S-1/A 1 a2239825zs-1a.htm S-1/A

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As filed with the Securities and Exchange Commission on October 15, 2019.

Registration No. 333-233965


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



Amendment No. 1
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Progyny, Inc.
(Exact name of Registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  7389
(Primary Standard Industrial
Classification Code Number)
  27-2220139
(I.R.S. Employer
Identification Number)

245 5th Avenue
New York, New York 10016
(212) 888-3124
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)



David Schlanger
Chief Executive Officer
Progyny, Inc.
245 5th Avenue
New York, New York 10016
(212) 888-3124

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Mark Weeks
Nicole Brookshire
Danielle Naftulin
Alison Haggerty
Cooley LLP
55 Hudson Yards
New York, New York 10001
(212) 479-6000

 

Peter Anevski
Jennifer Bealer
Progyny, Inc.
245 5th Avenue
New York, New York 10016
(212) 888-3124

 

Deanna Kirkpatrick
Yasin Keshvargar
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4135



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Smaller reporting company o

Emerging growth company ý

           If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Offering Pricer Per
Share(2)

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Common stock, par value $0.0001 per share

  11,500,000   $16.00   $184,000,000   $23,024

 

(1)
Includes 1,500,000 additional shares that the underwriters have the option to purchase.

(2)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) of the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

(3)
The registrant previously paid a registration fee of $12,120 in connection with the initial filing of this Registration Statement.



           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated October 15, 2019

10,000,000 Shares

LOGO

Common Stock



        This is the initial public offering of shares of common stock of Progyny, Inc. We are offering 6,700,000 shares of our common stock and the selling stockholders are offering 3,300,000 shares of common stock. We will not receive any proceeds from the sale of stock by the selling stockholders.

        Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $14.00 and $16.00 per share. We have applied to list our common stock on the Nasdaq Global Market under the symbol "PGNY."

        We are an "emerging growth company" as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

        See "Risk Factors" beginning on page 21 to read about factors you should consider before buying our common stock.



        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.



       
 
 
  Per Share
  Total
 

Initial public offering price

  $                           $                        
 

Underwriting discount(1)

  $                           $                        
 

Proceeds, before expenses, to us

  $                           $                        
 

Proceeds to selling stockholders

  $                           $                        

 

(1)
See the section titled "Underwriting" for additional information regarding compensation payable to the underwriters.

        Certain selling stockholders have granted the underwriters the right to purchase up to an additional 1,500,000 shares of common stock from such selling stockholders at the initial public offering price less the underwriting discount.



        The underwriters expect to deliver the shares against payment in New York, New York on or about                , 2019.

J.P. Morgan   Goldman Sachs & Co. LLC   BofA Merrill Lynch



    Citigroup    



Piper Jaffray   SVB Leerink   TPG Capital BD, LLC

   

Prospectus dated                        , 2019.


LOGO


TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    21  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    52  

MARKET, INDUSTRY AND OTHER DATA

    53  

USE OF PROCEEDS

    54  

DIVIDEND POLICY

    55  

CAPITALIZATION

    56  

DILUTION

    58  

SELECTED CONSOLIDATED FINANCIAL DATA

    60  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    62  

BUSINESS

    85  

MANAGEMENT

    112  

EXECUTIVE COMPENSATION

    120  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    132  

PRINCIPAL AND SELLING STOCKHOLDERS

    135  

DESCRIPTION OF CAPITAL STOCK

    138  

SHARES ELIGIBLE FOR FUTURE SALE

    142  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK

    144  

UNDERWRITING (CONFLICTS OF INTEREST)

    148  

LEGAL MATTERS

    159  

EXPERTS

    159  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

    159  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

    F-1  



        Neither we, the selling stockholders nor any of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by us or on our behalf to which we may have referred you in connection with this offering. Neither we, the selling stockholders nor the underwriters take responsibility for, or can provide assurance as to the reliability of, any other information that others may give you. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

        For investors outside the United States: Neither we, the selling stockholders nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

        Through and including                , 2019 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.



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PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to "Progyny," the "company," "we," "our," "us" or similar terms refer to Progyny, Inc.

Overview

        We envision a world where anyone who wants to have a child can do so. Our mission is to make dreams of parenthood come true through healthy, timely and supported fertility journeys. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients' employees are able to pursue the most effective treatment from the best physicians and achieve optimal outcomes.

        Progyny is a leading benefits management company specializing in fertility and family building benefits solutions in the United States. Our clients include many of the nation's most prominent employers across a broad array of industries. We launched our fertility benefits solution in 2016 with our first five employer clients, and we have grown our base of clients to over 80. We currently provide coverage to approximately 1.4 million employees and their partners (known in our industry as covered lives), who we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction. We have retained substantially all of our clients since we launched our fertility benefits solution, and our member satisfaction over that same time period is evidenced by our most recent industry-leading Net Promoter Score, or NPS, of +71 for our fertility benefits solution and +86 for our integrated pharmacy benefits solution, Progyny Rx.

        The prevalence of infertility is high, affecting one in eight couples in the United States according to the Centers for Disease Control and Prevention, or CDC, and infertility is gaining attention as individuals are more openly discussing their struggles. Despite its high prevalence and its recognition by the World Health Organization, or WHO, as a disease since 2009, access to treatment has previously been limited by poor insurance coverage in the United States. This is driven in part by the fact that the American Medical Association did not vote in support of WHO's designation until 2017. Similarly, legislators have not designated infertility as a condition meriting mandated health insurance coverage, with only approximately one-third of states in the United States mandating insurance coverage for infertility. For the states that do mandate coverage, the mandates vary greatly and often leave patients with inadequate coverage or unable to pursue care at all.

        We estimate that the market for fertility treatments in the United States was approximately $6.7 billion in 2017, based on data published by the CDC regarding the number of treatment cycles and FertilityIQ's estimate of the average cost per cycle. As only 50% of individuals suffering from infertility seek treatment, we estimate the potential size of the U.S. fertility market to be at least twice as large.

        Whether an employer is mandated to cover infertility, or simply chooses to do so, the coverage and benefits design options have historically been limited and have resulted in poor patient outcomes, increased costs and unintended consequences for both patients and employers. Infertility coverage offered by conventional health insurance carriers today generally falls short in a number of important ways, including that it typically: (1) is structured as a limited lifetime dollar maximum benefit, which is often depleted by the patient before they have achieved a successful pregnancy; (2) includes rules that limit access to treatment options, leading to poor outcomes; (3) does not provide adequate education, guidance or support for patients struggling with the rigors of the fertility journey, leading to poor

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treatment choices; and (4) limits patient access to many of the nation's top reproductive endocrinologists because these fertility specialists do not broadly participate in conventional health insurance carrier networks.

        We are redefining fertility and family building benefits, proving that a comprehensive fertility solution can simultaneously benefit employers, patients and physicians. We believe the differentiated value proposition we deliver to all of these constituents is key to our success and growth. We enable our members to pursue effective and cost-efficient fertility treatments and support them throughout the entire fertility journey. It starts with our unique approach to benefits plan design—the Smart Cycle—which ensures that all member populations, regardless of their chosen path to parenthood, have comprehensive and equitable coverage. Smart Cycles are our proprietary treatment bundles designed by us to include the medical services required for a member's full course of treatment, including all necessary diagnostic testing and access to the latest technology. We offer a number of different Smart Cycle treatment bundles, which may be used in various combinations depending on the member's need. In conjunction with the Smart Cycle plan design, each of our members has a dedicated Patient Care Advocate, or PCA, who has fertility expertise and provides end-to-end concierge support, including logistical support, clinical guidance and emotional support. Additionally, all Progyny members have access to our selective network of high-quality fertility specialists who we equip with a benefits design that enables them to pursue the best treatment pathways.

        In addition to our fertility benefits solution, we offer an integrated pharmacy benefits solution, Progyny Rx, which can be added by our clients. Progyny Rx provides our members with access to the medications needed during their fertility treatment. Our Progyny Rx solution creates an efficient pharmacy solution for our members and their provider clinics by reducing dispensing and delivery times to our members, eliminating the risk of a missed treatment cycle and mitigating their administrative burden. As our members receive more effective treatment and differentiated support throughout their fertility journeys, our clients gain more value from their fertility benefits expenditures through an increase in healthier, timelier pregnancies as well as an ultimate reduction in both fertility treatment costs and maternity and neonatal intensive care unit, or NICU, expenses, all while supporting a more present and productive employee base.

        We have demonstrated our ability to drive better outcomes for our clients, members and provider clinics across multiple metrics as summarized in the table below. Provider clinics within our network produce outcomes that surpass their own reported practice averages when treating Progyny members because of our differentiated solution. As displayed in the chart below, Progyny's single embryo transfer rate, pregnancy rate per IVF transfer, miscarriage rate, live birth rate and IVF multiples rate are all better than national averages.

Outcome
  National Averages for All
Provider Clinics
  Progyny In-Network
Provider Clinic
Averages for
All Patients
  Progyny In-Network
Provider Clinic
Averages
for Progyny Members Only(4)
 

Single embryo transfer rate(1)

    49.5 %   53.1 %   89.0 %

Pregnancy rate per IVF transfer(2)

    52.5 %   54.6 %   60.7 %

Miscarriage rate(2)

    18.5 %   18.2 %   10.2 %

Live birth rate(3)

    43.3 %   45.3 %   54.5 %

IVF multiples rate(3)

    16.1 %   15.4 %   3.6 %

(1)
Calculated based on the Society for Assisted Reproductive Technology, or SART, 2017 National Summary Report, published in 2019.

(2)
Calculated based on CDC, 2016 National Summary and Clinic Data Sets, published in 2018.

(3)
Calculated based on CDC, 2017 National Summary and Clinic Data Sets, published in 2019.

(4)
Calculated based on the 12-month period ended December 31, 2018.

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        We have experienced significant growth since the launch of our fertility benefits solution. Our growth strategy is to increase the number of clients we serve, expand the services our current clients utilize and increase the breadth of our offering with new services. We believe we are well positioned for growth as our current base of 1.4 million members represents only 2% of what we believe to be our total addressable market. In addition, we believe we can continue to increase our business with our existing clients as they expand their employee bases and adopt more of our services over time. As evidence of our success to date, we have retained substantially all of our clients since we began offering our fertility benefits solution, and in many cases, these clients have expanded their use of our offerings.

        Our revenue was $48.6 million and $105.4 million for the years ended December 31, 2017 and 2018, respectively, representing year-over-year growth of 117%. Our revenue was $48.4 million and $103.4 million for the six months ended June 30, 2018 and 2019, respectively, representing period-over-period growth of 113%. Our net loss from continuing operations was $(12.5) million and $(5.1) million for the years ended December 31, 2017 and 2018, respectively. Our net (loss) income from continuing operations was $(2.4) million and $4.0 million for the six months ended June 30, 2018 and 2019, respectively. Our Adjusted EBITDA was $(7.9) million and $1.4 million for the years ended December 31, 2017 and 2018, respectively. Our Adjusted EBITDA was $0.3 million and $8.9 million for the six months ended June 30, 2018 and 2019, respectively. See the section titled "—Summary Consolidated Financial Data—Non-GAAP Financial Measure—Adjusted EBITDA" below for the definition of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations. Our fertility benefits solution represented 100% and 95% of our total revenue for the years ended December 31, 2017 and 2018, respectively, and 94% and 83% of total revenue for the six months ended June 30, 2018 and 2019, respectively. Progyny Rx, which went live in 2018, represented 5% of our total revenue for the year ended December 31, 2018 and 6% and 17% of total revenue for the six months ended June 30, 2018 and 2019, respectively.

Industry Challenges

        Employers are faced with three major challenges relating to providing fertility benefits to their employee bases:

    Lack of Effective Fertility Benefits Solutions

        The conventional fertility benefits options available to employers have been designed to control the utilization of services (and expenditures) by employees rather than to optimize outcomes. As such, their plan designs have included restrictive features, such as lifetime dollar maximums, mandated step therapy protocols and limited or no coverage for advanced diagnostics and procedures. In addition, these plan designs have failed to provide access to premier fertility specialists, robust patient support and the ability to dispense fertility medication in a timely manner. Given the evolution of fertility science, such conventional plans have not kept pace and have generated suboptimal clinical outcomes, as well as greater upfront treatment costs and maternity and NICU expenses. This in turn leads to inefficient utilization of employers' expenditures on their fertility benefits programs. Suboptimal outcomes also cause employers to bear the costs and the negative impact related to decreased employee productivity and retention, as well as increased employee absenteeism, stress and depression related to infertility. Furthermore, the restrictive plan designs, limited lifetime dollar maximums and significant administrative burdens of conventional fertility programs have deterred many of the nation's top fertility specialists from broadly participating in conventional health insurance carriers' networks. As a result, patients may not have access to premier specialists who have the highest success rates.

        Conventional benefits programs also lack any meaningful care coordination, education or patient support. Patients and their dependents have no help in understanding the complex choices they are faced with and discerning between treatment alternatives, or in managing the emotional strain of infertility.

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        Additionally, conventional pharmacy delivery infrastructure is not designed to address the uniqueness of fertility treatment, which requires highly coordinated and timely delivery of medication. Conventional benefits managers require extensive and multiple authorizations and have inconsistent approval processes, which can complicate and delay the provision of medications that are essential to fertility treatment. If medications are not received on time, patients may have to wait a month or longer to commence another round of fertility treatment, wasting valuable time and money. Additionally, fertility medications are often self-administered injectable drugs, and the effectiveness of a patient's treatment may be compromised by improper storage and/or incorrect administration of their medications if the patient is not provided access to education and support.

    Costs Associated with Multiple Births and Poor Fertility Treatment Outcomes

        Regardless of whether an employer chooses to cover fertility treatments, employers end up bearing the significant medical costs associated with unanticipated multiple births and miscarriages, as well as the associated impacts on the workplace:

    The high number of multiple embryo transfers that conventionally occurs during IVF leads to a significant number of multiple births, which in turn is a primary cause of dangerous and expensive preterm births, with extensive maternity and NICU costs.

    The relatively higher miscarriage rate associated with IVF treatment also results in significant additional medical costs for employers and their employees.

    Employers bear additional costs of increased employee absenteeism at the workplace, which is common with instances of multiple births and can result from the emotional and physical strain of miscarriages.

        Employers may not be fully aware of the causal effect and ultimate impact of suboptimal fertility care under the current solutions offered by the conventional benefits programs since these programs do not collect outcomes data from their fertility specialists and therefore cannot accurately report on their program's performance in a timely manner.

    Ability to Attract and Retain Talent

        Employers are facing increasing competition to attract and retain talent as the labor market is at historically low unemployment levels. In a 2015 survey conducted by Reproductive Medicine Associates of New Jersey, 68% of respondents indicated that they were willing to change jobs to ensure fertility coverage. Among those respondents who have needed fertility treatment, 90% indicated a willingness to change jobs to ensure fertility coverage. As a result, employers are enhancing their value proposition to employees by evaluating and providing benefits that are most in demand. Family building solutions are an increasing area of focus for employees, and in turn, employers.

Our Solutions

        We are redefining effective fertility and family building benefits through our purpose-built, data-driven and disruptive platform. Our innovative and comprehensive fertility solution has proven to be simultaneously beneficial for our clients, our members and our network of fertility specialists. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients' employees are able to pursue the most effective treatment from the best fertility specialists and achieve optimal outcomes in a cost-efficient manner, while our clients achieve savings in upfront treatment costs as well as reduced maternity and NICU expenses.

    Fertility Benefits Solution

    Differentiated Benefits Plan Design

        The innovative Smart Cycle is our easy-to-understand fertility benefits design. Our Smart Cycle plan design allows members equitable access to the treatment they need and is designed to drive

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superior outcomes and reduce both upfront treatment and subsequent costs. Everything needed for a comprehensive fertility treatment is contained within a Smart Cycle treatment bundle, including all necessary diagnostic testing and access to the latest technology (e.g., in the case of IVF treatment, preimplantation genetic testing). The Smart Cycle structure allows our members, together with the advice of their fertility specialists and the support of their PCAs, to select the Smart Cycle treatment bundles that align with their unique treatment needs and their intended family building pathway, without having to follow the "one size fits all" protocols common to conventional health insurance carriers, and without the worry that their desired treatment approach will not be authorized or covered throughout the full treatment cycle.

    Personalized Concierge-Style Member Support Services

        Our fertility benefits solution provides members with access to significant support services that are crucial to the success of the fertility and family building journey. Before the fertility treatment process begins, and throughout every step of the fertility journey, we deliver high-touch member support services through a dedicated PCA. Our PCAs have deep fertility expertise and provide extensive clinical education, guidance and emotional support to our members. Additionally, we have an in-house clinical staff, comprised of professionals with substantial expertise in reproductive endocrinology, fertility nursing, clinical psychology and social work that design our PCA training curriculum and direct our comprehensive member experience. Our member portal, accessible via any desktop or mobile device, further supports the member experience by providing key educational resources and easy-to-access benefits information to our members. We believe our platform provides our members with best-in-class support services to help them navigate their fertility and family building journeys.

    Selective Network of High-Quality Fertility Specialists

        We have utilized our deep industry knowledge and the insights derived from our data analytics platform to establish and actively manage a national network of the leading fertility specialists in the country. Our members receive access to our selective Center of Excellence network of high-quality providers that includes nearly 800 fertility specialists who practice at nearly 600 provider clinic locations throughout the United States. Our network includes 22 of the top 25 fertility practice groups by volume in the United States according to 2017 CDC data, which was published in 2019 and is the most recent data available. Our fertility specialist network is unique in that approximately 30% of our provider clinics do not broadly participate in conventional health insurance carrier networks, meaning they contract with us and no more than one other health insurance carrier. Our national network serves members in virtually every state (two states have no practicing reproductive endocrinologists), providing extensive geographic coverage to our national employers.

    Progyny Rx, an Integrated Pharmacy Benefits Solution

        Progyny Rx is our integrated pharmacy benefits solution that can be added by clients that utilize our fertility benefits solution. This solution provides our members with access to the medications needed during their treatment. As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support. Progyny Rx reduces dispensing and delivery time to two days to eliminate the risk of missed treatment cycles. We provide phone-based, clinical education and support seven days a week to ensure that our members understand any necessary medication storage requirements and administration techniques, including injection training. To further support those members that require additional education, we also offer a library of on-demand videos. Given the importance of the timely use of medication to the success of fertility treatments, and the complexity involved in administering the medications, we believe Progyny Rx provides a differentiated and effective pharmacy solution for our clients and their employees.

