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Good day, everyone, and welcome to the Progyny, Inc. Third Quarter 2023 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, James Hart. Sir, the floor is yours.

Thank you, Matthew, and good afternoon, everyone. Welcome to our third quarter conference call. With me today are Pete Anevski, CEO of Progyny; Michael Sturmer, our President; and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions. Before we begin, I'd like to remind you that our comments and responses to your questions today reflect management's views as of today only, and will include statements related to our financial outlook for both the third quarter and full year 2023, and the assumptions and drivers underlying such guidance, including the impact of our sales season and client launches and our expected utilization rates and mix, our anticipated number of clients and covered lives for 2025 [Ph], the expected benefits of our pharmacy program partner agreements, including future conversion of adjusted EBITDA to operating cash flow, the potential benefits of our solution, our ability to acquire new clients and retain and upsell existing clients, our market opportunity, and our business strategy, plans, goals, and expectations concerning our market position, future operations, and other financial and operating information, which are forward-looking statements under the Federal Securities Law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, as well as other important factors. For a discussion of the material risks, uncertainties, assumptions, and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our investor relations website. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin on incremental revenue. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, are available in the press release, which is available at investors.progeny.com. I would now like to turn the call over to Pete.

Thank you, Jamie, and thanks, everyone, for joining us this afternoon. We're pleased to report that Progyny had a very strong third quarter, both in terms of our financial performance, as well as in the continued execution of our go-to-market activities. Those activities, which include new client acquisition, the retention of existing clients, and the further diversification of our business by expanding into new industries, while also adding new channel partners, have positioned us for another year of strong growth in 2024, with 1.3 million new covered lives sold, as well as a near 100% retention rate for the eighth year in a row. Before I get into the details of the sales season, let me begin with the highlights of our financial performance. We had record quarterly revenue of $281 million, reflecting 37% growth over the prior year period, as well as record adjusted EBITDA, which increased 43% over the third quarter of 2022 to $50 million. This yielded an adjusted EBITDA margin of 17.8%, which was an 80 basis point increase over the prior year period. As we've seen throughout 2023, our results this quarter once again reflect that member engagement remains healthy, demonstrating the importance of companies offering this benefit as members pursue the treatments they need in order to achieve their family building goals. As the prevalence of infertility continues to rise, with more people now needing assistance than ever before, and with millennials routinely citing family building benefits as one of the most relevant factors when deciding where they want to work, we've seen how fertility and family building solutions have increasingly become important to employers as they look to meet their recruitment, satisfaction, and retention goals. Progeny's continued focus on value to our clients and member satisfaction remains the foundation for our ability to lead and grow the market through a combination of a unique plan design, active management of the member experience, and the collaborative relationships we forged with the providers in our proprietary network. We continue to distinguish ourselves as a provider of choice for fertility and family building solutions amongst the world's largest leading brands. We're pleased with this year's sales season, highlighted by adding 1.3 million new lives from over 85 new client commitments, demonstrating the market's continued adoption of family building solutions, and further solidifying our leadership position. Because a small number of these clients both sold and launched in this sales year, we expect over 460 clients and approximately 6.7 million covered lives in 2024. And to put this into perspective, at the time of our IPL just four years ago, we had 87 clients and approximately 1.5 million covered lives, which means we have more than quadrupled our clients and covered lives since 2019. Even with this sustained track record of success, and once our newest clients have all gone live, we still remain at a very early stage of penetrating our market opportunity with just a mid-single-digit share of either the 8,000 companies or the 100 million covered lives in our current addressable market. The clients we've added for 2024 reflect an exceptionally diverse cohort, representing a wide range of industries, including chemicals manufacturing, hospitality, healthcare, energy, transportation, software, and telecommunications, to name just a few. And our book of business now represents approximately 45 different verticals. We continue to see strong momentum through the flywheel effect, where our initial win in an industry lays the groundwork for future success within that vertical as the other brands in that industry look to re-establish parity with the early adopters. A good example of this is the labor market, where we won our first client just a year ago and have had strong second-year success, winning new clients across different types of TAP heartland populations. As just one final anecdote of this dynamic, a year ago, we won our first professional sports team client, and this year, we not only won additional sports teams, we also won our first professional sports league. We also continue to see a broad range in the size of the newest clients, spanning from 1,000 to well over 100,000 lives, which further demonstrates that fertility has become a