Progyny Q3 2026 Earnings Call Transcript

Progyny (NASDAQ:PGNY) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Progyny Inc. reported a record third quarter with strong revenue growth and profitability, resulting in significant cash flow used for business investment and share repurchase.

The company added 1.3 million new covered lives and over 85 new clients, highlighting strong demand for fertility benefits and successful execution of go-to-market strategies.

Full-year revenue guidance for 2026 was raised to between $1.365 to $1.385 billion, with an anticipated adjusted EBITDA of $235 to $240 million.

Operational highlights include near 100% retention rate of existing clients and a 20% upsell rate for the 2027 season, along with high attach rates for the Progyny Rx pharmacy program.

Management emphasized the company’s competitive differentiation, scalability, and cost containment abilities amidst a challenging macroeconomic environment with high medical cost inflation.

Full Transcript

OPERATOR

Good afternoon and welcome to the Progyny Inc. third quarter earnings conference call. At this time, all participant lines are in listen-only mode and we will open the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, please press star 1. Should you wish to remove yourself from the queue, press star 2. It is now my pleasure to turn the floor over to your host, James Hart. The floor is yours.

James Hart (Investor Relations)

Thank you, Sylvie, and good afternoon, everyone. Welcome to our third quarter conference call. With me today are Pete Anevski, CEO of Progyny, and Mark Livingston, Chief Financial Officer. 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 fourth quarter and full year 2026, and the assumptions and drivers underlying such guidance; the demand for our solutions; our expectations for our selling season for 2027; launches; anticipated employment levels of our clients and the industries that we serve; the timing of client decisions; our expected utilization rates and mix; 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 laws. 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. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, is available in the press release, which is available at investors.progyny.com. I would now like to turn the call over to Pete.

Pete Anevski (Chief Executive Officer)

Thanks, Jamie, and thanks, everyone, for joining us this afternoon. Pleased to report that Progyny had a strong quarter, resulting in record revenue and profitability for the third quarter, as well as the continued generation of significant cash flow, which we’re using both to invest in the business for future growth and return value to our shareholders through meaningful share repurchase activity. As the fourth quarter begins, member engagement remains healthy. Given that, as well as our strong performance over the first nine months of the year, we’re pleased to be in a position to raise the midpoint of our full-year guidance. Mark will take you through those details shortly as well as the highlights from the quarter. I’ll spend my time this afternoon walking you through the results of our most recent selling and renewal season, as those are the areas that contribute the most to our longer-term growth trajectory.

We’re exceptionally pleased with our results this selling season, which yielded a record 1.3 million new covered lives and over 85 new clients. These outstanding results begin with the continued macro demand by plan sponsors for this critical benefit and, driven by across-the-board execution from all of our go-to-market strategies and teams, this year’s season once again highlights our meaningfully differentiated solutions from alternatives in the market.

Let me spend the rest of my time today unpacking this headline. We enter every selling season with multiple goals: acquiring new logos and lives, retaining our existing base, and deepening our relationships with existing accounts through the expansion of their services with Progyny. Across all three aspects of this year’s season, we once again achieved or exceeded our targets, starting with new client acquisition. Throughout the year, we’ve discussed the favorable activity we were seeing in new client acquisition.

We attribute this momentum to a few areas that we see continuing beyond this selling season. The first is that family building and women’s health are a key priority for employers. We’re addressing very real, very prevalent medical needs, ones that can be costly and even harmful to the workforce when they’re not well managed. In fact, this has been featured by a number of analysts in recent research reports, as market surveys and key opinion leader calls continue to validate that these programs are top of mind for HR leaders. It’s also no secret that employers and members are dealing with some of the highest costs and trends in decades.

Employers are demanding more from their partners, looking to drive costs down and control trends, all while expecting the highest quality outcomes and member experience. Companies continue to employ rigorous processes to determine the right solutions that fit this criteria, and Progyny’s ability to demonstrate its proficiency in delivering on these promises, backed by a proven track record across all key areas, differentiated our solution versus other competitors for these discerning buyers again and again.