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    Surrogacy and Adoption Reimbursement Program

        In addition, for clients who select the service, we manage the reimbursement of surrogacy and adoption expenses for clients and their employees. For these programs, employers designate a specific dollar amount toward surrogacy and/or adoption services, and we work with our clients to determine which expenses related to adoption and/or surrogacy will be covered under their plan, thereby alleviating their administrative burden.

    Robust Platform Support Capabilities

    Robust Data Collection Process.  We believe that we are the only fertility and family building benefits company to collect data in a timely manner directly from providers on adherence to treatment protocols and clinical outcomes. This data is used to understand the utilization of our benefits, our provider clinics' adherence to best practices and the outcomes produced by each clinic and across our network. This data informs decisions across our platform, from services covered to our fertility network standards.

    Prestigious Medical Advisory Board.  Our Medical Advisory Board, comprised of nationally recognized fertility specialists, is responsible for oversight of key clinical issues, including evaluating new fertility treatment diagnostics and procedures to ensure that our benefits design and overall program is comprehensive and is designed to drive to the best outcomes.

    Full Service Client Account Management.  We provide a dedicated account management team to each of our clients to support their day-to-day needs, resolve issues as they arise and to assist them in the review of the detailed quarterly and annual reporting that we provide.

    Ease of Integration for Our Clients.  We believe our ability to integrate our benefits solutions with all of the large national health insurance carriers is a differentiating factor within the industry.

Our Value Proposition

        We believe that our competitive success is a function of our ability to concurrently: (1) provide tangible financial value to our clients; (2) deliver a better and more supported fertility journey to our members; and (3) provide value to, and work collaboratively with, the nation's finest fertility specialists.

    We Provide Measurable Value to Our Employer Clients

    Substantial and Measurable Financial Value.  Our superior clinical outcomes drive savings in both upfront fertility treatment costs (due to our higher live birth rates) as well as subsequent maternity and NICU expenses for our clients (due to our lower multiples birth rates).

    Progyny Rx Savings.  Progyny Rx delivers unit cost savings of between 10% and 20% to our clients, and additional cost savings of approximately 8% through our cost containment program based on a reduction in unnecessary quantities dispensed.

    Employee Productivity and Retention.  Our solution addresses employee absenteeism, poor productivity and the lack of employee retention driven by the stress of suffering from infertility (and undergoing fertility treatment) as well as the back-to-work issues related to multiple births.

    Appeal to Existing and Prospective Employees.  Better fertility benefits programs can be a key component of enhancing a company's overall benefits and an important tool in its recruiting efforts and in helping retain key talent.

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    We Provide Meaningful Value to Our Members

    Superior Clinical Outcomes.  Our members experience healthier pregnancies and superior rates of pregnancy and live births, as well as reduced rates of miscarriage and multiple births, saving valuable time and money and limiting personal and professional disruption.

    Comprehensive Coverage.  Our Smart Cycle design ensures that members always have coverage for a full treatment cycle as their access to treatment is not limited by a dollar maximum that could be exhausted mid-treatment. Additionally, members have access to the latest technologies and procedures, which are reviewed and approved by our Medical Advisory Board.

    Access for All Members and Dependents.  Our Smart Cycles are available to be utilized across all employee groups, including populations not typically covered, such as LGBTQ+ individuals and single mothers by choice.

    Equitable Access to Care.  Our Smart Cycle design ensures members receive fair and balanced access to care that is not dependent on where members live, how expensive a fertility specialist is or which specific treatments are required.

    High-Touch Concierge Member Experience.  We provide our members with high-touch, end-to-end concierge support, including logistical assistance, clinical guidance and emotional support, through our PCAs and our in-house clinical staff.

    Access to Selective, Premier Fertility Specialist Network.  Our solution provides members access to the nation's most desired fertility providers, including nearly 800 fertility specialists who practice at nearly 600 provider clinic locations throughout the United States. Our network includes 22 of the top 25 fertility practice groups by volume in the United States according to 2017 CDC data. In addition, approximately 30% of our provider clinics do not broadly participate in conventional health insurance carrier networks.

    Integrated Pharmacy Benefits Solution.  Progyny Rx provides members with a simplified authorization process, timely medication delivery and member support from pharmacy clinicians seven days a week.

    We Provide Meaningful Value to Our Fertility Specialists

    Members Supported With a Comprehensive Benefit.  Our solutions allow our members to arrive at their fertility specialist with a fully-covered course of treatment and the flexibility to utilize the latest approved technologies and best practices via our comprehensive Smart Cycle benefits plan design. These members are also educated on the use of best practices and are supported by PCAs along their fertility journey.

    Eliminate Step Therapy Protocols.  Our network of fertility specialists have access to the latest science and technologies through our innovative Smart Cycles, which free our fertility specialists from having to follow the ineffective protocols common to conventional coverage and allow them to pursue the most effective treatments first, thereby saving time and money.

    Simplified Administration.  Once a Smart Cycle treatment is authorized, fertility specialists within our network are able to prescribe the optimal treatment plan without any need for pre-certification or pre-authorization.

    Superior Clinical Outcomes.  Outcomes for Progyny members across our fertility specialist network are superior to the average outcomes that these same provider clinics report to the CDC for all of their patients. For example, the in-network average live birth rate for Progyny

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      members is 54.5%, as compared to the 45.3% average live birth rate for all of the patients at those same clinics.

    Eliminating Financial Risk Associated With Collections.  We assume full responsibility for the collection of all members' deductibles and coinsurance, thereby eliminating the burden and cost of collection (and bad debt expense) for member payments that our provider clinics otherwise would experience.

    Data Sharing and Reporting.  We produce clinic scorecards quarterly with key performance indicators that allow fertility specialists to compare their results with peer averages.

    Higher Volumes and Improved Financial Performance.  Fertility specialists in our network often experience an increase in patient volume, and because of our comprehensive benefits design, an increase in the number of patients who progress from consultation to treatment.

Our Competitive Strengths

    Market Leadership

        We are a leading benefits management company specializing in fertility and family building benefits solutions in the United States, with a client base of over 80 self-insured employer clients representing 1.4 million members. We drive superior clinical outcomes for our members including higher pregnancy success rates, lower miscarriage rates, fewer multiple births and a higher live birth rate.

    Differentiated Model Drives Superior Clinical Outcomes at Reduced Overall Cost

        In contrast to conventional fee-for-service coverage, which is designed to simply contain utilization, our case management-driven benefits model is comprehensive, does not exhaust coverage mid-treatment cycle, includes access to the latest technologies and best clinical practices and drives superior outcomes. This is a cost-efficient model, allowing employers to provide more robust coverage with lower overall expenditures.

        Our clients also avoid some of the indirect costs of infertility such as employee absenteeism and loss of productivity caused by stress and depression, as well as lack of employee retention caused by multiple births.

    Superior Member Experience

    Concierge Member Support.  We provide our members with concierge support through our PCAs who are unique to our platform and a valuable resource to our members. PCAs provide meaningful education, clinical guidance and emotional support for our members and are available throughout the member's fertility and family building journey.

    Tailored Member Experience.  Our member experience is tailored to meet the unique needs of our clients' employees, and the PCAs have expertise in fertility treatment issues uniquely affecting LGBTQ+ individuals, single mothers by choice and individuals looking to pursue surrogacy or adoption.

    Online Member Portal.  Our solution includes an easy-to-use interface and significant educational resources and support tools.

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    Selective, Premier Fertility Specialist Network

        We have built a network of the nation's most desired fertility providers. Our fertility specialists are thought leaders in the treatment of fertility and are driving differentiated outcomes for our members. Because of the unique Progyny benefits design, our fertility specialists can utilize the most effective treatment for members the first time, without the restrictions of conventional benefits programs. Our network includes 22 of the top 25 fertility practice groups by volume in the United States according to 2017 CDC data. Our differentiated approach to fertility benefits design and its alignment with our fertility specialists' primary objective of delivering the best possible outcomes is evidenced by the fact that approximately 30% of our provider clinics do not broadly contract with conventional health insurance carriers.

    Value-Added Integrated Pharmacy Program

        Fertility medication is expensive, complicated, time sensitive and critical to the success of treatment. We more effectively manage the complex fertility medication process:

    Single Authorization Mechanism for Treatment and Medication.  Our single authorization mechanism includes both fertility treatments and the related prescription drugs, with guaranteed timely delivery and extensive seven days a week clinical support around drug storage and administration.

    Meaningful Cost Savings.  We generate significant unit cost savings for our clients through our negotiated formulary rates.

    Innovative Cost Containment Program.  This program enables our clients and members to save additional costs through the reduction in overprescribing that is typical of conventional fertility pharmacy management.

    Purpose-Built, Data-Driven and Disruptive Platform

        The outcomes data we collect and analyze provides insights across our business, including the creation and management of our plan design and clinical protocols to ensure the efficiency of employer expenditures. We also manage our fertility specialist network and ensure adherence to Progyny practice standards based on this data to ensure that fertility specialists are driving improved clinical outcomes and member satisfaction.

        A key differentiator of our solution is our in-depth client reporting. We believe we are the only benefits manager that tracks fertility outcomes from medical record data on a timely basis, and we believe this unique data reporting to be important for our employer clients to understand why Progyny offers a superior solution.

    Highly Scalable Platform

        Since launching our benefits solution, we have more than doubled our client base every year without any dilution to or decrease in the level and quality of services. Once we begin providing services to a client, we believe it is difficult for our clients to replicate our outcomes with another solution. In addition, we have been able to add new solutions and technologies to our offering while sustaining this growth and believe our platform is capable of continuing to rapidly adopt more clients without meaningful infrastructure enhancements.

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    Deeply Experienced Management Team with Strong Culture

        Our management team has extensive operational experience and background in healthcare, technology and services. Additionally, our sales, support and development teams have significant healthcare, technology and benefits experience and are a key competitive advantage to our success. Given the complexity of the highly regulated industry we operate in, we believe our management's industry experience is also a meaningful differentiator for us. Their demonstrated track record of success in running public companies and scaling growth organizations will allow us to continue to be leaders in our industry. A large part of our continued success is driven by our unique culture and the dedication and commitment of our Progyny team.

Our Growth Strategy

    Expand Our Client Base

        We intend to continue increasing our client base of self-insured employers throughout the United States by leveraging our experienced salesforce and strong relationships with benefits consultants. We believe we have an addressable market of approximately 8,000 potential self-insured employer clients in the United States and, with our current base of over 80 clients, are still in the early stages of our growth trajectory. As we have continued to grow, we have meaningfully diversified our client base across an array of different industries. We are expanding our client base within each industry that we serve, and have an industry-specific strategy, which enables us to most effectively target our addressable market. Additionally, we believe that our expanding presence has resulted in a heightened awareness of fertility benefits and has informed the market of the value we provide to our employer clients and our members, which we believe also helps facilitate growth.

    Capitalize on Embedded Growth Potential within Our Existing Client Base

        We believe we are positioned to realize organic revenue growth as our clients and their respective employee bases grow and utilize more fertility treatment services as a result. We believe this is supported by trends that we have witnessed within our existing client base, where we have historically realized similar utilization trends of fertility services for new members compared with existing members on a same client basis.

    Expansion of Progyny Benefits Solutions within Our Existing Client Base

        We believe we will continue to see growth from existing clients that add incremental services to their fertility benefits program, such as electing to cover egg freezing, increasing the number of Smart Cycles, or purchasing our add-on Progyny Rx solution. We introduced Progyny Rx in the third quarter of 2017 and went live with a select number of clients in January 2018. Currently, 60% of our clients are utilizing this solution, including 68% of the clients that went live in 2019.

    New Services and Addressable Markets to Enhance the Depth and Breadth of Our Comprehensive Fertility Offering

        We are continuously evaluating the latest evolving trends to find ways we can better serve the needs of existing and new potential clients and their employees. We believe the combination of our Medical Advisory Board and our selective network of high-quality fertility specialists, as well as the data we collect and analyze, provides us with differentiated insights into fertility care delivery and support. In addition, we believe we have positive and collaborative relationships with our clients that offer us additional insights into their needs. To date, we have identified several ways we believe we can potentially expand our offering and expand our client base in the future, including vertically integrating

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services we currently outsource, and pursuing adjacent growth opportunities such as adding programs for high-risk pregnancy management, neonatal care management, mental health and return-to-work programs. We will continue to evaluate opportunities as our platform continues to expand.

Recent Developments (Preliminary and Unaudited)

        Set forth below are preliminary estimates of unaudited selected financial and other data for the nine months ended September 30, 2019 and actual unaudited financial and other data for the nine months ended September 30, 2018. Our unaudited interim consolidated financial statements for the nine months ended September 30, 2019 are not yet available. The following information reflects our preliminary estimates based on currently available information, is not a comprehensive statement of our financial results and is subject to change.

        We have provided ranges, rather than specific amounts, for the preliminary estimates of the unaudited financial and other data described below primarily because our financial closing procedures for the nine months ended September 30, 2019 are not yet complete and, as a result, our final results upon completion of our closing procedures may vary from the preliminary estimates. These estimates should not be viewed as a substitute for our full interim or annual financial statements prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Further, our preliminary estimated results are not necessarily indicative of the results to be expected for the remainder of the year or any future period. See the sections titled "Risk Factors," "Special Note Regarding Forward-Looking Statements," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our unaudited financial and other data presented below and the actual financial and other data we will report for the nine months ended September 30, 2019.

        The preliminary estimates for the nine months ended September 30, 2019 presented below have been prepared by, and are the responsibility of, management. Ernst & Young LLP, our independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to such preliminary data nor has Ernst & Young LLP audited, reviewed or compiled the financial data for the comparative nine-month period ended September 30, 2018. Accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto.

 
  Nine Months Ended
September 30,
 
 
   
  2019
Estimated
 
 
  2018 Actual   Low   High  
 
  (unaudited)
 
 
  (dollars in thousands)
 

Revenue

  $ 76,213   $ 163,665   $ 164,165  

(Loss) income from operations

    (2,749 )   8,203     8,403  

Net (loss) income from continuing operations

  $ (3,539 ) $ 5,557   $ 5,757  

Non-GAAP Financial Data:

                   

Adjusted EBITDA(1)

  $ 950   $ 14,129   $ 14,329  

(1)
See the section titled "—Non-GAAP Financial Measure—Adjusted EBITDA" for the definition of Adjusted EBITDA and additional information. A reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most directly comparable financial measure stated in accordance with GAAP for each of the periods presented is included below.

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        The expected increase in revenue for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 is primarily due to higher revenue from our fertility benefits solution as a result of an increase in the number of clients as well as an increase in sales of our Progyny Rx solution.

        The expected improvement in income from operations for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 is primarily due to an increase in revenue and gross profit partially offset by increases in personnel costs, including stock-based compensation expense due to headcount growth, as well as commissions to support our growth in revenue.

        The expected net income from continuing operations for the nine months ended September 30, 2019 as compared to the net loss from continuing operations for the nine months ended September 30, 2018 is primarily due to the increase in income from operations.

        The following table provides a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most directly comparable financial measure stated in accordance with GAAP for each of the periods presented:

 
  Nine Months Ended
September 30,
 
 
   
  2019
Estimated
 
 
  2018 Actual  
 
  Low   High  
 
  (unaudited)
 
 
  (in thousands)
 

Net (loss) income from continuing operations

  $ (3,539 ) $ 5,557   $ 5,757  

Add:

                   

Depreciation and amortization

    1,395     1,594     1,594  

Stock-based compensation

    2,304     3,209     3,209  

Interest expense, net

    459     195     195  

Convertible preferred stock warrant valuation

    1,561     2,362     2,362  

Provision (benefit) for income taxes

    (1,230 )   89     89  

Legal fees associated with a vendor arbitration

        973     973  

IPO costs

        150     150  

Adjusted EBITDA

  $ 950   $ 14,129   $ 14,329  

Risk Factors Summary

        Investing in our common stock involves substantial risk. The risks described in the section titled "Risk Factors" immediately following this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant challenges include the following:

    The fertility market in which we participate is competitive, and if we do not continue to compete effectively, our results of operations could be harmed.

    We have a history of operating losses and may not sustain profitability in the future.

    We have a limited operating history with our current platform of solutions, which makes it difficult to predict our future results of operations.

    If we are unable to attract new clients, our business, financial condition and results of operations would be adversely affected.

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    Our business depends on our ability to retain our existing clients and increase the adoption of our services within our client base. Any failure to do so would harm our business, financial condition and results of operations.

    Our largest clients account for a significant portion of our revenue and a significant number of our clients are in the technology industry. The loss of one or more of these clients or changes within the technology industry could negatively impact our business, financial condition and results of operations.

    Changes in the health insurance market could harm our business, financial condition and results of operations.

    The health benefits industry may be subject to negative publicity, which could adversely affect our business, financial condition and results of operations.

    If our computer systems, or those of our provider clinics, specialty pharmacies or other downstream vendors, lag, fail or suffer security breaches, we may incur a material disruption of our services, which could materially impact our business and the results of operations.

    Our business depends on our ability to maintain our Center of Excellence network of high-quality fertility specialists and other healthcare providers. If we are unable to do so, our future growth would be limited and our business, financial condition and results of operations would be harmed.

    We operate in a highly regulated industry and must comply with a significant number of complex and evolving requirements.

    The healthcare regulatory and political framework is uncertain and evolving. Recent and future developments in the healthcare industry could have an adverse impact on our business, financial condition and results of operations.

    In connection with our preparation of our annual financial statements for the year ended December 31, 2018, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us.

Corporate Information

        We were incorporated in Delaware in 2008 under the name Auxogen Bioscience, Inc. In 2010, we changed our name to Auxogyn, Inc., and in 2015 we changed our name to Progyny, Inc. Our principal executive offices are located at 245 5th Avenue, New York, New York 10016, and our telephone number is (212) 888-3124. Our website address is www.progyny.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

        "Progyny®" and our other registered and common law trade names, trademarks and service marks are the property of Progyny, Inc. Other trade names, trademarks and service marks used in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.

