0 million and $ 5.2 million, respectively of gross realized gains related to marketable securities included within earnings. There were no related gross realized losses included within earnings for these periods. The gross realized gains and losses included within earnings for the year ended December 31, 2022 were $ 0.4 million and $ 0.1 million, respectively. The Company reclassified $ 7.3 million, $ 3.8 million, and $ 0.3 million of net unrealized holding gains out of other comprehensive income and into earnings for the years ended December 31, 2024, 2023, and 2022, respectively. These amounts were reclassified into interest and other income, net in the consolidated statement of operations. The total net gains for marketable securities recorded into other comprehensive income, before reclassifications into earnings, for the years ended December 31, 2024, 2023, and 2022, was $ 4.5 million, $ 6.1 million, $ 0.9 million, respectively. During the years ended December 31, 2024, 2023, and 2022, the Company did not maintain any assets or liabilities classified as Level 2 or Level 3 in the fair value hierarchy. 78 Table of Contents 5. Property and Equipment, Net Property and equipment consist of the following (in thousands): Estimated Useful Life (in years) December 31, 2024 2023 Machinery and equipment 3 - 5 $ 323 $ 312 Computers and hardware 3 2,362 1,811 Leasehold improvements lease term 4,397 3,733 Furniture and fixtures 7 2,227 1,488 Capitalized software 3 - 5 11,442 8,170 Property and equipment, gross 20,751 15,514 Less: accumulated depreciation ( 8,368 ) ( 5,301 ) Total property and equipment, net $ 12,383 $ 10,213 Depreciation expense was approximately $ 3.1 million, $ 2.2 million and $ 1.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. During the years ended December 31, 2024, 2023, and 2022, the Company capitalized $ 1.4 million, $ 0.6 million, and $ 0.8 million, respectively, in stock-based compensation related to the development of internal-use software. 6. Intangible Assets, Net Intangible assets consist of the following (in thousands): Estimated Useful Life (in years) December 31, 2024 2023 Trademarks 8 $ 4,000 $ 4,000 Physician Network 6 3,500 3,500 Website 5 2,000 2,000 Databases 8 864 — Technology 6 448 — Customers 10 94 — Intangible assets, gross 10,906 9,500 Less: accumulated amortization ( 9,603 ) ( 9,500 ) Total intangible assets, net $ 1,303 $ — Amortization expense was $ 0.1 million, $ 0.1 million, and $ 0.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, the future amortization expense of other intangible assets is as follows (in thousands): Year ending December 31: 2025 $ 192 2026 192 2027 192 2028 192 2029 192 Thereafter 343 Total $ 1,303 79 Table of Contents 7. Leases In September 2019, the Company’s sublease agreement for a 25,212 square foot office in its corporate headquarters in New York, NY commenced and is scheduled to expire in May 2029. Pursuant to the sublease, the Company is obligated to pay the base rent of approximately $ 1.3 million per annum through the end of the fifth lease year and approximately $ 1.4 million per annum thereafter through the expiration date. In February 2023, the Company's lease agreement for the additional 24,099 square foot office in its corporate offices (entered into in February 2022) commenced in New York, NY and is expected to expire in the second quarter of 2036. In accordance with ASC 842, the Company recorded right-of-use assets and lease liabilities of $ 12.2 million and $ 12.1 million, respectively. Pursuant to the lease, the Company is obligated to pay the base rent of approximately $ 1.4 million per annum through the end of the fifth lease year and approximately $ 1.5 million per annum thereafter through the expiration date. The Company recognizes lease expense on a straight-line basis over the lease term. Lease expense for the Company’s operating leases was $ 2.7 million for the year ended December 31, 2024. For the years ended December 31, 2023 and 2022 lease expense for the Company's operating leases was $ 2.4 million and $ 1.3 million, respectively . Cash outflows from operating activities attributable to the operating leases for the years ended December 31, 2024 was $ 2.3 million, For the years ended December 31, 2023, and 2022, cash outflows toward operating