{ "docId": "019dd923-622c-750b-8b99-4fdf89a4b224", "docSlug": "bcbeb3ac7b21", "documentTitle": "Progyny, Inc. (PGNY)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2023-02-07 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 8, "pageCount": 100, "prevPage": 7, "nextPage": 9, "slideType": "competitive_analysis", "function": "name_villain", "density": "overcrowded", "nDataPoints": 0, "notes": "This slide serves as a core thesis argument for an activist short report, focusing on competitive disadvantage.", "elementsJson": [ "headline_text", "bullet_list", "paragraph" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-4fdf89a4b224/8", "deckHref": "/decks/019dd923-622c-750b-8b99-4fdf89a4b224", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-4fdf89a4b224.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-4fdf89a4b224#slide-8", "components": [ { "bbox": { "h": 0.05, "w": 0.96, "x": 0.02, "y": 0.49 }, "kind": "callout", "text": "We believe that the fertility benefits marketplace is becoming increasingly commoditized and crowded, as credible, well-funded private players have achieved significant scale.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8568b758-dc18-49b0-aae0-c88ae6de2348", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.96, "x": 0.02, "y": 0.64 }, "kind": "paragraph", "text": "Several high-profile private companies have exhibited rapid growth and achieved both scale and impressive wins. We find that, if anything, it is these other players that have the most competitive differentiation in terms of business model (Kindbody, with owned clinics), payer relationships (WIN Fertility, with strong payer links), international scope (Carrot, with arguably the leading solution for employees outside the US), and breadth of solution (Maven, taking a more holistic view of women's health), and several of these players have innovated in areas such as payments and personal technology leverage (such as apps and wearables).", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "21d2b733-bf31-4dc6-910a-b1ae4f0b99af", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.96, "x": 0.02, "y": 0.91 }, "kind": "paragraph", "text": "We believe PGNY has glossed over the threats to its client base and has likely understated client churn. We find high profile examples of lost clients such as Activision provide a reality check on the PGNY marketing pitch. We identify specific risks at three major PGNY clients (in particular that Google Ventures is an investor in Kindbody) and note that nearly half of PGNY existing clients will roll-off their initial contracts in the coming two years.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "2e656996-bd0d-43fb-b01b-bec6b961c687", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "Technology companies were early adopters of fertility benefits, but benefits consultants with whom we spoke generally consider the market for large tech clients nearing saturation. Importantly, our analysis of fertility benefit coverage indicates that newer PGNY clients, more often outside knowledge worker sectors, are offering less generous (averaging a half cycle lower) benefits, meaning that new customers offer lower potential revenue per member.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6f066734-5b55-47b3-a12c-fe5b486d400f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.96, "x": 0.02, "y": 0.29 }, "kind": "paragraph", "text": "At the same time, in contradiction to management's claims of improved marketing and sales efficiency, we find that PGNY's cost of customer acquisition has skyrocketed since 2019, and the Company's increasing reliance on smaller clients will likely exacerbate these pressures.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8a828e77-6805-4b57-b4b4-bc098e6a53e4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.96, "x": 0.02, "y": 0.82 }, "kind": "paragraph", "text": "Just as PGNY's differentiation fades, two large competitive threats will likely loom. First, given their existing infrastructure and clinic relationships, we believe the large payers have an easy path to market entry, as developing a specialized fertility benefit is relatively easy. Second, given the aforementioned role of private equity in the clinic sector, we wouldn't be surprised to see a major clinic network offer their own fertility benefit to regional employers emulating the Kindbody model.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b414401b-16c8-4993-8333-f29c164a1d60", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.96, "x": 0.02, "y": 0.75 }, "kind": "paragraph", "text": "We believe investors have wrongly discounted PGNY's competitors since they are all private companies with minimal visibility. However, Google search trends, employee growth, member adds, and competitor financing trends highlight PGNY's deteriorating competitive position and the significantly greater pressures the Company will face.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b59fce89-6c75-4d57-8964-e57c9fac94de", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.96, "x": 0.02, "y": 0.36 }, "kind": "paragraph", "text": "We also believe that PGNY will face increasing cost pressures from its clinic network. Constrained clinic capacity in the face of increasing benefit manager competition and member adds means that clinics are likely gaining negotiating leverage, and PGNY clinic contracts are typically for only one-year terms, facilitating frequent repricing of economic splits. Moreover, the fertility landscape has been an area of significant consolidation by firms under private equity ownership, so we expect that larger, more financially sophisticated clinic networks will be able to exert materially greater financial pressure in contract negotiations with PGNY.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e829eda6-2659-4109-a4f8-44570e0a6374", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.96, "x": 0.02, "y": 0.55 }, "kind": "paragraph", "text": "Despite being the largest pure play, PGNY offers only modest differentiation or sustainable competitive advantage. The PGNY approach to fertility (for better or worse) has essentially become the standard of care among the focused fertility benefit managers. And since PGNY's relationships with its clinics are non-exclusive, PGNY lacks both operational control over costs and quality and any differentiation as it regards its clinic network.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f3345781-aec3-43e4-b6d7-3d110b31df12", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.65, "x": 0.31, "y": 0.05 }, "kind": "title", "text": "PGNY Has Little Competitive Advantage And New Entrants Have Gained Ground In A Rapidly Commoditizing Industry", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "73bd740d-2c9a-4fb7-8fb9-fda8c794ed8e", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "competitive-analysis", "slug": null, "matchId": "0175e68c-38ad-4c90-be6f-fd37ecc3d24f", "evidence": "The slide systematically breaks down competitive threats, market commoditization, and loss of differentiation.", "confidence": 0.9 } ], "arcBeats": [ { "to": 20, "from": 6, "beatId": "03536da8-6567-4733-bfa6-135f9da8b71f", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Complication", "beatSlug": "complication", "evidence": "The document outlines several issues with PGNY's reporting, management, and industry position.", "position": 1, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [ { "to": 20, "from": 6, "name": "Aha Moment", "slug": "03-aha-moment", "bestFor": "Data-heavy sections, research findings, analytical arguments", "matchId": "29317d8b-0853-47fe-b80c-7bbd608ade0d", "evidence": "The document presents several red flags in PGNY's reporting and management.", "position": 0, "objective": "What are the key issues with PGNY's reporting and management?", "structure": "The Problem/Question -> What the Data Shows -> The Insight", "confidence": 0.8, "description": "Establish a tension, present data, then deliver the insight that changes everything" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }