Progyny saw its revenue jump 72% to $81 million in the first quarter of 2020, despite disruptions to fertility medical services as a result of the COVID-19 pandemic.
First-quarter revenue increased from $47.2 million in the same period a year ago.
Profits in the first quarter totaled $4.1 million, up 61% from $2.5 million in the first quarter of 2019.
The company, which manages fertility benefits for employees at large firms, beat Wall Street estimates. Analysts had expected fourth-quarter earnings per share of 2 cents and a revenue consensus estimate of $71.8 million, according to Street Insider.
Progyny CEO David Schlanger said during the company's Q1 earnings call Tuesday that the company saw its volume of fertility treatments drop significantly toward the end of the first quarter. In mid-March, the American Society for Reproductive Medicine issued guidelines recommending that fertility clinics should cease initiating new fertility treatments.
Through the end of March and into the first half of April, Progyny saw significant reductions in the utilization of the benefit by its members, down to as low as 15% when compared to the early part of Q1, Schlanger said.
The company was having a strong start to the quarter prior to the COVID outbreak, both from a financial perspective as well as in the number of treatments performed, and that helped to drive strong revenue growth in Q1, he said.
Schlanger said he believes the fertility industry will recover more quickly relative to other areas of the economy negatively impacted by COVID-19.
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On April 24, ASRM updated its guidelines and advised that practices can reopen for all procedures so long as it can be done in a measured way that is safe for patients and staff. Many clinics in Progyny's network have already begun preparing new protocols to address patient and staff safety, he said.
Over the last few weeks, there has been a week-to-week acceleration in the volume of patient appointments and medication dispensing.
Progyny expects that by the end of June all of its network clinics will be open and providing their full range of services and patient volumes should continue to ramp up.
"As we are beginning to see clinics reopen and members reengage, we believe fertility will be on the leading edge of the recovery relative to other areas of the economy," Schlanger said.
Although he cautioned that it's still too early to know when member utilization will return to normal levels.
The first fertility benefits management company to ever go public, Progyny has grown its client base to more than 132 large self-insured employers including Google, Facebook and Microsoft.
At the end of the quarter, Progyny had 132 clients and 2.1 million members compared to 78 clients and approximately 1 million members the same time last year.
Fertility benefits revenue increased 47% to $59.4 million, with the growth being driven by a higher number of clients and covered lives.
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Pharmacy benefits revenue increased from $6.8 million in the first quarter last year to $21.6 million this quarter due primarily to an increase in the number of clients with the Progyny Rx benefit as compared to last year, according to Progyny chief financial officer Pete Anevski.
In 2018, the company expanded its offerings with the launch of Progyny Rx, a member portal and proprietary digital emotional support tool.
"Despite the impact COVID had to our volumes in the first quarter, we generated positive operating cash flow of $12.1 million as compared to operating cash use of $6.2 million in the prior-year period. The increase was primarily due to the continued improvement in our implementation processes with new clients," Anevski said.
The company's gross profit during the quarter was $16.6 million, an increase of 67% from the prior-year period, primarily due to the higher revenue. Gross margin was 20.5%, reflecting a decrease of 60 basis points from the 21.1% gross margin in the prior-year period, primarily as a result of the company’s decision to keep all of its care management staff in place during the pause in treatments caused by COVID-19.
Adjusted EBITDA was $7.1 million in the first quarter, an increase of $2.8 million, or 64%, from the prior-year period.
Looking ahead to the second quarter, Progyny expects the COVID-19 pandemic to have a bigger impact on its business. The company expects quarterly revenue around $45 million, a net loss of $4.2 million in the quarter, and adjusted loss before interest, taxes, depreciation and amortization of $1.30 in Q2.
Given the uncertainties created by the pandemic, the company withdrew its full-year 2020 financial guidance.
Despite the impact of COVID-19 on the economy and rising unemployment levels, Progyny's customer base, as a whole, has avoided the worst of these impacts, according to Schlanger.
"The clients that represent the significant majority of both our revenues and membership haven't announced any workforce reductions or meaningful furloughs. In fact, several of our largest customers have publicly said they are hiring or are committed to make no workforce reductions in 2020," he said.
The company is focusing its sales efforts on companies in industries that have weathered the storm, such as technology, pharmaceuticals, financial services, and consumer packaged goods.
Company executives said they believe that the macro trends that have been driving Progyny's success still remain in place, such as the high and growing rates of infertility, the lack of adequate coverage in the U.S. for fertility services, and the need for employers to get the most from their healthcare dollars, Schlanger said.
"We are collectively going through unprecedented times. However, some things don't change. One of them is the desire to have a child and start a family," Schlanger said.
He continued, "We believe employers will embrace the societal trends that result from the COVID-19 pandemic and that family building benefits could take on even more significance."