relevant benefit for any employer, regardless of the size of their operations or the industry in which they operate. This season, we also expanded into our first federal government population, representing approximately 300,000 covered lives. Government plans are a large and attractive new channel for us, particularly as those groups continue to look to enhance their benefits and keep parity to the benefits that their corporate counterparts provide. Given the stringent requirements that any provider must meet in order to be approved to serve the federal market, we believe the flywheel effect has the potential to be even more impactful within government than what we've seen amongst corporate employers, which would make this an accelerator to our long-term growth. At this point, the federal government has defined a fertility benefit more narrowly than what we typically see. To meet these requirements, we modified our usual scope of services and are expecting to see meaningfully lower financial contribution per engaged member from this population in 2024. We are excited about this unique opportunity as there could be increased contribution over time if the coverage is broadened and additional lives are won, similar to what we see with our corporate clients. Setting aside this unique client, the remainder of our newest clients have continued to select robust levels of coverage, offering two or three smart cycles on average, consistent with what we've historically seen. This year, we've also achieved our strongest ever adoption rate for Progyny Rx with 98% of the newest clients taking the pharmacy benefit. This comes on the heels of last year's 97% take rate. We believe our extraordinary success in selling the integrated solution is due to the significant combined cost savings we deliver with integrated medical and RX services, as well as our superior member experience that eliminates the risk of treatment delays, while also guiding the patient through a complex medication protocol. Once all these newest clients launch in combination with the existing clients who added the RX benefit for 2024, we anticipate that approximately 93% of our clients will have the integrated solution. While new sales activity is a critical focus for us and is the largest contributor to our incremental growth each year, retaining existing clients and adding new services are also significant priorities, and we're extremely pleased to have achieved a near 100% retention rate for the eighth straight year in a row, while also expanding the services that we're providing to our clients. We believe our sustained success with retaining an extraordinarily high rate of our clients and lives underscores the demonstrable value that our solution delivers year after year, especially when you consider that our clients include many of the most analytical and data-driven companies in the world. Further evidence of the value inherent in our services, we continue to see existing clients looking to expand their Progyny benefit for 2024, with more than 20% of clients increasing their programs in some way for next year, either by adding more smart cycles, taking Progyny Rx, covering more services such as donor tissue or fertility preservation, or expanding their adoption and surrogacy benefits in recognition of the many different pathways to parenthood. Of course, employers typically have many priorities with respect to their health plan and benefit strategies, and this year was more magnified in this regard. In 2023, we've seen companies evaluating a number of areas from their concerns on overall medical cost trends, which resulted in increasing evaluations of health plans and benefit strategies, as well as the rise of demand around GLP-1 and the overall ongoing macroeconomic uncertainty. Even with these competing factors, we've seen that fertility has remained a significant priority, and we are entering next year with meaningful tailwinds behind us. As in every year, a portion of the prospects in our pipeline end the sales year as of not now due to the competing priorities that I discussed previously. This year is no different, and we have a healthy number of opportunities remaining in our active pipeline that are carrying over into next year. We've gained considerable expertise over the years at effectively managing multi-year sales cycles, and in fact, in each of our previous selling seasons, most of our earliest wins have been conversions of what had once been a not now prospect, and we would expect the same for 2024. Accordingly, we're excited to be entering next year with a very healthy pipeline of advanced opportunities, which of course will be in addition to whatever new pipeline that we build through all of our traditional methods, including the channel partners who play a key role in broadening our reach and improving sales efficiency. Earlier this year, we discussed the new partnerships we forged with a number of leading organizations, Evernorth, Children's Hospital Association, Quantum Health, in addition to our existing relationships with CVS Point Solutions. And though we're only in the early initial stages with our newest partnerships, we're pleased with the progress we've made and feel well-positioned as we look into 2024. To add to this already strong list, we're pleased to announce that we recently signed a partnership with Vistia [Ph] Health, who has selected Progyny to be its preferred vendor for fertility and family building benefits, giving us access to the customers in their portfolio, which includes the clients of one of the largest health plans in Southeastern Pennsylvania. As with our other distribution partner relationships, when a Vistia Health client is looking to add fertility to their benefit coverage, Progyny will be the preferred fertility solution and will collaborate with them during the sales process. We're excited about the potential of this new relationship and view this partnership as enhancing our market presence even further with health plans in 2024, while also demonstrating the strength of our competitive position and our differentiation in the market. With that, let me now turn the call over to Mark to discuss the quarter in more detail and provide our expectations for the balance of the year.

