Progyny, Inc.

Previous wording

Investing in our common stock involves a high degree of risk. You should carefully consider all of the information contained in this Annual Report on Form 10-K, including the sections titled “Cautionary Note Regarding Forward-Looking Statements,” Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Any of the following risks could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form 10-K and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Current wording

Investing in our common stock involves a high degree of risk. You should carefully consider all of the information contained in this Annual Report on Form 10-K, including the sections titled “Cautionary Note Regarding Forward-Looking Statements,” Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Any of the following risks could materially and adversely affect our business, financial condition and results of operations, the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form 10-K and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Previous wording

Market volatility and uncertainty related to general economic conditions remain widespread, making it very difficult for our clients and us to accurately forecast and plan future business activities. Negative conditions in the general economy in the United States and elsewhere, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, consumer confidence, international trade relations, geopolitical conflict, political turmoil, natural catastrophes, epidemics, pandemics or outbreaks of contagious diseases, warfare and terrorist attacks, could cause a decrease in business investments, including spending on employee benefits, and negatively affect the growth of our business. In addition, economic conditions, including inflation, interest rate fluctuations, changes in capital market conditions, disruptions in the banking industry and other parts of the financial services sector, and regulatory changes, such as the taxability of medical benefits like ours, may affect our ability to obtain necessary financing on acceptable terms.

Current wording

Market volatility and uncertainty related to general economic conditions remain widespread, making it very difficult for our clients and us to accurately forecast and plan future business activities. Negative conditions in the general economy in the United States and elsewhere, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, consumer confidence, international trade relations, tariffs, export controls and other trade barriers, global trade wars or domestic preferences, geopolitical conflict, political turmoil, natural catastrophes, epidemics, pandemics or outbreaks of contagious diseases, warfare and terrorist attacks, could cause a decrease in business investments, including spending on employee benefits, and negatively affect the growth of our business. In addition, economic conditions, including inflation, interest rate fluctuations, changes in capital market conditions, disruptions in the banking industry and other parts of the financial services sector, and regulatory changes, such as the taxability of medical benefits like ours, may affect our ability to obtain necessary financing on acceptable terms.

Previous wording

As part of our growth strategy, we are focused on retaining and expanding our services within our existing client base. Our clients can expand the benefits they offer their employees in a number of ways, including by adding egg freezing, increasing the number of Smart Cycle units, and adding our Progyny Rx solution or any of our other solutions and services.

Current wording

As part of our growth strategy, we are focused on retaining and expanding our services within our existing client base. Our clients can expand the benefits they offer their employees in a number of ways, including by adding egg freezing, increasing the number of Smart Cycle units, and adding our Progyny Rx solution or any of our other solutions and services. We went live with Progyny Rx in 2018, and 92% of our current clients have now launched this solution, including approximately 97% of the clients we signed in 2025.

Previous wording

We currently have contracts to serve over 530 employers with at least 1,000 covered lives in the United States across more than 40 industries. For the year ended December 31, 2024, one of our clients accounted for 12% of our total revenue (the "Client"). For the year ended December 31, 2023, the Client accounted for 13% of our total revenue. No other clients accounted for more than 10% of our total revenue for the years ended December 31, 2024 and 2023. In the third quarter of 2024, we were notified that the Client elected to exercise a 90-day option to terminate its services agreement, effective as of January 1, 2025.

Current wording

We currently have contracts to serve over 590 employers with at least 1,000 covered lives in the United States across more than 40 industries. For the year ended December 31, 2025, none of our clients accounted for more than 10% of our total revenue. For the year ended December 31, 2024, one client accounted for 12% of our total revenue (the "Client"). The Client terminated its services agreement effective January 1, 2025.

Previous wording

To increase our revenue, we must continue to attract new clients. Our ability to do so depends in large part on the success of our sales and marketing efforts and our ability to attract industry leaders in diversified sectors, which could prompt others in the same sectors to follow suit in order to remain competitive. Potential clients may seek out other options; therefore, we must demonstrate that our solutions are valuable and superior to alternatives. If we fail to provide high-quality solutions and convince clients of the benefits of our model and value proposition, we may not be able to attract new clients. The market for our solutions could decline or grow more slowly than we expect, including due to general economic conditions, high unemployment rates, reductions in workforce or employee attrition, impacts related to epidemics, pandemics, and outbreaks of contagious diseases, a decrease in business investments, including spending on employee benefits, and other factors. If the market for our solutions declines or grows more slowly than we expect, or if the number of clients that contract with us for our solutions declines or fails to increase as we expect, our financial results could be adversely impacted. As the markets in which we participate mature, fertility solutions and services evolve and competitors begin to enter into the market and introduce differentiated solutions or services that are perceived to compete with our solutions, particularly if such competing solutions are adopted by an industry leader in a particular sector, our ability to sell our solutions could be impaired. As a result of these and other factors, we may be unable to attract new clients, which would have an adverse effect on our business, financial condition and results of operations.

Current wording

To increase our revenue, we must continue to attract new clients. Our ability to do so depends in large part on the success of our sales and marketing efforts and our ability to attract industry leaders in diversified sectors, which could prompt others in the same sectors to follow suit in order to remain competitive. Potential clients may seek out other options; therefore, we must demonstrate that our solutions are valuable and superior to alternatives. If we fail to provide high-quality solutions and convince clients of the benefits of our model and value proposition, we may not be able to attract new clients. The market for our solutions could decline or grow more slowly than we expect, including due to general economic conditions, high unemployment rates, reductions in workforce or employee attrition, impacts related to epidemics, pandemics, and outbreaks of contagious diseases, a decrease in business investments, including spending on employee benefits, and other factors. If the market for our solutions declines or grows more slowly than we expect, or if the number of clients that contract with us for our solutions declines or fails to increase as we expect, our financial results could be adversely impacted. As the markets in which we participate mature, fertility solutions and services evolve and competitors begin to enter the market and introduce differentiated solutions or services that are perceived to compete with our solutions, particularly if such competing solutions are adopted by an industry leader in a particular sector, our ability to sell our solutions could be impaired. As a result of these and other factors, we may be unable to attract new clients, which would have an adverse effect on our business, financial condition and results of operations.

