Progyny Inc

Previous wording

Pharmacy Benefits Solution. We went live with our integrated pharmacy benefits solution in 2018. Progyny Rx can only be purchased by clients that purchase our fertility benefits solution. Progyny Rx provides our members with access to the medications needed during their fertility treatment. As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support.

Current wording

Pharmacy Benefits Solution. Progyny Rx can only be purchased by clients that purchase our fertility benefits solution. Progyny Rx provides our members with access to the medications needed during their fertility treatment. As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support.

Previous wording

Our revenue in a given year is determined by the level and mix of the utilization of our fertility benefits and Progyny Rx solutions by our members as well as the number of members enrolled in our clients’ benefits plans. Each year, we contract with new clients for our fertility benefits solution and, where added by the client, our Progyny Rx solution. Given that the majority of our clients contract with us for a January 1 st benefits plan start date, our sales cycle follows the conventional healthcare benefits cycle, which largely concludes by the end of October of the prior year to allow for benefits education and annual open enrollment to occur in November. For some clients that are considering a start date later in the year, the sales cycle can extend through the next year.

Current wording

Our revenue in a given year is determined by the utilization, including rate of consumption and mix, of our fertility benefits and Progyny Rx solutions by our members as well as the number of members enrolled in our clients’ benefits plans. Each year, we contract with new clients for our fertility benefits solution and, where added by the client, our Progyny Rx solution. Given that the majority of our clients contract with us for a January 1 st benefits plan start date, our sales cycle follows the conventional healthcare benefits cycle, which largely concludes by the end of October of the prior year to allow for benefits education and annual open enrollment to occur in November. For some clients that are considering a start date later in the year, the sales cycle can extend through the next year.

Previous wording

Member and Client Base. Our addressable market is primarily large self-insured employers, as well as labor populations under the Labor Management Relations Act of 1947 (also known as the Taft-Hartley Act) and federal government populations. There are approximately 8,000 employers in the United States who have a minimum of 1,000 employees, who together with Taft-Hartley labor populations and federal government populations, represents approximately 106 million potential covered lives in total. Our current member base of approximately 6.4 million covered lives under contract represents a mid-single digit percent of our total market opportunity. We intend to continue to drive new client acquisition by investing significantly in sales and marketing to engage, educate and drive awareness of the unmet need around fertility solutions among benefits executives. We also increase brand awareness and adoption with employers by leveraging our strong relationships with benefits consultants. In particular, we are focused on expanding the number of clients with more than 2,500 covered lives. As of December 31, 2023 and 2022, we served 392 and 288 clients, respectively, representing 5,418,000 and 4,585,000 members, respectively.

Current wording

Member and Client Base. Our addressable market is primarily large self-insured employers, as well as labor populations under the Labor Management Relations Act of 1947 (also known as the Taft-Hartley Act) and federal government populations. There are approximately 8,000 employers in the United States who have a minimum of 1,000 employees, who together with Taft-Hartley labor populations and federal government populations, represents approximately 106 million potential covered lives in total. Our current member base of approximately 6.7 million covered lives under contract represents a mid-single digit percent of our total market opportunity. We intend to continue to drive new client acquisition by investing significantly in sales and marketing to engage, educate and drive awareness of the unmet need around fertility solutions among benefits executives. We also increase brand awareness and adoption with employers by leveraging our strong relationships with benefits consultants. In particular, we are focused on expanding the number of clients with more than 2,500 covered lives. As of December 31, 2024 and 2023, we served 473 and 392 clients, representing 6,472,000 and 5,418,000 members, respectively.

Previous wording

Benefits Utilization. A key driver of our revenue is the number of members we serve and the rate at which they utilize their fertility benefits. As our client base has grown, our membership has grown from approximately 110,000 members in 2016 when we launched our fertility benefits solution to 5.4 million members as of December 31, 2023.

Current wording

Benefits Utilization. A key driver of our revenue is the number of members we serve and the rate at which they utilize their fertility benefits. As our client base has grown, our membership has grown from approximately 110,000 members in 2016 when we launched our fertility benefits solution to 6.5 million members as of December 31, 2024.