Thank you, Pete, and good afternoon, everyone. I'll first take you through our third quarter results and then provide our expectations for the remainder of the year. Revenue in the third quarter was $280.9 million, reflecting growth of 37%. The growth versus the prior year was primarily due to an increase in the number of clients and covered lives as compared to a year ago. As of September 30th, we had 392 clients with at least 1,000 lives, representing an average of 5.4 million covered lives over the third quarter, which was consistent with what we told you to expect on our call in August. This compared to 282 clients and an average of 4.5 million covered lives a year ago, reflecting 21% growth in lives over the prior year. I'll remind you that we added a significant number of lives in the year ago period, more than 200,000, primarily through early and off-cycle launches, whereas a lesser number of lives were added in the current period. And while we have separately seen an impact from workforce reductions at some of our clients this year, the level we saw was both consistent with what we had expected, and this impact has continued to be fully offset by other clients that have been expanding their head count, either through hiring or M&A. In fact, this offsetting dynamic is consistent with what the Labor Department has been reporting throughout the year, with an average of well over 200,000 jobs added each month and unemployment remaining steadily below 4%. Looking at the components of the top line, medical revenue grew 35% over the third quarter last year to 175.1 million, again, due to our growth in clients and covered lives, while pharmacy revenue increased 39% in the quarter to 105.8 million. Turning now to our member engagement metrics, more than 15,000 ART cycles were performed during the third quarter, reflecting a 35% increase as compared to the third quarter last year. The female utilization rate, which most closely corresponds to our financial results, was 0.49% this quarter, an increase from 0.44% a year ago, and in line with the levels we've seen throughout the first nine months of 2023. We believe the level engagement we're seeing is reflective of both the high priority members continue to place on achieving their family building goals, as well as the increasing need for treatment given the growing prevalence of infertility as a medical condition. Nonetheless, I'll remind you that utilization rates can vary from period to period due to a number of factors, including the time of year, the timing of new client launches, demographic mix, and plan design. Turning now to our margins and operating expenses, gross profit increased 36% from the third quarter last year to $62.6 million, yielding a 22.3% gross margin, which was comparable to the prior year period, even as we continue to invest in our care management services. Year-to-date, gross margin has expanded by 70 basis points over the first three quarters of 2022, reflecting the efficiencies that we've continued to realize through our growing economies of scale. As we look over the remainder of the year, I'll remind you that the third quarter margin is typically higher than what we see in the fourth quarter, as Q4 reflects the incremental headcount that we bring on board in support of the significant step up in cover lives expected as of January 1st. Sales and marketing expense was 5.3% of revenue in the third quarter, a slight improvement from the 5.4% in the year ago period, as the investments we've made to increase our go-to-market resources and channel partner relationships continue to be offset by the leverage we gain through our client acquisition and retention activities. G&A costs were 10.5% of revenue this quarter, as compared to 11.5% in the year ago period. The 100 basis point improvement is primarily due to the efficiencies that we continue to realize in our back office operations, further demonstrating the inherent nature of our expanding margins on G&A as functions on our G&A functions as we grow. With our strong top line performance and the operating efficiencies we've realized, adjusted EBITDA grew 43% this quarter to $50 million, and adjusted EBITDA margin increased by 80 basis points to 17.8%. Over the first three quarters of the year, adjusted EBITDA margin on incremental revenue was 20.8%. We continue to believe this measure highlights our rate of margin capture as we expand the business, and is useful as a forward indicator of where the business is capable of moving. Third quarter net income was $15.9 million, or $0.16 per diluted share. This compared to net income of $13.2 million, or $0.13 per share in the year ago period. Higher income in EPS as compared to a year ago primarily reflect the operating efficiencies realized on our higher revenues, which was only partially offset by higher stock comp expense and higher tax expense in the current period. Turning now to our cash flow and balance sheet, operating cash flow during the quarter was $54.2 million, which compares to $20.9 million generated in the year ago period. The improvement reflects our higher profitability as well the timing of certain working capital items in both periods. Over the first nine months of the year, operating cash flow of $151 million compares to $29 million generated over the same period last year, with the improvement due primarily to our increased profitability as well as the amended rebate agreement terms that we discussed with you last quarter. As of September 30th, we had total working capital of $418 million, reflecting over $335 million in cash, cash equivalent, and marketable securities, and no debt. Now turning to our expectations for the fourth quarter and full year 2023. Given the strong results we've achieved over the first three quarters of the year, we're pleased to be in a position to raise our guidance again for the third consecutive quarter. For the full year, we now expect revenue to be between $1.087 billion to $1.095 billion, representing growth of 38% to 39%. We are also raising our guidance on profitability. We now expect 2023 adjusted EBITDA of between $186 million to $188.5 million. For net income, we expect between $58.3 million to $60 million, or between $0.58 and $0.59 earnings per share on the basis of approximately 101 million fully diluted shares. Our net income projections do not contemplate any discrete tax items, including any income tax benefit related to equity compensation activity. To the extent that activity occurs, we will continue to benefit from those discrete tax items. With this guidance, we are expecting to see the continued expansion of our margins in 2023, with adjusted EBITDA margin incremental revenues in excess of 20%. For the fourth quarter, we are projecting revenue of between $268.3 million to $276.3 million, reflecting growth of between 25% and 29%. For fourth quarter adjusted EBITDA, we expect between $42.2 million to $44.7 million, along with net income of between $9.7 million and $11.4 million, or between $0.10 and $0.11 earnings per share on the basis of approximately 102 million fully diluted shares. With that, we'll open it up to the call for questions. Operator, can you please provide the instructions?