leases were $ 1.3 million, respectively. Information related to the Company’s leases is as follows (in thousands): Balance Sheet Location December 31, 2024 Operating Leases Right-of-use assets Operating lease right-of-use assets $ 17,251 Short-term lease liabilities Accrued expenses and other current liabilities $ 2,859 Long-term lease liabilities Operating lease noncurrent liabilities $ 16,413 Other information Weighted average remaining lease term, operating lease 8.9 years Weighted average discount rate, operating lease 4.61 % Future minimum facility lease payments as of December 31, 2024, are as follows (in thousands): Year Ending December 31: Operating Lease Payments as of December 31, 2024 2025 $ 2,994 2026 2,999 2027 3,003 2028 3,008 2029 2,226 Thereafter 9,414 Total undiscounted lease payments $ 23,644 Less: imputed interest 4,372 Present value of lease liabilities $ 19,272 Less: current portion of operating lease liabilities 2,859 Operating lease noncurrent liabilities $ 16,413 February 2022 Lease Agreement As noted above, the Company commenced its lease for the 24,099 square foot office in its corporate offices in New York, NY in February 2023, pursuant to a lease agreement entered into by the Company in February 2022. The lease 80 Table of Contents 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 premise will become available to the Company for use, is currently expected to be in the first quarter of 2025. The Company is obligated to pay the base rent of approximately $ 1.3 million starting in the second quarter of 2026 for five years and approximately $ 1.4 million per year thereafter through second quarter of 2036, the expected expiration date. For the current 25,212 square foot office, the Company is obligated to pay the base rent of approximately $ 1.6 million per year beginning in June 2029, which is the lease commencement, through second quarter of 2036, the expected expiration date. 8. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands): December 31, 2024 2023 Accrued claims payable $ 32,121 $ 30,294 Accrued compensation 14,572 11,868 Accrued commission 2,207 3,284 Operating lease current liabilities 2,859 2,149 Professional fees 1,838 1,242 Other accrued expenses 14,634 10,504 Other current liabilities 5,299 1,183 Total accrued expenses and other current liabilities $ 73,530 $ 60,524 9. Acquisitions On June 17, 2024, the Company completed its acquisition of Apryl GmbH, a Berlin-based fertility benefits platform, to expand its global offering. The transaction was for a purchase price of € 5.1 million, or $ 5.3 million, net of cash acquired, based on the exchange rate on the acquisition closing date, and was accounted for using the acquisition method. As a result, tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of the assets and liabilities assumed was recognized as goodwill and is subject to revision as the purchase price allocation is completed during the measurement period (up to one year from acquisition date). This acquisition did not have a material impact on the Company’s consolidated financial statements. On January 8, 2025 the Company completed its acquisition of Benefit Bump LLC, a comprehensive parental leave benefits navigation program for new and growing families. The acquisition enhances the Company's existing offerings, extending its ability to further serve the needs of families on their journey from pregnancy to early childhood and beyond. The transaction was for a purchase price of $ 10.5 million including $ 2.5 million held in escrow for standard indemnifications and the satisfaction of certain conditions. The financial results of Benefit Bump will be included in the Company's consolidated financial statements beginning in the first quarter of fiscal year 2025. 10. Stockholders’ Equity Common Stock The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. The common stock confers upon its holders the right to receive dividends out of any assets legally available, when and as declared by the Board of Directors. The Company had 12,998,173 shares of treasury stock as of December 31, 2024. There were 615,980 shares of treasury stock shares for the years ended December 31, 2023 and 2022, respectively. 