Previous wording

A significant change in the utilization of our fertility solutions, including the consumption rate or the mix of utilization, could have an adverse effect on our business, financial condition and results of operations.

Current wording

A significant change in the utilization of our solutions, including the consumption rate or the mix of utilization, could have an adverse effect on our business, financial condition and results of operations.

Previous wording

We cannot control or predict the consumption rate of our solutions or the mix of utilization of our solutions by our clients, in particular as it relates to newer clients. A significant reduction in the number of members using our solutions could adversely affect our business, financial condition and results of operations. Factors that have and could continue to contribute to a reduction in the use of our solutions include: reductions in workforce by existing clients; general economic downturns that result in business failures and high unemployment rates; impacts related to public health emergencies; employers no longer offering comprehensive health coverage or offering alternative solutions such as coverage on a voluntary, employee-funded basis; labor shortages at our provider clinics; changes to the taxability of medical benefits; failure to adapt and respond effectively to changes in the medical landscape, laws, regulations and government enforcement priorities, client and member needs, requirements or preferences; premium increases and benefits changes; or negative publicity.

Current wording

We cannot control or predict the consumption rate of our solutions or the mix of utilization of our solutions by our clients, in particular as it relates to newer clients. A significant reduction in the number of members using our solutions could adversely affect our business, financial condition and results of operations. Factors that have and could continue to contribute to a reduction in the use of our solutions include: reductions in workforce by existing clients; general economic downturns that result in business failures and high unemployment rates; impacts related to public health emergencies; employers no longer offering comprehensive health coverage or offering alternative solutions such as coverage on a voluntary, employee-funded basis; labor shortages at our provider clinics; changes to the taxability of medical benefits; failure to adapt and respond effectively to changes in the medical landscape, laws, regulations and government enforcement priorities, or client and member needs, requirements or preferences; premium increases and benefits changes; or negative publicity.

Previous wording

It is also difficult for us to control or predict the consumption rate or mix of utilization of our solutions at the member level. If the actual utilization of our solutions by members is significantly greater than budgeted, our clients may be responsible for costs that exceed their planned expenditure. If we cannot help our clients accurately predict rate of consumption by their employees, our clients may turn to alternative solutions, and our business and profitability would be adversely impacted. In addition, higher clinical success rates and other factors could also impact timing and treatment paths, which may result in lower revenue per utilizing member.

Current wording

It is also difficult for us to control or predict the consumption rate or mix of utilization of our solutions at the member level. If the actual utilization of our solutions by members is significantly greater than budgeted, our clients may be responsible for costs that exceed their planned expenditure. If we cannot help our clients accurately predict the rate of consumption by their employees, our clients may turn to alternative solutions, and our business and profitability would be adversely impacted. In addition, higher clinical success rates and other factors could also impact timing and treatment paths, which may result in lower revenue per utilizing member.

Previous wording

From time to time, we may acquire or invest in businesses, joint ventures, products and services, or technologies that we believe could complement or expand our solutions, enhance our technical capabilities, or otherwise offer growth opportunities. For example, we acquired Apryl GmbH, a Berlin-based fertility benefits platform, in June 2024 and Benefit Bump LLC, a comprehensive parental leave benefits navigation program for new and growing families in January 2025. We also expanded our offerings to include preconception, maternity and postpartum and menopause and midlife care solutions. We expect to make additional investments as we continue to introduce new solutions and services to enhance our comprehensive family building offering and our technology infrastructure, including systems architecture, scalability, availability, performance and security. Any such acquisition or investment may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties integrating the businesses, technologies, products and services, personnel or operations of any acquired companies, particularly if key personnel of an acquired company choose not to work for us, an acquired company is operationally difficult to integrate, or we have difficulty retaining the clients of any acquired business due to changes in ownership, management or otherwise. Any such transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, certain transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. If the resulting business from a transaction fails to meet our expectations, or we fail to successfully integrate such businesses into our own, our business, financial condition and results of operations may be adversely affected, or we may be exposed to unknown risks or liabilities.

Current wording

From time to time, we may acquire or invest in businesses, joint ventures, products and services, or technologies that we believe could complement or expand our solutions, enhance our technical capabilities, or otherwise offer growth opportunities. For example, we acquired Apryl GmbH, a Berlin-based fertility benefits platform provider, in June 2024 and Benefit Bump LLC, a company that provides a comprehensive parental leave benefits navigation program for new and growing families, in January 2025. We have also expanded our offerings to include pregnancy and postpartum, menopause and midlife care, benefit and leave navigation and parent and child wellbeing solutions. We expect to make additional investments as we continue to introduce new solutions and services that complement our comprehensive family building offering and as we continue to enhance our technology infrastructure, including systems architecture, scalability, availability, performance and security. Any acquisition or investment may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties integrating the businesses, technologies, products and services, personnel or operations of any acquired companies, particularly if key personnel of an acquired company choose not to work for us, an acquired company is operationally difficult to integrate, or we have difficulty retaining the clients of any acquired business due to changes in ownership, management or otherwise. Any transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, certain transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. If the resulting business from a transaction fails to meet our expectations, or we fail to successfully integrate such businesses into our own, our business, financial condition and results of operations may be adversely affected, or we may be exposed to unknown risks or liabilities.

Previous wording

We went live with our fertility benefits solution in 2016 and Progyny Rx in 2018. As a result of our limited operating history with our current platform of solutions, as well as a limited amount of time serving a majority of our client base, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or decline for a number of reasons, including slowing demand for our solutions and fertility benefits in general, change in utilization trends by our members, general economic slowdown, an increase in unemployment rates, increased competition, changes in healthcare trends and regulations, changes to science relating to the fertility market, a decrease in the growth of the fertility market, or our failure to anticipate and adapt to changing market trends and to take advantage of growth opportunities. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks effectively, our operating and financial results could differ materially from our expectations, and our business could suffer.

Current wording

We went live with our fertility benefits solution in 2016, Progyny Rx in 2018 and more recently with our newer solutions. As a result of our limited operating history with our current platform of solutions, as well as a limited amount of time serving a majority of our client base, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or decline for a number of reasons, including slowing demand for our solutions and fertility and women's health benefits in general, change in utilization trends by our members, general economic slowdown, an increase in unemployment rates, increased competition, changes in healthcare trends and regulations, changes to science relating to the fertility market, a decrease in the growth of the fertility market, or our failure to anticipate and adapt to changing market trends and to take advantage of growth opportunities. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks effectively, our operating and financial results could differ materially from our expectations, and our business could suffer.

Previous wording

We experienced net losses from 2015 to 2019. For example, our net loss was $8.6 million for the year ended December 31, 2019. While we have experienced significant revenue growth since 2016, achieved profitability starting in 2020 and currently project future profitability, we cannot guarantee that we will have sufficient sales to sustain our growth or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase sufficiently to cover increased costs. In particular, we expect to continue to invest in our sales and client success teams to educate potential clients and drive new client adoption, as well as expand the scope of Progyny benefits within our existing client base. We also expect to incur additional costs as we continue to introduce new solutions and services to enhance our comprehensive family building offering and our technology infrastructure, including systems architecture, scalability, availability, performance and security. We will face increased compliance costs associated with our growth and the expansion of our client base. In addition, we incur significant legal, accounting and other expenses related to being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to sustain profitability, the value of our business and common stock may significantly decrease.

Current wording

We experienced net losses from 2015 to 2019. For example, our net loss was $8.6 million for the year ended December 31, 2019. While we have experienced significant revenue growth since 2016, achieved profitability starting in 2020 and currently project future profitability, we cannot guarantee that we will have sufficient sales to sustain our growth or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase sufficiently to cover increased costs. In particular, we expect to continue to invest in our sales and client success teams to educate potential clients and drive new client adoption, as well as expand the scope of Progyny benefits within our existing client base. We also expect to incur additional costs as we continue to introduce new solutions and services to enhance our comprehensive women's health and family building offerings and as we continue to invest in enhancing our technology infrastructure, including systems architecture, scalability, availability, performance and security. We will face increased compliance costs associated with our growth and the expansion of our client base. In addition, we incur significant legal, accounting and other expenses related to being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to sustain profitability, the value of our business and common stock may significantly decrease.

Previous wording

The health benefits industry may be subject to negative publicity, which can arise from, among other things, increases in premium rates, industry consolidation, cost of care initiatives, drug prices and the ongoing debate over the ACA. In addition, negative publicity may result in increased regulation and legislative review of industry practices, which may further increase our costs of doing business and adversely affect our profitability. For example, PBM programs and drug rebates have been criticized as leading to a lack of transparency about the true cost of a drug, and certain members of Congress as well as HHS’s Office of Inspector General, or OIG, have proposed regulatory changes that could potentially affect our business and operations. Negative public perception or publicity of the health benefits industry in general, the insurance carriers with whom we integrate our solutions, our self-insured employer clients, or us could adversely affect our business, financial condition and results of operations.

Current wording

The health benefits industry may be subject to negative publicity, which can arise from, among other things, increases in premium rates, industry consolidation, cost of care initiatives, and drug prices. In addition, negative publicity may result in increased regulation and legislative review of industry practices, which may further increase our costs of doing business and adversely affect our profitability. For example, PBM reform, increased disclosure requirements or additional review of benefit administrators by HHS’s Office of Inspector General, or OIG, could potentially affect our business and operations. Negative public perception or publicity of the health benefits industry in general, the insurance carriers with whom we integrate our solutions, our self-insured employer clients, or us could adversely affect our business, financial condition and results of operations.

Previous wording

In the current environment, there are numerous and evolving risks to cybersecurity and data privacy, including criminal hackers, hacktivists, denial-of-service, ransomware, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological errors. High-profile cybersecurity breaches at other companies and government agencies have increased in recent years. There is the possibility of targeted cyberattacks by foreign countries or entities that could impact United States government and private companies’ technological infrastructures, some of which we utilize to provide our services. The healthcare industry has seen a shift to an accelerated use of digital and technological platforms, particularly in response to the COVID-19 pandemic. As a result of such shift, there have been, and may continue to be, more targeted cyberattacks and threats on us, our vendors, provider clinics and specialty pharmacies. Despite the implementation of security measures, including steps designed to secure our technology infrastructure and sensitive data, we cannot provide assurance that our current information technology system or any updates or upgrades thereto, the current or future information technology systems of the third parties with whom we do business, including our provider clinics, specialty pharmacies or other vendors, are fully protected against malicious intrusion, malware, computer viruses, unauthorized access, natural disasters, terrorism, war, telecommunication and electrical failures, information or data theft or other similar risks. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience cybersecurity breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Current wording

In the current environment, there are numerous and evolving risks to cybersecurity and data privacy, including criminal hackers, hacktivists, denial-of-service attacks, ransomware, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological errors. High-profile cybersecurity breaches at other companies and government agencies have increased in recent years, and there remains the possibility of targeted cyberattacks by foreign countries or entities that could impact United States government and private companies’ technological infrastructures, some of which we utilize to provide our services. The healthcare industry has experienced a shift towards an increased use of and reliance on digital and technological platforms. As a result of this shift, there have been, and may continue to be, more targeted cyberattacks and threats directed at us, our vendors, provider clinics and specialty pharmacies. Despite the implementation of security measures, including steps designed to secure our technology infrastructure and sensitive data, we cannot provide assurance that our current information technology system or any updates or upgrades thereto or the current or future information technology systems of the third parties with whom we do business, including our provider clinics, specialty pharmacies or other vendors, are fully protected against malicious intrusion, malware, computer viruses, unauthorized access, natural disasters, terrorism, war, telecommunication and electrical failures, information or data theft or other similar risks. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience cybersecurity breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Previous wording

We have experienced in the past and expect to continue to experience actual and attempted cyberattacks of our information technology systems, such as through email phishing scams, spoofing attempts and malicious attachments. Although none of these actual or attempted cyberattacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that such incidents will not have such an impact in the future. In addition, to the extent that any disruption or cybersecurity breach were to result in a loss or inappropriate disclosure of confidential or proprietary information, we could incur liability. We have access to sensitive information relating to members, our employees and our business partners in the ordinary course of our business. Any failure or perceived failure by us, or our third-party vendors on our behalf, to comply with U.S. and foreign data privacy and cybersecurity laws, rules and regulations, as well as contractual commitments in this respect, may result in governmental enforcement actions, fines, or litigation, which could have an adverse effect on our reputation and business. If a significant data breach occurred, our reputation could be materially and adversely affected, confidence among our clients and members may be diminished, or we may be subject to legal claims, any of which may contribute to the loss of clients and have a material adverse effect on us. We maintain cyber liability insurance, however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems, and we cannot be sure that such coverage will continue to be available on commercially reasonable terms or at all. To the extent such disruptions or uncertainties result in the theft, destruction, loss or misappropriation or release of our confidential data or our intellectual property, our business and results of operations could be materially and adversely affected. See “Risks Related to Legal and Regulatory Requirements—We operate in a highly regulated industry and must comply with a significant number of evolving legal and regulatory requirements, as well as complex judicial mandates, which could have an adverse impact on our business—Data Protection and Breaches.”

Current wording

We have experienced in the past and expect to continue to experience actual and attempted cyberattacks of our information technology systems, such as through email phishing scams, spoofing attempts and malicious attachments. Although none of these actual or attempted cyberattacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that such incidents will not have such an impact in the future. In addition, to the extent that any disruption or cybersecurity breach were to result in a loss or inappropriate disclosure of confidential or proprietary information, we could incur liability. We have access to sensitive information relating to our members, our employees and our business partners in the ordinary course of our business. Any failure or perceived failure by us, or our third-party vendors on our behalf, to comply with U.S. and foreign data privacy and cybersecurity laws, rules and regulations, as well as contractual commitments in this respect, may result in governmental enforcement actions, fines, or litigation, which could have an adverse effect on our reputation and business. If a significant data breach occurred, our reputation could be materially and adversely affected, confidence among our clients and members may be diminished, or we may be subject to legal claims, any of which may contribute to the loss of clients and have a material adverse effect on us. We maintain cyber liability insurance, however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems, and we cannot be sure that such coverage will continue to be available on commercially reasonable terms or at all. To the extent such disruptions or uncertainties result in the theft, destruction, loss or misappropriation or release of our confidential data or our intellectual property, our business and results of operations could be materially and adversely affected. See “Risks Related to Legal and Regulatory Requirements—We operate in a highly regulated industry and must comply with a significant number of evolving legal and regulatory requirements, as well as complex judicial mandates, which could have an adverse impact on our business—Data Protection and Breaches.”

Previous wording

Our future revenue may not grow at the rates they historically have, or at all.

Current wording

Our future revenue and client base may not grow at the rates they historically have, or at all.

Previous wording

These investments may not result in increased revenue growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods.

Current wording

These investments may not result in increased revenue growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, we may not maintain profitability in the future, and our business, financial position and results of operations may be harmed.

Previous wording

Additionally, in June 2022 the U.S. Supreme Court in Dobbs v. Jackson Women's Health Organization reversed Roe v. Wade by holding that there is no constitutional right to abortion. Consequently, certain states have enacted or proposed restrictive abortion laws that may also implicate fertility procedures and travel reimbursement programs, which may decrease the demand for, or availability of, certain fertility services. Although President Biden issued executive orders and federal agencies have issued guidance intended to protect access to reproductive healthcare services, the enactment of certain state laws restricting abortion care and other changes in laws, or in interpretation of laws through court decisions, affecting fertility benefits may conflict with, and ultimately limit, the covered benefits offered by a company to its employees and the types of fertility treatment services available at provider clinics. We cannot predict the timing or impact of any future rule making, executive orders, court decisions or other changes in the law, or in how such laws, once enacted, would be interpreted and enforced.

Current wording

Additionally, in June 2022 the U.S. Supreme Court in Dobbs v. Jackson Women's Health Organization reversed Roe v. Wade by holding that there is no constitutional right to abortion. Consequently, certain states have enacted or proposed restrictive abortion laws that may also implicate fertility procedures and travel reimbursement programs, which may decrease the demand for, or availability of, certain fertility services. The enactment of certain state laws restricting abortion care and other changes in laws, or in interpretation of laws through court decisions, affecting fertility benefits may conflict with, and ultimately limit, the covered benefits offered by a company to its employees and the types of fertility treatment services available at provider clinics. We cannot predict the timing or impact of any future rule making, executive orders, court decisions or other changes in the law, or in how such laws, once enacted, would be interpreted and enforced.

Previous wording

Our business experiences moderate seasonality in revenue with a slightly higher proportion of revenue during the second half of the year as compared to the first half. Given that the majority of our clients contract with us for a January 1st benefits plan start date and that the average cost of treatments earlier in the overall treatment process is somewhat lower than the average cost as treatment progresses, our revenue from treatment services tends to grow as the year continues, particularly for new clients. In addition, as with most medical benefits plans, members will typically seek to maximize the use of their benefits once they have reached their annual deductible and/or annual out-of-pocket maximums, thereby increasing treatments in the latter part of the year. We expect that this seasonality will continue to affect our revenue and results of operations in the future as we continue to target larger enterprise clients.