Certainly. [Operator Instructions] Your first question is coming from Anne Samuel from JPMorgan. Your line is live.

Hey, guys. Congrats on the quarter, and thanks for the question. I was hoping maybe you could provide a little bit more color on the government clients. You said that they differ slightly in their benefit versus your other clients, and I was just hoping you could help us understand, maybe how that differs from a coverage standpoint, and then just how to think about the difference in revenue contribution for those 300,000 lives versus your more traditional clients. Thanks.

Sure. Hi, this is Michael. So, a couple things on that. First off, the federal plans are governed by OPM, and they've recently, this first year, expanded into fertility coverage. In doing that, the expansion was really focused around on the pharmacy side and some light coverage on the medical side for IUI. As for the services that we're providing, the medical and the pharmacy is not flowing through us, and so the services that we're providing for the governmental group is primarily focused around our PCA and case management, as well as services validation. And so, for those two reasons, to your question, the contribution is really going to be a fraction of what we would normally expect. All of that said, we're really excited to be at the ground floor of these new added benefits within the federal government. As you know, it's a high bar for us. It's a high bar to get over to begin contracting in this space. And, we do see, continued opportunity as they evaluate their benefits against other employers over the course of the coming years. And that provides opportunity for expansion, not just similar that we see to what we see on the on our employer business in services expanding over the years.

Very helpful. Thank you.

Thank you. Your next question is coming from Scott Schoenhaus from KeyBanc. Your line is live.

Hi, team. Thanks for taking the question. So, another strong selling season. If you back out the 300,000 lives from the federal contract, you're getting to the kind of the same selling season we saw last year. Just, really strong ability to win new clients. What are you seeing in the marketplace? Are you having to be more competitive in the market with new competitors entering this year versus last year? Just wanting to kind of understand the selling season this year. You saw another really strong year there. So, trying to get more color there. Thanks.

Yes. So, I'll start and then I'll let Michael add any comments. It was not more competitive. In fact, I would argue it might have been a little less competitive. Our overall largest competitor remained the, all the payers throughout the country. And then we also do see competition from the DC-backed competitors. Positives relative to the competitive environment were, known losses to competitors were actually way lower than last year. And there were more not-nows, if you will, overall, as opposed to sort of known losses. Again, each year we continue to grow our market share. And even against our competitors collectively, we believe we do a good job in terms of continuing to penetrate the market and expand and grow market share. But the environment wasn't, any more impacted, if you will, and in some places arguably, slightly less from competitors. Overall, I think the, very positive selling season, as you pointed out, given the backdrop of, both the continued uncertainty, the macroeconomic environment, given, concerns of some clients around overall medical trends, given, concerns of some clients as a result of those, medical trend costs, seemingly evaluating their overall health plans and their overall PVMs and what they're doing overall with their medical plans, on a heightened basis, if you will, this year. And even, as they reviewed sort of alternatives, whether it's the GLP-1s that are out there or other things, we're really pleased with the selling season.

Yes, the only I would add is, from a priority perspective, the strength of the selling season also represents the priority that employers continue to put on family building and on these benefits. So, I'm happy for how that turned out this year.

Great. Thanks for all that color, guys.

Thank you. Your next question is coming from Jailendra Singh from Truist Securities. Your line is live.

Thank you, and thanks for taking my question. First, a quick clarification follow up on Anne's question on government plan. Are you implying that margins on that contract could be relatively higher even at a smaller revenue base or similar? And my main question is on 4Q guidance, just trying to understand why fourth quarter guidance implies a sequential step down on both revenue and margins. I can't recall if you guys ever had a year where revenues declined from Q3 to Q4, and with some pull forward, some intra-year launches happening this year as well. I thought it would actually go up. Just curious on that trend.

Yes, so I'll do the first question and I'll give Mark, I'll let Mark handle the second question, Jailendra. Regarding your first question, yes, margins will be higher, but revenue will be lower. And that's sort of how you have to think about it relative to the overall contribution to the financial picture. It's probably the easiest way I could describe that. Mark, do you want to take the second?

Yes, so on the sequential guide, one of the things that you have to keep in mind that there are seasonal impacts that we see each year on, let's call it a same client basis. When you get into the end of the year, there are a number of clinics that close for routine maintenance, annual cleaning. Members actually will defer their treatments to avoid going through their treatments during the holiday periods and for other reasons. So there is a seasonal decline that hasn't been as evident in prior years because we had so many launches in Q2 and Q3 of large clients, for example, in last year that ramp up as they're going into Q4. So it's been a little bit masked, I think, by that. So that's really on the revenue side and that obviously impacts EBITDA margins as well. And the thing I would, again, point out, which was in the script, but that we build up our staff in Q4 as we're preparing to enter one, one we do a huge step up in members. And so the activity is very strong as we really begin the year. So we have to bring all those teams on, especially the member facing teams, throughout Q4 to be trained and prepared to do that. So we see a step down in EBITDA each year. And I think if you go back and look at the last couple of years, you'll see that the sequential change from Q3 to Q4 that we're now guiding to is pretty comparable to what we've seen in the last two years.

Okay. And if one follow-up, if I can, around utilization trends, I understand there could be some variability, but it has been pretty strong this year, 10 basis point year-over-year, which is pretty meaningful. How do you think about this trend, this metric longer term? Should we assume or consider 2023 trends as a new baseline, or you think there could be some variability even in the near term?

It's early to comment on utilization for next year. I will tell you that every year, as you combine your existing client base with the new client ads, the new client ads usually add slightly less utilization as an overall population than the existing clients, but there's usually some organic growth with the existing clients, which is why it's been balancing out. As we continue to grow, you're going to see maybe a little less impact of that, but overall, I wouldn't say that this is the new baseline. Every year, we look at utilization levels. We look at it early in the year, and we guide to what we're seeing at that time. Then obviously adjust, as we have this year, to the extent that we see any strength or changes in that, but I think it's early to comment on whether or not this is a new baseline or not relative to where we're at.

Great. Thanks a lot.

Thank you. Your next question is coming from Sarah James from Cantor. Your line is live.

Thank you. I was hoping to drill into the selling season a little bit more. First on the memory, the $1.3 million is a lot better than consensus was looking for, but it also implies about 1,000 lives per client uptick, so reversing the dip in 2023. How do you think about that trending forward? And then I was hoping you could also walk us through the math on the new client ads. I understand some of the 85 decided to start early, but I'm trying to bridge the 460 to where we are now and the 85 ads.