Previous wording

Other income, net primarily includes interest income and expense, as well as investment income and losses.

Current wording

Interest and other income, net primarily includes interest income and expense, as well as investment income and losses.

Previous wording

We are subject to income taxes in the United States. Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. We believe there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets are realizable.

Current wording

We are subject to income taxes in the United States and in certain foreign jurisdictions. Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. We believe there is sufficient positive evidence to conclude that it is more likely than not that substantially all the net deferred tax assets are realizable.

Previous wording

(2)Adjusted EBITDA is a non-GAAP financial measure that we define as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income, net, interest income, net, and provision (benefit) for income taxes. See “Management’s Discussion and Analysis of Financial Condition and Result of Operations – Non-GAAP Financial Measure – Adjusted EBITDA" below for a reconciliation of Adjusted EBITDA to net income, the most directly comparable measure calculated in accordance with U.S. GAAP.

Current wording

(2)Adjusted EBITDA is a non-GAAP financial measure that we define as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, interest and other income, net, and provision for income taxes. See “Management’s Discussion and Analysis of Financial Condition and Result of Operations – Non-GAAP Financial Measure – Adjusted EBITDA" below for a reconciliation of Adjusted EBITDA to net income, the most directly comparable measure calculated in accordance with U.S. GAAP.

Previous wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of Adjusted EBITDA include: (1) it does not properly reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating income and expenses, including other income (expense), net and interest income (expense), net; and (5) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net income from continuing operations and other U.S. GAAP results.

Current wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of Adjusted EBITDA include: (1) it does not properly reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating income and expenses, including interest and other income, net; and (5) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net income, gross margin, and other U.S. GAAP results.

Previous wording

We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, other income, net, interest income, net, and provision (benefit) for income taxes. The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated:

Current wording

We calculate Adjusted EBITDA as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, interest and other income, net, and provision for income taxes. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with U.S. GAAP, for each of the periods indicated:

Previous wording

Revenue increased by $301.7 million, or 38%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase is primarily due to a $166.2 million, or 33% increase, in revenue from our fertility benefits solution and a $135.5 million or 49% increase in revenue from our Progyny Rx solution. The increase in revenue from our fertility benefits solution was primarily due to the increase in the number of clients and covered lives. The increase in revenue from our pharmacy benefits solution was also driven by the number of clients and covered lives that added the Progyny Rx benefit. Progyny Rx went live with only a select number of clients on January 1, 2018 and has continued to add both new and existing fertility benefit solution clients since its initial launch. Our revenue for the year ended December 31, 2022 was negatively impacted by COVID-19.

Current wording

Revenue increased by $78.6 million, or 7%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase is primarily due to a $53.2 million, or 8% increase, in revenue from our fertility benefits solution and a $25.4 million or 6% increase in revenue from our Progyny Rx solution. The increase in revenue from our fertility benefits solution and Progyny Rx solution were primarily due to the increase in the number of clients and covered lives.

Previous wording

Cost of services increased by $230.2 million, or 37%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatments delivered. This increase in cost of services was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as an $8.6 million increase in stock-based compensation expense.

Current wording

Cost of services increased by $64.1 million, or 8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in medical treatment and pharmacy prescription costs associated with fertility treatments delivered. This increase in cost of services was also attributable to an increase in personnel-related costs primarily due to incremental headcount as well as an $2.3 million increase in stock-based compensation expense.

Previous wording

Gross profit increased by $71.5 million, or 43%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Current wording

Gross profit increased by $14.6 million, or 6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Previous wording

Gross margin increased 60 basis points for the year ended December 31, 2023 compared to year ended December 31, 2022, primarily due to ongoing efficiencies realized in the delivery of our care management services, partially offset by the impact of planned cost containment efforts that were shared with our clients.

Current wording

Gross margin decreased 20 basis points for the year ended December 31, 2024 compared to year ended December 31, 2023, primarily due to an increase in personnel-related costs in the delivery of our care management services.

Previous wording

Sales and marketing expense increased by $13.8 million, or 30%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was primarily due to an $11.3 million increase in personnel-related costs attributable to an increase in stock-based compensation expense of $5.9 million, incremental headcount and an increase in sales commissions, as well as a $2.5 million increase in other related sales and marketing expenses.

Current wording

Sales and marketing expense increased by $4.5 million, or 7%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily due to a $3.5 million increase in personnel-related costs attributable to an increase in stock-based compensation expense, as well as a $1.0 million increase in other related sales and marketing expenses.

Previous wording

General and administrative expense increased by $18.8 million, or 19%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was primarily due to a $9.7 million increase in personnel-related costs including an increase in stock-based compensation expense of $7.4 million, a $6.1 million increase in bad debt expense driven by our revenue growth, as well as a $3.0 million increase in other related general and administrative expenses.

Current wording

General and administrative expense increased by $4.8 million, or 4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily due to a $6.0 million increase in personnel-related costs attributable to incremental head count, and a $2.3 million increase in other related general and administrative expenses, partially offset by a $3.5 million decrease in bad debt expense.

Previous wording

Other income, net increased by $7.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increases in investment and interest income.

Current wording

Interest and other income, net increased by $7.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to increases in investment and interest income.

Previous wording

For the year ended December 31, 2023, we recorded a provision for income taxes of $8.7 million, as compared to a benefit for income taxes of $5.9 million for the year ended December 31, 2022, primarily due to higher operating profit as well as a decrease in tax benefits for equity compensation, including discrete tax benefits, in the current year period.

Current wording

For the year ended December 31, 2024, we recorded a provision for income taxes of $28.9 million, as compared to a provision for income taxes of $8.7 million for the year ended December 31, 2023, primarily due to a higher operating profit as well as a decrease in tax benefits for equity compensation.

Previous wording

As of December 31, 2023, we had $97.3 million of cash and cash equivalents and $273.8 million of marketable securities. Since inception, we have financed our operations primarily through sales of our solutions and the net proceeds we have received from sales of equity securities, including our initial public offering. Our cash and cash equivalents and working capital are affected by the timing of payments to third party providers and collections from clients and have increased as our revenue has increased. In particular, during the ramp up and onboarding of new clients who typically begin their benefits plan year as of January 1st, our accounts receivable has historically increased more than our accounts payable, accrued expenses and other current liabilities in the early part of each calendar year. Historically, these timing impacts have reversed throughout the remainder of the fiscal year. Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period.

Current wording

As of December 31, 2024, we had $162.3 million of cash and cash equivalents and $65.6 million of marketable securities. We have financed our operations primarily through sales of our solutions and the net proceeds we have received from sales of equity securities. Our cash and cash equivalents and working capital are affected by the timing of payments to third party providers and collections from clients and have increased as our revenue has increased. In particular, during the ramp up and onboarding of new clients who typically begin their benefits plan year as of January 1st, our accounts receivable has historically increased more than our accounts payable, accrued expenses and other current liabilities in the early part of each calendar year. Historically, these timing impacts have reversed throughout the remainder of the fiscal year. Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period.

Previous wording

We believe that our existing cash and cash equivalents, including the proceeds from our marketable securities, and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We also expect these sources of existing cash and cash equivalents will be sufficient to fund our long-term contractual obligations and capital needs. However, this is subject, to a certain extent, to general economic, financial, competitive, regulatory, and other factors that are beyond our control. Moreover, our future capital requirements will depend on many factors, including sales of our solutions and client renewals, the timing and the amount of cash received from clients, the expansion of our sales and marketing activities and the continuing market adoption of our solutions.

Current wording

We believe that our existing cash and cash equivalents, including the proceeds from our marketable securities, and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We also expect these sources of existing cash and cash equivalents will be sufficient to fund our long-term contractual obligations and capital needs. However, this is subject, to a certain extent, to general economic, financial, competitive, regulatory, and other factors that are beyond our control. Moreover, our future capital requirements will depend on many factors, including sales of our solutions and client renewals, the timing and the amount of cash received from clients, the amount of capital investment necessary to support our benefits offerings and growth strategy, the expansion of our sales and marketing activities and the continuing market adoption of our solutions. In addition, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies.