Current wording

Our business experiences moderate seasonality in revenue with a slightly higher proportion of revenue during the second half of the year as compared to the first half. Given that the majority of our clients contract with us for a January 1 benefits plan start date and that the average cost of treatments earlier in the overall treatment process is somewhat lower than the average cost as treatment progresses, our revenue from treatment services tends to grow as the year continues, particularly for new clients. In addition, as with most medical benefits plans, members will typically seek to maximize the use of their benefits once they have reached their annual deductible and/or annual out-of-pocket maximums, thereby increasing treatments in the latter part of the year. We expect that this seasonality will continue to affect our revenue and results of operations in the future as we continue to target larger enterprise clients.

Previous wording

If we fail to adapt and respond effectively to the changing medical landscape, changing laws, regulations and government enforcement priorities, and changing client needs, requirements or preferences, our offerings may become less competitive.

Current wording

If we fail to adapt and respond effectively to the changing medical landscape, changing laws, regulations or government actions or enforcement priorities, or changing client needs, requirements or preferences, our offerings may become less competitive.

Previous wording

The market in which we compete is subject to a changing medical landscape and changing laws, regulations and government enforcement priorities, as well as changing client needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Our business strategy may not effectively respond to these changes, and we may fail to recognize and position ourselves to capitalize on market opportunities. We may not have sufficient advance notice and resources to develop and effectively implement an alternative strategy. There may be scientific or clinical changes that require us to change our solutions or that make our solutions, including the Smart Cycles, less competitive in the marketplace. If there are sensitivities to our model or our existing competitors and new entrants create new disruptive business models and/or develop new solutions that clients and members prefer to our solutions, we may lose clients and members, and our results of operations, cash flows and/or prospects may be adversely affected. The future performance of our business will depend in large part on our ability to design and implement market appropriate strategic initiatives, some of which will occur over several years in a dynamic industry. If these initiatives do not achieve their objectives, our results of operations could be adversely affected.

Current wording

The market in which we compete is subject to a changing medical landscape and changing laws, regulations and government actions and enforcement priorities, as well as changing client needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Our business strategy may not effectively respond to these changes, and we may fail to recognize and position ourselves to capitalize on market opportunities. We may not have sufficient advance notice and resources to develop and effectively implement an alternative strategy. There may be scientific or clinical changes that require us to change our solutions or that make our solutions, including the Smart Cycles, less competitive in the marketplace. If there are sensitivities to our model or our existing competitors and new entrants create new disruptive business models and/or develop new solutions that clients and members prefer to our solutions, we may lose clients and members, and our results of operations, cash flows and/or prospects may be adversely affected. The future performance of our business will depend in large part on our ability to design and implement market appropriate strategic initiatives, some of which will occur over several years in a dynamic industry. If these initiatives do not achieve their objectives, our results of operations could be adversely affected.

Previous wording

Third parties may allege that our products and services, or the conduct of our business, infringe, misappropriate or otherwise violate such third party’s intellectual property rights. Even if such claims are without merit, defending such claims would cause us to incur substantial expenses and could cause us to pay substantial damages or seek a costly license if we are found to be infringing, misappropriating, or otherwise violating a third party’s intellectual property rights. If we are unable to enter into a license on acceptable terms or at all, we could be forced to cease some aspect of our business operations or be forced to redesign our products or services so that we no longer infringe a third-party's intellectual property rights, which may result in significant cost and delay to us or which redesign could be technically infeasible. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our employees and management from their normal responsibilities.

Current wording

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us, and our competitive position would be harmed. Third parties may allege that our products and services, or the conduct of our business, infringe, misappropriate or otherwise violate such third party’s intellectual property rights. Even if such claims are without merit, defending such claims would cause us to incur substantial expenses and could cause us to pay substantial damages or seek a costly license if we are found to be infringing, misappropriating, or otherwise violating a third party’s intellectual property rights. If we are unable to enter into a license on acceptable terms or at all, we could be forced to cease some aspect of our business operations or be forced to redesign our products or services so that we no longer infringe a third-party's intellectual property rights, which may result in significant cost and delay to us or which redesign could be technically infeasible. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our employees and management from their normal responsibilities.

Previous wording

Moreover, although we take measures to ensure that our employees do not use the confidential or proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other confidential or proprietary information, of third parties, including such individual’s former employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Current wording

Moreover, although we take measures to ensure that our employees do not use the confidential or proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees have used or disclosed intellectual property, including trade secrets or other confidential or proprietary information, of third parties, including such individual’s former employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Previous wording

We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.

Current wording

We may not be able to utilize a portion of our net operating loss carryforwards, which could adversely affect our profitability.

Previous wording

Under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Future issuances of our stock could cause an “ownership change.” Any future ownership change, which could be outside of our control, could also have a material effect on the use of our net operating loss carryforwards or other tax attributes existing at the time of the ownership change, which could adversely affect our profitability.

Current wording

Under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Future issuances of our stock could cause an “ownership change.” Any future ownership change, which could be outside of our control, could affect the use of our net operating loss carryforwards or other tax attributes existing at the time of the ownership change, which could adversely affect our profitability.

Previous wording

Accounting principles generally accepted in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting principles or interpretations, including the adoption of new or revised accounting principles, may require us to make changes to our systems, processes and controls, which could have a significant effect on our reported financial results, cause unexpected financial reporting fluctuations, retroactively affect previously reported results or require us to make costly changes to our operational processes and accounting systems upon or following the adoption of these standards. See Note 2 – Significant Accounting Policies included in the notes to the consolidated financial statements of this Annual Report on Form 10-K for additional information on recently issued but not yet adopted accounting standards.

Current wording

Accounting principles generally accepted in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting principles or interpretations, including the adoption of new or revised accounting principles, may require us to make changes to our systems, processes and controls, which could have a significant effect on our reported financial results, cause unexpected financial reporting fluctuations, retroactively affect previously reported results or require us to make costly changes to our operational processes and accounting systems upon or following the adoption of these standards. See Note 2 – Summary of Significant Accounting Policies included in the notes to the consolidated financial statements of this Annual Report on Form 10-K for additional information on recently issued but not yet adopted accounting standards.