The emphasis on value, cost control, outcomes, and member experience is what drove this momentum throughout the season from its earliest stages. While the pipeline built through the summer and fall and even extended into the season’s latest stages, as reflected by the incremental 100,000 lives just since the last update of our expectations that we put out a month ago, the activity this season wasn’t isolated to one geography, one industry, or one type of client.

Rather, our wins this year represent yet another diverse cross-section of the economy, no different than what we’ve seen for many years now. Our newest clients include several of the most prestigious universities in the country, another of the MAG7 technology leaders, one of the largest banks in the U.S., and the nation’s largest health benefit fund for public employees. The cohort is also broadly distributed by client size, where the newest logos are contributing anywhere from 1,000 to well in excess of 100,000 lives, further highlighting the universal relevance and appeal of our services.

Accordingly, we are entering 2027 with our most diverse client base ever, with no one area of the economy and no single client making an outsized contribution to our book. This newest cohort is also launching with the typical coverage levels that we’ve seen for many years now, with an average of two to three Smart Cycles. And amongst these new clients we’ve achieved a near 100% attach rate for our pharmacy program, emphasizing once again the value and differentiation of Progyny Rx to both the patient and the plan sponsor when measured against the alternatives.

Regarding market alternatives, while the competitive environment remains active, we continue to see signs of some rationalization occurring in the market. The models that perhaps may not be profitable, that perhaps may not be operating at scale, or haven’t been successful at controlling cost trend—we’ve seen one of those companies exit altogether a year ago, and we’re now seeing another significantly paring back. These are signs of a well-functioning market where capital flows to the models that have been proven to work, like ours, and our results this season clearly speak to the robust appetite for a proven solution from employers.

To be clear, while takeaways from competitors provided a nice contribution to our results, this was not an outsized driver to this season’s success. Instead, this season reflects the confluence of several of our strategies, including the furtherance of our channel partners—particularly our relationship with Cigna as our national partner as well as the largest regional plans—the disciplined management of our go-to-market strategies and resource allocation, and our ability to successfully respond to where the market is by continuing to invest in our solution so that there is no question on the value we deliver when we discuss our solution in detail with these prospects.

As expected and consistent with our prior commitments, Progyny Select, our newest offering in the fully insured market, was an immaterial contributor to this season’s results. As this is our first year with that program, our focus has been on building the relationships and the infrastructure that will allow us to meaningfully scale it over time. And based on our progress in both areas this year, as well as the feedback we’re hearing in the market, we continue to expect Select will become a key part of our longer-term growth.

Turning to the other areas of focus in the selling season—retention and expansions—as highlighted earlier this year, we had de-risked our retention by securing early decisions with the largest accounts in a renewal year, and we saw this favorable activity continue over the balance of the season, leading to yet another year of near 100% retention of the existing base. In addition, approximately 20% of the base has chosen to add to their solution in some way for 2027.

This includes those clients who have decided to consolidate with Progyny the other aspects of women’s health services that competitors were previously addressing for them. As we start to look into next year’s season, we believe we’re exceptionally well positioned to extend the momentum we experienced this year into 2027. We’re exiting the year with our strongest ever setup for the upcoming season ahead, both in terms of our number of opportunities as well as the overall size and quality of the pipeline, indicating that this year’s market momentum is contributing not only to this year’s selling season, but to next year’s as well.

In conclusion, on top of everything else, we’re excited and entering the upcoming 2027 season with our strongest sales momentum ever. Let me now turn the call over to Mark to review the results in more detail.

Mark Livingston (Chief Financial Officer)

Thank you, Pete, and good afternoon, everyone. Before I begin, please note that the 8-K we filed this afternoon includes the customary slides summarizing our results for the quarter. This material has also been posted to our website. Rather than repeating the content of those slides, my remarks today will focus on the longer-term trends that we believe are the most important in understanding the health and direction of the business. So let’s begin.

Member engagement has remained consistent with our long-established ranges, with utilization trending to the higher end of those ranges this quarter. The slightly more pronounced seasonality we discussed last quarter was, as expected, short lasting and has reverted back to what we would expect to see as the fall began. We believe this demonstrates once again that members pursue the care and services they need, doing so at a time that is right for them.

As a result, revenue this quarter was above the midpoint of our guidance, reflecting a nearly 9% increase over 2025. Over the first nine months of the year, revenue has increased 11% when excluding the contribution from a large former client who was under a transition of care agreement through the first half of 2025. In tandem with this good growth, we’ve maintained our healthy margins overall even as we continue to invest to expand our product platform, to enhance the member experience through new features, and to lay the foundation for future growth. Gross margin expanded by 130 basis points from the third quarter last year due to a reduction in stock compensation expense as well as the efficiencies we’ve continued to realize in the delivery of our care management services.

It’s worth taking a moment to emphasize those efficiencies. For years we’ve been leveraging the growing scale of our volumes to mitigate the pressures of broader medical cost inflation on program rates. While we may retain a portion of those savings for margin expansion, we may also share those with our clients, enhancing the value that we already provide for them through disciplined program management and our superior clinical outcomes. Adjusted EBITDA margin was modestly lower than a year ago. However, when measured on a trailing twelve-month basis, adjusted EBITDA margin was 17.1%, consistent with where it’s trended throughout this period of increased investment, demonstrating our ability to invest for growth without having to reset our overall levels of profitability. And as it relates to those investments, CAPEX year to date is approximately 9 million ahead of our spend for the first three quarters of 2025, though it remains at a relatively modest level of approximately 2% of revenue.

Through disciplined and prudent management of our business, we’ve also continued to achieve a high conversion of adjusted EBITDA to operating cash flow, and we continue to meet and even exceed our 75% conversion target both in the third quarter and year to date. This quarter we generated more than 56 million in operating cash flow, yielding 207 million on a trailing 12-month basis. Given this result, we’ve now exceeded 200 million in last 12-month operating cash flow for seven consecutive quarters, demonstrating both the consistency of our performance as well as the strength and adaptability of our business model.

We also continue to drive an improvement in our DSO through our ongoing focus on revenue-to-cash processes. DSO ended the third quarter nearly seven days lower than the year-ago period, at just under 66 days. While we will always pursue further improvements, we do believe we’re nearing a level of maximum yield given our interdependence on health plan claim processing. As of September 30th we had 224 million in total working capital, which includes 196 million in cash, cash equivalents, and marketable securities.

There were no borrowings against our 200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. The decline in our cash balances from June reflects the meaningful share repurchase activity conducted through the quarter. Under our most recent 200 million authorization, we purchased nearly 3 million shares during the third quarter for approximately 83 million. Since the authorization began in May, and including the activity that’s happened subsequent to September 30, we’ve purchased nearly a cumulative 5.5 million shares under the most recent program and approximately 51 million remains available for future activity.

On an aggregate basis, combining this current program as well as our prior 200 million program, which concluded earlier this year, we have now purchased more than 14 million shares overall since last November. This has reduced our overall shares outstanding by nearly 15% over the past year. Turning now to our expectations for the fourth quarter and the remainder of 2026, the majority of the over 85 clients and 1.3 million lives added in the most recent selling season are expected to go live in the first quarter of 2027, though a meaningful number of lives, several hundred thousand give or take, are expected to launch mid-year. In addition, a small number of the newest clients have already launched their benefit in 2026. Once all the new clients are live in 2027, we anticipate having more than 660 clients representing 8.3 million covered lives as the fourth quarter begins.

Member engagement remains healthy and consistent with past patterns. Accordingly, our expectations for engagement metrics remain consistent with our previous assumptions. The table at the back of today’s press release outlines those assumptions at both ends of the full-year guidance ranges. Given the consistency we’ve seen in engagement and the strength of our results over the first three quarters, we’re pleased to raise the midpoints of our guidance for the year.

