BNFT - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to the Benefitfocus Q4 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Michael Bauer. ahead. go Please

Michael Bauer

Good XXXX operator. welcome Benefitfocus' to Thank call. afternoon, quarter earnings fourth you, and

We the market be issued will discussing after press in the release our close of today. operating results announced

session. August, open Joining me and Dussault, for the remarks, will call Chief our and President Jonathon Q&A Chief Officer. and some Executive up Jonathon Ray our Financial offer today Officer; and then Ray are prepared we a will

subsequent such as Before expectations let key are financial statements, differ will remind as include stage of the XXXX fluctuation that that a of subject year you materially including and today of and might be predictions, regulatory results changing discussion of quarter date. we our of considered from federal today's first could risks risk market, guidance considered reflect statements representative as of views forward-looking statements only as cause environment begin, me retention our These to to personnel, that other uncertainties, of full should actual and and These and under be growth, forward-looking of variety cybersecurity management and and the laws. a views our expectations. securities information early results, recruitment not any

discussion could on the Form and For affect a XX-K refer filings. further other our that and report annual of other our material please important factors risk to actual results, our SEC

also today's will financial call, refer of course we certain the to During measures. non-GAAP

measures over Ray. that, me call let about can to You With find turn disclosures in our release. these press important the

Raymond August

began we for We very experience in to first increasing earnings across the business QX. and joining for Benefitfocus. discuss and Thanks, my our demand finished to as call is I thank progress Mike. of Good you and year expected future. see Today afternoon as our the the excited CEO am us. opportunities

sales and revenue our we company. our strategic marketing, of in total guidance EBITDA to exceeded the made For investments, and and ranges, particularly strengthen quarter, adjusted the midpoint

quarter. also fourth organization. free milestone was many successful a the a of the Overall, the delivered in progress reflects positive on quarter becoming across and that We major accomplishments cash flow one

execution channels bookings improved. better distribution expected in than growth. of across First, This all our resulted

performance employer from specific the two XX enterprise components partner. Cigna include, as certified year customers, and adding addition momentum carrier up improved period, six, prior with large of this of accounts, in strengthening third carrier our Some the adding

business XXX Next, strong capped points basis improved year-over-year. quarter, and our XXX margin demonstrated throughout an performance fundamentals. expansion improved over year margin and increased the in quarterly company. The QX, basis our operational impressive nearly improved we gross leverage strengthened points, In EBITDA efficiencies and of

proving are season and second XX% quarter, the and one Both continued we is completed enrollment average The be that as customers. company our positive to majority performance busiest our indicators of XX.X% open many enhancements investments a from revenue springboard report our for customers. our performance both the also During systems our the outstanding, excited uptime of I'm half This results the enrollment our were important by and most under fourth for highlighted of as our XXXX retention. focus over data a for our to feedback to from time. rate to well contributor benefits selling contributed response for during drive customers.

investors associates. I months doubled we shift will as customers, during capabilities interest the Since some addition, I observations of role number prospects, three our to have business. opportunity now past mobile increasing the and the many In nearly ago, to enrollment enrollment. focused continue assuming industry-leading CEO our to open Benefitfocus in discussions had partners, see on this downloads with of

Benefitstore their and value our to our carriers, force, pipeline demonstrated key solution strong I extremely fast as progress benefits by experience medical participants products Certified for ability in early employees. exciting actionable their Hartford, for and about has going and The now, are options momentum, We like sound employers Benefitfocus data-rich success are carriers, provide to the the customers for am for the this Cigna. growing a from ROI sales consumers, value productivity an and right many benefit and encouraged in which perspective. of extremely Program enthusiastic by our ways, an support all offering, marketplace The cost-effective tenure customers, direction. efficient both include to the and delivers that our voluntary including unmatched and are insights we in Overall, made have a received business employees, brokers which from ancillary Carrier and employers, see industry our Aflac, a platform grow. sales Importantly, life business, TPAs, fundamentals their continues

on observations drive encouraged execution, we first a and improvement our these as by perspective, our will in we opportunities, continuous improving strengthening also SAP QX we priorities. we drivers and I sales by ensure on addition, two, We will Based channel executing to Successfully the strong our value are continue are business, participants our strengthening, revenue execution. on partner leaders, our new on achieve all to you to future Mercer. recurring each This three, In a profitability we momentum XXXX. One, on to will a to focused our these in and new are priorities priorities of and and core. update our to in believe more three earnings continue specifics the deliver quarter To profitability and these distribution our cash free improving you on for Across are provide calls. expanding product market, to create greater are Benefitfocus. opportunities platform position From uncovering value. priorities generate being expand feedback faster now improved plan three these revenue public offerings. shareholder our growth growth, potential, industry highlighted is in flow-positive and getting we expansion will demonstrate steady improvement. with marked company. margin continue

execution, in execution better improve priority made will we we user our across sales refined team. to company. This our platform investments to on in entire and drove we XXXX, sales sales teams. in growing as marketing better have QX, continue substantial processes In accelerate growth aligned our XXXX, resulted in our Regarding our and

focus we advantage. on verticals have experience expanded existing example, competitive For our where our us key scale and gives

on Mercer SAP We In relationships new salespeople hire in optimize very and in in will productivity are more and sales also have XXXX, existing of both partner with the across regions. the continued to distribution potential and These changes channel focused select partnerships. organization, our our regions. of our investing we addition depth

and brokers. with building to committed particularly stronger are better relationships We