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 (the “February Share Repurchase Program”). In May 2024, the Company's Board of Directors 81 Table of Contents authorized an additional share repurchase program of up to $ 100 million in shares of common stock (the “May Share Repurchase Program”). In August 2024, the Company's Board of Directors authorized an additional share repurchase program of up to $ 100 million in shares of common stock (the “August Share Repurchase Program,” and together with the February Share Repurchase Program and the May Share Repurchase Program, the "2024 Share Repurchase Programs"). For the year ended December 31, 2024, the Company repurchased a total of 12,382,193 shares of common stock under the 2024 Share Repurchase Programs at an average price per share of $ 24.22 and a total cost of $ 300.3 million, inclusive of $ 0.4 million in trading fees. In addition, the Company recognized $ 2.6 million of excise taxes related to the share repurchases. As of the year ended December 31, 2024, the 2024 Share Repurchase Programs were completed, and no amounts remained available for repurchase under the programs. 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, 2024, the Company had no outstanding common stock warrants. The Company had 305,595 common stock warrants outstanding as of December 31, 2023. For the year ended December 31, 2024, 305,595 common stock warrants were exercised for 279,867 shares of common stock at a weighted-average exercise price of $ 1.73 . 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. The Company did not recognize compensation expense relating to the common stock warrants for the years ended December 31, 2024, 2023 and 2022 as they were all fully vested. Stock Incentive Plan In October 2019, the Company’s Board of Directors and stockholders adopted and approved the 2019 Equity Incentive Plan, as amended (the “2019 Plan”), as the successor to the Company’s 2017 Equity Incentive Plan, as amended (the “2017 Plan”). No further grants were made under the 2017 Plan from the date that the 2019 Plan became effective. Initially, the maximum number of shares issuable under the 2019 Plan will not exceed 19,198,875 shares of common stock, which is the sum of 1) 2,640,031 new shares and 2) an additional number of shares not to exceed 16,558,844 consisting of (a) shares that remained available for the issuance of awards under the 2017 Plan immediately prior to the effective date of the 2019 Plan and (b) shares of common stock subject to outstanding stock options or other stock awards granted under the 2017 Plan that, on or after the date the 2019 Plan became effective, terminate, expire or are cancelled prior to exercise or settlement; are forfeited or repurchased because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time. Under the Company’s 2017 Plan and consistent with the Company's prior 2008 Equity Incentive Plan, options and other stock awards to purchase shares of common stock may be granted to employees, directors, and consultants. Incentive stock options are granted to employees and non-statutory stock options are granted to consultants and directors at an exercise price not less than 100 % of the fair value (as determined by the Board of Directors) of the Company’s common stock on the date of grant. The exercise price of options granted to stockholders who hold 10 % or more of the Company’s common stock on the option grant date shall not be less than 110 % of the fair value of the Company’s common stock on the date of grant for both incentive and non-qualified stock option grants. These options generally vest over 4 years and expire 10 years from the date of grant. Stock option grants may be exercisable upon grant, and any unvested shares purchased are subject to repurchase. There were no unvested shares subject to repurchase as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, 3,602,455 and 3,573,416 shares of common stock, respectively, remained available for future grants under the 2019 Plan. Under the 2019 Plan, subject to any adjustments necessary to implement any capitalization adjustments, an annual increase to the number of shares issuable is automatically added on January 1 of each year for a period of ten years commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 4 % of the total number of shares of common stock outstanding on December 31 of the preceding year or such smaller amount as determined by the Company's Board of Directors. 