We’re now projecting full-year revenue of between 1.365 to 1.385 billion, reflecting growth of 5.9% to 7.5%. If we exclude the 48.5 million in revenue from the client who was under a transition of care agreement over the first half of 2025, our full-year revenue growth is projected to be 10.1% to 11.7%. With respect to profitability, we expect adjusted EBITDA of 235 to 240 million with net income of 107 to 110.6 million. This equates to $1.30 to $1.35 in earnings per diluted share and $2.09 to $2.13 of adjusted EPS. On the basis of approximately 82 million fully diluted shares, for the fourth quarter we expect 344.7 to 364.7 million in revenue for growth of 8.3% to 14.6%, reflecting our expectations on engagement in the fourth quarter. On profitability, we expect between 57.9 to 62.9 million in adjusted EBITDA in the quarter along with net income of between 28.5 to 32.1 million.

This equates to $0.36 to $0.41 of earnings per diluted share or $0.53 to $0.58 of adjusted EPS on the basis of 79 million fully diluted shares. At the midpoints of ranges for both the quarter and the year, you can see that we expect to maintain a consistent adjusted EBITDA margin even with the investment to grow the business. And with that, we’d like to open the call for questions. Operator, can you please provide the instructions?

OPERATOR

Thank you. The floor is now open to questions. If you wish to join the queue to ask a question at this time, please press star one. We do ask, if listening on speakerphone today, to please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your phone at this time to join the queue to ask a question. And your first question will be from Joandra at Truist Securities. Please go ahead.

Joandra (Analyst at Truist Securities)

Thank you, and thanks for taking my questions, and congratulations on a very strong selling season. Thanks for the color. On the breakdown between 1/1 and mid-year rollout, I’m assuming the mid-year rollout probably does attribute to the CalPERS contract, which has got a lot of focus. This is based on your prior experience. Is it fair to say that the economics or expected utilization of a large sector client would be any different from your average client in a new cohort?

Just trying to understand the economics there for this new contract.

Mark Livingston (Chief Financial Officer)

Sure. Thanks, Joandra. So the economics from a margin profile perspective we expect to be consistent with our business. I’ll start with that. As it relates to utilization rate of that population, we got a tremendous amount of data from them, and based on our underwriting process we expect slightly lower utilization than our normal book of business for that population. But consistent with that expectation, that’s how we underwrote it and that’s how we expect the overall margin profile to be as it relates to that client.

Joandra (Analyst at Truist Securities)

Okay. And my follow-up, more broadly staying on the same margin topic: you previously talked about elevated investment cycle should begin to moderate in 2027. At the same time you’re seeing continued efficiencies in care management delivery and now you have a record selling season coming online. How should we think about the balance between reinvestment and allowing more of that incremental gross profit to flow through EBITDA? Just trying to understand if 2027 should be a year of margin expansion for you guys.

Mark Livingston (Chief Financial Officer)

Yes, so we will set expectations around full-year guidance for 2027 when we report year-end results. But the expectation that we have put out there already around us tapering back investments throughout 2027 still is the expectation.

Joandra (Analyst at Truist Securities)

Great, thanks a lot.

OPERATOR

Next question comes from Scott Schoenhaus at KeyBank. Please go ahead.

Scott Schoenhaus (Analyst at KeyBanc Capital Markets)

Hey team, thanks for taking my question, and congrats on the 100,000 additional lives since the last announcement. Pete, you mentioned your differentiation in the market versus other competitors. You know, we keep hearing that this year versus prior years. Maybe can you talk about the competitive conversations or the conversions you saw this selling season? What’s out there in the market remains that you’re having active conversations with? Specifically, we all know of the large employer—in fact the largest employer—I think you mentioned your comments has seen some challenges with their fellow fertility benefit partner.

Are these large employers still up for play? Are you seeing them come to you? Just to get a sense of these prospects on your platform versus what’s out there in the market. Thanks.

Pete Anevski (Chief Executive Officer)

I’ll try to hit on all your points, and if I miss any, please follow up. So as it relates to the sales process and our differentiation in the market, what’s really key is two things. One, as you do a deep dive into all the solutions, there’s significant differentiation in every part of what we do vis-à-vis other alternatives in the market. The process that large employers—and all employers, but large ones generally go deeper—go through highlights that differentiation, and it’s appreciated.