Previous wording

We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

Current wording

We may, in the future, be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

Previous wording

Net cash provided by operating activities was $80.4 million for the year ended December 31, 2022, primarily consisting of net income of $30.4 million adjusted for certain non-cash items, which included $100.7 million of stock-based compensation expense, $13.8 million of bad debt expense, $6.6 million of deferred tax benefits, and $1.6 million of depreciation and amortization. Changes in operating assets and liabilities resulted in cash used in operating activities from an increase in accounts receivable of $119.3 million and other noncurrent assets and liabilities of $1.1 million, partially offset by cash provided by operating activities from increases in accounts payable of $47.7 million and accrued expenses and other current liabilities of $13.1 million and decreases in prepaid expenses and other current assets of $0.1 million. These changes are a result of the impact of revenue growth and our operating results as well as the timing of cash collection and payments to third parties.

Current wording

Net cash provided by operating activities was $179.1 million for the year ended December 31, 2024, primarily consisting of net income of $54.3 million adjusted for certain non-cash items, which included $128.1 million of stock-based compensation expense, $16.4 million of bad debt expense, $10.5 million of deferred tax benefit, $3.2 million of depreciation and amortization, $2.1 million of net accretion of discounts on marketable securities, and $1.4 million loss on disposal of property and equipment. Changes in operating assets and liabilities resulted in cash used in operating activities from a decrease in accounts payable of $30.3 million, and an increase in accounts receivable of $9.9 million, partially offset by cash provided by operating activities from increases in accrued expenses and other current liabilities of $9.9 million and other noncurrent assets and liabilities of $0.4 million, and a decrease in prepaid expenses and other current assets of $18.0 million. These changes are a result of the impact of revenue growth and our operating results as well as the timing of cash collections and payments to third parties, including $40.4 million of cash paid for income taxes, net of refunds for the year ended December 31, 2024.

Previous wording

Net cash used in investing activities was $200.5 million and $43.9 million for the years ended December 31, 2023 and 2022, respectively, which primarily consisted of net investments in marketable securities of $196.9 million and $40.6 million, respectively. The remainder of the activity for the years ended December 31, 2023 and 2022 consisted of purchases of computers, software, including capitalized software development costs, and leasehold improvements.

Current wording

Net cash provided by investing activities was $195.8 million for the year ended December 31, 2024, which primarily consisted of net sales in marketable securities of $206.5 million, partially offset by $5.3 million used in a business acquisition, net of cash acquired. For the year ended December 31, 2023, net cash used in investing activities was $200.5 million, which primarily consisted of net investments in marketable securities of $196.9 million. The remainder of the activity for the year ended December 31, 2024 consisted of purchases of computers, software, including capitalized software development costs, and furniture and fixtures. Our capital investments, including investments in technology and the development of software, are expected to increase over the next 12 months as we continue to invest in our benefits offerings and growth strategy.

Previous wording

Net cash used in financing activities was $7.9 million for the year ended December 31, 2022, consisting of payments of $12.1 million for employee taxes related to equity awards, partially offset by $3.1 million in proceeds from stock option exercises and $1.2 million in proceeds from contributions to our employee stock purchase plan.

Current wording

Net cash used in financing activities was $309.9 million for the year ended December 31, 2024, consisting of $300.3 million of repurchases of common stock under the 2024 Share Repurchase Programs, inclusive of $0.4 million in trading fees and payments of $12.0 million for employee taxes related to the net settlement of equity awards, partially offset by $1.1 million in proceeds from stock option exercises and $1.3 million in proceeds from contributions to our employee stock purchase plan.

Previous wording

Net cash used in financing activities was $11.1 million for the year ended December 31, 2023, consisting of payments of $17.2 million for employee taxes related to equity awards, partially offset by $4.9 million in proceeds from stock option exercises and $1.3 million in proceeds from contributions to our employee stock purchase plan.