and lives have we channel with on proposition. way This Benefitfocus we the platform. more reinvented for this more value our fact, In collective completely commissions in key partner by brokers the improving results

work expand within a care. number for this sales to broker to Benefitfocus Our platform our already client powerful U.S. improved solution advanced top of opportunity has cost analytics homegrown of our a our better broker improve key its broker a contain tool the a This win produced and users transaction quality increases and it outreach team product as quarter, this strong is our clients footprint to to and help selected fourth legacy growth. pipeline the replace with base. the on In its provides

our Next Conference annual Place Florida. in week is One Orlando,

in and We including are broker hosting a our increases prospect record-breaking attendance. exponential crowd,

our and highlight existing We customers. prospective for offerings both new will

revenue only upside benefits see opportunities. drive Our monetizing is to the channels positioned second We is priority end-to-end incredible the our efficient serves that by platform. market. expand all to Benefitfocus growth as provider in

products opportunity, multiple of our This see confidence our the platform innovation, drive of experience are quality indicates in We investments The a continuous growing XXXX. products Benefitfocus To carriers now of these data into alongside working as continue on consumers installed catalog employers. We team solutions. we transactions in to from our the to right that service investments expert selling strategic connect products carrier new in have that communities great through on engineering as validates revenue and more shift have partner. improving with streams platform. purpose-built productivity numerous Overall, is sales customer's their from on our we selling to only inside also for made customers see the we two this our to and emerging support. and we team focused our sell Benefitfocus we our adopt base, capitalize

The focused execution our and operational is core consistent our strengthen of profitability to we'll to data, in our third through commitments. platform. maintain efficiencies strengthen priority further our and XXXX, improvements, To continue focused of financial investments our to invest in off build

growth expansion. data automation, competitive increase investing our increase on growth revenue to our gross partner data resources are our allocating example, and we customer drive to drive in deepen frameworks. on our To satisfaction our This tools we delivering quality while efficiency channels focused help profitable growth, and EBITDA objectives. will programs, exchange are and adjusted support long-term For from advantage, accelerated ample margin direct both all and driving

We are early continuing the we EBITDA adjusted forward these benefits on that in in in of the and confident these important drive and beyond. are I still meaningful gross the areas, are making we and can investments in relatively to look year on progress margin we our throughout both improvements capturing priorities. XXXX update to three you

expand with administrative the decided retire recurring months market XXXX has transitioning and end off revenue out successfully sales to XXXX. expanding well Benefitfocus update XXXX. quarter. We improving provide the core, our the with ability our strengthening family, spending after three on After our to opportunities you fully are end to the in growth that a into executing these capture CEO role significant final priorities, on front. by of drive revenue confident is Shawn and first strategic I want several to execution, positioned goal It's Jenkins and margins of to share his

will quarter, to foundation against into As with company am I as the discussed the optimistic our strong we from contribution of his responsibility He very assume I we steps the our the balance his growth conclusion, and value place over his strategy. In years. taking are to the thank down build forward Shawn put in on Benefitfocus and to the term. seat beyond. to I enough growth last board, for concurrent future. drive the additional company board for for execute today we his Shawn XXXX continue retirement, that opportunities look about and shareholder the into to When helped can't

our sales proven financial preparing EVP team foundation sales terrific has Annmarie for Jonathon in several will job a both years leadership of strong a created XX Jim Robert Sales Dussault, done has leader of that Customer technologist, an foundation Dahdah, Success, in marketing, extremely has is an and our with our future. and Fini, CFO, Marketing, our Restivo, enable is strong SVP transformed have of the growth. experience, CTO, organizations We over experienced a and

over to financial results. to call the I Now turn Jonathon review would to like Jonathon? our

Jonathon Dussault

Thank financial ASC revenue revenue this discuss and X our you, year Ray. results review which the quarter will on to to recognition fourth financial the now guidance XXX, of adopted ASC according provide impact standard, our XXX, according I we XXX, standard, new historical QX XXXX January ASC year. for and full recognition of

and to our we and was delivered milestone on fourth quarter All year a from would period, revenue both Benefitfocus above Turning solid quarter's the of line products a the and the new both half year execution range was customers of compared revenue revenue the the our million, ago cash the was XXXX. revenue of last revenue Total the in our down highlighted, of above were revenue to rate This $XX.X the was guidance been and prior free Removing XXXX existing midpoint accelerated or increase from half the midpoint to same have period for quarter a QX, metrics or an XXXX. as fourth of for previously major of million year of the and, the period. continuation impact compared QX reflects becoming the carrier it to down services of and quarter our professional contracts, quarter quarterly the XX% $XX.X to XX% of retention. at up QX second the period sales carrier performance. with flow further. more team. Employer ago year Breaking million, growth positive. reflects prior $XX.X compared to first guidance for was in high ranges X% XXXX of

totaled million, XX% quarter, representing fourth services and gross XXXX. XXXX. services was of $X.X the of million, our GAAP in or favorably efforts. QX X% of of steady operating XX% margin million XX% Total representing profit $XX.X operational total management of software in and professional quarter the of the was the Non-GAAP our QX quarter a to $XX.X of share the infrastructure point gross optimization services improvement a and For $X.XX. to XX% non-GAAP million, per XXXX. loss a results which revenue net total the as compared revenue an QX growing last compares Employer growth $XX.X gross of was representing XX% fourth million, contributing include total software year-over-year. margin well non-GAAP over basis profit margin, The for $XX.X year to gross an $XX.X increasing XX% increase revenue loss increase and reflects over improvements in million, revenue nearly XXX of revenue scale, as an benefits revenue cost and of as XX%

the year-over-year evident also in software improvements increased gross our in these points over Importantly, margin, which by basis XX quarter. are