I'll do the second part of the question first. It's a weird echo. I'll do the second part of the question first. So relative to bridging the new client ads versus the expected clients for next year, what we've seen this year is much more normal than we've seen in prior years, if you exclude last year. New client starts during the year are small clients not having any meaningful contribution to incremental revenue relative to existing clients, but in terms of client counts, do start earlier and this year was no different. So if you just take the existing clients that we just reported that we're live with and take the 85 and subtract the delta in the math of what we are saying for next year, that's roughly how many new clients with a small amount of lives each have already launched this year. As it relates to the average per client, we sort of say this every year in our sales years, it's not a perfect science relative to who you add in which year and whether they're bigger or smaller, we try and win all of them and the averages sort of play out. I think the more relevant point for us in terms of where we're at relative to our addressable market is that there is plenty of opportunity relative to large and small clients that we can still go after and will and so the averages will play out whether they bounce around plus or minus a thousand as you point out in a given year, we sort of don't focus on that as much, we focus on winning as many as we can.

Great and second question here is on your partnerships. It's really exciting to see the announcements ramp up this quarter. How should we think about the pipeline potential for future partnership and how do you think about that materiality to your revenue growth?

Yes, I mean partners play a significant role in both pipeline activity as well as obviously closed and committed clients and business and we would expect that trend to continue. We're excited about the partnerships that we added this year. It's early in sort of the first year so we would expect those partnerships to continue to evolve and continue to increase in their impact and then, the new partnerships around FIFTIA [Ph] Health and the opportunity to partner with, our first, large regional health plan and importantly collaborating with them to offer the Progyny solution to clients of all sizes relative to the prior question. We're excited about that. We sort of don't go into detail on partner by partner of what that impact will be, but we're pleased with the ads of these new partnerships, especially since, especially on the health plan side, we really just started, recently focusing in that area.

Great, thank you.

Thank you. Your next question is coming from Richard Close from Canaccord. Your line is live.

Yes, thanks for the questions and congratulations. Pete, I was just wondering if you could talk a little bit about the not now and your thoughts about that. I mean, I know you talked about benefit changes and GLP-1s and just curious in terms of how much of a change that was this year during the selling season and thought process as these not nows go into the pipeline and opportunity to convert them next year.

Yes, this is Michael. So, each year there's always, there's always competing priorities and other priorities that employers are dealing with that get factored into the selling season and certainly factor into the not nows. We sort of, you know, Pete referenced a few of those in the script. You referenced one on the GLP-1s. Obviously, there was upward pressure on medical cost inflation in general. And then some of the macro uncertainties in the broader economic environment. Certainly, those all played a role in, what is on the minds of employers and prioritized with employers. But as I said in the prior question, fertility also remained. One of those priorities and so specifically in the sale season, we didn't hear specifically that, any one of those individual things drove a not now. Certainly, we didn't hear specifically that, you focus around GLP-1s drove a not now. But some combination of all of those priorities lead towards sort of the decision to wait on adding a family building benefit until the next year. That said, as Pete referenced in the prepared remarks, much like prior years, those not nows become a strong tailwind going into the next year. And certainly, we expect to see that trend continue as we go into 2024.

Okay. And as a follow up, I was curious on the partnerships. Can you just remind us in terms of is the go-to-market with those partners, the same across, the various partnerships that you discussed today? Or is there some nuance to different partnerships in terms of how you go to market?

Yes, I mean, they all they all have some general similarities to each other. And sort of where and how we're positioned, certainly from that last mile contracting perspective. But each one also has a slightly different approach on where and how we fit into maybe other services that they're providing, or where and how we fit into the medical coverage, or the pharmacy side of the equation, or from a more pure navigation perspective. So there's certainly similarities. But each one has nuances and differences in how we go-to-market. And we adjust to, we adjust to work with those partners as we launch and roll out to account for each of those different scenarios.

Okay, thank you.

Thank you. Your next question is coming from Allen Lutz from Bank of America. Your line is live.

Good afternoon, and thanks for taking the questions. Pete, you mentioned that more than 20% of current customers are increasing their programs by some amount, adding things like more smart cycles and covering more solutions. But is there any way to frame how much that's contributing to revenue? And then my follow up, you talked about with the not now, is there a way to frame kind of the top of funnel or how much larger the overall pipeline has gotten year-over-year? Thanks.

