On Thursday, Progyny Inc (NASDAQ:PGNY) reported first-quarter sales of $278.1 million, up 7.6% year over year, missing the consensus of $289.46 million, primarily due to the increased number of clients and covered lives.

Fertility benefit services revenue was $169.8 million, an 8.0% increase from the $157.1 million reported in the first quarter of 2023.

Pharmacy benefit services revenue was $108.3 million, a 7.0% increase compared to the $101.2 million reported in the first quarter of 2023.

The company reported adjusted EPS of $0.39, up from $0.34 a year ago.

The company had 451 clients as of March 31, 2024, compared to 379 a year ago. Assisted Reproductive Technology (ART) cycles were 14,802 compared to 13,171 a year ago. Utilization rate was 0.53%.

"Utilization through the end of February was consistent with the record engagement we saw a year ago. However, March was modestly below our expectations, coinciding with the national conversations concerning fertility treatments and access to maternal healthcare following the Alabama Supreme Court ruling," said Pete Anevski, CEO of Progyny.

"This, in combination with the previously-disclosed unfavorable treatment mix shift that we experienced for a limited period of time earlier in the first quarter, lowered our first quarter revenue growth rate," Anevski added.

Guidance: Progyny expects second-quarter adjusted EPS of $0.39-$0.41 versus consensus of $0.41.

The company sees second-quarter revenue of $300 million-$310 million versus the consensus of $335.76 million.

Progyny forecasts fiscal year 2024 adjusted EPS of $1.61-$1.68 versus a consensus of $1.57, and revenue of $1.23 billion—$1.27 billion versus a consensus of $1.29 billion.

KeyBanc Capital Markets lowered the rating from Overweight to Sector Weight.

The analyst says, 'We are becoming more weary of the company's visibility into its revenues, utilization, and customer behavior." The new client cohorts added will likely not meet the utilization profiles of the legacy cohorts and constricted budgets.

"While we always believed Progyny deserved a more premium multiple than where it had been trading, this was predicated on sustained healthy growth, which we longer can underwrite in our forecasts," the KeyBanc analyst writes.

Keybanc revised revenue growth projections to around 14% for this year and approximately 10% for next year. The analyst says better utilization rates and customer trends, along with an understanding of overall business performance, are needed to regain confidence in the stock.

Price Action: PGNY shares are down 20.8% at $25.74 at last check Friday.