EBITDA improvements to of and impressive $X.X adjusted compares revenue in EBITDA of adjusted X% in continued QX to our year-over-year or million also and X% results. favorably QX XXXX. drive was We consistent revenue

EBITDA Our revenue was margin above net $X.XX - of and and operational per share prior growth our loss share $X.XX loss in midpoint quarter, a the year was our ago $X.XX adjusted the by based positively guidance on shares scale. impacted loss period million outstanding and per non-GAAP average XX.X gross $X.XX of weighted for of expansion share. to per increasing the was Net

Moving the $XX.X to balance QX We with million. million million. declined $XX.X deferred Total revenue ended $X.X cash equivalents to of sequentially sheet. cash,

services revenue well as lower the as carrier the decline the As and new professional certain of timing carrier deferred margin deliveries reflects discussed business. in of engagements, prior in sales de-emphasis the quarters, in

the period. flow-positive. Now to used milestone million operations we the expenditures used as negative provided million pleased to Free XXXX cash major That less $X.X flow in QX cash report, operations, million flow, XXX. million by that in or under a measure $X.X define the I'm cash review $X in by we non-GAAP to cash cash a ago on in $X.X totaled ASC becoming delivered period. statement. provided a concludes QX our to was capital year QX, free compared of year-ago compared

comparison recast ASC XXXX adoption basis are ASC restated deferred our apples-to-apples results ASC in XXXX change as presentation, of benefit timing we the retrospective in enable for increase press results. of both full full approach expense. January XXX a our and release X, service adopted results, and of in brokerage XXX IR as our on XXXX. we beginning an website, retrospective XXXX and our revenue, a we disclosed and revenue sales of decrease our professional as a QX revenue in revenue as available As an when The effective under on our year and will of to which XXXX publish full will is marketing well historical our In commission the cost well and in result our aggregate, revenue XXX quarterly

each provide on line me additional item. Let color

to standard, included deferred Under in transferred control also revenue, expected shifted the brokerage primarily is when we over adoption our service terms ASC customer the formerly will of which to will expect the impact periods, of typically term XXX software in revenue of recognition recognition the policy net than services, XXX the due customer. impacts customer timing relationship segment, QX of professional the commission we insurance on to policy our revenue, contract services revenue mentioned the over used With commission versus call, revenue. the the term our relationship. professional which contract our previously from deferred the shorter of upon loss new result be insurance negatively to carrier ASC As services. brokerage decrease

Benefits will ASC quarter customers recognized QX, completing and services these earlier standard recognized from restatement quarterly software professional comparison between in the enrollment XXX, revenue, under new the under elected vast is be professional arrangements periods. revenue the recognized be of being in software less our annual and expect we but for to make versus will conjunction in With will to of this result, In fourth majority This our recurring also moving subscriptions. the management ratably is change our revenue of XXX core most services. of services. in will revenue reallocations software recognized XXX. of the ASC under periods open services retrospective and to largely higher certain ASC a timing with revenue our reflective in related to amount As Center Service revenue margin gross result services services that software This and

stated As QX comprised commissions costs assets we with as of mostly obtain contracts as of our of time ASC XXX on to costs contracts. the certain also at well customers, for expected call, adoption be costs to years. generally creation costs Under be sales Under which were of approximately systematic expensed a the to the ASC ASC is expected fulfill five majority the on basis, XXX, incurred. XXX, amortized as will the

increase anticipate we revenue XXXX. of such, in As services cost due professional large performed and carrier XXXX implementations to to

XXX, to selling or under details was QX ASC carrier changes over on our not in ASC In core will expect more do to continue Under we also related largely which XXX, and XXXX. to transactions ratably impacted provide be the software our also term. marketing call. expenses and ASC services XXX, cash expect operating We recognized increase subscriptions, certain and summary, to by Benefitfocus we materially will contract XXXX

moving guidance. Now to

Our is finalize are have XXX are change and X, ASC revenue been approach. The that based January guidance is finalized comparisons new period retrospective on recognition we preliminary, beginning to our full effective subject XXXX. the standard prior not as

XX% to software growth to We our are to We line the item. to be compared revenue will from driven of we majority our services this XXXX believe $XXX X% million. approximately $XXX growth vast million targeting XXXX, anticipate of revenue of For reflect total XXXX.

to million. $X We $XX EBITDA adjusted of expect million

revenue, represent believe of million. compared percentage XXX a non-GAAP this XXX loss a $XX basis to of million to point We XXXX. improvement we anticipate $XX As a to will net

of this a to XXX basis we point compared improvement believe a revenue, percentage XXX to As XXXX. will represent

expect Due percentage that the recognized commission revenue half average timing I to We be brokerage of million outstanding. shares anticipate our also the second in to earlier, the weighted greater of of revenue insurance XX.X year. we mentioned a

throughout ASC shift it and EBITDA in the items of this negative adjusted under year. will and year gradually starting result expect expense expect in We the timing improve revenue XXX the to

by as in our Importantly, cash indicated business positive. margin are and EBITDA drive and the towards expansion flow ability confident to we our adjusted guidance,