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Implications of Being an Emerging Growth Company

        We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions for up to five years or until we are no longer an emerging growth company, whichever is earlier. In addition, the JOBS Act provides that an "emerging growth company" can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

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The Offering

Common stock offered by us

  6,700,000 shares

Common stock offered by the selling stockholders

 

3,300,000 shares

Common stock to be outstanding after this offering

 

82,174,794 shares

Option to purchase additional shares of common stock offered by certain selling stockholders

 

1,500,000 shares

Use of proceeds

 

We estimate that our net proceeds from the sale of our common stock that we are offering will be approximately $91.0 million, assuming an initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The principal purposes of this offering are to create a public market for our common stock, facilitate our future access to the capital markets and increase our capitalization and financial flexibility. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. However, we currently intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds to acquire complementary businesses, services or technologies. However, we do not have agreements or commitments to enter into any acquisitions at this time. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders. See the section titled "Use of Proceeds" for additional information.

Conflicts of Interest

 

An affiliate of TPG Capital BD, LLC, an underwriter in this offering, owns more than 10% of our outstanding common stock. Accordingly, TPG Capital BD, LLC is deemed to have a "conflict of interest" within the meaning of Rule 5121 of the Financial Industry Regulatory Authority, Inc., or FINRA, and this offering will be conducted in accordance with the applicable provisions of FINRA Rule 5121. See "Underwriting (Conflicts of Interest)—Conflicts of Interest."

Risk factors

 

You should carefully read the "Risk Factors" beginning on page 21 and other information included in this prospectus for a discussion of facts that you should consider before deciding to invest in shares of our common stock.

Proposed trading symbol

 

"PGNY"

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        The number of shares of common stock that will be outstanding after this offering is based on 75,474,794 shares of common stock outstanding as of September 30, 2019, and excludes:

    17,409,666 shares of common stock issuable on the exercise of stock options outstanding as of September 30, 2019 under the 2008 Stock Plan, or 2008 Plan, and 2017 Equity Incentive Plan, or the 2017 Plan, with a weighted-average exercise price of approximately $2.12 per share (including 1,091,941 shares of common stock to be issued upon exercise of stock options by certain of the selling stockholders in connection with the sale of these shares in the offering);

    225,611 shares of common stock issuable upon the exercise of outstanding stock options issued after September 30, 2019 pursuant to our 2017 Plan with an exercise price of $9.60 per share;

    2,159,639 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2019 with a weighted-average exercise price of $1.69 per share;

    3,059,708 shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan, or the 2019 Plan (which number includes the contemplated director nominee grants described under "Management—Non-Employee Director Compensation"), as well as any shares underlying options outstanding under the 2017 Plan that expire or otherwise terminate prior to exercise after the effective date of the 2019 Plan and any future increases in the number of shares of common stock reserved for issuance under our 2019 Plan; and

    1,700,000 shares of common stock reserved for issuance under our 2019 Employee Stock Purchase Plan, or the ESPP, as well as any future increases in the number of shares of common stock reserved for future issuance under our ESPP.

        In addition, unless we specifically state otherwise, the information in this prospectus assumes:

    a 1-for-4.5454 reverse stock split effected on October 14, 2019;

    the filing of our amended and restated certificate of incorporation, which will be in effect on the completion of this offering;

    the conversion of all outstanding convertible preferred stock warrants to warrants to purchase 2,019,245 shares of our common stock in connection with this offering;

    the automatic conversion of all outstanding shares of preferred stock into an aggregate of 65,428,088 shares of common stock in connection with this offering; and

    no exercise of the underwriters' option to purchase up to an additional 1,500,000 shares of common stock from certain selling stockholders in this offering.

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Summary Consolidated Financial Data

        The summary statement of operations data for the years ended December 31, 2017 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. In order to provide additional historical financial information, we have included supplemental unaudited summary statement of operations data for the year ended December 31, 2016, which have been derived from our unaudited consolidated financial statements not included elsewhere in this prospectus. The summary statements of operations data for the six months ended June 30, 2018 and 2019 and the summary consolidated balance sheet data as of June 30, 2019 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our consolidated financial position and results of operations.

        You should read the consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. Our interim and historical results are not necessarily indicative of the results to be expected for the full year or any other period in the future.

 
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (unaudited)
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Consolidated Statements of Operations Data:

                               

Revenue

  $ 22,106   $ 48,584   $ 105,400   $ 48,415   $ 103,365  

Cost of services(1)

    21,368     41,184     85,966     39,443     81,949  

Gross profit

    738     7,400     19,434     8,972     21,416  

Operating expenses:

                               

Sales and marketing(1)

    2,407     4,258     7,285     3,494     5,463  

General and administrative(1)

    12,868     14,147     15,601     7,640     10,489  

Total operating expenses

    15,275     18,405     22,886     11,134     15,952  

(Loss) income from operations

    (14,537 )   (11,005 )   (3,452 )   (2,162 )   5,464  

Other expense:

                               

Interest expense, net

    (1,065 )   (740 )   (497 )   (432 )   (166 )

Convertible preferred stock warrant valuation adjustment

    741     (714 )   (2,944 )   (643 )   (1,193 )

Total other expense, net

    (324 )   (1,454 )   (3,441 )   (1,075 )   (1,359 )

(Loss) income from continuing operations, before tax

    (14,861 )   (12,459 )   (6,893 )   (3,237 )   4,105  

Benefit (provision) for income taxes

    3,028     3     1,777     835     (64 )

Net (loss) income from continuing operations

    (11,833 ) $ (12,456 ) $ (5,116 ) $ (2,402 ) $ 4,041  

Net income from discontinued operations, net of taxes(2)

    4,737   $ 4   $ 5,777   $ 5,724   $  

Net (loss) income and comprehensive (loss) income

  $ (7,096 ) $ (12,452 ) $ 661   $ 3,322   $ 4,041  

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  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (unaudited)
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Net (loss) income attributable to common stockholders

  $ (11,833 ) $ (13,468 ) $ (5,541 ) $ (2,826 ) $  

Net (loss) income per share attributable to common stockholders, basic and diluted Continuing operations

  $ (2.09 ) $ (2.37 ) $ (1.00 ) $ (0.50 ) $  

Discontinued operations(2)

    0.84         1.04     1.00      

Total net (loss) income per share attributable to common stockholders, basic and diluted

  $ (1.25 ) $ (2.37 ) $ 0.04   $ 0.50   $  

Weighted-average shares used in computing net (loss) income per share:

                               

Basic(3)

    5,564,140     5,677,860     5,539,739     5,691,643     5,164,564  

Diluted(3)

    5,564,140     5,677,860     5,539,739     5,691,643     5,164,564  

Pro forma (loss) income per share, (unaudited)(3)

                               

Basic

              $ (0.08 )       $ 0.06  

Diluted

              $ (0.08 )       $ 0.05  

Weighted-average shares used in computing pro forma net (loss) income per share (unaudited)(2)(3)

                               

Basic

                71,499,944           70,592,652  

Diluted

                71,499,944           81,561,714  

(1)
Includes stock-based compensation expense as follows:
   
  Year Ended
December 31,
  Six Months Ended
June 30,
 
   
  2016   2017   2018   2018   2019  
   
  (unaudited)
   
   
  (unaudited)
 
 

Cost of services

  $ 4   $ 26   $ 96   $ 38   $ 125  
 

Selling and marketing

    131     309     366     177     261  
 

General and administrative

    593     1,224     2,535     1,293     1,143  
 

Total stock-based compensation expense

  $ 728   $ 1,559   $ 2,997   $ 1,508   $ 1,529  
(2)
See Note 6 to our consolidated financial statements included elsewhere in this prospectus for further information about a certain divestiture.

(3)
See Note 15 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted earnings per share attributable to common stockholders, pro forma earnings per share attributable to common stockholders and the weighted average number of shares used in the computation of the per share amounts.

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  June 30, 2019  
 
  Actual   Pro Forma(1)   Pro Forma
As Adjusted(2)(3)
 
 
  (in thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 298   $ 298   $ 91,268  

Total assets

    63,082     63,082     154,052  

Working capital(4)

    (547 )   5,235     96,205  

Convertible preferred stock warrant liability

    5,782          

Total stockholders' (deficit) equity

    (89,514 )   22,505     113,475  

(1)
The pro forma consolidated balance sheet data gives effect to (a) the automatic conversion of all of our outstanding shares of convertible preferred stock into 65,428,088 shares of common stock in connection with this offering, (b) the conversion of outstanding convertible preferred stock warrants to warrants to purchase 2,019,245 shares of our common stock, and the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital in connection with this offering; and (c) the filing and effectiveness of our amended and restated certificate of incorporation that will be in effect on the completion of this offering.

(2)
The pro forma as adjusted consolidated balance sheet data reflects (a) the items described in footnote (1) above and (b) our receipt of estimated net proceeds from the sale of shares of common stock that we are offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, total assets, working capital and total stockholders' (deficit) equity by $6.3 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, total assets, working capital and total stockholders' (deficit) equity by $14.1 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting the estimated underwriting discounts and commissions.

(4)
Working capital is defined as current assets less current liabilities.

Non-GAAP Financial Measure—Adjusted EBITDA

 
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (unaudited)
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Non-GAAP Financial Measure:

                               

Adjusted EBITDA(1)

  $ (12,109 ) $ (7,887 ) $ 1,428   $ 267   $ 8,929  

(1)
We calculate Adjusted EBITDA as net (loss) income from continuing operations, adjusted to exclude: (a) depreciation and amortization; (b) stock-based compensation expense; (c) interest expense, net; (d) convertible preferred stock warrant valuation adjustment; (e) provision (benefit) for income taxes; (f) legal fees associated with a vendor arbitration; and (g) non-deferred costs associated with this offering.

    Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with GAAP. We believe that Adjusted EBITDA, when taken together with our GAAP financial results, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation, evaluating our operating performance, and for internal planning and forecasting purposes.

    Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA include: (1) it does not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and

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    Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating expenses, including interest expense, net; (5) it does not consider the impact of any stock warrant valuation adjustment; (6) it does not reflect tax payments that may represent a reduction in cash available to us; (7) it does not include legal fees that may be payable in connection with vendor arbitration; and (8) it does not include non-deferred costs associated with this offering. In addition, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net (loss) income from continuing operations and other GAAP results.

    The following table presents a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most directly comparable financial measure stated in accordance with GAAP for each of the periods presented:

 
  Year Ended
December 31,
  Six Months
Ended June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (in thousands)
 

Net (loss) income from continuing operations

  $ (11,833 ) $ (12,456 ) $ (5,116 ) $ (2,402 ) $ 4,041  

Add:

                               

Depreciation and amortization

    1,700     1,559     1,883     921     1,060  

Stock-based compensation expense

    728     1,559     2,997     1,508     1,529  

Interest expense, net

    1,065     740     497     432     166  

Convertible preferred stock warrant valuation adjustment

    (741 )   714     2,944     643     1,193  

Provision (benefit) for income taxes

    (3,028 )   (3 )   (1,777 )   (835 )   64  

Legal fees associated with a vendor arbitration(a)

                    726  

IPO costs

                    150  

Adjusted EBITDA

  $ (12,109 ) $ (7,887 ) $ 1,428   $ 267     8,929  

(a)
We engage in other activities and transactions that can impact our net income. In recent periods, these other items included, but were not limited, to legal fees related to an arbitration resulting from our termination of an agreement with a specialty pharmacy vendor.

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. The risks described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. In such case, the trading price of our common stock could decline, and you may lose some or all of your original investment.

Risks Related to Our Business and Industry

The fertility market in which we participate is competitive, and if we do not continue to compete effectively, our results of operations could be harmed.

        The market for our solutions is competitive and is likely to attract increased competition, which could make it hard for us to succeed. We compete on the basis of several factors, including the comprehensiveness of our benefits solutions and our unique Smart Cycle plan design, superior clinical outcomes, access for all employee groups (including LGBTQ+ and single mothers by choice), equitable access to care across geographies, quality of the member experience and comprehensive member support, access to our Center of Excellence network of high-quality fertility specialists, data reporting and sharing and access to an integrated pharmacy solution. While we do not believe any single competitor offers a similarly robust and integrated fertility and family building benefits solution, we compete primarily with health insurance companies and benefits administrators that also provide fertility benefits management services as part of their overall healthcare coverage. These competitors include all conventional health insurers, such as UnitedHealthcare, Cigna, Aetna and members of the Blue Cross Blue Shield Association. Other competitors that currently provide fertility benefits management services to employers include WIN Fertility and Optum Fertility Solutions. We also compete with benefits managers that are new to the industry that do not have integrated health insurance carrier solutions, such as Carrot Fertility and Maven Clinic, which currently offer employees post-tax reimbursement programs for fertility benefits.

        As we market our solutions to potential clients that currently utilize other vendors to manage their employees' fertility benefits, we may fail to convince their internal stakeholders that our offerings and our model are superior to their current solutions. Some of our competitors are more established, benefit from greater brand recognition and have substantially greater financial, technical and marketing resources. Our competitors may seek to develop or integrate solutions and services that may become more efficient or appealing to our existing and potential clients. For example, fertility-focused pharmacy benefits managers, or PBMs, could emerge that would compete with our Progyny Rx solution. In addition, we believe one of our key competitive advantages is our purpose-built, data-driven platform. While we do not believe any competitors have developed a similarly robust data collection, analysis and reporting process at this time, current or future competitors may be successful in doing so in the future.

        In addition, we believe that there is growing awareness of the demand for fertility benefits. As the fertility benefits field gains more attention, more competitors may be drawn into the market. We also could be adversely affected if we fail to identify or effectively respond to changes in market dynamics. As a result of any of these factors, we may not be able to continue to compete successfully against our current or future competitors, and this competition could result in the failure of our platform to continue to maintain market acceptance, which would harm our business, financial condition and results of operations.

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We have a history of operating losses and may not sustain profitability in the future.

        We experienced net losses from 2015 to 2018. Our net loss from continuing operations was $(12.5) million and $(5.1) million for the years ended December 31, 2017 and 2018, respectively. Our net (loss) income from continuing operations was $(2.4) million and $4.0 million, for the six months ended June 30, 2018 and 2019, respectively. While we have experienced significant revenue growth since 2016, we are not certain whether we will obtain sufficient levels of sales to sustain our growth or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we intend to continue to incrementally expand our sales and client account management teams to educate potential clients and drive new client adoption, as well as enhance the scope of Progyny benefits within our existing client base. We also expect to incur additional costs as we introduce new solutions and services to enhance our comprehensive fertility offering. We will also face increased compliance costs associated with growth, the expansion of our client base and being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to sustain profitability, the value of our business and common stock may significantly decrease.

We have a limited operating history with our current platform of solutions, which makes it difficult to predict our future results of operations.

        We went live with our fertility benefits solution in 2016 and Progyny Rx in 2018. As a result of our limited operating history with the current platform of solutions, as well as a limited amount of time serving a majority of our client base, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or decline for a number of reasons, including slowing demand for our solutions and fertility benefits in general, change in utilization trends by our members, general economic slowdown, an increase in unemployment, an increase in competition, changes to health care trends and regulations, changes to science relating to the fertility market, a decrease in the growth of the fertility market, or our failure, for any reason, to continue to take advantage of growth opportunities. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.

If we are unable to attract new clients, our business, financial condition and results of operations would be adversely affected.

        To increase our revenue, we must continue to attract new clients. Our ability to do so depends in large part on the success of our sales and marketing efforts, and the success of attracting industry leaders in diversified sectors, which could prompt others in the same sectors to follow suit to remain competitive. Potential clients may seek out other options; therefore, we must demonstrate that our solutions are valuable and superior to alternatives. If we fail to provide high-quality solutions and convince clients of the benefits of our model and value proposition, we may not be able to attract new clients. If the markets for our solutions decline or grow more slowly than we expect, or if the number of clients that contract with us for our solutions declines or fails to increase as we expect, our financial results could be harmed. As the markets in which we participate mature, fertility solutions and services evolve and competitors begin to enter into the market and introduce differentiated solutions or services that are perceived to compete with our solutions, particularly if such competing solutions are adopted

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by an industry leader in a particular sector, our ability to sell our solutions could be impaired. As a result of these and other factors, we may be unable to attract new clients, which would have an adverse effect on our business, financial condition and results of operations.

Our business depends on our ability to retain our existing clients and increase the adoption of our services within our client base. Any failure to do so would harm our business, financial condition and results of operations.

        As part of our growth strategy, we are focused on retaining and expanding our services within our existing client base. A client can expand the fertility benefit they offer to their employees a number of ways, including by adding egg freezing or increasing the number of Smart Cycle units under their benefits plan (i.e., from two to three Smart Cycles per household). For example, 9% of our existing 2018 clients increased their Smart Cycle benefit for their 2019 benefits plan year. In addition, our fertility benefits solution clients can purchase our add-on Progyny Rx solution. We went live with Progyny Rx in 2018 and 60% of our clients have now launched this solution, including 68% of the clients we signed in 2019.

        Factors that may affect our ability to retain our existing clients and sell additional solutions to them include, but are not limited to, the following:

    the price, timeliness and outcomes of our solutions;

    the availability, price, timeliness, outcome, performance and functionality of competing solutions;

    our ability to maintain and appropriately expand our Center of Excellence network of high-quality fertility specialists;

    our ability to offer complementary solutions and services that will enhance our comprehensive fertility offering;

    changes in healthcare laws, regulations or trends;

    any material increase in unemployment rate;

    the business environment of our clients and, in particular, reduction in our clients' headcount; and

    consolidation of our clients, resulting in a change to their benefits program or a shift to one of our competitors.

        Any of the above factors, alone or together, could negatively affect our ability to retain existing clients and sell additional solutions to them, which would have an adverse effect on our business, revenue growth and results of operations.

Our largest clients account for a significant portion of our revenue and a significant number of our clients are in the technology industry. The loss of one or more of these clients or changes within the technology industry could negatively impact our business, financial condition and results of operations.

        We currently serve over 80 self-insured employers in the United States across more than 20 industries. In 2017 and 2018, each of our largest three clients represented more than 10% of our total revenue and in the six months ended June 30, 2019, each of our largest two clients represented 10% or more of our total revenue. For the years ended December 31, 2017 and 2018 and for the six months ended June 30, 2019, one of our clients accounted for 45%, 24% and 17% of our total revenue, respectively. In addition, another client accounted for 14% and 11% of our total revenue for the year ended December 31, 2018 and the six months ended June 30, 2019, respectively. Engagement with these clients is generally covered through contracts that are multi-year in duration. One or more of these clients may terminate early or decline to renew their existing contracts with us upon expiration

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and any such termination or failure to renew could have a negative impact on our revenue and compromise our growth strategy. In addition, we generate a significant portion of our revenue from clients in the technology industry. Any of a variety of changes in that industry, including changes in economic conditions, mergers or consolidations, reduced spending on benefits programs and other factors, could adversely affect our business, financial condition and results of operations.