82 Table of Contents Stock Options Stock options are exercisable based on the terms and conditions outlined in the applicable award agreement. Stock options generally vest over four years and typically expire ten years from the date of grant. A summary of the Company’s stock option activity for the year ended December 31, 2024 is as follows: Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) Outstanding at December 31, 2023 17,228,415 $ 35.24 7.4 $ 158,773 Granted 2,493,293 30.20 Exercised ( 530,256 ) 9.13 Forfeited ( 335,264 ) 41.26 Cancelled ( 236,282 ) 58.15 Outstanding at December 31, 2024 18,619,906 $ 34.92 6.7 $ 54,193 Exercisable at December 31, 2023 9,379,508 $ 27.82 6.3 $ 152,166 Exercisable at December 31, 2024 11,939,099 $ 32.83 5.8 $ 53,294 The total intrinsic value of options exercised was $ 13.7 million, $ 79.7 million, and $ 76.7 million for the years ended December 31, 2024, 2023, and 2022, respectively. The weighted-average grant date fair value of options granted was $ 16.60 , $ 19.10 , and $ 21.84 in the years ended December 31, 2024, 2023, and 2022, respectively. The total grant date fair value of options vested was $ 202.4 million, $ 134.1 million, and $ 62.6 million as of December 31, 2024, 2023, and 2022, respectively. The total unrecognized compensation cost related to unvested options was approximately $ 118.3 million at December 31, 2024. The weighted-average remaining recognition period is approximately 2.0 years. Certain assumptions used in the option-pricing model for options granted to employees, directors, and non-employees are as follows: Year Ended December 31, 2024 2023 2022 Expected term (in years) 5.25 - 6.11 5.50 - 6.11 4.61 - 6.11 Risk-free interest rate 3.5 % - 4.6 % 3.5 % - 4.8 % 1.4 % - 4.4 % Expected volatility 53.0 % - 55.0 % 52.0 % - 54.0 % 49.3 % - 53.3 % Expected dividend rate — — — 83 Table of Contents Restricted Stock Units Restricted stock units are subject to service-based or performance-based vesting criteria. The restricted stock units vest based on the terms outlined in the applicable award agreement, which, for service-based awards, is generally over a period of 4 years. The Company's performance-vesting awards are based on the achievement of specified revenue targets and continued employment through the date of achievement of such targets. If the targets have not been achieved prior to the fifth anniversary of the grant, the awards will be forfeited. 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, 2024, 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: Number of Shares Weighted-Average Grant Date Fair Value Outstanding at December 31, 2023 2,561,213 $ 42.19 Granted 2,570,570 $ 25.05 Vested ( 1,015,883 ) $ 42.76 Forfeited ( 195,523 ) $ 36.65 Outstanding at December 31, 2024 3,920,377 $ 31.16 The total intrinsic value of restricted stock units vested was $ 27.6 million, $ 33.0 million, and $ 22.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. The weighted-average grant date fair value of restricted stock units granted was $ 25.05 , $ 35.02 , and $ 44.09 for the years ended December 31, 2024, 2023, and 2022, respectively. The total grant date fair value of restricted stock units vested was $ 43.4 million, $ 45.5 million and $ 28.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. The total unrecognized compensation cost related to unvested restricted stock units was approximately $ 99.5 million at December 31, 2024. The weighted-average remaining recognition period is approximately 2.6 years. Employee Stock Purchase Plan In October 2019, the Board of Directors and stockholders also adopted and approved the 2019 Employee Stock Purchase Plan (the “ESPP”). Following the IPO, the ESPP authorized the issuance of 1,700,000 shares of common stock to purchase rights granted to the Company’s employees. Subject to the ESPP, the maximum number of shares of common stock that may be issued under the Plan will not exceed 1,700,000 shares, plus the number of shares that are automatically added on January 1st of each year, in an amount equal to the lesser of 1 % of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, and 2,500,000 shares of common stock, or such smaller amount as determined by the Company's Board of Directors. As of December 31, 2024 and December 31, 2023, 5,111,514 and 4,194,264 shares of common stock remained available to be issued under the ESPP, respectively. 