The second part of that that’s key is our track record of delivering consistent performance both around outcomes as well as cost containment over time, especially in a world where medical cost inflation is an issue, is another key factor. So when you’re making a selection of a very important benefit and you’re either adding it and/or replacing what you have today, you’re doing it in an environment where costs are rising significantly around the rest of healthcare.

And it’s a feel-good decision when you select Progyny, where you’re selecting, in our opinion, the best solution for many different reasons, but also selecting a solution that has demonstrated year after year effective cost containment. There was just a second part to that question. Yeah, so the answer is yes, we had conversations with clients that were at competitors. Yes, we saw conversion from those clients across our competitors. The important part of that though is that that’s not the biggest driver of our overall sales year. Our overall sales year was a contributor based on us hitting all of our different strategies and go-to-market and the teams executing very effectively.

Now, as it relates to that large employer that you were talking about, we do have the opportunity from time to time to talk to them. There are other large opportunities that are active in our pipeline that I referred to for setting us up for the 2027 sales season as well. I would never hang our hat on any one opportunity. I think the more important point that you should hear in terms of my comments is how we’re set up overall in our overall active pipeline for next year, with many large opportunities already.

OPERATOR

Next question comes from Scott Bernstein at Wells Fargo. Please go ahead.

Dan (Analyst at Wells Fargo)

Hi, thanks. It’s Dan. I think Scott was on before me, but yeah, I appreciate the questions. Maybe first on the guidance. You know, ART cycles were pretty flat sequentially. It seems that 4Q requires a bit of a bump on a sequential basis, I guess. Can you just comment on your visibility here as we stand maybe a third into the quarter?

Mark Livingston (Chief Financial Officer)

Yeah, look, I think part of this is just a factor of a bit of the slowing that we saw in the third quarter, which is now, as we said, we typically see that begin to turn in September and then on into October. So the visibility that we have sitting here is very good for October as well as into November. And so we’re seeing that renew to sort of normal, healthy patterns as we get into Q4. And that’s really what our guidance is based on.

Dan (Analyst at Wells Fargo)

Got it. And then just to follow up on the sales pipeline, obviously strong season that you had this year. Can you maybe comment on the composition of your sales pipeline as we think about next year, top of funnel? Anything changed in terms of what you anticipate next year’s sales season to look like? Thanks.

Pete Anevski (Chief Executive Officer)

You know, as we always do and as we’re doing now, we’ll give you commentary not only now but also at our year-end earnings call and we’ll have more visibility into the overall pipeline and how the sales season is setting up. However, as we sit here now, as I said in my prepared remarks, our active pipeline, which again, as I always talk about pipeline, is defined based on specific activity relative to sales progression on these accounts, is bigger than it’s ever been at this point in time, including over last year.

So that’s why I say we are very well set up overall in active pipeline, including with the number of jumbo accounts that we have in that active pipeline for next year. Beyond that, I can’t give you any more color commentary that will be constructive until the year-end call in February.

Dan (Analyst at Wells Fargo)

Got it. Thanks so much.

OPERATOR

Next question comes from Constantine Davidis at Citizens. Please go ahead.

Constantine Davidis (Analyst at Citizens)

Thank you. A couple of questions if I can. Pete, I think you said 20% of the base is expecting to add to their benefits in ’27. Can you expand on what that expansion trend looks like relative to the last couple of years? And then second, I think you commented that you saw 100% attach rate on the new business for next year with respect to pharmacy. Can you talk about what that looks like in terms of some of your newer solutions that you’ve rolled out in recent years and what that attach rate looks like on that 1.3 million lives?

Pete Anevski (Chief Executive Officer)

Yeah, regarding the first part of your question, the 20%—and those are sales commitments relative to upsells with existing clients—is generally in line with what we’ve experienced in the last couple years. The second part of that question around the Rx, the attach rate with the Rx, very positive, consistent with what’s happened over the last couple of sales seasons where the significant majority of all new clients are adding Rx. I think we now expect about 96% of clients next year to have Rx overall—95, 96.