Changes in the health insurance market could harm our business, financial condition and results of operations.

        The market for private health insurance in the United States is evolving and, as our solutions are integrated with health insurance plans offered by insurance carriers for our clients, our future financial performance will depend in part on the growth in this market. Changes and developments in the health insurance system in the United States, including taxability of medical benefits like ours, could reduce demand for our solutions and harm our business. For example, there has been an ongoing national debate relating to the health care reimbursement system in the United States. Some members of Congress have introduced proposals that would create a new single payor national health insurance program for all United States residents, others have proposed more incremental approaches such as creating a new public health insurance plan option as a supplement to private sources of coverage. In the event that laws, regulations or rules that eliminate or reduce private sources of health insurance or require such benefits to be taxable are adopted, the subsequent impact on the insurance carriers may in turn adversely impact our ability to accurately forecast future results and harm our business, financial condition and results of operations.

The health benefits industry may be subject to negative publicity, which could adversely affect our business, financial condition and results of operations.

        The health benefits industry may be subject to negative publicity, which can arise from, among other things, increases in premium rates, industry consolidation, cost of care initiatives, drug prices and the ongoing debate over the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA. Negative publicity may result in increased regulation and legislative review of industry practices, which may further increase our costs of doing business and adversely affect our profitability. For example, PBM programs and drug rebates have recently been criticized as leading to a lack of transparency about the true cost of a drug, and this negative publicity may lead to regulatory changes that could potentially affect our business and operations. Negative public perception or publicity of the health benefits industry in general, the insurance carriers with whom we integrate our solutions, or us could adversely affect our business, financial condition and results of operations.

If our computer systems, or those of our provider clinics, specialty pharmacies or other downstream vendors lag, fail or suffer security breaches, we may incur a material disruption of our services, which could materially impact our business and the results of operations.

        Our business is increasingly dependent on critical, complex and interdependent information technology systems, including cloud-based systems, to support business processes as well as internal and external communications. Our success therefore is dependent in part on our ability to secure, integrate, develop, redesign and enhance our (or contract with vendors to provide) technology systems that support our business strategy initiatives and processes in a compliant, secure, and cost and resource efficient manner. If we or our provider clinics, specialty pharmacies or other downstream vendors have an issue with our or their respective technology systems, it may result in a disruption to our operations or downstream disruption to our relationships with our clients or our selective network of high-quality fertility specialists. Additionally, if we choose to insource any of the services currently handled by a third party, it may result in technological or operational disruptions.

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        In addition, despite the implementation of security measures, our internal computer systems, and those of our provider clinics, specialty pharmacies or other downstream vendors, are potentially vulnerable to damage from malicious intrusion, malware, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we are not aware that we have experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption to our ability to deliver our solutions. In addition, to the extent that any disruption or security breach were to result in a loss or inappropriate disclosure of confidential information, we could incur liability. See "—Risks Related to Government Regulation—We operate in a highly regulated industry and must comply with a significant number of complex and evolving requirements—Data Protection and Breaches."

A significant change in the utilization of our solutions could have an adverse effect on our business, financial condition and results of operations.

        We do not control or impact the level of utilization of our solutions for each of our clients, in particular for newer clients. A significant reduction in the number of members using our solutions could adversely affect our business, financial condition and results of operations. Factors that could contribute to a reduction in the use of our solutions include: reductions in workforce by existing clients; general economic downturn that results in business failures and high unemployment rates; employers no longer offering comprehensive health coverage or offering alternative solutions such as coverage on a voluntary, employee-funded basis; federal and state regulatory changes; changes to taxability of medical benefits; failure to adapt and respond effectively to changing medical landscape, changing regulations, changing client needs, requirements or preferences; premium increases and benefits changes; negative publicity, through social media or otherwise and news coverage.

        It is also difficult for us to predict the level of utilization of our services at the member level. If the actual utilization of our services by members is significantly greater than budgeted, the client may be responsible for corresponding costs that exceed its planned expenditure. If we cannot help our clients accurately predict the level of utilization by their employees, our clients may turn to alternative solutions, and our business and profitability would be adversely impacted.

If we fail to offer high-quality support, our reputation could suffer.

        Our clients rely on our client account management personnel and our members rely on our PCAs to resolve issues and realize the full benefits that our solutions and services provide. High-quality support is also important for the renewal and expansion of our services to existing clients. The importance of our support functions will increase as we expand our business and pursue new clients. If we do not help our clients quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our offerings to existing and new clients could suffer, and our reputation with existing or potential clients could suffer. Further, to the extent that we are unsuccessful in hiring, training and retaining adequate PCAs and client account management personnel, our ability to provide adequate and timely support to our members and clients would be negatively impacted, and our members' and clients' satisfaction with our solutions and services would be adversely affected.

Our marketing efforts depend significantly on our ability to receive positive references from our existing clients.

        Our marketing efforts depend significantly on our ability to call on our current clients to provide positive references to new, potential clients. Given our limited number of long-term clients, the loss or dissatisfaction of any client could substantially harm our brand and reputation, inhibit the market adoption of our offering and impair our ability to attract new clients and maintain existing clients. Any of these consequences could have an adverse effect on our business, financial condition and results of operations.

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Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our client base and achieve broader market acceptance of solutions we provide.

        Our ability to increase our client base and achieve broader market acceptance of solutions we provide will depend to a significant extent on our ability to expand our marketing and sales capabilities. We plan to continue expanding our direct sales force and to dedicate significant resources to sales and marketing programs, including direct sales, inside sales, targeted direct marketing, advertising, digital marketing, e-newsletter and conference sponsorships. All of these efforts will require us to invest significant financial and other resources. Our business and results of operations could be harmed if our sales and marketing efforts do not generate significant increases in revenue. We may not achieve anticipated revenue growth from expanding our sales and marketing efforts if we are unable to hire, develop, integrate and retain talented and effective sales personnel, if our new and existing sales personnel, on the whole, are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.

Our future revenue may not grow at the rates they historically have, or at all.

        We have experienced significant growth since the launch of our fertility benefits solution in 2016 and have more than doubled our client base each year since then. Revenue and our client base may not grow at the same rates they historically have, or they may decline in the future. Our future growth will depend, in part, on our ability to:

    continue to attract new clients and maintain existing clients;

    price our solutions and services effectively so that we are able to attract new clients, expand sales to our existing clients and maintain profitability;

    provide our clients and members with client support that meets their needs, including through dedicated PCAs;

    maintain successful collection of member cost shares and other applicable receivable balances directly from members;

    retain and maintain relationships with high-quality and respected fertility specialists;

    attract and retain highly qualified personnel to support all clients and members;

    maintain satisfactory relationships with insurance carriers; and

    increase awareness of our brand and successfully compete with other companies.

        We may not successfully accomplish all or any of these objectives, which may affect our future revenue, and which makes it difficult for us to forecast our future results of operations. In addition, if the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, it may be difficult for us to maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

        In addition, we expect to continue to expend substantial financial and other resources on:

    sales and marketing;

    our technology infrastructure, including systems architecture, scalability, availability, performance and security; and

    general administration, including increased legal and accounting expenses associated with being a public company.

        These investments may not result in increased revenue growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods.

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If our revenue growth does not meet our expectations in future periods, we may not maintain profitability in the future, our business, financial position and results of operations may be harmed.

If the estimates and assumptions we use to determine the size of the target markets for our services are inaccurate, our future growth rate may be impacted and our business would be harmed.

        Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Furthermore, the healthcare industry is rapidly evolving and the markets for fertility benefits management and the related fertility pharmacy benefits management are relatively immature. Market opportunity estimates and growth forecasts included in this prospectus, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including the risks described herein. Even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all.

        Our estimates of the market opportunity for our services are based on the assumption that the purpose-built, data-driven and disruptive fertility benefits platform with the Smart Cycle plan design we offer will be attractive to employers. Employers may pursue alternatives or may not see the value in providing enhanced fertility-related coverage and services to their employees. In addition, we believe we are expanding the size of the fertility market as we enhance demand and increase awareness for fertility benefits. If these assumptions prove inaccurate, or if the increase in awareness of fertility benefits attracts potential competitors to enter the market and results in greater competition, our business, financial condition and results of operations could be adversely affected.

        It is difficult to predict member utilization rates and demand for our solutions, the entry of competitive solutions or the future growth rate and size of the fertility market, and more specifically the fertility benefits management market and the pharmacy benefits management market. The expansion of the fertility market depends on a number of factors, including, but not limited to: the continued trend of individuals starting families later in life, increase in number of single mothers by choice, adoption of non-traditional paths to parenthood and continued de-stigmatization of infertility. Further, the expansion of the fertility benefits management market and the pharmacy benefits market both depend on a number of factors, including, but not limited to: the continued trends of a competitive workforce with employers competing for talent based on benefits that they provide and employers' focus on benefits to attract and retain top talent.

        If fertility benefits management or pharmacy benefits management do not continue to achieve market acceptance, or if there is a reduction in demand caused by a lack of client or member acceptance, a reduction in employers' focus on enhancing benefits to employees, weakening economic conditions, data security or privacy concerns, governmental regulation, competing offerings or otherwise, the market for our solutions and services might not continue to develop or might develop more slowly than we expect, which would adversely affect our business, financial condition and results of operations.

We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed.

        As usage of our solutions grows, we will need to devote additional resources to improving and maintaining our infrastructure. In addition, we will need to appropriately scale our internal business systems and our client account management and member services personnel to serve our growing client base. Any failure of or delay in these efforts could result in reduced client and member satisfaction, resulting in decreased sales to new clients and lower renewal and utilization rates by existing clients, which could hurt our revenue growth and our reputation. Even if we are successful in these efforts, they will require the dedication of management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that

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the expansion and improvements to our internal infrastructure will be effectively implemented on a timely basis, and such failures could harm our business, financial condition and results of operations.

Unfavorable conditions in our industry or the United States economy, or reductions in employee benefits spending, could limit our ability to grow our business and negatively affect our results of operations.

        Unfavorable changes in our industry or in the United States economy could have a negative effect on ours and our clients' and potential clients' results of operations. Negative conditions in the general economy in the United States, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, could cause a decrease in business investments, including spending on employee benefits, and negatively affect the growth of our business. In addition, unfavorable economic conditions could result in the cancellation by certain clients or material defaults by members on their cost share. Further, economic conditions including interest rate fluctuations, changes in capital market conditions and regulatory changes, such as the taxability of medical benefits like ours, may affect our ability to obtain necessary financing on acceptable terms. In addition, the increased pace of consolidation in the healthcare industry may result in competitors with greater market power. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry.

Seasonality may cause fluctuations in our sales and results of operations.

        Our business experiences moderate seasonality in revenue with a slightly higher proportion of revenue during the second half of the year as compared with the first half. Given that the majority of our clients contract with us for a January 1st benefits plan start date and that the average cost of treatments earlier in the overall treatment process is somewhat lower than the average cost as treatment progresses, our revenue from treatment services tend to grow as the year continues, particularly for new clients. In addition, as with most medical benefits plans, members will typically seek to maximize the use of their benefits once they have reached their annual deductible and/or annual out-of-pocket maximums, thereby increasing treatments in the latter part of the year. We expect that this seasonality will continue to affect our revenue and results of operations in the future as we continue to target larger enterprise clients.

        In addition, the seasonality of our businesses could create cash flow management risks if we do not adequately anticipate and plan for periods of comparatively decreased cash flow, which could negatively impact our ability to execute on our strategy, which in turn could harm our results of operations. Accordingly, our results for any particular quarter may vary for a number of reasons, and we caution investors to evaluate our quarterly results in light of these factors.

If our new solutions and services are not adopted by our clients or members, or if we fail to innovate and develop new offerings that are adopted by our clients, our revenue and results of operations may be adversely affected.

        To date, we have derived a substantial majority of our revenue from sales of our fertility benefits and Progyny Rx solutions. As we operate in an evolving industry, our long-term results of operations and continued growth will depend on our ability to successfully develop and market new successful solutions and services to our clients. If our existing clients and members do not value and/or are not willing to make additional payments for such new solutions or services, it could adversely affect our business, financial condition and results of operations. If we are unable to predict clients' or members' preferences, if the markets in which we participate change, including in response to government regulation, or if we are unable to modify our solutions and services on a timely basis, we may lose clients. Our results of operations would also suffer if our innovations are not responsive to the needs of the members, appropriately timed with market opportunity or effectively brought to market.

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If we fail to adapt and respond effectively to the changing medical landscape, changing regulations, changing client needs, requirements or preferences, our offerings may become less competitive.

        The market in which we compete is subject to a changing medical landscape and changing regulations, as well as changing client needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Our business strategy may not effectively respond to these changes, and we may fail to recognize and position ourselves to capitalize upon market opportunities. We may not have sufficient advance notice and resources to develop and effectively implement an alternative strategy. There may be scientific or clinical changes that require us to change our solutions or that make our solutions, including the Smart Cycles, less competitive in the marketplace. If there are sensitivities to our model or our existing competitors and new entrants create new disruptive business models and/or develop new solutions that clients and members prefer to our solutions, we may lose clients and members, and our results of operations, cash flows and/or prospects may be adversely affected. The future performance of our business will depend in large part on our ability to design and implement market appropriate strategic initiatives, some of which will occur over several years in a dynamic industry. If these initiatives do not achieve their objectives, our results of operations could be adversely affected.

If we fail to maintain and enhance our brand, our ability to expand our client base will be impaired and our business, financial condition and results of operations may suffer.

        We believe that maintaining and enhancing the Progyny brand is important to support the marketing and sale of our existing and future solutions to new clients and expand sales of our solutions to existing clients. We also believe that the importance of brand recognition will increase as competition in our market increases. Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable services that continue to meet the needs of our clients at competitive prices, our ability to maintain our clients' trust, our ability to continue to develop new solutions, and our ability to successfully differentiate our platform from competitive solutions and services. Our brand promotion activities may not generate client awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, our business, financial condition and results of operations may suffer.

If we fail to retain and motivate members of our management team or other key employees, or fail to attract additional qualified personnel to support our operations, our business and future growth prospects could be harmed.

        Our success and future growth depend largely upon the continued services of our management team and our other key employees. From time to time, there may be changes in our executive management team or other key employees resulting from the hiring or departure of these personnel. Our executive officers and other key employees are employed on an at-will basis, which means that these personnel could terminate their employment with us at any time. The loss of one or more of our executive officers, or the failure by our executive team to effectively work with our employees and lead our company, could harm our business.

        In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for experienced sales and client account management personnel. There is no guarantee we will be able to attract such personnel or that competition among potential employers will not result in increased salaries or other benefits. From time to time, we have experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have

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breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed.

If we cannot maintain our company culture as we grow, our success and our business and competitive position may be harmed.

        We believe our culture has been a key contributor to our success to date and that the critical nature of the mission we are pursuing promotes a sense of greater purpose and fulfillment in our employees. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our culture. If we fail to maintain our company culture, our business and competitive position may be harmed.

Risks Related to Our Relationships with Third Parties

Our business depends on our ability to maintain our Center of Excellence network of high-quality fertility specialists and other healthcare providers. If we are unable to do so, our future growth would be limited and our business, financial condition and results of operations would be harmed.

        Our success is dependent upon our continued ability to maintain a selective Center of Excellence, our proprietary, credentialed network of high-quality fertility specialists. Fertility specialists could refuse to contract, demand higher payments or take other actions that could result in higher medical costs, less attractive service for our members or difficulty meeting regulatory or accreditation requirements. Identifying high-quality fertility specialists, credentialing and negotiating contracts with them and evaluating, monitoring and maintaining our network, requires significant time and resources. If we are not successful in maintaining our relationships with top fertility specialists, these fertility specialists may refuse to renew their contracts with us, and potential competitors may be effective in onboarding these or other high-quality fertility specialists to create a similarly high-quality network. There may be additional shifts in the fertility specialty provider space as the fertility market matures, and high-quality fertility specialists may become more demanding in re-negotiating to remain in our network. Our ability to develop and maintain satisfactory relationships with high-quality fertility specialists also may be negatively impacted by other factors not associated with us, such as regulatory changes impacting providers or consolidation activity among hospitals, physician groups and healthcare providers. In addition, certain organizations of physicians, such as practice management companies (which group together physician practices for administrative efficiency), may change the way in which healthcare providers do business with us and may compete directly with us, which could adversely affect our business, financial condition and results of operations.

        In addition, the perceived value of our solutions and our reputation may be negatively impacted if the services provided by one or more of our fertility specialists are not satisfactory to our members, including as a result of provider error that could result in litigation. For example, if a provider within our network experiences an issue with their cryopreservation techniques or releases sensitive information of our members, we could incur additional expenses and give rise to litigation against us. Any such issue with one of our providers may expose us to public scrutiny, adversely affect our brand and reputation, expose us to litigation or regulatory action, and otherwise make our operations vulnerable. Further, if a fertility specialist provides services that result in less than favorable outcomes, this could cause us to fail to meet our contractually guaranteed specified service metrics, and we could

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be obligated to provide the client with a fee reduction. The failure to maintain our selective network of high-quality fertility specialists or the failure of those specialists to meet and exceed our members' expectations, may result in a loss of or inability to grow or maintain our client base, which could adversely affect our business, financial condition and results of operations.

Our growth depends in part on the success of our strategic relationships with, and monitoring of, third parties, including vendors, as well as insurance carriers.

        In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including vendors and insurance carriers. As the fertility management market and our client base grow, if we do not successfully maintain our relationships with insurance carriers, they may make integration more difficult or expensive, such as implementing an onerous fee structure in exchange for our ability to continue to integrate our solutions with their platforms. If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer.

        In addition, our arrangements with these third parties may expose us to public scrutiny, adversely affect our brand and reputation, expose us to litigation or regulatory action, and otherwise make our operations vulnerable if we fail to adequately monitor their performance or if they fail to meet their contractual obligations to us or to comply with applicable laws or regulations.

If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our distribution network, our business, financial condition and results of operations could suffer.