For are ASC $XX.X million the in first the compared low represents single-digit to $XX.X quarter XXXX, revenue the range of growth XXX. which we expected impacts timing of million, targeting and QX reflects XXXX to

As the in largely this revenue quarter the normalizing ratably growth point the XXXX. upfront basis being in XXXX, of highlighted, our previously be for an quarter. impact, additional ACA will recognized After XXX recognized result in will to compared first approximately be

$X non-GAAP We expect and to EBITDA $XX negative of million. net adjusted million million be million loss $XX negative $X to to

a a expenses and XXXX decline the As ratable revenue, ACA timing modest of by represent of quarter the revenue the to will of accounting compared recognition under we of are impacted the and well revenue. standard as both first percentage as believe new

please shares of closing, expect and We value. priorities outstanding. XX.X by year-end significant are execution, the question-and-answer expanding million our we performance With executing strengthening we and confident shareholder session three strategic this your on questions. drive we of are weighted are to also begin that are strong improving sales positioned core, ready well proud to average In opportunities the at Operator, our time. take now that, revenue

Operator

with your James. [Operator with first question. Instructions] Raymond is Peterson Please Brian with proceed question Our

Brian Peterson

the for thanks questions. And gentlemen. Hi, taking

Ray, CEO some the stepped off this want high-level I level few view I a just the start been while. So you company thoughts to follow-ups. one you high a and point? the asking at know maybe recently. on for start just into But role a with you've I got to Ray for business by how

Raymond August

much. thank you Yes. Well, very

business, us for I the very, very am As about opportunities I look excited as the company. a at

willingness think our platform our of business, consumers our Carrier willingness have And the Benefitstore enthusiastic we our extremely use and that, as that As day. shown over our expressed a of they purchase on every million years and overall about look products all have single of fundamentals now community XX couple we at last a evidenced you Certified by the when platform success to over Program. an

have The is an that's investment. fast other on thing truly return compelling extremely products our

our really have very entire at They've that strongest for of business. the employer and The The not EBITDA-positive opportunity is payback business they're fundamentals, shown year, when solution, I the leadership of cash we've overall quick, been about improved steady the sales very, buys And So the business sales benefit. benefit force, our our as only We quarter of are we've very the think also they're so point seeing we're seeing dramatically software, economic our as an QX the our under and strong. improvements seeing there. a our in both Rob been And terrific success expansion great our Dahdah. first lot a a margin. improving sales operation results our our Mercer for very, operational fundamentals with of as in the positive. SAP, was sales when been and significant and channel in we're us the at we're and execution increases overall has flow company. you ever QX, thing of quality were saw free dramatically,

points, associates. gross adjusted was our XXX margin to up XXXX points. think EBITDA really and basis Benefitfocus, you're And about in need up thinking basis when our Our about XXX was you

about long-term truly another, a our are obsessive success. associates Our both customers lot really our and one that serving drives and of

of number As on us I the business very and about and platform is future, lives powerful into a equation, but way times our about that's think think going simple I really through our of the forward million price And number ARPU. the amount platform, it we our starts, is look tremendous our have or of if a average unit, lives at you on per but where our XX activities. other lives the

is just brokers, brokers effort spent and But with can and This time it's the our and we channel to and for other SAP. largest focus excite us really a our lives we're force thought and more lot sales very broker been a adding in big direct efficient. recommending really Mercer Benefitfocus. our the We've they push how in We ever is really did through Our channel. broker reinventing Charleston. broker We of to place we for brokers year, platform. council, January, had about strategically advisory last our add site to programs putting lives in did more groups,

things, so by adding those very different And lives platform. doing very, about our all to we're enthusiastic

ARPU, The our other it's equation of team. side back-to-base the and is equally important. And with it starts

is Our gives for even year. sell, out our as team things thing platform, to they commission back-to-base for products. sign to return the for employer purpose-built team and very they Benefitfocus, Certified through products carriers. in benefits we those that, them carriers ability works expanding relationship Carrier It's products second available staff, for their engineering we good are and back-to-base continue premier a build to make Program And we get our platform, And a them. straight then, the where on our the world's our to just and purchase our it more put to have platform. us percent and actually to exciting products for companies with another employers our on customers, But the up we for products from access that marquee have get the is they truly access how is consumers roll our real more

brokers ever is a attendance proposition One without market order the conference of we're largest far, at at The the ever have question, place, had. involved. than in the been look value the strong for By We've getting If reaction we magnitude the next it produces of in our higher increased really exponentially. we've prospects it's all Conference. week, So Place very we the before. number

hotels sold fact, In are the out.

So and take we're the really our together, for the level. get and strategy company really our future direction next excited everybody to to about talk

Brian Peterson

to Got Ray. it. Great, That's hear. good

about directionally context, don't growth, X% know some we How you employer anything the if on XX% like-for-like I should excluding as XXX. kind it just could relates carrier think of versus to the share the maybe So growth? to

Jonathon Dussault

the Brian, it. Jonathon Thanks for appreciate its here. I question,

we two the of revenue continue business, segments revenue represented business XXXX, our the as about a pretty to So the forward. the what see relatively at whereas really of indifferent to In good stay mix That's we XX% the carrier to we expect year-over-year. standard, employer represented consistent XX%. between look approximation going our revenue

don't guide that segments to to expect we mix continue. we course, specifically, but Of

Brian Peterson

it. wanted And to maybe I it for more expenses Got the relates XXX. just comments me. on one understand to as

or So like it - may as that? XXXX go would - go there maybe to deferred, up I'm be expenses expenses guess, of were one I as are down? like the, something XXXX that kind year XXXX as those to run now off implementations. I look But some XXXX just out that it or where of as rate sounds cadence actually to once costs roll you're pulling-forward related and were we or your that that expensed would to relates trying make sure can commissions through think

Jonathon Dussault

run 'XX, it XXXX time, carry show the with back point, nature But here, expenses. Yes, commission and rate to at it we normalize you deals of the And the living and, larger begin some look over it's it amortization But restated incremental the as the in large came and we're and that expenses numbers, would XXXX expect will in will question. some to itself. today, good fulfillment the years a in ultimately, itself, normalize that due and timing XXXX to. expenses will when will

Brian Peterson

Jonathon. It. Thanks, Got.

