Progyny shares plummet on "significant" contract loss, downgrade at JMP

Investing.com -- Shares of Progyny, Inc. (NASDAQ:PGNY ) plunged by 27.8% in pre-market trading on Thursday after the company said that a significant client had exercised its option to terminate their services agreement.

Analysts at Barclays believe the large client is Amazon (NASDAQ:AMZN ), given previous disclosures about Progyny’s largest clients, the size of the member base lost, and Amazon's recent partnership with a competitor. 

The termination, set to take effect on January 1, 2025, follows a multi-year relationship with the client contributing 12% and 13% of Progyny’s revenue for the six-month period ending June 30, and the twelve-month period ending December 31, 2023, respectively.

“The Client confirmed that they had no issues of concern over the course of its multi-year relationship with the Company, including member satisfaction or quality of service or outcomes. There have not been any disputes with the Client during the course of service,” the company said in a statement.

The existing agreement will remain in effect through the remainder of 2024, which means the termination is not expected to impact the company’s financial results for the fiscal year ending December 31, 2024, the company added.

While Progyny still aims to increase its member count in 2025, the loss creates a substantial gap to fill. Even if Progyny achieves its target of adding 1 million new members, it would still only result in a net growth of 5% in the member base, Barclays said.

“We are negatively surprised by this announcement, especially after PGNY reduced its 2024 guidance twice already. Given the lack of visibility that management has had, and an increasingly competitive market, we maintain our Neutral rating on PGNY,” said analysts at BTIG.

Analysts at BofA believe the biggest risk moving forward for Progyny is an increased churn rate, given the company's strong historical retention record and the possibility of heightened competitive pressures.

Analysts at JMP Securities said that a major client discontinuing fertility benefits is unlikely,  as it would go against a fairly strong secular trend, and also given that fertility spend is a relatively small component of total health expenditures.

Therefore, they have downgraded shares of Progyny to market perform from market outperform 

To reflect this change, they have also revised their 2025 revenue estimate from to $1.17 billion $1.30 billion (-5% year-over-year), while reducing their EBITDA estimate by about 10% to $203 million.

Source: Investing.com