        The timely delivery of fertility prescriptions is essential for fertility treatments. If prescriptions are delivered late, the delay may result in postponement of a member's treatment cycle and member dissatisfaction with our solutions. We believe that our ability to maintain and grow the adoption of Progyny Rx is highly dependent on our success in maintaining an efficient pharmacy distribution network and our record of on-time delivery. If we are unable to maintain an efficient pharmacy distribution network, or if a significant disruption thereto should occur, the use of Progyny Rx may decline due to the inability to timely deliver prescription to members, which could cause our business, financial condition and results of operations to suffer.

If we lose our relationship with one or more key pharmaceutical manufacturers, or if the rebates provided by pharmaceutical manufactures decline, our business and results of operations could be adversely affected.

        We maintain contractual relationships with select pharmaceutical manufacturers which provide us with access to limited distribution specialty pharmaceutical rebates for drugs we purchase. The consolidation of pharmaceutical manufacturers, the shortages of drugs provided by such manufacturers, the termination or material alteration of our contractual relationships, or our failure to renew such contracts on favorable terms could have a material adverse effect on our business and results of operations. In addition, PBM programs have been the subject of debate in federal and state legislatures and various other public and governmental forums. Adoption of new laws, rules or regulations or changes in, or new interpretations of, existing laws, rules or regulations, relating to any of these programs could materially adversely affect our business and results of operations.

Our marketing efforts depend on our ability to maintain our relationship with benefits consultants.

        We sell our solutions through our sales organization and, in many cases, we leverage our relationships with top benefits consultants to establish relationships with potential clients. Our sales team has broad experience in health benefits management and extensive pre-existing long-term relationships with industry participants and benefits executives at large employers. If we fail to maintain

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our relationship with the benefits consultants, our marketing efforts, business and profitability would be adversely impacted.

We are exposed to credit risk from our members.

        We collect copayments, coinsurance and deductibles directly from members. We do not require collateral for such receivables. Our failure to collect a significant portion of the amount due on such receivables directly from members could adversely affect our business, financial condition and results of operations.

Risks Related to Government Regulation

We operate in a highly regulated industry and must comply with a significant number of complex and evolving requirements.

        We have attempted to structure our operations to comply with laws, regulations and other requirements applicable to us directly and to our clients and vendors, but there can be no assurance that our operations will not be challenged or impacted by regulatory authorities or enforcement initiatives. We have been, and in the future may become, involved in governmental investigations, audits, reviews and assessments. Any determination by a court or agency that our solutions or services violate, or cause our clients to violate, applicable laws, regulations or other requirements could subject us or our clients to civil or criminal penalties. Such a determination also could require us to change or terminate portions of our business, disqualify us from serving clients that do business with government entities, or cause us to refund some or all of our service fees or otherwise compensate our clients. In addition, failure to satisfy laws, regulations or other requirements could adversely affect demand for our solutions and could force us to expend significant capital, research and development and other resources to address the failure. Even an unsuccessful challenge by regulatory and other authorities or parties could be expensive and time-consuming, could result in loss of business, exposure to adverse publicity, and injury to our reputation and could adversely affect our ability to retain and attract clients. If we fail to comply with applicable laws, regulations and other requirements, our business, financial condition and results of operations could be adversely affected. Such non-compliance could also require significant investment to address and may prove costly. There are several additional federal and state statutes, regulations, guidance and contractual provisions related to or impacting the healthcare industry that may apply to our business activities directly or indirectly, including, but not limited to:

    Licensing and Licensed Personnel. Many states have licensure or registration requirements for entities acting as a third-party administrator, or TPA, and PBMs. The scope of these laws differs from state to state, and the application of such laws to the activities of TPAs and PBMs is often unclear. Given the nature and scope of the solutions and services that we provide, we are required to maintain TPA and PBM licenses and registrations in certain jurisdictions and to ensure that such licenses and registrations are in good standing on an annual basis. We are licensed, have licensure applications pending before appropriate regulatory bodies, are exempt from licensure or registration, or are otherwise authorized under such laws in those states in which we provide our TPA and PBM services. These licenses require us to comply with the rules and regulations of the governmental bodies that issued such licenses. Our failure to comply with such rules and regulations could result in administrative penalties, the suspension of a license, or the loss of a license, all of which could negatively impact our business. Additionally, from time to time, legislation is considered that would purport to declare a PBM a fiduciary with respect to its clients. While the validity of such laws is questionable and we do not believe any such laws are currently in effect, we cannot predict what effect, if any, such statutes, if enacted, may have on our business and financial results.

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      Separately, states impose licensing requirements on insurers, risk-bearing entities, and insurance agents, as well as those entities that provide utilization review services. We do not believe that the nature of our services requires us to be licensed under applicable state law. We are unable to predict, however, how our services may be viewed by regulators over time, how these laws and regulations will be interpreted, or the full extent of their application. If a regulatory authority in any state determines that the nature of our business requires that we be licensed under applicable state laws, we may need to restructure our business to comply with any related requirements, such as maintaining adequate reserves, creating new compliance processes, hiring additional personnel to manage regulatory compliance, and paying additional regulatory fees, which could adversely affect our results of operation. Additionally, we may need to cease operations until we are able to obtain appropriate licensure, which may adversely affect our revenue for a period of time that we cannot estimate.

      In addition, we employ PCAs to support and guide our members as part of our fertility benefits management services. The PCAs do not provide any licensed healthcare services, and in turn, are not licensed by any regulatory body to provide these services. We otherwise do not employ individuals to provide any healthcare services requiring licensure. If a professional board in any state determines that the services provided by our employed PCAs require a license to be provided, we may need to conduct additional training and credentialing, replace staff, obtain additional insurance, and pay increased salaries, which could adversely affect our results of operation. We may additionally need to suspend the PCA services we provide while our personnel obtains the necessary licensure, which may adversely affect our relationships with our clients and members and cause us to be in breach of our contracts.

    HIPAA Privacy and Security Requirements. There are numerous federal and state laws and regulations related to the privacy and security of health information. In particular, regulations promulgated pursuant to HIPAA establish privacy and security standards that limit the use and disclosure of certain individually identifiable health information (known as "protected health information") and require the implementation of administrative, physical and technological safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity and availability of electronic protected health information. The privacy regulations established under HIPAA also provide patients with rights related to understanding and controlling how their protected health information is used and disclosed. As a provider of services to entities subject to HIPAA, we are directly subject to certain provisions of the regulations as a "Business Associate." When acting as a Business Associate under HIPAA, to the extent permitted by applicable privacy regulations and contracts and associated Business Associate Agreements with our clients, we are permitted to use and disclose protected health information to perform our services and for other limited purposes, but other uses and disclosures, such as marketing communications, require written authorization from the patient or must meet an exception specified under the privacy regulations. We also have downstream Business Associates, which provide us with services and are also subject to HIPAA regulations.

      If we, or any of our downstream Business Associates, are unable to properly protect the privacy and security of protected health information entrusted to us, we could be found to have breached our contracts with our clients and be subject to investigation by the U.S. Department of Health and Human Services, or HHS, Office for Civil Rights, OCR. In the event OCR finds that we have failed to comply with applicable HIPAA privacy and security standards, we could face civil and criminal penalties. In addition, OCR performs compliance audits of Covered Entities and Business Associates in order to proactively enforce the HIPAA privacy and security standards. OCR has become an increasingly active regulator and has signaled its intention to continue this trend. OCR has the discretion to impose penalties and may require companies to enter into resolution agreements and corrective action plans which impose ongoing compliance

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      requirements. OCR enforcement activity, or a third-party audit related to a HIPAA incident regarding us or a third-party vendor, can result in financial liability and reputational harm, and responses to such enforcement activity can consume significant internal resources. In addition to enforcement by OCR, state attorneys general are authorized to bring civil actions under either HIPAA or relevant state laws seeking either injunctions or damages in response to violations that threaten the privacy of state residents. Although we have implemented and maintain policies, processes and compliance program infrastructure to assist us in complying with these laws and regulations and our contractual obligations, we cannot provide assurance regarding how these laws and regulations will be interpreted, enforced or applied to our operations. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state levels also might require us to make costly system purchases and/or modifications or otherwise divert significant resources to HIPAA compliance initiatives from time to time.

    Other Privacy and Security Requirements. In addition to HIPAA, numerous other federal and state laws govern the collection, dissemination, use, access to and confidentiality of personal information. Certain federal and state laws protect types of personal information that may be viewed as particularly sensitive. For example, New York's Public Health Law, Article 27-F protects information that could reveal confidential HIV-related information about an individual. In many cases, state laws are more restrictive than, and not preempted by, HIPAA, and may allow personal rights of action with respect to privacy or security breaches, as well as fines. State laws are contributing to increased enforcement activity and may also be subject to interpretation by various courts and other governmental authorities. Further, California recently enacted the California Consumer Privacy Act, or CCPA, which goes into operation on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business.

      Certain of our solutions and services involve the transmission and storage of client and member data in various jurisdictions, which subjects the operation of those solutions and services to privacy or data protection laws and regulations in those jurisdictions. While we believe these solutions and services comply with current regulatory and security requirements in the jurisdictions in which we provide these solutions and services, there can be no assurance that such requirements will not change or that we will not otherwise be subject to legal or regulatory actions. These laws and regulations are rapidly evolving and changing, and could have an adverse impact on our operations. These laws and regulations are subject to uncertainty in how they may be interpreted and enforced by government authorities and regulators. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs, prevent us from providing our solutions, and/or impact our ability to invest in or jointly develop our solutions. We also may face audits or investigations by one or more government agencies relating to our compliance with these laws and regulations. An adverse outcome under any such investigation or audit could result in fines, penalties, other liability, or could result in adverse publicity or a loss of reputation, and adversely affect our business. Any failure or perceived failure by us or by our solutions to comply with these laws and regulations may subject us to legal or regulatory actions, damage our reputation or adversely affect our ability to provide our solutions in the jurisdiction that has enacted the applicable law or regulation. Moreover, if these laws and regulations change, or are interpreted and applied in a manner that is inconsistent with our policies and processes or the operation of our solutions,

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      we may need to expend resources in order to change our business operations, policies and processes or the manner in which we provide our solutions. This could adversely affect our business, financial condition and results of operations.

    Data Protection and Breaches. In recent years, there have been a number of well-publicized data breaches involving the improper dissemination of personal information of individuals both within and outside of the healthcare industry. Laws in all 50 states require businesses to provide notice to clients whose personally identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also constantly amending existing laws, requiring attention to frequently changing regulatory requirements. Most states require holders of personal information to maintain safeguards and take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals or the state's attorney general. In some states, these laws are limited to electronic data, but states increasingly are enacting or considering stricter and broader requirements.

      Additionally, under HIPAA, Covered Entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach by a Covered Entity or its agents. Notification also must be made to OCR and, in certain circumstances involving large breaches, to the media. Business Associates must report breaches of unsecured protected health information to Covered Entities within 60 days of discovery of the breach by the Business Associate or its agents. A non-permitted use or disclosure of protected health information is presumed to be a breach under HIPAA unless the Covered Entity or Business Associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA.

      Despite our security management efforts with respect to physical and technological safeguards, employee training, vendor (and sub-vendor) controls and contractual relationships, our infrastructure, data or other operation centers and systems used in our business operations, including the internet and related systems of our vendors (including vendors to whom we outsource data hosting, storage and processing functions) are vulnerable to, and from time to time experience, unauthorized access to data and/or breaches of confidential information due to a variety of causes. Techniques used to obtain unauthorized access to or compromise systems change frequently, are becoming increasingly sophisticated and complex, and are often not detected until after an incident has occurred. As a result, we might not be able to anticipate these techniques, implement adequate preventive measures, or immediately detect a potential compromise. If our security measures, some of which are managed by third parties, or the security measures of our service providers or vendors, are breached or fail, it is possible that unauthorized or illegal access to or acquisition, disclosure, use or processing of personal information, confidential information, or other sensitive client, member, or employee data, including HIPAA-regulated protected health information, may occur. A security breach or failure could result from a variety of circumstances and events, including third-party action, human negligence or error, malfeasance, employee theft or misuse, phishing and other social engineering schemes, computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, and catastrophic events.

      If our security measures, or those of our service providers or vendors, were to be breached or fail, our reputation could be severely damaged, adversely affecting client or investor confidence. As a result, clients may curtail their use of or stop using our offering and our business may suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other laws or regulations applicable to data

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      protection and significant costs for remediation and for measures to prevent future occurrences. In addition, any potential security breach could result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to clients or other business partners in an effort to maintain the business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. Negative publicity may also result from real, threatened or perceived security breaches affecting us or our industry or clients, which could cause us to lose clients or partners and adversely affect our operations and future prospects. While we maintain cyber insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and such insurance may not be available for renewal on acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

    HIPAA Transaction and Identifier Standards. HIPAA and its implementing regulations mandate format and data content standards and provider identifier standards (known as the National Provider Identifier) that must be used in certain electronic transactions, such as claims, payment advice and eligibility inquiries. HHS has established standards that health plans must use for electronic fund transfers with providers, has established operating rules for certain transactions, and is in the process of establishing operating rules to promote uniformity in the implementation of the remaining types of covered transactions. The ACA also requires HHS to establish standards for health claims attachment transactions. HHS has modified the standards for electronic healthcare transactions (e.g., eligibility, claims submission and payment and electronic remittance) from Version 4010/4010A to Version 5010. Further, HHS now requires the use of updated standard code sets for diagnoses and procedures known as the ICD-10 code sets. Enforcement of compliance with these standards falls under HHS and is carried out by CMS.

      In the event new requirements are imposed, we will be required to modify our systems and processes to accommodate these changes. We will seek to modify our systems and processes as needed to prepare for and implement changes to the transaction standards, code sets operating rules and identifier requirements; however, we may not be successful in responding to these changes, and any responsive changes we make to our systems and processes may result in errors or otherwise negatively impact our service levels. In addition, the compliance dates for new or modified transaction standards, operating rules and identifiers may overlap, which may further burden our resources.

    Fraud and Abuse Laws. Many of our clients, insurance carriers, and network healthcare providers are impacted directly and indirectly by certain fraud and abuse laws, including the federal Anti-Kickback Statute, the Physician Self-Referral Law, commonly referred to as the Stark Law, and the False Claims Act, as well as their state equivalents. Because the solutions and services we provide are not reimbursed by government healthcare payors, such fraud and abuse laws generally do not directly apply to our business, however, some laws may be applicable.

      The laws, regulations and other requirements in this area are both broad and vague and judicial interpretation can also be inconsistent. We review our practices with regulatory experts in an effort to comply with all applicable laws, regulatory and other requirements. However, we are unable to predict how these laws, regulations and other requirements will be interpreted or the full extent of their application, particularly to services that are not directly reimbursed by federal healthcare programs. Any determination by a federal or state regulatory authority that any of our activities or those of our clients or vendors violate any of these laws or regulations could subject us to civil or criminal penalties, require us to enter into corporate integrity agreements or similar agreements with ongoing compliance obligations, disqualify us from providing services

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      to clients that are, or do business with, government programs and/or have an adverse impact on our business, financial condition and results of operations. Even an unsuccessful challenge by a regulatory authority of our activities could result in adverse publicity and could require a costly response from us.

    ERISA Regulation. The Employee Retirement Income Security Act of 1974, or ERISA, regulates certain aspects of employee pension and health benefits plans, including self-funded corporate health plans sponsored by our clients, with which we have agreements to provide TPA services. As part of our agreements with a number of these clients, we offer PBM services through Progyny Rx. We believe the conduct of our business vis-à-vis these plans is not generally subject to the fiduciary obligations of ERISA. However, there can be no assurance the United States Department of Labor, or the DOL, which is the agency that enforces ERISA, would not in the future assert that the fiduciary obligations imposed by ERISA apply to certain aspects of our operations or courts would not reach such a ruling in private ERISA litigation. In addition to its fiduciary provisions, ERISA has broad preemptive effect and has been held to preempt state laws imposing transparency requirements on PBMs. ERISA also imposes civil and criminal liability on service providers to health plans subject to ERISA and certain other persons with relationships to such plans if certain forms of illegal or prohibited remuneration are made or received by such service providers or other persons. These provisions of ERISA are similar, but not identical, to the healthcare anti-kickback laws described above, although ERISA lacks the statutory and regulatory "safe harbor" exceptions incorporated into the healthcare anti-kickback laws. Like the healthcare anti-kickback laws, the corresponding provisions of ERISA are broadly written and their application to particular cases can be uncertain. Employee benefits plans subject to ERISA are subject to certain rules, published by the DOL, including certain reporting requirements for direct and indirect compensation received by plan service providers. However, many self-funded health plans such as the plans that we have contracts with are exempt from these reporting requirements under current law. At this time, we are unable to predict whether the DOL will issue additional regulations or guidance on reporting or which additional regulations, if any, may be proposed in formal rulemaking by the DOL.

    Prompt Pay Laws. Certain states have laws regulating the amount of time that may elapse from when a third-party payor receives a claim for services rendered to when those services are paid. These "prompt pay" laws may impact us as well as our clients and insurance carriers. Under these "prompt pay" laws, we may be obligated to pay healthcare providers within established time periods, and such time periods may be shorter than existing contracted terms and/or via electronic transfer. In many states, we are deemed to be exempt from the prompt pay laws, however, we seek to comply with them in each state in which we do business to the extent applicable, and our efforts include the use of controls such as policies and processing systems that ensure we pay claims as quickly as possible and contract language related to timeframes permitted by applicable law. If we do not make payments to healthcare providers in a timely fashion consistent with prompt pay laws, we may be required to pay interest in addition to any amounts owed to such providers. In addition, our reputation may be harmed and our contractual obligations to certain clients may be breached, causing us to lose revenue or otherwise pay penalties under such contracts.