Operator

RBC. MacMillan Ross is with question question. Please your with next Our proceed with

Ross MacMillan

if some center 'XX. for give like pro the It services in million on could number revenue software Thank you. wondered Jonathon, line. call steer the sounds $XXX to I services of a that of us $XXX least at million you a of little out bit you're revenue pulling

of if kind that with new help And look to related able decent well? do the under that maybe line wondered what might that, like standard of like. you to might gross look will margins So as think you an what be approximation on us a for line range

Jonathon Dussault

the Yes, question, thank you Ross. for

call I'll of, it, XXX, added impacts So question. directly let little the me give color you your to then bit of a get and on

not So an our overall, cash, core will not have services on will and impact XXX impact on it an our business. subscription have

we as revenue consistent maintain a where composition think type our in level services, we of from about at at we it with expect were So XXXX. to revenue and between a professional software

by software in on to XX% XXXX X% driven improvements the our of will our software and growth Specifically side, revenue range line. in be acceleration

high dust 'XX ultimately, driver to remarks, of improve my including to be on in in driver Benefit revenue gross software our XXX, that the and, settles and XXXX the quality be revenue discussed will that acceleration So Center a will Service prepared beyond. as as continued I result. that margin the importantly, the will reallocation And

we've target a software stated on to in perspective XX% XX% in we've our approach will and reaffirmed the target long-term gross XXXX, settles As and, we year. are range margin XX% the the that past dust today, from when

the but component improvement high in gross revenue will our quality in see So XXXX. software drive will business margin not only of an the

Ross MacMillan

retrospective filing 'XX? Or just a on 'XX think when helpful. you plan Will separate on that? results? and then you'll the come you with do That's disclosure have And that have do XQ to

Jonathon Dussault

and, do it to XX-Q. of greater earnings in No. in course, our detail quarter first we're call the going in conjunction Yes, with

Ross MacMillan

employer And know Great. the me. I 'XX for you disclosed one last adds. customer

think think you've in the to any sort how been as as net giving some vary alternative in I'm radically mulling terms you've that new we had metric leading thoughts size. of growth think just customers can of of kind on about selling us to further of business through might whether because you sort way example? I maybe curious an season, for go about in

Jonathon Dussault

to more about metrics forward providing some long year unfolds. we the Yes, we've look thinking it, been and and as hard

you to get our through have XXX the implementation, we color as and additional guide that, to way like sure our appreciate, drivers As on are forward giving we we'd around might that wading some in look help arms models. through will metrics underlying then calls future make the and metrics

Ross MacMillan

you. Great. Thank

Jonathon Dussault

welcome. You're

Operator

Please with next question with is Our your Jefferies. with John DiFucci proceed question.

John DiFucci

in the in it look all really - that's in just it's Jonathon. haven't employer XX% then don't seen employee going off, that's that under reset that's happened which something Ray, to exactly Thank I about and here numbers mean, I you trying a but Ross, I Jonathon - for growth, there that - not than I to. per Or we little customers, I'm do forward? larger a yet. the employer last large probably I talking it on perhaps are spoke fourth comparing XXX just going XXX, and this focusing about when quarter seeing aren't And which is really customers, were Ray though count, to think momentum Ross assuming Like, growth. this. you. real and a revenue. And those bit. X% increasing to question going for And XXX, was customer that nice - forward that was anticipating follow-up with numbers you you're the guys Even to we implies stuff? a we understand But not have up, something of or has anymore we're and and count you losing you guidance. and XXX XX% and a talked where but compare on before I number. about the comparable, at Is realize XXX revenue year's a decline guess, past - other your and what in not have couple the to have anything far that guess like reflected they're then

Jonathon Dussault

at first take going the Yes. Hey, to John, it's Jonathon here. this. I'm shot

of would all, XX% XXX under that XXX, the as under revenue standards. would've our of So it first estimate been X% both it's under proxy approximate so well, range ASC an that, appropriate to of we what guidance

in under what the Cigna. two QX we a operating, closing deals keeping enterprise average We're in of and be our feeling momentum books not expectations will good XXX not to deal deal had. come saw Specific approximate our new in does new question it continued that XXXX, et has sizes, our about we're grow. to deal Although were. we've size cetera, carrier new about alone deals your

share new continues deals to heading market and strength of our at deal the of getting into XXXX. So larger be our those momentum values part

Raymond August

Hey, John.