Previous wording

In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including channel partners, vendors and insurance carriers, among others. As the fertility industry and our client base grow, if we do not successfully maintain our relationships with insurance carriers, they may make integration more difficult or expensive, such as implementing an onerous fee structure in exchange for our ability to continue to integrate our solutions with their platforms. If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer.

Current wording

In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including channel partners, vendors and insurance carriers, among others. As the fertility industry and our client base grow, if we do not successfully maintain our relationships with insurance carriers, they may make integration more difficult or expensive, such as implementing an onerous fee structure in exchange for our ability to continue to integrate our solutions with their platforms. If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer. In addition, our arrangements with such third parties may expose us to public scrutiny, adversely affect our brand and reputation, expose us to litigation and/or regulatory action, or otherwise make our operations vulnerable if we fail to adequately monitor their performance or if they fail to meet their contractual obligations to us or to comply with applicable laws or regulations.

Previous wording

If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our network of specialty pharmacies or their supply chains, our business, financial condition and results of operations could suffer.

Current wording

If we fail to maintain an efficient pharmacy distribution network or if there is a disruption to our network of specialty pharmacies or their supply chains or business economics, our business, financial condition and results of operations could suffer.

Previous wording

The timely delivery of fertility medication is essential for fertility treatments. If medication is delivered late or becomes unavailable, it may result in postponement of a member’s treatment cycle and member dissatisfaction with our solutions. We believe that our ability to continue to maintain and grow the adoption of Progyny Rx by our clients is highly dependent on our success in maintaining an efficient pharmacy distribution network and our on-time delivery record. The specialty pharmacies in our network could refuse to contract with us, demand higher drug pricing or take other actions that could result in higher medical costs or less attractive services for our members.

Current wording

The timely delivery of fertility medication is essential for fertility treatments. If medication is delivered late or becomes unavailable, it may result in postponement of a member’s treatment cycle and member dissatisfaction with our solutions. We believe that our ability to continue to maintain and grow the adoption of Progyny Rx by our clients is highly dependent on our success in maintaining an efficient pharmacy distribution network and our on-time delivery record. The specialty pharmacies in our network could refuse to contract with us, demand higher drug pricing or take other actions in response to industry actions that could result in higher medical costs or less attractive services for our members, thereby limiting our commercial opportunities.

Previous wording

We maintain contractual relationships with select pharmacy program partners, which provide us access to limited distribution specialty pharmaceutical rebates for drugs we purchase. While we have contractual relationships with such pharmacy program partners, they in turn often negotiate complex and multi-party pricing structures with other industry participants, and we have no control over the policies and strategies utilized in negotiating these pricing structures. Such structures may set or significantly impact market prices for prescription drugs that we purchase and the associated rebates for such drugs. Pharmacy program partners generally direct medication pricing by setting medication list prices and offering rebates and/or discounts for their medications. Various market considerations, such as the number of competitor medications, the availability of fertility medications and alternative treatment options, and negotiated rates among industry participants, impact the list prices for medications. Our ability to obtain and maintain specialty pharmaceutical rebates, our relative bargaining power, the value of any such rebates and our ability to generate revenue are directly affected by the pricing structures in place among the various industry participants, and changes in medication pricing and in the general pricing structures, whether due to regulatory requirements, competitive pressures or otherwise, could have an adverse effect on our business, financial condition and results of operations. Further, the consolidation of pharmaceutical manufacturers, shortages of drugs provided by such manufacturers, the termination or material alteration of our contractual relationships, or our failure to renew such contracts on favorable terms could also have a material adverse effect on our business and results of operations.

Current wording

We maintain contractual relationships with select pharmacy program partners, which provide us access to limited distribution specialty pharmaceutical rebates for drugs we purchase. While we have contractual relationships with such pharmacy program partners, they in turn often negotiate complex, multi-national and multi-party pricing structures with other industry participants, and we have no control over the policies and strategies utilized in negotiating these pricing structures. Such structures may set or significantly impact market prices for prescription drugs that we purchase and the associated rebates for such drugs. Pharmacy program partners generally direct medication pricing by setting medication list prices and offering rebates and/or discounts for their medications. Various market considerations, such as the number of competitor medications, the availability of fertility medications and alternative treatment options, negotiated rates among industry participants, cost to import, and distribution of materials and finished products, impact the list prices for medications. Our ability to obtain and maintain specialty pharmaceutical rebates, our relative bargaining power, the value of any such rebates and our ability to generate revenue are directly affected by the pricing structures in place among the various industry participants, and changes in medication pricing and in the general pricing structures, whether due to regulatory requirements, competitive pressures or otherwise, could have an adverse effect on our business, financial condition and results of operations. Further, the consolidation of pharmaceutical manufacturers, shortages of drugs provided by such manufacturers, the termination or material alteration of our contractual relationships, or our failure to renew such contracts on favorable terms could also have a material adverse effect on our business and results of operations.

Previous wording

Our marketing efforts depend on our ability to maintain our relationships with benefits consultants and receive positive references from our existing clients, channel partners and benefit consultants.

Current wording

Our marketing efforts depend on our ability to maintain our relationships with benefits consultants and receive positive references from our existing clients, channel partners and benefits consultants.

Previous wording

Our marketing efforts also depend significantly on our ability to call on our current clients, channel partners and benefits consultants to provide positive references to new, potential clients. Given our limited number of long-term clients, the loss or dissatisfaction of any client, channel partnership or benefit consulting relationship could substantially harm our brand and reputation, inhibit the adoption of our offering and impair our ability to attract new clients and retain existing clients. Any of these consequences could have an adverse effect on our business, financial condition and results of operations.

