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  "docSlug": "bcbeb3ac7b21",
  "documentTitle": "Progyny, Inc. (PGNY)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2023-02-07 00:00:00",
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  "notes": "Includes a specific callout box questioning the math behind new client revenue contribution.",
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      "kind": "callout",
      "text": "“Additionally, given the large number of new clients and lives on boarded during the last couple of quarters, cash flow also reflects that short-term negative impact that we typically see with these new launches, as it can take a quarter or so to get the integrations with the newest clients and their carriers running efficiently.” -- Mark Livingston, CFO, 3Q22 Transcript",
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      "kind": "callout",
      "text": "How did new clients that represented 4% of average member lives during 3Q22 represent 23% of total fertility revenues?",
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      "kind": "callout",
      "text": "Weighted average covered lives increased by more than 200,000 driven by the launch of nine new clients at various points during the quarter. -- Mark Livingston, CFO, 3Q22 Transcript",
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      "kind": "callout",
      "text": "Said differently, how could new member lives have a utilization that was +6x versus the legacy member lives? This does not pass our sanity check and we call on PGNY management for an explanation.",
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      "kind": "metric",
      "text": "Unbilled A/R: $65.7",
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      "kind": "paragraph",
      "text": "The short report published in December attributed the recent increase in unbilled A/R to an intentional delay in billing by PGNY. We have a different take where we believe that the recent spike could potentially be attributable to accelerated revenue recognition from new client additions. PGNY noted a negative cash flow impact to new client additions on its 3Q22 conference call, which we believe is directly correlated to the anomalistic increase in non-cash revenues associated with the increased 3Q22 unbilled A/R balance. New launches, of which there were nine in 3Q22, can take a “quarter or so” to integrate thus delaying collections. We find it suspect that adding 200,000 member lives which represented 4% of the average lives in 3Q22 could have contributed 23% of the total fertility revenues. Said differently, how could new member lives have a utilization that was +6x versus the legacy member lives? This does not pass our sanity check and we call on PGNY management for an explanation.",
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      "kind": "quote",
      "text": "“Weighted average covered lives increased by more than 200,000 driven by the launch of nine new clients at various points during the quarter.” -- Mark Livingston, CFO, 3Q22 Transcript",
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      "kind": "source-note",
      "text": "Sources: PGNY FY19 10-K, 1Q20 10-Q, 2Q20 10-Q, 3Q20 10-Q, FY20 10-K, 1Q21 10-Q, 2Q21 10-Q, 3Q21 10-Q, FY21 10-K, 1Q22 10-Q, 2Q22 10-Q, 3Q22 10-Q, 3Q22 Press Release, 3Q22 Transcript",
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      "kind": "table",
      "text": "Spruce Point Estimated Fertility Benefit Breakout (New Members vs. Legacy Members)",
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      "kind": "table",
      "text": "PGNY Fertility Benefits Revenue Detail, Unbilled A/R Balance and Impact to Operating Cash Flow",
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      "kind": "title",
      "text": "We Cannot Reconcile The Large Increase in Q3 Unbilled A/R With Management Disclosures",
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