John DiFucci

Yes, Ray. go ahead,

Raymond August

which rate year-over-year. growth this had quarter, add year-over-year, an reporting, actually rate to our of growth from basis points look about wanted ACA by our at just that you one-time even impacted I impact overall Yes, QX was XXX if

in so in and doesn't really show not that growth. baked And that's

of sales thing have as by typically as last those of the The those QX, a you'll will impacted two reported year, is see QX, hoped And was our was One at look to look other impacts one model, that that, in we to impact we lives we them things. did where execution. sales we That and QX. the come our and say things in you at of the though good were online not at was QX was overall ACA, begin to second be. the

So half-loaded kick see begin we do to back you'll and plan, then. in a have that

John DiFucci

Okay.

right out And on you you you with, guess the there I out there's we've is vague it be if of pretty that year, there everybody transcript and give I'll all I for understand not - lot ourselves, deck but on beginning I a to guys. you went you guess this nice it, you're things, talked because, mean, those to trying you guidance very, and prudent impacts, the think but with of momentum very - this through it's like has, comfortable XXX XXX, And to away I confident, you you're sure and I So a I'm guess. take that it's still maybe think the all don't the a this I follow-up and it'd a call that you I of about, know and some through Jonathon, went from have - slide and some specifics. been away

if constant cash - can, those maybe your thing mean, figure on it is go the we'll maybe I flow. be But through one I here with out, slide So of details. see pointed some you another to be guess but again, don't out to going it we website that's nice might

cash the of bit a sense or at of a next directionally Just help So you the flow, that, us on give for least business. momentum little year? can even us than more substantial

Jonathon Dussault

no, you for Yes, thank that.

a I'll proud into free from and starting XXXX, of momentum in and it in of a our prevalent and base. cash actually positive. operational We're how amount with from benefit being the the flow perspective of as good maturity That PEPY our comment fourth we to we're quarter an XXXX, provides more organization contracts commitment from of year created that fair heading all, perspective. executed well as a ended discipline in being the the on we cash target flow First about of fact start

So from have we cash a the good flow foundation perspective.

look XXXX, we will being into year. come play As cash at for to positive though. we flow full committed Seasonality free are the

free of nature first the flow our be we quarters, ultimately, and, see cash earnings won't for expect XXXX, the the in Given full free cash seasonality, positive we we few our seasonality revenue will year positive. but flow

John DiFucci

Okay, want I great. you That's correct segment. that employer really something. grew And year, I XX% last just helpful. to the was said

sorry You grew about that. XX% you. total revenue, about so Thank

Jonathon Dussault

That's okay. you. That's though. Thank correct,

Operator

Our with question. with Canaccord. Hynes with your is next David question Please proceed

David Hynes

guys. Thanks, Hey.

the have this expect what's How mean, digestion was of sales are alignment to in business Are on like wanted additions? for a you 'XX? part year. XXXX big plan it the I sales that ask just And about does front, you Should scaling the we mode? now? feel correct a year? we sales obviously investment Ray, the I So thinking

Raymond August

Yes.

from in, the to areas. Rob and very, focused lot our he the anticipated. were had of the roles, were we point than the where it in organized right correctly. make strength ended a Dahdah QX And was people focus very the - sure sure was to other a are have that One right of we we led higher bookings different on was We were activities we in make very QX. with pleased growing sales had came team sales. We

the focus heavily, We're partners, activities of us channel. marketing really focused focused customers. is areas have a we're programs for and channel from increases proud channel, Mercer. channel investing and of our significant has two seen on team those been channel, flow that One real the really, SAP of something in in now have on the We've

really, really pleased is what So of channel the doing.

point is improved That's of seen also both also a both operational total we've increase sales view sales an of productivity team. that a it at dramatic and and thing the of the We other rigor. in individual growing tenure The given view. our at efficiency the point see

prospects the to are Place the than that any the Typically, of is is good really coming indicator. are we've that that's where in showing just at at about seen Conference. has past. One people feeling greater we up One of our with a point sales exponentially things me recent the our leading And conference number

for just that's early - sign just it's great So a us.

QX, about marketplace. seeing And we're and the early good I feel in about so good demand the QX very I the on feel pipeline

David Hynes

a to on I successful enrollment it about kind the to past, you public okay. like sense it of a in about would gets from we seasonality. had that cloud maybe think the infrastructure was shared, kind your thinking Day, stats that Yes, the And but engagement sounds another open And season of just seasonality make me that the Analyst platform. think migration given of at talked

longer adoption impact that this model? And margins in Infrastructure-as-a-Service process we are could of an how term? where So

Raymond August

our Officer, this companies to Chief focus Technology with had We our is us architecture is previous has our cloud thank something through public ourselves And are in that. on you, Restivo, continue memory. make has we he something progress. no, Yes, - preparing application and experience that on that way our going we Jim our getting great a as and And and for to well.

In thought today. using some we're fact, components

in making last good will months of So it and of it's usage we see and forward. very percentage infrastructure for progress significant area. that our as Such during the as is we occurs, that three create something year, margin important And us as go very we're the us. high a that for it very improvement

David Hynes

the time full can, in, first Jonathon. Jonathon, guidance if I'll you've - for year Yes. sneak for given one I one is last And this just Benefitfocus.

in mean, maybe is growth guidance about point coming feel we're any extra to we're X% to baked cushion everyone - I 'XX. not numbers? year. your to a off this Obviously, to sure have bit at a of XX% to challenging you very any growth just take like you do talk wants into the down a us going think I be lot. that Just

how you any conservatism the and the around model could give think context there? So about baked of you kind building in