Current wording

Our marketing efforts also depend significantly on our ability to call on our current clients, channel partners and benefits consultants to provide positive references to new, potential clients. Given our limited number of long-term clients, the loss or dissatisfaction of any client, channel partnership or benefit consulting relationship could substantially harm our brand and reputation, inhibit the adoption of our offerings and impair our ability to attract new clients and retain existing clients. Any of these consequences could have an adverse effect on our business, financial condition and results of operations.

Previous wording

We are unable to predict how new legislation, regulation, judicial action or executive action will ultimately impact the healthcare industry at large or our business and our relationships with existing and future clients, insurance carriers, and healthcare providers in particular. We also cannot predict the timing or impact of any future rule making, court decisions or other changes in law. If we are unable to comply with new laws and regulations or provide adequate assistance to our clients who may be subject to such laws or regulations, or if such changes impact our current business model and operations, our business, financial condition and results of operations may be adversely impacted.

Current wording

As we continue to execute on our growth strategy, we may be subject to new laws, regulations, and other requirements. We announced that we anticipate offering our fertility solution to large group fully insured employers, which will subject us to additional laws, regulations and other requirements. We expect to devote a significant amount of management time and resources related to ensuring regulatory compliance in connection this new offering, and such compliance costs will be ongoing and may increase in the future. We are unable to predict how new legislation, regulation, judicial action or executive action will ultimately impact the healthcare industry at large or our business and our relationships with existing and future clients, insurance carriers, and healthcare providers in particular. We also cannot predict the timing or impact of any future rule making, court decisions or other changes in law. If we are unable to comply with new laws and regulations or provide adequate assistance to our clients who may be subject to such laws or regulations, or if such changes impact our current business model and operations, we may be exposed to litigation or other government action and our business, financial condition and results of operations may be adversely impacted.

Previous wording

Many states have licensure or registration requirements for entities acting as a TPA or PBM. We are licensed, are exempt from licensure or registration, or believe that we are otherwise authorized in the states where we provide TPA and PBM services. These licenses require us to comply with the rules and regulations of the governmental bodies that issued such licenses, including maintaining certain solvency or bonds requirements. Our failure to comply with such rules and regulations could result in significant administrative penalties, including monetary penalties and corrective action plans, the suspension of a license, or the loss of a license, all of which could negatively impact our business.

Current wording

Many states have licensure or registration requirements for entities acting as a TPA or PBM. We are licensed, are exempt from licensure or registration, or believe that we are otherwise authorized in the states where we provide TPA and PBM services. These licenses require us to comply with the rules and regulations of the governmental bodies that issued such licenses, including maintaining certain solvency or bond requirements. Our failure to comply with such rules and regulations could result in significant administrative penalties, including monetary penalties and corrective action plans, the suspension of a license, or the loss of a license, all of which could negatively impact our business.

Previous wording

In addition to HIPAA, numerous other federal and state laws, rules, regulations and standards govern the collection, dissemination, use, handling, transfer, processing, access to and confidentiality of personal information, some of which may be applicable to our business. Certain federal and state laws protect types of personal information that may be viewed as particularly sensitive. In many cases, state laws are more restrictive than, and not preempted by, HIPAA, and may allow personal rights of action with respect to data privacy or cybersecurity breaches, as well as fines. State laws are contributing to increased enforcement activity and may also be subject to interpretation by various courts and other governmental authorities. The CCPA gives California residents certain rights to access and delete their personal information, opt out of certain personal information sharing, including certain sensitive personal information, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which has increased the likelihood and risks associated with data breach litigation. Additional investment in compliance and potential business process changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. Such laws could potentially impose conflicting requirements that would make compliance more challenging and could lead to additional liability. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and could lead to additional liability risks.

Current wording

In addition to HIPAA, numerous other federal and state laws, rules, regulations and standards govern the collection, dissemination, use, handling, transfer, processing, access to and confidentiality of personal information, some of which may be applicable to our business. Certain federal and state laws protect types of personal information that may be viewed as particularly sensitive. In many cases, state laws are more restrictive than, and not preempted by, HIPAA, and may allow personal rights of action with respect to data privacy or cybersecurity breaches, as well as fines. State laws are contributing to increased enforcement activity and may also be subject to interpretation by various courts and other governmental authorities. The CCPA gives California residents certain rights to access and delete their personal information, opt out of certain personal information sharing, including certain sensitive personal information, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which has increased the likelihood and risks associated with data breach litigation. Additional investment in compliance and potential business process changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and could lead to additional liability risks.

Previous wording

Separately, although ERISA generally preempts state laws that would otherwise apply to ERISA plans, the recent Supreme Court ruling in Rutledge v. Pharm. Care Mgmt. Ass’n established that ERISA does not preempt all state laws imposing transparency or other requirements on PBMs. If the interpretation of ERISA preemption is further narrowed in the future, our contractual obligations with our self-insured clients would likely require us to comply more broadly with state laws applicable to health insurance that do not currently apply to us. This may adversely impact our ability to standardize our products, solutions, and services across states.

Current wording

Separately, although ERISA generally preempts state laws that would otherwise apply to ERISA plans, recent Supreme Court rulings continue to clarify ERISA preemption as it relates to PBMs. If the interpretation of ERISA preemption is further narrowed in the future, our contractual obligations with our self-insured clients would likely require us to comply more broadly with state laws applicable to health insurance that do not currently apply to us. This may adversely impact our ability to standardize our products, solutions, and services across states.

Previous wording

We are part of the broader healthcare industry and subject to increasing scrutiny and regulation within our business, including with respect to Progyny Rx’s PBM operations, which may adversely affect our business, financial condition and results of operations.

Current wording

We are part of the broader healthcare industry and subject to increasing scrutiny, disclosure requirements and regulation within our business, including with respect to Progyny Rx’s PBM operations, which may adversely affect our business, financial condition and results of operations.