84 Table of Contents The following table summarizes the purchases that were made for each purchase period of the ESPP in the years ending December 31, 2024, 2023, and 2022 (in thousands, except for share amounts): Purchase Period Proceeds used for purchase Shares purchased August 1, 2021 to January 31, 2022 $ 683 $ 19,838 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 August 1, 2023 to January 31, 2024 790 24,387 February 1, 2024 to July 31, 2024 524 21,848 The next purchase period commenced on August 1, 2024 and ended on January 31, 2025. Stock-Based Compensation Expense The following table summarizes stock-based compensation expense, which was included in the statements of operations as follows (in thousands): Year Ended December 31, 2024 2023 2022 Cost of services $ 36,799 $ 34,490 $ 25,918 Sales and marketing 30,490 27,015 21,135 General and administrative 60,841 61,106 53,695 Total stock-based compensation expense $ 128,130 $ 122,611 $ 100,748 Accumulated Other Comprehensive Income Accumulated other comprehensive income consisted of the following (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 Unrealized gains on marketable securities Foreign currency translation adjustments Total Unrealized gains on marketable securities Foreign currency translation adjustments Total Unrealized gains on marketable securities Foreign currency translation adjustments Total Balance at beginning of period $ 2,829 $ ( 10 ) $ 2,819 $ 496 $ 5 $ 501 $ ( 93 ) $ — $ ( 93 ) Other comprehensive income before reclassifications, net of tax (1) 4,500 31 4,531 6,143 ( 15 ) 6,128 884 5 889 Amounts reclassified from accumulated other comprehensive income, net of tax (2) ( 7,311 ) — ( 7,311 ) ( 3,810 ) — ( 3,810 ) ( 295 ) — ( 295 ) Net current period other comprehensive (loss) income ( 2,811 ) 31 ( 2,780 ) 2,333 ( 15 ) 2,318 589 5 594 Balance at end of period $ 18 $ 21 $ 39 $ 2,829 $ ( 10 ) $ 2,819 $ 496 $ 5 $ 501 (1) Represents unrealized gains of $ 6.2 million, net of tax expense of $ 1.7 million for the year ended December 31, 2024, unrealized gains of $ 8.6 million, net of tax of $ 2.5 million for the year ended December 31, 2023, and unrealized gains of $ 0.9 million, net of tax of $ 0 for the year ended December 31, 2022. 85 Table of Contents (2) The effects on net income of amounts reclassified from accumulated other comprehensive income were as follows (in thousands): Details about Accumulated Other Comprehensive Income Component Year Ended December 31, Affected Line Item in Statement of Operations 2024 2023 2022 Gains on marketable securities 9,982 5,196 295 Interest and other income, net 9,982 5,196 295 Income before income taxes 2,671 1,386 0 Provision for income taxes 7,311 3,810 295 Net income 11. Net Income Per Share A reconciliation of net income and the number of shares in the calculation of basic and diluted net income per share is as follows (in thousands, except share and per share amounts): Year Ended December 31, 2024 2023 2022 Basic net income per common share: Numerator: Net income $ 54,336 $ 62,037 $ 30,358 Denominator: Weighted-average shares used in computing basic net income per share 91,481,995 95,021,175 92,195,068 Basic net income per share $ 0.59 $ 0.65 $ 0.33 Diluted net income per common share: Numerator: Net income $ 54,336 $ 62,037 $ 30,358 Denominator: Weighted-average shares used in computing basic net income per share 91,481,995 95,021,175 92,195,068 Effect of dilutive securities: Options to purchase common stock 3,499,412 4,813,004 6,981,512 Shares issuable under ESPP 9,553 804 3,292 Warrants to purchase common stock 177,292 458,537 539,702 Restricted stock units 280,105 378,879 237,599 Total effect of dilutive securities 3,966,362 5,651,224 7,762,105 Weighted-average shares used in computing diluted net income per share 95,448,357 100,672,399 99,957,173 Diluted net income per share $ 0.57 $ 0.62 $ 0.30 86 Table of Contents The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share for the periods presented because including them would have been antidilutive: Year Ended December 31, 2024 2023 2022 Options to purchase common stock 13,868,635 11,901,773 8,019,010 Shares issuable under ESPP 4,022 919 — Restricted stock units 2,118,102 1,111,634 1,733,420 Total potential dilutive shares 15,990,759 13,014,326 9,752,430 12. 