    Network Adequacy and Access Requirements. Network adequacy and access laws require health plans to maintain a network of healthcare providers sufficient to deliver the benefits they contract to provide to their enrollees. In light of the increase in "narrow networks", there has been a legislative push to ensure that commercial payors contract with a sufficient number of healthcare providers to create an "adequate network." Additionally, a majority of states now have some form of legislation affecting our payor clients' ability to limit access to a provider network or remove a provider from the network. Such legislation may require our clients to

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      admit any healthcare provider including any pharmacy provider willing to meet the plan's price and other terms for network participation ("any willing provider" legislation) or may provide that a provider may not be removed from a network except in compliance with certain procedures ("due process" legislation). Further, to ensure network adequacy and quality, a network may seek to accredit its healthcare providers through any number of accrediting bodies, such as the National Committee for Quality Assurance, or NCQA, and the Utilization Review Accreditation Commission. We follow NCQA standards to credential the health providers with whom we contract to provide services within our network, and engage Council for Affordable Quality Healthcare to conduct provider credentialing where required. Should any of the states we operate in determine that our network of providers does not meet adequacy or access requirements, we may be subject to administrative penalties and other administrative actions, as well as private litigation. In addition, if we are unable to contract with a sufficient number of providers, we may become subject to administrative penalties or enforcement actions from state regulatory agencies, litigation from consumers, and may be in breach of certain contractual covenants with our partners.

    Consumer Protection Laws. Federal and state consumer protection laws are being applied increasingly by the Federal Trade Commission, or FTC, Federal Communications Commission, or FCC, and states' attorneys general to regulate the collection, use, storage and disclosure of personal or health information, through websites or otherwise, and to regulate the presentation of website content. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements to users of our services that describe how we handle personal information and choices consumers may have about the way we handle personal information. If such information that we publish is considered untrue, we may be subject to claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences, including, costs of defending against litigation, settling claims and loss of willingness of current and future clients to work with us.

    Restrictions on Communication. Communications with our members increasingly may be subject to and restricted by laws and regulations governing communications via telephone, fax, text, and email. We also use email and social media platforms as marketing tools. For example, we maintain social media accounts. As laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.

The healthcare regulatory and political framework is uncertain and evolving. Recent and future developments in the healthcare industry could have an adverse impact on our business, financial condition and results of operations.

        All of our revenue is derived from the healthcare industry, which is highly regulated and subject to changing political, legislative, regulatory and other influences. Healthcare laws and regulations are rapidly evolving and may change significantly in the future. For example, while ACA does not directly regulate our business as a benefit area, it does affect the coverage and plan designs that are or will be provided by certain insurance carriers and certain of our clients, taxability of such plans, as well as the overall reimbursement and drug pricing environment for healthcare providers. Health reform efforts, including reforms to the ACA, and measures that would expand the role of government-sponsored coverage, including single payer or so-called "Medicare-for-All" proposals, which could have far-reaching implications for the healthcare industry if enacted.

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        We are unable to predict the full impact of health reform initiatives on our operations in light of the uncertainty regarding whether, when and how the ACA will be further changed, what alternative reforms (including single payer proposals), if any, may be enacted, the timing of enactment and implementation of alternative provisions and the impact of alternative provisions on various healthcare industry participants.

Government regulation, industry standards and other requirements create risks and challenges with respect to our compliance efforts and our business strategies.

        The healthcare industry is highly regulated and subject to frequently changing laws, regulations, industry standards and other requirements. Many healthcare laws and regulations are complex, and their application to specific solutions, services and relationships may not be clear. Because our clients are subject to various requirements, we may be impacted as a result of our contractual obligations even when we are not directly subject to such requirements. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the solutions and services that we provide, and these laws and regulations may be applied to our solutions and services in ways that we do not anticipate. The ACA, efforts to repeal or materially change the ACA, and other federal and state efforts to reform or revise aspects of the healthcare industry or to revise or create additional legal or and regulatory requirements could impact our operations, the use of our solutions and services, and our ability to market new solutions and services, or could create unexpected liabilities for us. There have also been a number of reform efforts around PBMs including pricing and transparency which could affect our business. We also may be impacted by laws, industry standards and other requirements that are not specific to the healthcare industry, such as consumer protection laws and payment card industry standards. These requirements may impact our operations and, if not followed, could result in fines, penalties and other liabilities and adverse publicity and injury to our reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations.

        While we operate only in the United States, we remain subject to the U.S. Foreign Corrupt Practices Act, or FCPA, U.S. domestic bribery laws, and other anti-corruption and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. If we expand our business and sales outside the United States and to the public sector, we may engage with business partners and third-party intermediaries to market our services and to obtain for us the necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.

        Detecting, investigating, and resolving actual or alleged violations of anti-corruption laws can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, prosecution, enforcement actions, sanctions, settlements, fines, damages, other civil or criminal penalties or injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our business, financial condition and results of

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operations could be harmed. In addition, responding to any action will likely result in a materially significant diversion of management's attention and resources and significant defense costs and other professional fees, which could adversely affect our business, financial condition and results of operations.

Any potential sales to government entities are subject to a number of challenges and risks.

        We may sell our services or solutions to U.S. federal, state, and local government, and agency, clients. Sales to such entities are subject to a number of challenges and risks. Selling to such entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we have attained the revised certification. Government demand and payment for our offerings is dependent on many factors outside our control, including general economic conditions, public sector budgetary constraints and funding authorizations, and general political priorities, with funding reductions or delays adversely affecting public sector demand for our offerings.

        Further, governmental and highly regulated entities may demand contract terms that differ from our standard arrangements. Such entities may have statutory, contractual, or other legal rights to terminate contracts with us or our partners due to a default or for other reasons. Any such termination may adversely affect our reputation, business, financial condition and results of operations.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

        Our success depends in part on our ability to protect our brand and proprietary trade secret and confidential information, including unpatented know-how, technology and other proprietary information, maintaining, defending and enforcing our intellectual property rights. We rely on our agreements with our clients, and non-disclosure and confidentiality agreements with employees and third parties, and our trademarks, trade secrets, and copyrights to protect our intellectual property rights. However, any of these parties may breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for such breaches. There is no assurance that we will be able to obtain, maintain, defend and enforce our intellectual property rights, or that such intellectual property rights will not be challenged, narrowed, held unenforceable or circumvented. Therefore, these legal protections and precautions may not prevent infringement, misappropriation or other violations of our intellectual property. Any litigation and any infringement, misappropriation or other violations of our intellectual property could hinder our ability to market and sell our solutions, and our business, financial condition and results of operations could be adversely affected.

        If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed.

        Third parties may allege that our products and services, or the conduct of our business, infringe, misappropriate or otherwise violate such third party's intellectual property rights. Even if such claims are without merit, defending such claims would cause us to incur substantial expenses and could cause us to pay substantial damages or seek a costly license if we are found to be infringing, misappropriating, or otherwise violating a third party's intellectual property rights. If we are unable to enter into a license on acceptable terms or at all, we could be forced to cease some aspect of our business operations or be forced to redesign our products or services so that we no longer infringe the third-party intellectual property rights, which may result in significant cost and delay to us, or which redesign could be technically infeasible. Even if resolved in our favor, litigation or other legal

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proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our employees and management personnel from their normal responsibilities.

        Moreover, although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any third parties, including such individual's former employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

        Furthermore, we currently own registered trademarks. In addition, any of our trademarks or trade names, whether registered or unregistered, may be challenged, opposed, infringed, cancelled, circumvented or declared generic, or determined to be infringing on other marks, as applicable. We may not be able to protect our rights to these trademarks and trade names, which we will need to build name recognition by potential collaborators or clients in our markets of interest.

Any litigation against us could be costly and time-consuming to defend and could harm our business, financial condition and results of operations.

        We have in the past and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our clients or vendors in connection with commercial disputes or employment claims made by our current or former employees. We are currently in arbitration with a former vendor who alleges a breach of our contract with such vendor. See "Business—Legal Proceedings." We are unable to predict the outcome of any of these legal proceedings. Such proceedings might result in substantial costs, regardless of the outcome, and may divert management's attention and resources, which might seriously harm our business, financial condition and results of operations. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial condition and results of operations.

Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition and results of operations.

        We may in the future seek to acquire or invest in businesses, joint ventures, products and services, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. Any such acquisition or investment may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products and services, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, they are operationally difficult to integrate, or we have difficulty retaining the clients of any acquired business due to changes in ownership, management or otherwise. These transactions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Any such transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic partner. These transactions could also result in dilutive

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issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if the resulting business from such a transaction fails to meet our expectations, or we fail to successfully integrate such businesses into our own, our business, financial condition and results of operations may be adversely affected or we may be exposed to unknown risks or liabilities.

The December 2017 U.S. federal tax reform may subject us to potential adverse tax consequences.

        The Tax Cuts and Jobs Act, or the Tax Act, enacted in December 2017, among other things, includes changes to U.S. federal tax rates, imposes additional limitations on the deductibility of interest, has both positive and negative changes to the utilization of future net operating loss carryforwards, allows for the expensing of certain capital expenditures, and puts into effect the migration from a "worldwide" system of taxation to a "quasi-territorial system". Our net deferred tax assets and liabilities and valuation allowance have been revalued at the U.S. corporate rate, which the Tax Act reduced to 21%. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform on holders of our common stock is uncertain and could be adverse.

Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.

        Our effective tax rate could increase due to several factors, including, but not limited to:

    changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

    changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Tax Act;

    changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;

    the outcome of future tax audits, examinations, or administrative appeals; and

    limitations or adverse findings regarding our ability to do business in some jurisdictions.

    Any of these developments could have an adverse effect on our results of operations.

Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local income taxes which could adversely affect our results of operations.

        We currently file state income tax returns in certain states. There is a risk that certain state tax authorities where we do not currently file a state income tax return could assert that we are liable for state and local income taxes based upon income or gross receipts allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state income tax purposes. We could be subject to state and local taxation, including penalties and interest attributable to prior periods, if a state tax authority in which we do not currently file a state income tax return successfully asserts that our activities give rise to a taxable nexus. Such tax assessments, penalties and interest may adversely affect our results of operations.

We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.

        As of December 31, 2018, we had federal and state net operating loss carryforwards of approximately $86 million and $68 million, respectively, due to prior period losses, some of which, if not utilized, will begin to expire in 2030 for federal and state purposes. The federal and California research and development tax credits are approximately $756,000 and $830,000, respectively. The

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federal research and development tax credits begin to expire in 2030, and the California research and development tax credits have no expiration date. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

        In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an "ownership change." A Section 382 "ownership change" generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. This offering or future issuances of our stock could cause an "ownership change." Any future ownership change, which could be outside of our control, could also have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

        Accounting principles generally accepted in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions already completed before the announcement of a change.

        For example, in February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. As an "emerging growth company," we are allowed under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The adoption of new or revised accounting principles may require us to make changes to our systems, processes and control, which could have a significant effect on our reported financial results, cause unexpected financial reporting fluctuations, retroactively affect previously reported results or require us to make costly changes to our operational processes and accounting systems upon or following the adoption of these standards.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this prospectus. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates." The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments used in preparing our consolidated financial statements include those related to the determination of fair value of our common stock, estimates of accounts receivable relating to member copayments and revenue recognition relating to services rendered but for which no claim has yet been reported, among others. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of

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operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile, and the value of our common stock may decline.

        The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including, but not limited to:

    actual or anticipated fluctuations in our financial condition or results of operations;

    variance in our financial performance from expectations of securities analysts;

    changes in the pricing of our solutions and services;

    changes in our projected operating and financial results;

    changes in laws or regulations applicable to our products and solutions;

    announcements by us or our competitors of significant business developments, acquisitions, or new offerings;

    significant data breaches of our company, providers, vendors or pharmacies;

    our involvement in litigation;

    future sales of our common stock by us or our stockholders, as well as the anticipation of lock-up releases;

    changes in senior management or key personnel;

    the trading volume of our common stock;

    changes in the anticipated future size and growth rate of our market; and

    general economic, industry, and market conditions.

        Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may also negatively impact the market price of our common stock. These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management's attention.

No public market for our common stock currently exists, and an active public trading market may not develop or be sustained following this offering.

        No public market for our common stock currently exists. An active public trading market for our common stock may not develop following the completion of this offering or, if developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. The initial public offering price of shares of our common stock will be determined by negotiation between us and the underwriters and may not be

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indicative of prices that will prevail following the completion of this offering. The market price of shares of our common stock may decline below the initial public offering price, and you may not be able to resell your shares of our common stock at or above the initial public offering price.

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline.

        Our results of operations may fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

    fluctuations in demand for or pricing of our solutions;

    our ability to attract new clients;

    our ability to retain our existing clients;

    client expansion rates;

    changes in clients' budgets and in the timing of their budget cycles and purchasing decisions;

    our ability to control costs, including our operating expenses and healthcare costs;

    the amount and timing of payment for operating expenses, particularly sales and marketing expenses;

    the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;

    the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;

    general economic conditions, as well as economic conditions specifically affecting industries in which our clients participate;

    the impact of new accounting pronouncements;

    changes in the competitive dynamics of our market, including consolidation among competitors or clients; and

    significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our solutions and services.

        Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.

In connection with our preparation of our annual financial statements for the year ended December 31, 2018, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us.

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. In connection with our audit of the fiscal year 2018 consolidated financial

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statements, we and our independent registered public accounting firm identified one material weakness in our controls related to the lack of review and oversight over financial reporting. We determined that we had insufficient financial statement close processes and procedures relating to the classification and presentation of certain revenue and expenses. Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

        We have taken steps to remediate this weakness, including hiring of a senior financial executive in 2019 with a focus on SEC reporting and technical accounting. We have also implemented preventative and detective procedures and controls including analytical reviews designed to improve our annual and quarterly financial close process. However, we cannot assure you that the measures we have taken will remediate this deficiency or that we will not suffer from other material weaknesses in the future.

        If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

        We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending December 31, 2020, which is the year covered by the second annual report following the completion of our initial public offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an "emerging growth company." We have recently commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated. Our compliance with Section 404 will require that we incur substantial accounting expenses and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

        During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our

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financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.

        We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled "Use of Proceeds," and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, our ultimate use may vary substantially from our currently intended use. Investors will need to rely upon the judgment of our management with respect to the use of proceeds. Pending use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the United States government that may not generate a high yield for our stockholders. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations and prospects could be harmed, and the market price of our common stock could decline.

Future sales of our common stock in the public market could cause the market price of our common stock to decline.

        Sales of a substantial number of shares of our common stock in the public market following the completion of this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

        All of our directors and officers and the holders of substantially all of our capital stock and securities convertible into our capital stock are subject to lock-up agreements that restrict their ability to transfer shares of our capital stock for 180 days from the date of this prospectus. These lock-up agreements limit the number of shares of capital stock that may be sold immediately following this offering. Subject to certain limitations, substantially all of these shares will become eligible for sale upon expiration of the 180-day lock-up period. J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and BofA Securities, Inc. may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

        In addition, there were 17,409,666 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2019. We intend to register all of the shares of common stock issuable upon exercise of outstanding options or other equity incentives we may grant in the future, for public resale under the Securities Act of 1933, as amended, or the Securities Act. The shares of common stock will become eligible for sale in the public market to the extent such options are exercised, subject to the lock-up agreements described above and compliance with applicable securities laws.

        Further, based on shares outstanding as of September 30, 2019, holders of approximately 62,034,844 shares, or 76% of our capital stock after the completion of this offering, will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

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Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders.

        We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in businesses, joint ventures, products and services, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

If securities or industry analysts do not publish research, or publish unfavorable or inaccurate research, about our business, the market price and trading volume of our common stock could decline.

        The market price and trading volume of our common stock following the completion of this offering will be heavily influenced by the way analysts interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.

You will experience immediate and substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering.

        The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our common stock immediately after this offering. If you purchase shares of our common stock in this offering, you will suffer immediate dilution of $13.74 per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to the sale of common stock in this offering and the assumed public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus. See the section titled "Dilution."

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

        We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

We are an "emerging growth company," and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including the auditor attestation requirements of Section 404 reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on

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executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

        We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.

        We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

        As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an "emerging growth company." The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market, or Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time- consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

        Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the completion of this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

    authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;

    require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

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    specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;

    establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

    establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

    prohibit cumulative voting in the election of directors;

    provide that our directors may be removed for cause only upon the vote of at least 662/3% of our outstanding shares of voting stock;

    provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

    require the approval of our board of directors or the holders of at least 662/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.

Our amended and restated certificate of incorporation that will become effective upon the closing of this offering will designate the state courts in the State of Delaware of, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us or our directors, officers, or employees.

        Our amended and restated certificate of incorporation, as will be in effect upon the completion of this offering, will provide that, to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, any state court located within the State of Delaware, or if all such state courts lack jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a breach of a fiduciary duty owed by any current or former director, officer or other employee, to us or our stockholders; (3) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; (4) or any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; (5) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; or (6) any action asserting a claim against us, or any of our directors, officers or other employees, that is governed by the internal affairs

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doctrine, in all cases to the fullest extent permitted by law and subject to the court's having personal jurisdiction over the indispensable parties named as defendants. For the avoidance of doubt, these choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

        These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Furthermore, if a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will" or "would" or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

    our expectations regarding our revenue, expenses and other operating results, including our preliminary estimates for the nine months ended September 30, 2019;

    our ability to achieve profitability on an annual basis and then sustain such profitability;

    future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

    our ability to acquire new clients and successfully engage new and existing clients;

    the costs and success of our marketing efforts, and our ability to promote our brand;

    our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;

    our ability to effectively manage our growth, including our ability to expand our network of fertility specialists, retain and recruit personnel, and maintain our culture;

    our ability to compete effectively with existing competitors and new market entrants; and

    the growth rates of the markets in which we compete.

        You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk Factors" and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

        In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

        The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

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MARKET, INDUSTRY AND OTHER DATA

        This prospectus contains statistical data, estimates and forecasts that are based on independent industry publications, such as those published by The Journal of the American Medical Association, the American Society for Reproductive Medicine, the American Journal of Obstetrics & Gynecology, Reproductive Medicine Associates of New Jersey, the Reproductive Medicine Associates of New York, European Society of Human Reproduction and Embryology, RESOLVE: The National Infertility Association, FertilityIQ, the Twin & Multiple Births Association, Family Equality Council, Gallup and other publicly available information, as well as other information based on our internal sources. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Further, while we believe our internal research is reliable, such research has not been verified by any third party. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors," that could cause results to differ materially from those expressed in these publications and other publicly available information.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from the sale of the common stock that we are offering of approximately $91.0 million based on an assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of our common stock by the selling stockholders.

        A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock would increase (decrease) the net proceeds to us from this offering by approximately $6.3 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $14.1 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions.

        The principal purposes of this offering are to create a public market for our common stock, facilitate our future access to the capital markets and increase our capitalization and financial flexibility. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. However, we currently intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds to acquire complementary businesses, services or technologies. However, we do not have agreements or commitments to enter into any acquisitions at this time.

