Progyny ($PGNY) – Final Thoughts on Earnings – August 10, 2024
After getting through the transcript, nothing has changed about my views towards the company and investment from my mid-week update. For those who missed that piece, I copy and pasted it here.
Results
- Missed revenue estimate by 0.2% & missed guidance by 0.3%.
- Beat EBITDA estimate by 2.4% & beat guide by 1.8%.
- Beat $0.40 EPS estimates & its identical guide by $0.03 each.
Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases
Balance Sheet
- $370M in cash & equivalents.
- No debt. Bad debt expense fell Y/Y.
- Diluted share count rose 0.8% Y/Y; basic share count rose 2.9% Y/Y.
Guidance & Valuation
- Lowered annual revenue guide by 5.6%, which missed by 4.8%.
- Lowered annual EBITDA guide by 7.7%, which missed by 6.0%.
- Lowered annual EPS guide from $1.65 to $1.57, which missed by $0.07.
Progyny trades for 13x 2024 EPS. EPS is expected to grow by 107% Y/Y this year (-55% Y/Y growth last year) and by 15% Y/Y next year.
Thoughts on Progyny Following Another Bad Quarter
This was the third bad earnings report in a row for Progyny. It slashed full year revenue guidance by over 5% and by 10% compared to its original 2024 outlook. It cut EBITDA guidance by 7.7% and cut EPS guidance from $1.64 to $1.57.
It called out stabilizing utilization rates, but falling revenue per member, which it doesn’t exactly know the reason for. Leadership thinks the “business remains healthy and well-positioned, based on progress,” and I’m a tad torn on whether or not I agree with them.
On one hand, the guidance revision is awful. The last handful of quarters have featured a hodgepodge of excuses — ranging from med shortages, to treatment mix shift, to abortion news hurting utilization — to explain the disappointment. This quarter, the new excuse was treatment monetization, which the team doesn’t know the true source of. It’s very hard to model both macro and human biology, so I understand how they could struggle. Regardless, investors rightfully demand some level of visibility and this team clearly doesn’t have any. There’s no sugar-coating any of that.
On the other hand, early success in its selling season for 2025 is actually pacing above this past year, and its newest products have been successfully cross-sold to a notable 1 million (16%) of its members. That is undeniably impressive and expands its addressable market materially. It continues to print cash, has no debt and just added the equivalent of another 5% of its market cap in buybacks. It is the clear financial and clinical leader in its space. It saves its members, clients and carrier partners money and vastly uplifts patient outcomes across all categories. It boasts near-100% client retention and trades for about 14× 2024 earnings. Finally, it has an investor day next week. Companies generally don’t schedule these unless they have good things to say to investors.
I can’t buy this dip. I don’t think this team knows how to level-set expectations and I think they are reliant on a normalization in trends that they cannot possibly forecast or bank on. I can’t sell this company because it does create so much value and is deeply profitable. It should compound revenue at 15% during normal times and is oh so very cheap. I’m going to sit on my hands and do nothing. Perhaps I’m being too patient, but holding losers is a far less damaging mistake than selling future winners too early. Either they turn a fundamental corner like every single thing indicates that they should, or this dwindles further and further down as a % of my portfolio.