401(k) Plan The Company sponsors a 401(k) defined contribution plan covering all employees and began employer contributions in 2018. The Company incurred expenses related to employer contributions of $ 1.8 million, $ 1.4 million, and $ 1.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. 13. Income Taxes The provision (benefit) for income taxes is composed of the following (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal $ 27,342 $ 2,311 $ — State and local 11,980 2,598 695 Total current provision for income taxes 39,322 4,909 695 Deferred: Federal ( 6,836 ) 4,433 ( 6,880 ) State and local ( 3,620 ) ( 688 ) 268 Total deferred provision (benefit) for income taxes ( 10,456 ) 3,745 ( 6,612 ) Total provision (benefit) for income taxes $ 28,866 $ 8,654 $ ( 5,917 ) A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2024 2023 2022 Income tax provision at statutory rate 21 % 21 % 21 % State income taxes, net of federal benefit 7 2 3 Stock-based compensation 2 ( 18 ) ( 48 ) Section 162(m) compensation limitation 4 6 — Other 1 1 — Effective tax rate 35 % 12 % ( 24 ) % For the year ended December 31, 2024, the effective tax rate differs from the U.S. federal statutory rate primarily due to permanent tax adjustments, including shortfalls 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, 2023, and 2022, 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. 87 Table of Contents The components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2024 2023* Deferred tax assets: Net operating loss carryforwards $ 5,577 $ 16,818 Research and development capitalization and credits 1,989 282 Stock-based compensation 60,738 42,257 Accruals and reserves 18,354 15,190 Operating lease liabilities 4,918 5,171 Depreciation and amortization 185 467 Total deferred tax assets 91,761 80,185 Valuation allowance ( 1,779 ) ( 513 ) Deferred tax assets after valuation allowance $ 89,982 $ 79,672 Deferred tax liabilities: Goodwill ( 683 ) ( 832 ) Operating lease right-of-use assets ( 4,352 ) ( 4,695 ) Unrealized gain on marketable securities ( 14 ) ( 1,025 ) Total deferred tax liabilities ( 5,049 ) ( 6,552 ) Net deferred tax assets $ 84,933 $ 73,120 * Presentation updates between the breakout of categories for 2023 have been made from the 2023 Form 10-K for comparability purposes. Assessing the realizability of deferred tax assets requires the determination of whether it is more-likely-than-not that some portion or all the deferred tax assets will not be realized. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carry back and tax-planning strategies. The valuation allowance increased by $ 1.3 million during the year ended December 31, 2024. As of December 31, 2024, management believes there is sufficient positive evidence to conclude that it is more likely than not that substantially all the net deferred tax assets were realizable. As of December 31, 2024, the Company has U.S. federal net operating loss carryforwards of $ 1.1 million which expire in the year 2030 and U.S. state net operating loss carryforwards of $ 51.8 million, which will begin to expire in the year 2030. In addition, the Company has foreign net operating loss carryforwards of $ 5.9 million, which will begin to expire in the year 2042. Utilization of the U.S. federal net operating loss carryforwards may be subject to an annual limitation due to ownership changes, as provided by Section 382 of the Internal Revenue Code. Such annual limitation could result in the expiration of net operating losses before their utilization. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): December 31, 2024 2023 2022 Balance at the beginning of the year $ 390 $ 390 $ 390 Additions based upon tax positions related to the current year 213 — — Balance at the end of the year $ 603 $ 390 $ 390 For the years ended December 31, 2024, 2023, and 2022, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $ 0.6 million, $ 0.4 million, and $ 0.4 million, in the aggregate, respectively. The Company classifies interest and penalties related to unrecognized tax benefits as components of the provision for income taxes. As of December 31, 2024, 2023, and 2022, the Company had no significant accrued interest or penalties related to unrecognized tax benefits and no amounts have been recognized in the Company’s consolidated statements of 88 Table of Contents operations. The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months. The Company files income tax returns in the U.S. for federal and state and local jurisdictions, as well as in certain foreign jurisdictions, with varying statutes of limitations. All tax years since inception remain open to examination due to the carryover of unused net operating losses. 