Current wording

Net cash used in financing activities was $11.1 million for the year ended December 31, 2023, consisting of payments of $17.2 million for employee taxes related to the net settlement of equity awards, partially offset by $4.9 million in proceeds from stock option exercises and $1.3 million in proceeds from contributions to our employee stock purchase plan.

Previous wording

In February 2024, our Board of Directors authorized a share repurchase program of up to $100 million in shares of common stock. Repurchases may be made in the form of open market repurchases, including through plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, depending on stock price, market conditions and other factors, as determined by management. There can be no assurance as to the number of shares to be repurchased by us, if any.

Current wording

In February 2024, our Board of Directors authorized a share repurchase program of up to $100 million in shares of common stock. In May 2024, our Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock. In August 2024, our Board of Directors authorized an additional share repurchase program of up to $100 million in shares of common stock.

Previous wording

In February 2022, we entered into a lease agreement for additional space in our corporate offices in New York, New York, consisting of a 24,099 square foot office and a 21,262 square foot office, and also for continued occupancy of the 25,212 square foot office after the expiration of the current sublease. For the 24,099 square foot office, we will pay the base rent of approximately $1.4 million per year starting in April 2024 for five years and approximately $1.5 million per year thereafter through the fourth quarter of 2035, the expected expiration date. For the 21,262 square foot office, we will pay the base rent of approximately $1.3 million starting in the fourth quarter of 2025 for five years and approximately $1.4 million per year thereafter through the fourth quarter of 2035, the expected expiration date. For our current 25,212 square foot office, we will pay the base rent of approximately $1.6 million per year beginning in June 2029 through the fourth quarter of 2035, the expected expiration date.

Current wording

In February 2022, we entered into a lease agreement commencing in February 2023 for additional space in our corporate offices in New York, New York, consisting of a 24,099 square foot office and a 21,262 square foot office, and also for continued occupancy of the 25,212 square foot office after the expiration of the current sublease. For the 24,099 square foot office, we pay base rent of approximately $1.4 million per year through the end of the fifth year and approximately $1.5 million per year thereafter through the second quarter of 2036, the expected expiration date. For the 21,262 square foot office, we will pay the base rent of approximately $1.3 million starting in the second quarter of 2026 for five years and approximately $1.4 million per year thereafter through the second quarter of 2036, the expected expiration date. For our current 25,212 square foot office, we will pay the base rent of approximately $1.6 million per year beginning in June 2029, which is the lease commencement date, through the second quarter of 2036, the expected expiration date.

Previous wording

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

Current wording

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

Previous wording

Fertility benefits solution revenue is recognized based on the negotiated price with our clients and includes the portion to be paid directly by the member. Revenue is recognized when Smart Cycle services are completed for a member, which includes estimates of accrued receivables. We estimate accrued receivables based on historical experience for those fertility benefit services provided but for which a claim has not been received from the provider clinic, which includes assumptions regarding the lag between the authorization date and service date as well as estimates for changes and cancellations of services. We include accrued receivables within accounts receivable on our consolidated balance sheet. As of December 31, 2023 and 2022, accrued receivables were $45.8 million and $54.6 million, respectively.

Current wording

Fertility benefits solution revenue is recognized based on the negotiated price with our clients and includes the portion to be paid directly by the member. Revenue is recognized when Smart Cycle services are completed for a member, which includes estimates of accrued receivables. We estimate accrued receivables based on historical experience for those fertility benefit services provided but for which a claim has not been received from the provider clinic, which includes assumptions regarding the lag between the authorization date and service date as well as estimates for changes and cancellations of services. We include accrued receivables within accounts receivable on our consolidated balance sheet. As of December 31, 2024 and 2023, accrued receivables were $45.6 million and $45.8 million, respectively.

Previous wording

At the same time, we estimate cost of services and accrued claims payables based on the amount to be paid to the provider clinic and expected gross margin on fertility benefit services. Accrued claims payable of $30.3 million and $31.1 million as of December 31, 2023 and 2022, respectively, are included within accrued expenses and other current liabilities in the consolidated balance sheet.