Jonathon Dussault

the appreciate David, I background too. Yes, there, question. thanks for the

pre-detailed, might is as imagine. pretty, methodology So you our

also of model. subscription revenue, should, in high degree as We a have to visibility a our we

on pretty approximately XXXX, a head degree with we XXXX. sales reasonable range side into our that combined much visibility's our feel good QX. improved we these good we're that grasp a pipeline saw the We that in and for with providing and XX%. comfort execution in about a further We opportunities the As combine numbers of

Raymond August

that. Yes, add to and I want just to

of something on future we We And our enrollment we As are we driving into both lot business, give growth revenue revenue have provide leadership very unit. our unit results that customers, good can will solutions average actually visibility existing by of our that a to at one good customers during us frame, strength flexibility and and around making have customer's want buy that the lives the open a looking looking focused per that and in as - our and areas time and per as revenue on highly focus that's average look that at growth. see the opportunity we us is, here. that it future gives for a for at already our because solutions we sure them, revenue team, the

David Hynes

sense. makes That

guys. Thanks, Okay.

Raymond August

you. Thank

Operator

question proceed question. with Our Wells your Fargo. is with with next Jamie Stockton Please

Jamie Stockton

the maybe for more you of Ray, guys been a and went the client part Hey, my a on. that's value And like with have that ticked around good from that where Thanks face where ton what's going going sure and were open questions. the delivering of taking people front. But guess you said churn. and know there's - you've first on expectations churn to I noise of evening. just I'm lot one wonder are on revenue is well, XXX. I up the and if you gap maybe consistently with guided, has feel enrollment Obviously, service

you great. historical be versus if how trending about that'd could talk it's just levels, So

Raymond August

Yes.

over talked we've customer is and XX%. As well prepared our our retention revenue remarks, in

by of our We've base. been in best We continue see had from sales enrollment. ever as it's to installed the results this that increased get told open we've the company. excellent many, to a We feedback many customers

So positive with wallet they're their in very way. a responding

the overall of carrier look employer our business, the we're growth higher in the growth our of an that's segment, you at really seeing is than segment on If the our and success the dynamics employer in indication side.

negative our putting is a where that I'll to their business, overall business products As it's of on it that's is revenue to we're our, would business carrier platform. moving to while is carrier important growth. business services-light the thing to about them really entire revenue. than actually know we to our those at selling classic model see, impact carriers like want the isn't call, The though part that And a look our the sell it a we that on growth what platform, more solutions that having is business, By much And our something overall seeing carriers. our great was that there terrific carrier driving incremental on activity. revenue it's our professional sales up

and very nicely, expect accelerate we if very, see business, our to segment look as employer the our business So is at you still growing carrier also total well.

So kind the that's of of our dynamics the revenue overall picture.

Jonathon Dussault

is today I'll simply XXXX, guidance the the I'd the add, revenue of that would've to the in XXX. with guidance and it standard. X% be what that between under consistent for estimated And XX% difference giving our of to just terms we too, previous is reiterate range guidance estimates we're accounting

Jamie Stockton

fall what one, that's we commissions for you're cost is still. of but for ago said, sales I one for commissions? off some Jonathon. Can of you amortization just kind the Okay, stomaching mentioned what period us will The amortization commissions. years is you [ph] six think give those five, And from pro commission, not quick maybe When then it service great. see you essentially?

Jonathon Dussault

Yes, years. It's it's five five years. about about

Jamie Stockton

great. Thank you. Okay. That's

Operator

Please proceed Frank question. Our next question with First with Analysis. your is with Sparacino

Frank Sparacino

you. for first maybe Jonathon, guys. Hi,

of there? bookings but there just during the of any side I and a sales figure for thoughts strength terms guess, the the surprise QX, was higher quarter, me marketing In was in on function one things. assume the of I

Jonathon Dussault

we and would've strong And ahead it. the in that But success different did typically annual we there had of Yes, conference, sales into as for improvement in the in that compare perspective. pull we was prior you we it marketing, bit logo important, commissions XXXX, quarter year, been huge particular, carried expense quarter as We sales the first a team year-over-year the and count quarter. so the a the as [ph] fourth year, look the by to have definitely and in from over pulled a our which as order to got forward but position a GM in indicated a more move XXXX. we

Raymond August

expected was investment And channel to increase the other our to in add that our we operations. and while thing budgeted, did it is

an some have entirely at built focus on out. around We our And of channel and visibility new year, also challenges predictability really sales of we've that sales we operations, team we to looked the overall as had last we pipeline. wanted

leading his to built out world-class team that our operation have sales So Rob talent really team ensure we have group. and that

Frank Sparacino

much that from sort can the at a channel? expect SAP Carrier look channel, what Jonathon, but year, Great. up, And Mercer for contributing? Ray spin do you of determine expect Because to for one's of give maybe broker what the can the sense little just is we have hard And what the you. XXXX, contribution revenue some us at Certified do from terms you extent the in you of part when then obviously that from least a or off to you Program? And bit follow just how to

Raymond August

results things We very part around as benefit very product Central Employee that fact heavily as come is are SAP product. their the employee the person, important And our frequently seeing SAP in in and our solution. excited advocates channel. we're They site very, team, really they has the portfolio. them branded focus one that SAP the actually that on very the we're as users we SAP and well on their every it some, solution, of met Yes, on with attend them sales all made by to I've SAP, they because an cloud-based that SAP we're list, the knows very really in sell price is as of And that the the ideal of business fact they conferences. see our their investing that the every makes SAP a marketplace. solution fit use that U.S. solution. solution, at our as they're for of The

cycle. So to an we've that SAP seen actually as relates impact it of

such money So Rob we're on investing and channel making of high to a for that lot driving SAP, a sure that very, sees that us. and as maintaining leverage is area very growth the channel. committed

Turning that something a we on. brokers, put to tremendous are of our brokers amount attention focus

If recommended our companies in space, space that above, you than strategic account the more or deals XX% at X,XXX of are look by of broker.