14. Commitments and Contingencies Arbitration/Litigation 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 The Company indemnifies each of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities relating to these obligations for any period presented. 15. Segment Reporting Progyny is a benefits management company specializing in fertility, family building and women's health benefits solutions. Substantially, all of the Company's revenues and assets are attributable to the United States. The chief operating decision maker (“CODM”) is the Chief Executive Officer. The Company determined it has one operating segment and one reportable segment, as the CODM manages the business and evaluates performance at the consolidated level. The CODM uses net income to allocate resources (including personnel, technology, and capital resources) for the single segment to make decisions regarding the annual budget, ongoing operations, and strategic investments to drive the Company's strategy and mission. 89 Table of Contents Year Ended December 31, 2024 2023 2022 Revenue (1) $ 1,167,221 $ 1,088,598 $ 786,913 Less: Cost of services 913,858 849,799 619,588 Sales and marketing 63,948 59,488 45,657 General and administrative 121,960 117,127 98,327 Interest and other (income), net ( 15,747 ) ( 8,507 ) ( 1,100 ) Provision (benefit) for income taxes 28,866 8,654 ( 5,917 ) Net income $ 54,336 $ 62,037 $ 30,358 (1) Refer to footnote 3, for disaggregated revenue by service. Year Ended December 31, 2024 2023 Total Assets $ 607,102 $ 756,620 16. Unaudited Quarterly Results of Operations Data The following table sets forth the unaudited quarterly consolidated results of operations for each of the eight quarterly periods in the period ended December 31, 2024. The unaudited quarterly results of operations have been prepared on the same basis as the audited consolidated financial statements, and we believe they reflect all normal recurring adjustments necessary for the fair statement of the Company’s results of operations for these periods. This information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. The Company’s historical operating data may not be indicative of the Company’s future performance. Three Months Ended Mar. 31, 2023 Jun. 30, 2023 Sep. 30, 2023 Dec. 31, 2023 Mar. 31, 2024 Jun. 30, 2024 Sep. 30, 2024 Dec. 31, 2024 (in thousands) Revenue $ 258,394 $ 279,373 $ 280,891 $ 269,940 $ 278,078 $ 304,087 $ 286,625 $ 298,431 Cost of services 199,754 218,732 218,267 213,046 215,672 235,806 227,381 234,999 Gross profit 58,640 60,641 62,624 56,894 62,406 68,281 59,244 63,432 Operating expenses: Sales and marketing 14,282 15,384 14,911 14,911 15,454 16,421 16,457 15,616 General and administrative 29,347 30,073 29,524 28,183 28,429 31,173 30,329 32,029 Total operating expenses 43,629 45,457 44,435 43,094 43,883 47,594 46,786 47,645 Income from operations 15,011 15,184 18,189 13,800 18,523 20,687 12,458 15,787 Interest and other income, net 1,320 1,983 2,742 2,462 3,992 4,380 5,504 1,871 Income before income taxes 16,331 17,167 20,931 16,262 22,515 25,067 17,962 17,658 Provision (benefit) for income taxes ( 1,347 ) 2,176 5,033 2,792 5,617 8,582 7,541 7,126 Net income $ 17,678 $ 14,991 $ 15,898 $ 13,470 $ 16,898 $ 16,485 $ 10,421 $ 10,532 Net income per share: Basic $ 0.19 $ 0.16 $ 0.17 $ 0.14 $ 0.18 $ 0.18 $ 0.12 $ 0.12 Diluted $ 0.18 $ 0.15 $ 0.16 $ 0.13 $ 0.17 $ 0.17 $ 0.11 $ 0.12 Weighted-average shares used in computing net income per share: Basic 93,832,873 94,738,651 95,502,250 95,980,425 96,484,657 93,868,409 90,067,675 85,809,325 Diluted 100,166,008 100,615,919 100,879,576 100,748,054 101,052,933 97,839,576 93,821,812 88,914,595 90 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 91 Table of Contents