Sure. As it relates to the first question, the best way to frame it is this. The last year, for example, we talked about 25% of clients added something to their benefit coming into 2023. That was probably the last big year of sort of Progyny Rx as a contributor in revenue, which is the largest sort of revenue opportunity from an upsell perspective. Given now that our penetration overall is 93%, or next year will be 93% of clients having Progyny Rx is probably a factor that will contribute to less contribution, not more coming from upsell opportunity. We don't generally quantify the dollar value of it. We always talk about that the revenue contribution, incremental revenue comes mostly from new client ads, second from upsell activity, and third from any organic sort of growth. And next year will be no different. But we don't frame the dollars, but simply to say, overall, it will be less of a contribution than it was, in the past year. As it relates to the overall, not now, sort of continued active pipeline going to next year, it's higher than what it was a year ago, which is really positive. Again, we don't quantify sort of how much higher, but I would say it's nicely higher. And, and bodes well, considering those generally are always the significant majority of early client wins in every year. And take sort of any year that you look at, they usually represent roughly, 30% or so sort of new client ads in a given year.

Thank you.

Thank you. Your next question is coming from David Larsen from BTIG. Your line is live.

Hi, congratulations on the good quarter. Can you talk about some of the ancillary services that you are getting into, like family planning, for example, or just maternity care, like post birth, just any color there would be very helpful. And any thoughts on the longer term revenue contribution that could come from those areas? Thank you.

Sure. So, so we talked about adding preconception services, maternity support, postpartum, male infertility and menopause. Male infertility was live this year. The rest of those are, will be live, one, one, if you will. Relative to contribution, most of the sales we had around those, because they were sort of announced throughout the year, were to existing clients. Although we have some activity with new clients that was positive. I think the bigger contribution will be next year's sales year. And then the revenue, contribution coming from that will be in the following year. That'll be meaningful or more meaningful, if you will, versus what we expect in next year.

That's very helpful. Thank you. And then the question that I keep getting asked from clients is, what's the state of the economy? What's the risk of a potential slowdown here? Should the labor market soften a little bit? Can you just maybe give some more color on that? Like in terms of your new client wins, are they all roughly the same size or are more of those coming from sort of midsize, smaller businesses? Or is it held pretty steady in terms of the size of the new client wins? And then even if, even if the labor market softened by, let's call it one or 200 basis points, in my mind, I'm kind of like, so what? Your top line growth rate, if it slows by 1% or 2%, so what? It's still so robust. Just any thoughts there would be very helpful. Thank you.

Sure. And I think you're thinking about it the right way. If you remember a year ago this time, there was a lot of concern around announcements that were coming out. I called them headline risk at the time. Mostly tech companies were announcing layoffs. The amount of actual layoffs they were announcing versus their existing client base was single digit percentages collectively. And we had talked about across all the clients that we had, the number of client announcements for layoffs was collectively at that time around 100,000 or so lives. And we framed it the way you're framing it, which is in the grand scheme of things, and a year ago, I forgot exactly what our lives were, but let's call it around 3.7 or something million, but don't hold me exactly to that number. But either way, it was nothing relative to the overall population. And we also talked about and predicted that even with the layoffs that were announced, whether they were announced, again, where the tech companies announced them, they weren't announcements that were reduction in force. They were announcements that were what we call right sizing, where they had some reductions, but they still grew overall. A lot of the bigger tech companies that our clients have already talked about that they're adding employees, not declining employees, etcetera. And even for companies that may have not made large announcements, the net effect of it was non-existent from a reduction in lives perspective versus our prediction from the beginning of the year. We said that any reductions that were going to happen, even if we didn't know about them, would be offset or more than offset by growth in organic lives. And that's what's been materializing for us so far this year. So I think you're thinking about it the right way.

Okay, great. Thanks very much. Just one last quick one. Quantum Health, why did you select them and not, say, accolade, for example?

We have a lot of alignment with how Quantum thinks about the market and how they go about their value prop and their approach. We had a significant number of mutual clients already aligned. And so that's always positive. But then, more broadly in general, for us, it's having the right partners and continuing to have more channels and avenues for employers to acquire and add the fertility benefit. That's really what is most important to us. And we'll continue to sort of evaluate that as we continue to look at our partnerships going forward.

Thanks a lot. I'll hop back into the queue. Thank you.

Thank you. That concludes the Q&A portion of the call. I will now hand the conference back to James Hart for closing remarks. Please go ahead.