And then the last part of your question is that the attach rate of the expanded products beyond Rx was positive again this year and now we’ll have over 3 million lives with the expanded products starting during 2020.

James Hart (Investor Relations)

Okay, next question. Sylvie,

OPERATOR

Next question comes from Michael Trini at Leerink. Please go ahead.

Michael Trini (Analyst at Leerink)

Maybe coming back to the summer seasonality from last quarter, can you talk a little bit more about how engagement progressed back to normal levels, and was that simply a return to more typical activity, or did you see some of the treatments deferred over the summer coming back on?

Mark Livingston (Chief Financial Officer)

I’m sorry, it cut off a little bit in the beginning, if you don’t mind.

Michael Trini (Analyst at Leerink)

The question, I think, is the seasonality that we saw in Q3—did it return to normal levels, or more basically, just comment on that, on returning to normal levels.

Mark Livingston (Chief Financial Officer)

Yeah. So we saw, as the quarter completed, a bit heavier utilization, people not yet progressing towards ART cycle treatment. So we had a little bit higher utilization as the quarter exited and then into Q4. And typically October is a very strong month for us overall. So we’ve seen the progress that we expected. But as far as mix and whatnot, it’s again as we would typically see and, as I think I said in my comments a few minutes ago, good visibility throughout October and into November.

And that’s what’s factored into our guide.

Michael Trini (Analyst at Leerink)

Okay, thank you.

OPERATOR

Next question will be from Brian Tranquillit at Jefferies. Please go ahead, Brian.

Cameron Harbilis (Analyst at Jefferies)

Hi, this is Cameron Harbilis on for Brian Tankulet. Congrats on the quarter, and thank you for taking my question. Can you tell us a little bit about what you learned in your first selling season with Cigna as a partner? I know you called out that that drove a lot of growth, but not an outsized amount. Is there anything new you learned here? And then just remind us on what the selling process is like between a partner-led deal and a competitive takeaway.

Pete Anevski (Chief Executive Officer)

I’m not sure that we learned anything significantly new, but the same type of activity that you would do when you work with your consulting partners that are advising their clients is the same type of activity that helps sales activity through Cigna’s clients, you know, when we work with their account executives. As a simple example, I think that plus where there were opportunities on the operations side to help with integration of these clients with our systems and Cigna systems are all factors that drove positive activity across the Cigna organization.

Cameron Harbilis (Analyst at Jefferies)

Awesome. And then as a quick follow-up, could you provide an update on where you guys are at with receiving the full eligibility files from your client base? I know that was a goal you set earlier in the year to have a significant, significant majority of these by year-end.

Pete Anevski (Chief Executive Officer)

Yeah, by year-end we should have eligibility files for more than half of our lives.

Cameron Harbilis (Analyst at Jefferies)

Thank you.

OPERATOR

Next question comes from Alan Lutz at Bank of America. Please go ahead, Alan.

Dev (Analyst at Bank of America)

Hey, this is Dev on for Allen. Thanks for taking our questions. A lot on the selling season. I think that turned out great, Pete. I guess as we think about utilization and the ART cycle intensity this year, ART cycle intensity may be a little bit lower than what was expected heading into the year. Utilization seems kind of within expectations. As we look ahead to next year, I know you guys usually take the historical base and do some forecasting, but is kind of the utilization rate and ART cycle intensity that we saw this year a good starting point, or is there anything that suggests that that could be better or worse?

Pete Anevski (Chief Executive Officer)

Well, I’ll remind you that utilization has slight variations from time to time. So I’m not sure that I would read totally into anything that’s happening so far this year—and the year’s not over—in terms of what’s going to happen next year. We don’t get visibility that far out in terms of actual utilization. We do comment when we report year-end and talk about guidance for 2027 on our February call, what we’re seeing at that point on utilization. That’s the best time that we could give you any real color in terms of what we’re seeing so far for utilization versus sort of guessing at it now. But again, utilization looks good. As Mark said, overall utilization came in a little stronger than what we expected for Q3 as it relates to, you know, our site was utilizing—they were pretty much in line with what we expected. And more importantly, as we talked about beginning here in the fall for Q4, it’s what we would expect.