Current wording

At the same time, we estimate cost of services and accrued claims payables based on the amount to be paid to the provider clinic and expected gross margin on fertility benefit services. Accrued claims payable of $32.1 million and $30.3 million as of December 31, 2024 and 2023, respectively, are included within accrued expenses and other current liabilities in the consolidated balance sheet.

Previous wording

The Black-Scholes option-pricing model requires the input of subjective assumptions, including (1) the expected stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. Due to the lack of historical and implied volatility data of our common stock, the expected stock price volatility is estimated based on the historical volatilities of the daily closing prices of a specified group of companies in our industry for a period equal to the expected term of the option. We selected companies with comparable characteristics to our Company, including enterprise value, risk profiles and position within the industry, that have historical stock price information sufficient to meet the expected term of the stock option. The expected term of the award represents the period of time that options granted are expected to be outstanding and is calculated utilizing the simplified method, which is the mid-point between the vesting date and end of the contractual term for each option. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities for the period that is consistent with the expected term of the stock option. The dividend yield is assumed to be none as we have not paid dividends, nor do we anticipate paying dividends. The weighted-average estimated fair value of stock option awards granted in the year ended December 31, 2023 was $19.10. Changes in these inputs could result in a significant change in the fair value of stock options.

Current wording

The Black-Scholes option-pricing model requires the input of subjective assumptions, including (1) the expected stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. Due to the lack of historical and implied volatility data of our common stock, the expected stock price volatility is estimated based on the historical volatilities of the daily closing prices of a specified group of companies in our industry for a period equal to the expected term of the option. We selected companies with comparable characteristics to our Company, including enterprise value, risk profiles and position within the industry, that have historical stock price information sufficient to meet the expected term of the stock option. The expected term of the award represents the period of time that options granted are expected to be outstanding and is calculated utilizing the simplified method, which is the mid-point between the vesting date and end of the contractual term for each option. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities for the period that is consistent with the expected term of the stock option. The dividend yield is assumed to be none as we have not paid dividends, nor do we anticipate paying dividends. The weighted-average estimated fair value of stock option awards granted in the year ended December 31, 2024 was $16.60. Changes in these inputs could result in a significant change in the fair value of stock options.

Previous wording

Our outstanding stock-based awards as of December 31, 2023 are subject to service-based or performance-based vesting. We recognize compensation expense for service-based awards over the vesting period of the award on a straight-line basis. Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period when achievement of the performance condition is considered probable. Forfeitures and cancellations of awards are recognized as they occur. For the years ended December 31, 2023 and 2022, stock-based compensation expense was $122.6 million and $100.7 million, respectively. As of December 31, 2023, we had $165.1 million and $91.0 million of unrecognized compensation costs related to unvested options and restricted stock units, respectively, which are expected to be expensed and vest over a weighted-average remaining period of approximately 2.5 years and 2.6 years, respectively.

Current wording

Our outstanding stock-based awards as of December 31, 2024 are subject to service-based or performance-based vesting. We recognize compensation expense for service-based awards over the vesting period of the award on a straight-line basis. Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period when achievement of the performance condition is considered probable. Forfeitures and cancellations of awards are recognized as they occur. For the years ended December 31, 2024 and 2023, stock-based compensation expense was $128.1 million and $122.6 million, respectively. As of December 31, 2024, we had $118.3 million and $99.5 million of unrecognized compensation costs related to unvested options and restricted stock units, respectively, which are expected to be expensed and vest over a weighted-average remaining period of approximately 2.0 years and 2.6 years, respectively.

Previous wording

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made. We believe there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets were realizable as of December 31, 2023.

Current wording

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made. We believe there is sufficient positive evidence to conclude that it is more likely than not that substantially all the net deferred tax assets were realizable as of December 31, 2024.

Previous wording

As of December 31, 2023 and 2022, we had $73.1 million and $77.9 million of net deferred tax assets, respectively. There was a valuation allowance of $0.5 million and $0.3 million as of December 31, 2023 and 2022, respectively.

Current wording

As of December 31, 2024 and 2023, we had $84.9 million and $73.1 million of net deferred tax assets, respectively. There was a valuation allowance of $1.8 million and $0.5 million as of December 31, 2024 and 2023, respectively.