Previous wording

PBM operations and business models are highly regulated and subject to frequently changing laws, regulations, government enforcement priorities, negative publicity, industry standards and other requirements. Recently, there have been a number of reform efforts focused on PBM regulation, program pricing, and transparency, from both federal and state legislatures and agencies, including, but not limited to, disclosure, receipt and retention of rebates and other payments received from pharmaceutical manufacturers or pharmacy program partners, rules governing contractual provisions between PBMs and their contracted payers and/or pharmacies, and registration or licensing of PBMs. If adopted, these proposals could affect our business by further restricting PBM practices critical to maintaining current levels of profitability or could impact our ability to meet future financial forecasts. For example, in 2019, the U.S. Senate and House of Representatives proposed a number of bills that would, among other things, require PBMs to submit information on their costs, fees and rebates; require 100% of the rebates to be passed on to consumers; and/or impose rebates on manufacturers that choose to increase their drug prices at a rate that exceeds the inflation rate. In June 2022, the FTC announced an inquiry into the role of PBMs and stated its intent to closely scrutinize the impact of PBM rebates and fees on patients and payers. In September 2024, the FTC filed actions against certain PBMs related to their rebate practices.

Current wording

PBM operations and business models are highly regulated and subject to frequently changing laws, regulations, government enforcement priorities, negative publicity, industry standards and other requirements. Recently, there have been a number of reform efforts focused on PBM regulation, program pricing, and transparency, from both federal and state legislatures and agencies, including, but not limited to, disclosure, receipt and retention of rebates and other payments received from pharmaceutical manufacturers or pharmacy program partners, rules governing contractual provisions between PBMs and their contracted payers and/or pharmacies, and registration or licensing of PBMs. If adopted, these proposals could affect our business by further restricting PBM practices critical to maintaining current levels of profitability or could impact our ability to meet future financial forecasts. For example, on February 3, 2026, the Consolidated Appropriations Act of 2026 was signed into law and includes PBM reforms that would, among other things, require PBMs to disclose information on their costs, fees and rebates; require 100% of the rebates to be passed on to consumers; and impose other disclosure, reporting and audit requirements on PBMs. In July 2024, the FTC released its interim staff report on PBMs and the impact of PBM rebates and fees on patients and payers. In September 2024, the FTC filed actions against certain PBMs related to their rebate practices.

Previous wording

The Supreme Court’s decision in Rutledge v. Pharm. Care Mgmt. Ass’nin December 2020 held that an Arkansas state law requiring PBMs to reimburse pharmacies at a price equal to or greater than the price pharmacies pay in purchasing medications from a wholesaler was not preempted by ERISA. The Supreme Court’s ruling solidifies the legality of state-level legislation regulating PBMs, which may encourage a new wave of legislation aimed at controlling prescription drug costs and providing pricing transparency. For example, effective June 1, 2022, New York enacted a law that establishes regulatory oversight of PBMs. Several states have proposed separate PBM bills, and at least 18 states have adopted PBM oversight laws. A number of these proposed laws would require PBMs to submit annual transparency reports or otherwise disclose contractual arrangements with health plans or health insurance issuers or allow regulators to conduct audits of PBM operations.

Current wording

The Supreme Court’s decision in Rutledge v. Pharm. Care Mgmt. Ass’nin December 2020 held that an Arkansas state law requiring PBMs to reimburse pharmacies at a price equal to or greater than the price pharmacies pay in purchasing medications from a wholesaler was not preempted by ERISA. The Supreme Court’s ruling in Rutledge and other recent rulings solidify the legality of state-level legislation regulating PBMs. New legislation aimed at controlling prescription drug costs and providing pricing transparency and regulatory oversight of PBMs has been enacted. At least 33 states have adopted some form of oversight legislation. In certain states, PBMs are required to file transparency reports or otherwise disclose contractual arrangements with health plans or health insurance issuers and regulators have begun to conduct audits of PBM operations.

Previous wording

Developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. We may also communicate certain initiatives and goals related to ESG matters in our SEC filings or in other public disclosures. These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. In addition, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing and have not been harmonized, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. We could be criticized for the scope or nature of such initiatives or goals or for any revisions to these goals. If our ESG-related data, processes and reporting are incomplete or inaccurate, our reputation, business, financial performance and growth could be adversely affected. In addition, in recent years, “anti-ESG” sentiment has gained momentum across the U.S., with several states, Congress, and most recently, the new U.S. presidential administration proposing or enacting

Current wording

Developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. We may also communicate certain initiatives and goals related to ESG matters in our SEC filings or in other public disclosures. These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. In addition, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing and have not been harmonized, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. We could be criticized for the scope or nature of such initiatives or goals or for any revisions to these goals. If our ESG-related data, processes and reporting are incomplete or inaccurate, our reputation, business, financial performance and growth could be adversely affected. In addition, in recent years, “anti-ESG” sentiment has gained momentum across the U.S., with several states, Congress, and most recently, the new U.S. presidential administration proposing or enacting “anti-ESG” policies, legislation, or initiatives or issuing related legal opinions, as well as executive actions in response to ESG-related initiatives in the private sector. Such anti-ESG-related policies, legislation, initiatives, litigation, legal opinions, and scrutiny could result in additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining reputational harm.

Previous wording

In addition, as of December 31, 2024, there were an aggregate of 18,619,906 and 3,920,377 shares of our common stock subject to outstanding options and unvested restricted stock units, respectively. We have registered all of the shares of common stock issuable upon exercise of outstanding options or other equity awards we may grant in the future for public resale under the Securities Act. Accordingly, these shares will be eligible for sale in the public market to the extent such options are exercised and restricted stock units are vested in compliance with applicable securities laws.

Current wording

In addition, as of December 31, 2025, there were an aggregate of 18,984,966 and 3,778,964 shares of our common stock subject to outstanding options and unvested restricted stock units, respectively. We have registered all of the shares of common stock issuable upon exercise of outstanding options or other equity awards we may grant in the future for public resale under the Securities Act. Accordingly, these shares will be eligible for sale in the public market to the extent such options are exercised and restricted stock units are vested in compliance with applicable securities laws.