Dev (Analyst at Bank of America)

Got it. Thank you. And then just a quick maybe administrative question here. I saw the member base is down just slightly quarter over quarter. I know there’s administrative true-ups once in a while. Was that the case in 3Q as well? Anything else you want to comment on that?

Mark Livingston (Chief Financial Officer)

I heard that, yeah. You follow what I mean. Look, I think that the membership is essentially at the same level that it was. We’re talking tiny percentages at this point. Yeah, nothing to read into that from a trend perspective.

Dev (Analyst at Bank of America)

Got it. Thank you.

OPERATOR

Question comes from Sarah James at Cantor. Please go ahead.

Sarah James (Analyst at Cantor)

Thank you. You talked about the care management savings potentially being retained as a tailwind for gross margins or shared with clients. What determines that split, and has the share going to clients risen as employers are facing increasing cost pressures?

Mark Livingston (Chief Financial Officer)

So, Sarah, this is a practice that we’ve been doing, frankly, since inception, and I was really just calling out that over the long term, as we’ve grown scale, we’ve been able to hold costs in line and in some cases reduce it over many years. And the point is that in addition to the favorable outcomes and the other savings that we generate for our clients, we’re quite hawkish around cost and pricing for them as well. Now, you will see that our gross margins over time have improved slightly.

But part of that is really because, obviously, we want to balance returns for our shareholders at the same time. And look, we’re mindful of where our clients are and the types of cost increases they’re getting from their other plans. But as you can see, even in that environment, we’ve continued to expand our margins a bit. So, nothing I’d call out there. Pete, I don’t know if you want to add in.

Pete Anevski (Chief Executive Officer)

Yeah, I think the important point around that—and we had put out, I don’t remember, James, which conference that was; at J.P. Morgan—over a three-year period, costs were only up 1% to 2% a year. And that’s a function of our continued leverage as we continue to grow across the network to be able to contain costs even despite other challenges, as I’ve said before, and we all see in the country, medical cost inflation being what it is. So I think the clients—and our retention rate speaks volumes around it—the clients appreciate that reality significantly while we’re also continuing to deliver real value in terms of outcomes and overall savings due to our outcomes and a positive member experience that we continue to deliver on.

Sarah James (Analyst at Cantor)

That’s great. And one more, if I could. You guys had a really strong selling season, obviously 1.3 million new lives. How much of that is brownfield versus greenfield? And does that impact what first-year utilization typically looks like?

Pete Anevski (Chief Executive Officer)

Yeah, they’re relatively balanced. Slightly more brownfield than greenfield, but relatively balanced. And no, it doesn’t impact utilization. What impacts utilization more is industry. But we don’t expect anything significantly different in terms of utilization for that overall population of 1.3 million. And just remember our definition of brownfield was having some form of fertility benefit at all. But again, we believe that most of the other plans are, you know, not comprehensive coverage. And so it isn’t really a situation where somebody’s going from comprehensive coverage to comprehensive coverage. It is, it is a step up when they join us.

OPERATOR

Next question comes from Peter Warrendoff at Barclays. Please go ahead.

Peter Warrendoff (Analyst at Barclays)

Yeah, hi. Thanks for the question. I just wanted to ask about fiscal 27. Now that you guys have the selling season pretty much in the rear view, membership looks like it’s going to be up kind of mid-teens next year. It sounds like a few hundred thousand of those lives maybe starting midyear. And you could have some offset from upsell with the current membership base, I guess. Is membership growth kind of a reasonable baseline as we start to think about next year?

And are there any other major puts and takes that we should think about? Thanks.