        We will have broad discretion over how to use the net proceeds to us from this offering. We intend to invest the net proceeds to us from the offering that are not used as described above in investment-grade, interest-bearing instruments.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

        The following table sets forth our cash and capitalization as of June 30, 2019:

    on an actual basis;

    on a pro forma basis, giving effect to (1) the automatic conversion of all of our outstanding shares of convertible preferred stock into shares of common stock in connection with this offering, (2) the conversion of outstanding convertible preferred stock warrants to warrants to purchase 2,019,245 shares of our common stock, and the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital in connection with this offering; and (3) the filing and effectiveness of our amended and restated certificate of incorporation which will be in effect on the completion of this offering; and

    on a pro forma as adjusted basis, giving effect to (1) the pro forma adjustments set forth above and (2) our receipt of estimated net proceeds from the sale of shares of common stock that we are offering at an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        You should read this table together with the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of June 30, 2019  
 
  Actual   Pro Forma   Pro Forma
As Adjusted
 
 
  (in thousands except share and per
share amounts)

 

Cash and cash equivalents

  $ 298   $ 298   $ 91,268  

Convertible preferred stock, $0.0001 par value; 314,930,070 shares authorized, 65,428,088 shares issued and outstanding, actual; and no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

    106,237          

Stockholders' (deficit) equity:

                   

Preferred stock, $0.0001 par value; no shares authorized, issued or outstanding, actual; 100,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted

             

Common stock, $0.0001 par value; 441,000,000 authorized, 5,187,474 shares issued, actual; 1,000,000,000 shares authorized, pro forma and pro forma as adjusted; 70,615,562 shares issued and outstanding, pro forma; and 77,315,562 shares issued and outstanding, pro forma as adjusted

    1     8     8  

Additional paid-in capital

    12,180     124,194     215,164  

Treasury stock, at cost, $0.0001 par value, 589,320 shares outstanding

    (884 )   (884 )   (884 )

Retained earnings

    (100,813 )   (100,813 )   (100,813 )

Total stockholders' (deficit) equity

  $ (89,514 ) $ 22,505   $ 113,475  

Total capitalization

  $ 16,723   $ 22,505   $ 113,475  

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        A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' (deficit) equity and total capitalization by approximately $6.3 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' (deficit) equity and total capitalization by approximately $14.1 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions.

        The information set forth in the table is based on 70,615,562 shares of common stock outstanding as of June 30, 2019, and excludes:

    21,808,981 shares of common stock issuable on the exercise of stock options outstanding as of June 30, 2019 under our 2008 Plan and our 2017 Plan, with a weighted-average exercise price of approximately $1.81 per share (including 1,091,941 shares of common stock to be issued upon exercise of stock options by certain of the selling stockholders in connection with the sale of these shares in the offering);

    758,693 shares of common stock issuable upon the exercise of outstanding stock options issued after June 30, 2019 pursuant to our 2017 Plan with a weighted-average exercise price of $5.97 per share;

    2,159,639 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2019, with a weighted-average exercise price of $1.69 per share;

    3,059,708 shares of common stock reserved for future issuance under our 2019 Plan (which number includes the contemplated director nominee grants described under "Management—Non-Employee Director Compensation"), as well as any shares underlying options outstanding under the 2017 Plan that expire or otherwise terminate prior to exercise after the effective date of the 2019 Plan and any future increases in the number of shares of common stock reserved for issuance under our 2019 Plan; and

    1,700,000 shares of common stock reserved for issuance under our ESPP, as well as any future increases in the number of shares of common stock reserved for future issuance under our ESPP.

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DILUTION

        If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible book value per share immediately after this offering.

        Our historical net tangible book value as of June 30, 2019 was $(105.6) million, or $(20.37) per share. Our pro forma net tangible book value as of June 30, 2019 was $6.4 million, or $0.09 per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of common stock outstanding as of June 30, 2019, after giving effect to: (1) the automatic conversion of all of our outstanding shares of convertible preferred stock into 65,428,088 shares of common stock in connection with this offering, (2) the conversion of outstanding convertible preferred stock warrants to warrants to purchase 2,019,245 shares of our common stock, and the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital in connection with this offering; and (3) the filing and effectiveness of our amended and restated certificate of incorporation that will be in effect on the completion of this offering.

        After giving effect to the sale by us and the selling stockholders of 10,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2019 would have been $97.3 million, or $1.26 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $1.17 per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $13.74 per share to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

        $ 15.00  

Historical net tangible book value per share as of June 30, 2019

  $ (20.37 )      

Increase in historical net tangible book value per share attributable to the pro forma adjustments described above

    20.46        

Pro forma net tangible book value per share as of June 30, 2019

    0.09        

Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this offering

    1.17        

Pro forma as adjusted net tangible book value per share after this offering

          1.26  

Dilution in pro forma as adjusted net tangible book value per share to new investors participating in this offering

        $ 13.74  

        The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $0.08 per share and increase (decrease) the dilution to new investors by $0.92 per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase or decrease of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) our pro forma as adjusted net tangible book value by approximately $0.16 per share and

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decrease (increase) the dilution to new investors by approximately $0.16 per share, in each case assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The following table summarizes, as of June 30, 2019, on a pro forma as adjusted basis as described above, the number of shares of our common stock, the total consideration and the average price per share (1) paid to us by existing stockholders, and (2) to be paid by new investors acquiring our common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
   
   
  Total
Consideration
   
 
 
  Shares Purchased    
 
 
  Average Price
Per Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

    70,615,562     91.3 %   99,306,342     49.7 % $ 1.41  

New investors

    6,700,000     8.7     100,500,000     50.3   $ 15.00  

Totals

    77,315,562     100.0 % $ 199,806,342     100.0 %      

        Sales of our common stock by the selling stockholders in this offering will reduce the number of shares of common stock held by existing stockholders to 67,315,562 shares, or 87.1% (or 65,815,562 shares, or 85.1% if the underwriters' option to purchase additional shares of our common stock from certain selling stockholders is exercised in full) of the total number of shares of our common stock outstanding following the completion of this offering, and will increase the number of shares held by new investors purchasing shares in this offering to 10,000,000 shares, or 12.9% (or 11,500,000 shares, or 14.9% if the underwriters' option to purchase additional shares of our common stock from certain selling stockholders is exercised in full) of the total number of shares of common stock outstanding following the completion of this offering.

        The information set forth in the table and calculations above is based on 70,615,562 shares of common stock outstanding as of June 30, 2019, and excludes:

    21,808,981 shares of common stock issuable on the exercise of stock options outstanding as of June 30, 2019 under the 2008 Plan and the 2017 Plan with a weighted-average exercise price of approximately $1.81 per share (including 1,091,941 shares of common stock to be issued upon exercise of stock options by certain of the selling stockholders in connection with the sale of these shares in the offering);

    758,693 shares of common stock issuable upon the exercise of outstanding stock options issued after June 30, 2019 pursuant to our 2017 Plan with a weighted-average exercise price of $5.97 per share;

    2,159,639 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2019 with a weighted-average exercise price of $1.69 per share;

    3,059,708 shares of common stock reserved for future issuance under our 2019 Plan (which number includes the contemplated director nominee grants described under "Management—Non-Employee Director Compensation"), as well as any shares underlying options outstanding under the 2017 Plan that expire or otherwise terminate prior to exercise after the effective date of the 2019 Plan and any future increases in the number of shares of common stock reserved for issuance under our 2019 Plan; and

    1,700,000 shares of common stock reserved for issuance under our ESPP, as well as future increases in the number of shares of common stock reserved for future issuance under our ESPP.

        To the extent that any outstanding options are exercised or new options are issued under our stock-based compensation plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The selected consolidated statement of operations data for the years ended December 31, 2017 and 2018 and the selected consolidated balance sheet data as of December 31, 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. In order to provide additional historical financial information, we have included supplemental unaudited selected statement of operations data for the year ended December 31, 2016 and unaudited selected consolidated balance sheet data as of December 31, 2016, which have been derived from our unaudited consolidated financial statements not included elsewhere in this prospectus. The selected statements of operations data for the six months ended June 30, 2018 and 2019 and the selected consolidated balance sheet data as of June 30, 2019 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our consolidated financial position and results of operations. You should read the consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. Our interim and historical results are not necessarily indicative of the results to be expected for the full year or any other period in the future.

 
  Year Ended December 31,   Six Months Ended
June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (unaudited)
   
   
  (unaudited)
 
 
   
  (in thousands, except share and per share data)
 

Consolidated Statements of Operations Data:

                               

Revenue

  $ 22,106   $ 48,584   $ 105,400   $ 48,415   $ 103,365  

Cost of services(1)

    21,368     41,184     85,966     39,443     81,949  

Gross profit

    738     7,400     19,434     8,972     21,416  

Operating expenses:

                               

Sales and marketing(1)

    2,407     4,258     7,285     3,494     5,463  

General and administrative(1)

    12,868     14,147     15,601     7,640     10,489  

Total operating expenses

    15,275     18,405     22,886     11,134     15,952  

(Loss) income from operations

    (14,537 )   (11,005 )   (3,452 )   (2,162 )   5,464  

Other expense:

                               

Interest expense, net

    (1,065 )   (740 )   (497 )   (432 )   (166 )

Convertible preferred stock warrant valuation adjustment

    741     (714 )   (2,944 )   (643 )   (1,193 )

Total other expense, net

    (324 )   (1,454 )   (3,441 )   (1,075 )   (1,359 )

(Loss) income from continuing operations, before tax

    (14,861 )   (12,459 )   (6,893 )   (3,237 )   4,105  

Benefit (provision) for income taxes

    3,028     3     1,777     835     (64 )

Net (loss) income from continuing operations

    (11,833 ) $ (12,456 ) $ (5,116 ) $ (2,402 ) $ 4,041  

Net income from discontinued operations, net of taxes(2)

    4,737   $ 4   $ 5,777   $ 5,724   $  

Net (loss) income and comprehensive (loss) income

  $ (7,096 ) $ (12,452 ) $ 661   $ 3,322   $ 4,041  

Net (loss) income attributable to common stockholders

  $ (11,833 ) $ (13,468 ) $ (5,541 ) $ (2,826 ) $  

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  Year Ended December 31,   Six Months Ended
June 30,
 
 
  2016   2017   2018   2018   2019  
 
  (unaudited)
   
   
  (unaudited)
 
 
   
  (in thousands, except share and per share data)
 

Net (loss) income per share attributable to common stockholders, basic and diluted

                               

Continuing operations

  $ (2.09 ) $ (2.37 ) $ (1.00 ) $ (0.50 ) $  

Discontinued operations(2)

    0.84         1.04     1.00      

Total net (loss) income per share attributable to common stockholders, basic and diluted

  $ (1.25 ) $ (2.37 ) $ 0.04   $ 0.50   $  

Weighted-average shares used in computing net (loss) income per share:

                               

Basic(3)

    5,564,140     5,677,860     5,539,739     5,691,643     5,164,564  

Diluted(3)

    5,564,140     5,677,860     5,539,739     5,691,643     5,164,564  

Pro forma (loss) income per share (unaudited)(3)

                               

Basic

              $ (0.08 )       $ 0.06  

Diluted

                (0.08 )         0.05  

Weighted-average shares used in computing pro forma net (loss) income per share (unaudited)(2)(3)

                               

Basic

                71,499,944           70,592,652  

Diluted

                71,499,944           81,561,714  

(1)
Includes stock-based compensation expense as follows:
   
  Year Ended December 31,   Six Months Ended
June 30,
 
   
  2016   2017   2018   2018   2019  
   
  (unaudited)
   
   
  (unaudited)
 
 

Cost of services

  $ 4   $ 26   $ 96   $ 38   $ 125  
 

Selling and marketing

    131     309     366     177     261  
 

General and administrative

    593     1,224     2,535     1,293     1,143  
 

Total stock-based compensation expense

  $ 728   $ 1,559   $ 2,997   $ 1,508   $ 1,529  
(2)
See Note 6 to our consolidated financial statements included elsewhere in this prospectus for further information about a certain divestiture.

(3)
See Note 15 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted earnings per share attributable to common stockholders, pro forma earnings per share attributable to common stockholders and the weighted average number of shares used in the computation of the per share amounts.
 
   
  December 31,    
 
 
   
  June 30,
2019
 
 
  2016   2017   2018  
 
  (unaudited)
   
   
  (unaudited)
 

Consolidated Balance Sheet Data:

                         

Cash and cash equivalents

  $ 3,011   $ 4,691   $ 127   $ 298  

Total assets

    32,159     34,961     41,324     63,082  

Working capital(1)

    (2,386 )   (1,000 )   (5,665 )   (547 )

Convertible preferred stock warrant liability

    931     1,645     4,589     5,782  

Total stockholders' deficit

    (85,742 )   (97,622 )   (95,115 )   (89,514 )

(1)
Working capital is defined as current assets less current liabilities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section titled "Selected Consolidated Financial Data" and the consolidated financial statements and related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for growing our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled "Special Note Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

        We envision a world where anyone who wants to have a child can do so. Our mission is to make dreams of parenthood come true through healthy, timely and supported fertility journeys. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients' employees are able to pursue the most effective treatment from the best physicians and achieve optimal outcomes.

        Progyny is a leading benefits management company specializing in fertility and family building benefits solutions in the United States. Our clients include many of the nation's most prominent employers across a broad array of industries. We launched our fertility benefits solution in 2016 with our first five employer clients, and we have grown our base of clients to over 80. We currently provide coverage to approximately 1.4 million employees and their partners (known in our industry as covered lives), who we refer to as our members. We have achieved this growth by demonstrating that our purpose-built, data-driven and disruptive platform consistently delivers superior clinical outcomes in a cost-efficient manner while driving exceptional client and member satisfaction. We have retained substantially all of our clients since inception, and our member satisfaction over that same time period is evidenced by our most recent industry-leading Net Promoter Score, or NPS, of +71 for our fertility benefits solution and +86 for our integrated pharmacy benefits solution, Progyny Rx.

        Fertility Benefits Solution.    Our fertility benefits solution includes providing members with access to effective and cost-efficient fertility treatments through our Smart Cycle plan design. Smart Cycles are proprietary treatment bundles designed by us to include those medical services available to our members through our selective network of high-quality fertility specialists. Medical services under our Smart Cycles include everything needed for a comprehensive fertility treatment cycle, including all necessary diagnostic testing and access to the latest technology (e.g., in the case of in vitro fertilization, or IVF, preimplantation genetic testing). We currently offer 17 different Smart Cycle treatment bundles, which may be used in various combinations depending on the member's need. Each Smart Cycle treatment bundle has a separate unit value (i.e., some have fractional values and some have whole values). Our clients contract to purchase a cumulative Smart Cycle unit value per eligible member. These can range from one to an unlimited unit value. Members, in consultation with their Patient Care Advocates, or PCAs, can choose their preferred provider clinics within our network and utilize the specific Smart Cycle treatment bundles necessary for the treatment pathway they determine throughout their fertility journey.

        In addition, we provide care management services as part of our fertility benefits solution, which include active management of our selective network of high-quality fertility specialists, real-time member eligibility and treatment authorization, member-facing digital solutions, detailed quarterly reporting for our clients supported by our dedicated account management teams and end-to-end comprehensive concierge member support provided by our in-house staff of PCAs. Clients can also add adoption and surrogacy reimbursement programs as part of this solution.

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        Progyny Rx.    We went live with our integrated pharmacy benefits solution in 2018. Progyny Rx can only be purchased by clients that purchase our fertility benefits solution. Progyny Rx provides our members with access to the medications needed during their fertility treatment. As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support.

        We currently serve over 80 self-insured employers in the United States across more than 20 industries, including three of the top ten Fortune 500 companies. Our current clients, who are industry leaders across both high-growth and mature industries and who range in size from 1,000 to 250,000 employees, represent 1.4 million covered lives.

        We sell our solutions through our in-house sales organization and, in many cases, we leverage our relationships with top benefits consultants to establish relationships with potential clients. Our sales team has broad experience in health benefits management and extensive long-term relationships with industry participants and benefits executives at large employers. Our sales team is organized principally by geography and account size and is responsible for identifying potential clients and managing the overall sales process. The success and effectiveness of our sales team is evidenced by the over 50 new clients that added our fertility benefits solution in 2019, and the fact that approximately 65% of our current clients terminated their existing fertility coverage with their conventional carrier to switch to Progyny.

        In addition to bringing on new clients, we have been able to grow our revenue by increasing services bought by existing clients. We are able to expand our services to existing clients in several ways, including by adding our Progyny Rx solution or by increasing the number of Smart Cycles provided to members. As part of our fertility benefits solution, we provide a dedicated account management team to each of our clients to support their day-to-day needs, resolve issues as they arise and review with them the detailed quarterly and annual reporting that we provide. Through these teams we are able to understand and anticipate our clients' needs and drive awareness of our solutions within our existing clients.

        Our revenue was $48.6 million and $105.4 million for the years ended December 31, 2017 and 2018, respectively, representing year-over-year growth of 117%. Our revenue was $48.4 million and $103.4 million for the six months ended June 30, 2018 and 2019, respectively, representing period-over-period growth of 113%. Our net loss from continuing operations was $(12.5) million and $(5.1) million for the years ended December 31, 2017 and 2018, respectively. Our net (loss) income from continuing operations was $(2.4) million and $4.0 million for the six months ended June 30, 2018 and 2019, respectively. Our Adjusted EBITDA was $(7.9) million and $1.4 million for the years ended December 31, 2017 and 2018, respectively. Our Adjusted EBITDA was $0.3 million and $8.9 million for the six months ended June 30, 2018 and 2019, respectively. See the section titled "Prospectus Summary—Summary Consolidated Financial Data—Non-GAAP Financial Measure—Adjusted EBITDA" for the definition of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations. Our fertility benefits solution represented 100% and 95% of our total revenue for the years ended December 31, 2017 and 2018, respectively, and 94% and 83% of total revenue for the six months ended June 30, 2018 and 2019, respectively. Our Progyny Rx solution, which went live in 2018, represented 5% of our total revenue for the year ended December 31, 2018 and 6% and 17% of total revenue for the six months ended June 30, 2018 and 2019, respectively.