January, in on interviewed community, strength sessions company Charleston focus in we done us past. as what the we very where a broker been getting site have in at to we not the two area We had them that's them. where So is an for and different broker actually, of had close a sessions

- came off up next just compared we wanted groups, actually, and We have we're the number to blew commissions work our we doors they they company out One programs, standpoint what brokers very with our Place standpoint. Broker a So the all to new We week conferences. of a Advisory both those from from servicing see with, innovative those closely and with of Council. from a rolling different programs, we work Conference previous at where

we really us, into about with our to and the about of relationships we're future. excited be part important that the So brokers. the contribution They're expect excited an

Operator

Sean with Wieland question. Jaffray. proceed next Our is question with Piper Please with your

Sean Wieland

hasn't a then a It's of founder a step touched management an away little and company role operator from the first, one Hi, thanks. odd Maybe entirely a to off on. see that both, been board. role,

you or why as provide additional to any clarity So is insight away. stepping us just Shawn can

Raymond August

where a the was of CEO. of I Yes. decades his It that his took back his assume vacation the In his coming working, his basically time, spend where stepping that an on November, role underway staying years with with had Upon announced family, he of two transition decided end he Shawn family. the building was December, down went that from Benefitfocus. of several really orderly CEO. rest want family, attention, to vacation Shawn with we we that's part At for that, with spend after as

leadership a decision finance, the well. the company, extremely He's we still Across working to marketing, very from been retire it'd sales the the and whether we customer be while place in the very, and of leadership, leadership, So we've at he good feel team But well. Benefitfocus. for about now shareholder made company, wish major him company. quite technology and a here

So very, forward. very excited team as the go about we

Sean Wieland

all And then between growth, XXX of guidance a from I XX% know employer. going a rate implies your from the forward? out that that to growth? But Thanks. Benefitfocus Okay. we're just to And that carrier be about revenue as aside the for for would new I thinking at kind really we we break total at about The competitive trying put should - and landscape anything be growth a is should pressuring let's to really a think perspective normal you're perspective, target unwilling deceleration there growth line. that macro of think least minute. X%

Raymond August

we last our we chronicled year, the if X% a year, you look XX% range, to tough season, rate year, XX%, as a Yes, flow didn't had as We this We're sales leadership. we with well roughly expected. at that this and be off we and in already to sales seeing line last selling growth we in this made expect year. investments marketing, year year, and marketing last that and major have pay

in we we're demand we QX, good solutions. that about we're in our feel seeing So - seeing. good the what we're logo you seeing increased about feel seeing, And we're overall count our as saw volumes for

Jonathon Dussault

that, probably our an throughout as Yes. add revenue acceleration QX correlate the rate range, we to expect of The I'd only you to our can year. guidance too, thing growth

of of it rate stronger than our what out XXXX. coming So out exit coming be is will XXXX

Sean Wieland

much. very you Thank helpful. That's Okay.

Operator

final Wardell question. Our with Steven Please is from question Markets. Capital your proceed with Chardan

Steven Wardell

in effort largest their can Thanks on you to strong questions. going for are you questions And from Benefitfocus' the What interest is customers. to are the hoping that products? what sell how taking my [ph] hearing customers? the summarize largest and I'm going are their how just in minds is

Raymond August

Yes.

employee - largest continued increase look at we has year-over-year. the count customers, was to average As our dramatically

We continue QX. two We to which had carriers, sign we call over XX,XXX. companies in enterprise

seeing because the XX demand year, additional on sales the we're for customers, larger the actually created we top we've of done One things this customers force of the an in focused the country.

because customers, we focused customers So have team a a seeing strategic from on XX those and enterprise top team we of an demand account the we're now have types team.

of drive customer one they shift so X,XXX much than when lives of can as example. the is, definition, of we - usually that to number. customers, seeing And the years and reasons system logos. over largest sales seeing A is state not the governments, of about X,XXX have on business, meet a demand as the for very think large those the last Governments range. such are, our robust several where And value focused type with the focus gotten We're of in on really those number great well. has enterprise on we we're lot very happening us of of on The our about for in solutions demand this other large really thinking a is the member focusing by number for force because our needs a that area just different lot employers. by we we is, these of think state greater economic verticals, governments, traditional

Steven Wardell

you. Thank Great.

Operator

Ray to call question-and-answer and I over Ladies and for the closing session, to turn like gentlemen, remarks. concludes back the will this August

Raymond August

appreciate areas, everybody revenue you Great. questions. our value. two, for we'll and by extremely to growth, accelerate I in one, joining and three, we long-term sales very be our executing believe focusing recurring improving In execution, all shareholder call wanted our thank today. had terrific on create very strengthening expanding focused and the strong the revenue Well, We core. much, our we're three We to very, XXXX, opportunities; these able finish closing, thank to an margins priorities, and expand our on

you concludes thank this So much, and very our call.

Operator

our Ladies has gentlemen, conference concluded. and

for you at disconnect Thank may your time. this participation. lines You your

Benefitfocus (BNFT) 14 Mar 182017 Q4 Earnings call transcript