Pete Anevski (Chief Executive Officer)

None that I would call out now. I think the big variable is the lives and obviously our expectations are what I just said relative to this cohort. But we always wait to see what early utilization looks like in the year when we set the stage for guidance for 2027. So I think, you know, if there’s anything else to call out then we will. But other than that, no real other big puts and takes relative to what might be a big driver in next year.

Peter Warrendoff (Analyst at Barclays)

Great, thanks.

OPERATOR

Our final question comes from David Larson at BTIG. Please go ahead.

David Larson (Analyst at BTIG)

Hi. Looks like your gross margin has expanded nicely, up more than 100 basis points year over year. We’re modeling around a 25% gross margin. Where could that get to over time? And then also your SG&A, modeling a 15% year-over-year decline from year to year. That’s great. Where are those cost savings coming from? And what are your longer term expectations for your EBITDA margin? Thank you.

Mark Livingston (Chief Financial Officer)

So both lines, or both questions, relate to some degree to stock comp expense. We’ve been projecting for some years now that grants that we had made in a number of years in the past, from an expense accounting perspective, would roll off some late in 25 and more here in 26. And so if you look, and we provide it in the release, if you look at it excluding stock comp, it’s a little bit more moderated in terms of the growth in the gross margin, as well as the changes in the OPEX lines.

And actually, when you see the OPEX lines, you’ll see there’s actually been some investment year over year in SG&A, both for our go-to-market resources as well as the platform expansions that we’ve talked about over the last several quarters.

David Larson (Analyst at BTIG)

And what’s your long-term EBITDA margin goal?

Mark Livingston (Chief Financial Officer)

We don’t have a goal that we’ve put out to the marketplace. We’ve commented about growth in the different areas of the business, whether it’s from our new products or from Progyny Select. And what we said is that the margins, we expect those to be comparable. Now, as we begin to taper the investments that we’ve been making these last couple of years and some of the integrations of some of the companies we purchased, as well as our platform, we do expect to return to incremental margins as we grow, but we haven’t put out a formal number on that yet.

David Larson (Analyst at BTIG)

Just one last quick one. Can you just talk about the broader macro trends and how that’s affecting demand? I mean, it looks like demand is great, but we still have relatively high inflation. Medical trend is really high. Still have like a fairly high prevalence, or increasing prevalence, of users of GLP-1s, which are not cheap. Those are driving up medical costs. So it seems to me like there would be sort of a lot of competing costs to your clients, yet you still see great growth.

Just any thoughts around that would be very helpful. Thank you.

Pete Anevski (Chief Executive Officer)

Sure. In an environment where medical cost inflation is, exactly what you said, continues, projected to be high still next year, juxtaposed against the reality that there’s an incidence and prevalence for infertility that’s still one in five for the CDC. So very, very prevalent in terms of an area of healthcare that has to be covered, you do have to make a decision to cover this benefit at some point, whether you’re already covering it and it’s not comprehensive enough, or whether you’re looking for a new solution that’s doing a better job, or whether you’re not covering it at all.

And that, we believe, is what drove our sales. Right. At the end of the day, when you have to make that decision, add that expense and/or manage that expense, you want to do it in a way that you can do it most effectively from a cost perspective with the best member experience and outcome and savings. That resonated in the market. So although you’re right, mindshare out there is being shared relative to these other drivers that are out there, the conversation is still very robust relative to needing this benefit, especially when you consider that, you know, it addresses the millennial population, which is the largest population of your workforce today.

David Larson (Analyst at BTIG)

Great. Thanks very much. Congrats on a good quarter.

Pete Anevski (Chief Executive Officer)

Thank you. Thank you.

OPERATOR

Thank you. This does conclude our question and answer period for today, and I would like to turn the conference over to James Hart.

James Hart (Investor Relations)

Thank you, Sylvie. And thank you everyone for joining us this afternoon. We hope this call was informative for you. As always, please feel free to reach out to me should you need any further assistance. We’re happy to engage. Otherwise, we look forward to seeing you at the upcoming conferences.

OPERATOR

Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful evening. Thank you for your participation.

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