Visibility and Revenue Model

        We believe we have an attractive investment profile given the visibility and predictability of our revenue model and our ability to retain substantially all of our clients since we launched our fertility

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benefits solution in 2016. Our clients primarily contract with us to provide our fertility benefits solution and, where added on by our clients, our Progyny Rx solution. Our revenue has both a utilization-based component and a population-based component, as follows:

    Utilization Component.  Clients pay us for the fertility benefits and Progyny Rx solutions utilized by their employees. With respect to the fertility benefits solution, we bill clients for Smart Cycles in accordance with our bundled case rates, which vary by the type of fertility service rendered and clinic location. Case rates include all third-party fertility specialists, anesthesiology and laboratory services, as well as all of our care management services. With respect to Progyny Rx, we bill the client for the fertility medication dispensed to their employees in connection with the authorized fertility treatments. Medication fees also include our formulary management, drug utilization review and cost containment services and other care management services.

    Population-Based Component.  Clients who purchase our fertility benefits solution also typically pay us a per employee per month fee, or PEPM fee, which is population-based. This allows us to provide access to our PCAs for fertility and family building education and guidance and other digital tools to all of our members, regardless of whether they ultimately pursue fertility treatment. PEPM fees represented 0% and 1% of our total revenue for the years ended December 31, 2017 and 2018 and 1% for each of the six months ended June 30, 2018 and 2019.

        Our revenue in a given year is determined by both the utilization of our fertility benefits and Progyny Rx solutions by our members and the number of members enrolled in our clients' benefits plans. Each year, we contract directly with new clients for our fertility benefits solution and, where added by the client, our Progyny Rx solution. Given that the majority of our clients contract with us for a January 1st benefits plan start date, our sales cycle follows the conventional healthcare benefits cycle, which concludes by the end of October of the prior year to allow for benefits education and annual open enrollment to occur in November. As a result, our revenue model provides visibility into our financial performance for the following year once contracts are agreed upon. Revenue forecasting for the next year is determined by the number of members enrolled and the estimated utilization, based on our historical experience, of fertility treatments and fertility medications.

        Similarly, for existing clients, any changes in plan designs are typically elected by the end of October so that clients can inform their employees of the benefits during the open enrollment period ahead of a January 1st plan year start. This timeline, together with existing hiring trends and information provided by any client regarding their employee hiring plans, provides us visibility into the level of benefits to be provided for the upcoming plan year and an estimated number of enrolled members.

        Given the scale and geographical distribution of our members and the historical utilization of our services by those members, the utilization of our fertility benefits and Progyny Rx solutions has become relatively predictable for our existing clients. Likewise, the utilization rate for new clients as a whole has become relatively predictable based on the historical utilization of our members across our broader existing client base. Finally, it has been our experience that utilization patterns from the early months of the plan year are a reliable indicator of utilization for the remainder of the year on a client-by-client basis.

Key Factors Affecting Our Performance

        Expanding Our Client Base.    We believe there is substantial opportunity to continue to grow our revenue through sales to new clients. Our addressable market is large self-insured employers. There are approximately 8,000 self-insured employers in the United States (excluding quasi-governmental entities, such as universities and school systems, and labor unions) who have a minimum of 1,000 employees, representing approximately 69 million potential covered lives in total. Our current member base of 1.4 million represents only 2% of our total market opportunity. We intend to continue to drive new client acquisition by investing significantly in sales and marketing to engage, educate and drive

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awareness of the unmet need around fertility solutions among benefits executives. We also increase brand awareness and adoption with self-insured employers by leveraging our strong relationships with benefits consultants. In particular, we are focused on expanding the number of clients with more than 2,500 covered lives. The following table highlights the number of active clients and covered lives as of the end of the respective periods.

 
  As of December 31,   As of June 30,  
 
  2017   2018   2018   2019  
Client Tier (Members)
  Clients   Members   Clients   Members   Clients   Members   Clients   Members  

Up to 2,500

    5     7,400     7     10,800     6     8,400     16     28,400  

2,501 - 10,000

    8     58,300     15     98,300     16     101,300     42     215,100  

10,001 - 50,000

    4     92,800     7     180,700     7     181,200     17     367,500  

Greater than 50,000

    1     75,500     4     430,400     4     419,600     5     710,600  

Total

    18     234,000     33     720,200     33     710,500     80     1,321,600  

        Importantly, as we have continued to grow, we have meaningfully diversified our client base across more than 20 different industries currently from just two industries when we launched our fertility benefits solution in 2016. We are expanding our client base within each industry and have an industry-specific strategy that enables us to most effectively target our addressable market. Because our clients within an industry compete with each other for employees, we believe our solutions are increasingly viewed as an important way for them to differentiate from, or remain competitive with, one another. Additionally, we believe that our expanding presence has resulted in a heightened awareness of the need to offer fertility benefits and has informed the market of the value we provide to our clients and our members, which we believe also helps facilitate growth. In addition, we are continuously utilizing our established client relationships to evaluate other potential fertility solutions that could benefit our members and simultaneously drive growth. Our ability to attract new clients will depend on a number of factors, including the effectiveness and pricing of our solutions, offerings of our competitors, the effectiveness of our marketing efforts to drive awareness and the demand for fertility benefits solutions overall. We define a client as an organization for which we have an active contract in the period indicated. We count each organization we contract with as a single client including divisions, segments or subsidiaries of larger organizations to the extent we contract separately with them.

        Membership Growth and Benefits Utilization.    A key driver of our revenue is the number of members we serve and the rate at which they utilize their fertility benefits. As our client base has grown, our membership has grown from approximately 110,000 members in 2016 when we launched our fertility benefits solution to 1.4 million members currently.

        The following table highlights the number of assisted reproductive treatment, or ART, cycles performed for Progyny members and the member utilization rates for each of the periods presented.

 
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2017   2018   2018   2019  

Assisted Reproductive Treatment (ART) Cycles(1)

    3,517     7,099     3,209     6,005  

Utilization - All Members(2)

    1.69 %   1.25 %   0.77 %   0.86 %

Utilization - Female Only(2)

    1.39 %   1.02 %   0.64 %   0.73 %

(1)
Represents the number of ART cycles performed, including IVF with a fresh embryo transfer, IVF freeze all cycles/embryo banking, frozen embryo transfers and egg freezing.

(2)
Represents the member utilization rate for all services, including but not limited to, ART cycles, initial consultations, IUIs and genetic testing. The utilization rate for all members includes all unique members (female and male) who utilize the benefit during that period while the utilization rate for female only includes only unique females who utilize the benefit during that period. For the purposes of calculating utilization rates in any given period, the results reflect the number of unique members utilizing the benefit for that period. Individual periods cannot be combined as member treatments may span multiple periods.

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        We believe we are well positioned to realize organic revenue growth from our existing clients as our clients and their respective employee bases grow, thereby providing an opportunity for more employees to utilize their fertility benefits. In addition, based on historical experience, the rate at which members of our existing clients choose to begin their fertility journey and utilize our services has grown as the trend of individuals choosing to start a family later in life continues and more employees become aware of their existing benefits and the experience of their co-workers who have used them. We believe the combination of these factors results in a meaningful opportunity for revenue expansion with our existing client base. Our ability to grow our revenue from our existing client base will depend on our performance and the growth of the employee bases as well as the awareness of the benefits within our clients.

        Increasing Adoption of Our Offerings within Our Client Base.    We believe there is a significant opportunity to grow our revenue by selling enhanced levels of our services and add-on solutions to our existing client base. For example, a client can expand the fertility benefits they offer to their employees by increasing the number of Smart Cycle units under their benefits plan (i.e., from two to three Smart Cycles per household). For example, 9% of our existing 2018 clients increased their Smart Cycle benefit for their 2019 benefits plan year. In addition, our fertility benefits solution clients can purchase our add-on Progyny Rx solution. We introduced Progyny Rx in the third quarter of 2017 and went live with a select number of clients in January 2018. Currently, 60% of our clients are utilizing this solution, including 68% of the clients that went live in 2019. We believe our sales and marketing capabilities play an important role in informing and educating clients about the additional value and impact we can provide to them and their members by enhancing their benefits program with us. Our ability to sell more of our services to our existing client base will depend on our performance and our ability to demonstrate the value of our solutions.

        Enhancing the Depth and Breadth of Our Fertility Benefits Offering.    Our ability to stay at the forefront of the fertility benefits market and continue to achieve superior outcomes as it continues to evolve is a key determinant of our success. We believe the combination of our Medical Advisory Board, consisting of 10 nationally recognized fertility clinicians (i.e., reproductive endocrinologists or embryologists), our relationships with our selective network of high-quality fertility specialists and our ability to collect, track and report our proprietary fertility outcomes data to each and every client provides us with differentiated insights into fertility care delivery and support. In addition, we believe we have positive and collaborative relationships with our clients that offer us additional insights into their needs. To date, we have identified multiple ways we believe we can potentially expand our services including vertical integration of services we currently outsource, such as laboratory and pharmacy services. In addition to new solutions, we believe our platform is well positioned to expand our client base beyond self-insured employers to support quasi-governmental entities, such as universities and school systems, and labor unions. We will continue to evaluate all of these opportunities as our business continues to expand.

        Purpose-Built Platform Designed for Scale.    As part of our strategic plan prior to and in conjunction with launching our fertility benefits solution, we designed a purpose-built platform with the intent of sustaining significant growth and supporting a much larger client base over time. One of our main objectives in designing our platform was to ensure that we could achieve this growth without any dilution to or decrease in the level and quality of services we provide, which we believe we have demonstrated to date through the annual growth in our client base. We believe this is further supported by our NPS score and our retention rate, as we have been able to retain substantially all of our clients since we launched our fertility benefits solution in 2016. We regularly evaluate and measure our performance relative to our internal benchmarks and historical outcomes to ensure our standards are maintained and reinvest in our platform where needed. We believe we are capable of continuing to rapidly acquire more clients and members without significant infrastructure enhancements or capital expenditures, including with regard to our relatively newer offering, Progyny Rx. If we were to further expand our solutions into new adjacencies, it is possible that we would have to make additional investments in our platform.

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Components of Results of Operations

    Revenue

        Revenue includes fertility benefits solution revenue, pharmacy benefits solution revenue and PEPM fees.

    Fertility Benefits Solution Revenue

        Fertility benefits solution revenue primarily represents utilization of our fertility benefits solution. Our client contracts are typically for a three-year term and pricing for this solution is established for each Smart Cycle treatment bundle, based in part on when the client first became a client and the number of members covered under the solution. Fertility benefits solution revenue includes amounts we receive directly from members, including deductibles, co-insurance and co-payments associated with the treatments under the fertility benefits solution. Revenue is recognized based on the negotiated price with our clients and includes the portion to be paid directly by the member. Revenue is recognized when the Smart Cycle is completed for a member. Revenue is also accrued for authorized Smart Cycles rendered based on member appointments scheduled with a fertility specialist in our network but for which no claim has yet been reported, net of an allowance for appointment cancellations.

    Pharmacy Benefits Solution Revenue

        Pharmacy benefits solution revenue primarily represents utilization of Progyny Rx. For clients who contract for the fertility benefits solution, we offer an add-on, separate, fully integrated pharmacy benefits solution designed by us. Progyny Rx provides our members with access to our formulary plan design, simplified authorization, prescription fulfillment and timely delivery of the medications used during treatment through our network of specialty pharmacies, as well as provides our members with medication administration training and other pharmacy support services. Prescription drugs are dispensed by our contracted mail order specialty pharmacies. Revenue related to the dispensing of prescription drugs by the specialty pharmacies in our network includes the prescription fees negotiated with our clients, including the portion that we collect directly from members (deductibles, co-insurance and co-payments). The contractual fees agreed to with our clients are inclusive of the cost of the prescription drug from our specialty providers, less any applicable discounts, as well as the related clinical and care management services. Revenue from these arrangements are recognized when the drugs are dispensed. This solution was introduced in the marketplace in the third quarter of 2017 and went live with a select number of clients in January 1, 2018.

    Per employee per month (PEPM) fee

        Clients who purchase our fertility benefits solution also pay us a population based PEPM fee which provides access to our PCAs for fertility and family building education and guidance and other digital tools for all of our covered members, regardless of whether or not they ultimately pursue fertility treatment. We earn a PEPM fee for the majority of our clients. Revenue from the PEPM fee is billed and recognized monthly based upon the contractual fee and the number of employees at that specific client for that month.

    Cost of Services

        Our cost of services has three primary components: (1) fertility benefits services; (2) pharmacy benefits services; and (3) vendor rebates.

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    Fertility Benefits Services

        Fertility benefits services costs include: (1) fees paid to provider clinics within our network, labs and anesthesiologists; (2) costs incurred in connection with our care management service functions, which include employee-related expenses (e.g. salaries and benefits) for teams such as the Provider Account Management, PCA and Provider Relations teams; and (3) associated overhead costs, including related information technology support costs and depreciation and amortization. Our contracts with provider clinics are typically for a term of one to two years.

    Pharmacy Benefits Services

        Pharmacy benefits services costs include: (1) the fees for prescription drugs dispensed and clinical services provided during the reporting period by our specialty pharmacy partners; (2) costs incurred in connection with our care management service functions, which include employee-related expenses (e.g., salaries and benefits) for teams such as the PCA and Provider Relations teams; and (3) associated overhead costs, including related information technology support costs and depreciation and amortization. Contracts with the specialty pharmacies are typically for a term of one year.

    Vendor Rebates

        We receive a rebate on certain medications purchased by our specialty pharmacies. Our contractual arrangements with pharmaceutical manufacturers provide for us to receive a rebate from established list prices, which is paid subsequent to dispensing. These rebates are recorded as a reduction to cost of services when prescriptions are dispensed.

    Gross Profit and Gross Margin

        Gross profit is total revenue less total cost of services. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors including the geographic location where treatments are performed, as well as pricing with each of our clients, provider clinics, labs, specialty pharmacies and pharmaceutical companies, all of which are negotiated separately, have different contracting start and end dates and durations which are not coterminous with each other. Additionally, staffing levels necessary to deliver our care management services will continue to grow as we continue to add clients and their associated members.

    Operating Expenses

        Our operating expenses consist of sales and marketing and general and administrative expenses.

    Sales and Marketing Expense

        Sales and marketing expense consists primarily of employee related costs, including salaries, bonuses, commissions, benefits, stock-based compensation, other related costs, and an allocation of our general overhead for those employees associated with sales and marketing. These expenses also include third-party consulting services, advertising, marketing, promotional events, and brand awareness activities. We expect sales and marketing expense to continue to increase in absolute dollars as we continue to invest and grow our business.

    General and Administrative Expense

        General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead for those employees associated with general and administrative services such as executive, legal, human resources, information technology, accounting, and finance. These expenses also include

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third-party consulting services and facilities costs. We anticipate that we will incur additional costs for employees and professional fees and insurance and related third-party consulting services in anticipation of readiness to become and operate on an ongoing basis as a public company.

    Other (Income) Expense, net

        Other expense includes interest expense and stock warrant valuation adjustment.

    Benefit (Provision) for Income Taxes

        We are subject to income taxes in the United States. As of December 31, 2018, and 2017, we recorded a full valuation allowance for our deferred tax assets based on our historical loss and the uncertainty regarding our ability to project future taxable income. In future periods, if we are able to generate income, we may reduce or eliminate the valuation allowance.

Results of Operations

        The following tables set forth our results of operations for the periods presented and as a percentage of revenue for those periods:

 
  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2017   2018   2018   2019  
 
   
   
  (unaudited)
 
 
  (in thousands)
 

Consolidated Statements of Operations Data:

                         

Revenue

  $ 48,584   $ 105,400   $ 48,415   $ 103,365  

Cost of services(1)

    41,184     85,966     39,443     81,949  

Gross profit

    7,400     19,434     8,972     21,416  

Operating expenses:

                         

Sales and marketing(1)

    4,258     7,285     3,494     5,463  

General and administrative(1)

    14,147     15,601     7,640     10,489  

Total operating expenses

    18,405     22,886     11,134     15,952  

(Loss) income from operations

    (11,005 )   (3,452 )   (2,162 )   5,464  

Other expense, net

    1,454     3,441     1,075     1,359  

(Loss) income before income taxes

    (12,459 )   (6,893 )   (3,237 )   4,105  

Benefit (provision) for income taxes

    3     1,777     835     (64 )

Net (loss) income from continuing operations

  $ (12,456 ) $ (5,116 ) $ (2,402 ) $ 4,041  

(1)
Includes stock-based compensation expense as follows:
   
  Year Ended
December 31,
  Six Months Ended
June 30,
 
   
  2017   2018   2018   2019  
   
   
   
  (unaudited)
 
 

Cost of services

  $ 26   $ 96   $ 38   $ 125  
 

Sales and marketing

    309     366     177     261  
 

General and administrative

    1,224     2,535     1,293     1,143  
 

Total stock-based compensation expense

  $ 1,559   $ 2,997   $ 1,508   $ 1,529  

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  Year Ended
December 31,
  Six Months Ended
June 30,
 
 
  2017   2018   2018   2019  
 
   
   
  (unaudited)
 

Consolidated Statements of Operations Data, as a percentage of revenue:

                         

Revenue

    100 %   100 %   100 %   100 %

Cost of services

    85     82     82     79  

Gross profit

    15     18     18     21  

Operating expenses:

                         

Sales and marketing

    8     7     7     5  

General and administrative

    30     15     16     10  

Total operating expenses

    38     22     23     15  

(Loss) income from operations

    (23 )   (4 )   (5 )   5  

Other expense, net

    3     3     2     1  

(Loss) income before income taxes

    (26 )   (7 )   (7 )   4  

Benefit (provision) for income taxes

        2     2      

Net (loss) income from continuing operations

    (26 )%   (5 )%   (5 )%   4 %

Comparison of Six Months Ended June 30, 2018 and 2019

Revenue

 
  Six Months
Ended June 30,
   
 
 
  2018   2019   % Change  
 
  (unaudited)
(dollars in thousands)

   
 

Revenue

  $ 48,415   $ 103,365     113 %

        Revenue increased by $55.0 million, or 113%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. This increase is primarily due to a $40.5 million or 89% increase in revenue from our fertility benefits solution and a $14.5 million or 515% increase from sales of our Progyny Rx solution. The increase in revenue from our fertility benefits solution was primarily due to an increase in the number of clients. Our Progyny Rx solution was introduced in the marketplace in the third quarter of 2017 and went live with a select number of clients in January 1, 2018. Our revenue growth for the six months ended 2019 benefited from having Progyny