BNFT - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by. This is the conference operator. Welcome to Benefitfocus' Q2 2021 Earnings Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will an opportunity to ask questions. now Vice turn President would to, conference I Leahy, Patti of Instructions] like the to over [Operator Investor Relations. ahead. go Please

Patti Leahy

Thank welcome and Earnings Good Second operator. XXXX Call. to Quarter you, Benefitfocus' afternoon,

Matt Levin, Chief for prepared questions. the Wegner, Matt remarks Joining me then Officer. today President Chief will and Financial offer Executive will Alpana call we and and and Alpana Officer; some up are, open

that that today's involve Before cause discussion of include key of remind we and including development begin, differ that uncertainties let personnel, our the forward-looking statements, and business, to risks results our you and those including could me actual statements impacts from strategy. reliance growth and market will materially COVID-XX integration on

in For more our the filed Form information, SEC. with XX-K please recent refer discussed factors most to risk

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

can today's important turn call in over You to I'll earnings press about measures now disclosures With that, the find Matt. those release.

Matt Levin

Benefitfocus you It's Thank our a Patti. today. to you forward we're results you, strong be with sharing today. pleasure with quarter looking and all had to another

my industry. to I'd and service by create focus I've this actions build taking the our is reach. Before on of I company history its to the I and thought best Benefitfocus excellence. absolutely short, career. throughout to hear things execution value. strongly admired and It's In win some also you'll on believe, is within path this since about positioned company. ramping to company the how well we're believe excellence watched start entire we I'll I discuss excited highlighting, service why the learned in the XX-year and our return I've more the do, importantly opportunity joining I'm lead enhance we're to growth.

business care focus such benefits Aon, While products recenter at grow launching natural adjacencies. the at was exchanges. services as helped I and health my Later, into around new Hewitt, I was and

for our unlock to what growth be at do needs will and to very things, we our need to useful And We areas. this experience. need growth. fortifying is experience opportunity, proxy continue believe, return enhance Benefitfocus. done customers' three we to the create about I these We value significant if we think I company a thoughtful to need be business. core

an my industry focus and how and even meet to understand we of three third, experience During we my customers have are first days, top how believe them; at; all and have our drive them priorities elements this to priorities. growth serve learning build first, XX associates ensure from with and learn to strategy, value. sessions partners to conducting on been, our organization we better listening better and understand I work can these second, to create and to to the with can heritage depth critical and unlock

lever at perfect customers to ever user about this easier it and benefits benefits. we Our our greatly make help made not of them our highly be they gaining with drive excellence to and in our to day be for experience commitment We've brokers and including a company. frankly the It decisions tell of employees. the and and continue to one them. grows to with hand Service industry. customers we our excellence and They day I will having is We've serves insight team in referenceable consistently that no increases This this for a But superior our more our industry. important customers created mission-critical until Service be lead respect administrative my value most our hand valuable It have shared hands, biggest in area the it service growth and to than the and scores customer we're partners, our ARR. compliance NPS ecosystem The value will and customers. I vendor know us Benefitfocus enroll this tell Yet, greatest can with lead immediate people. their all strive it's set believe me. our increases retention. selectors. safest focus, goal value excellence. how to goes industry will is their They we needs. with you while, service excellence for been single

talent good team potential, strategy, I'm while that, can and importance leaders have are who the And Benefitfocus experience, to excellence I reach credibility deep the key its experience, service the reputation be will Given industry, are attracting we full who to has with can a that focused already of growth well. the people help our on industry in tech and service you place. as in fit incredible tell differentiators company

ground at as Suzanne Customer Customer Previously, Doctors Operations members press you Massachusetts. Tim was in team As growth was execution. he announced Operations. from I management our saw connected her Sand the well of employers, Cross market from senior-level held where today's and into Global we Leary Teladoc, ConnectYourCare, running. SVP roles Blue is as enablement Officer. Chief key expect four Operating and Best serve health our comes and segments Officer. to will she believe where release, of Sue customer us she of will our joins and to hit be Chief new instrumental Blue plans Shield to the I SVP Sue that,

benefits a favorable was Sue and been he and Chief where us enrollment roles a Aon. Willis is comes have already held about preparations Craig Commercial well implementations and management. Their Maloney across Tim is as known Before implementation, making enrollment. impact the of hundreds month, health their Chief more Executive to well joining that, Maestro careers, open experience customers, level XX are us Throughout brings credentials for at employer Officer. later at served from as and Tim he plans. Hewitt and Officer. Towers as than with industry. client on new us Health, open of Watson He's customer years senior and in He

Before has anyone across years a providers, Craig He with and roles and I that, And he network Univers the industry. experience. health decades in XX benefits would benefit Workplace. nearly voluntary Craig better space plans, senior knows employers than voluntary wide brokers. argue, has Hewitt spent Aon leadership in the of and

Each with they great We Transformation Fidelity, I'm from came they ability to individuals rich have an was Accolade, also saw President come hired chose them she to previously recently jobs prospects. customer our great these and first our talent at at Benefitfocus, Officer, and excited Chief even Strategy confidence Change. the and Provancal. experience. health worked in most Vice where bring to I product Senior of and great Tina drive to Tina Tina's has product She and But create plan experience about strategy our employer opportunity company. value. to because better of Aon

results, a biggest outlook, on few our grow thoughts I'd inflection touch particular quarterly is last company turn priority business in like business the That's on employer we good is our hired since sustainably. about trending compared for We've the our of to corner. emerging to point This I started Board It the The onset why in me. return our growth. me year. from to the single to to COVID. offer Before made business. strides, the favorable feel great to

them to decision levels, pre-COVID pipeline to where we and need However, yet and exiting they're not be. cycles, back QX not are

to more levels a demand. away result IT enrollment. the is are health shift with recovery Our the muted XXXX, employer health plans along Simply near-term addressing business of This demand. from lower in informing our is other risk plan previously market This dynamics. continues priorities levels for lower outlook primarily and see changes group regulatory put, and we've of a of renewal prioritizing discussed, of of

full but likely next a occur year. determine, towards the provide in during next year's revenue will point We our year. to guidance return we plan premature if XXXX, to We the to quarter It's most have fourth earnings of latter inflection continue for as expect growth historically company to call. to growth part the

the to specific I'm further health we very with quote-to-pay, referenceable customers strategic. plans, vast clear growth lighthouse To relationships customers. our close our these as be that me the through been plan near-term majority remain health road in map. contact to and actions about such we're organic and confident taking to challenges. key stable I've start address activate We for Let plan strengthen the plan of solutions

and For even momentum the employer, I'm relationships, which advancing more strategy help also on will and on partner placing implementation. opportunities. expose service intensely to us broker year's our focused OE, greater focus building on we're from And last

good. I our allow and COVID to actions, see trajectory a these expectation convert The subsides, that tailwind more will next we believe year nice that business. With us feels should

up us oversight the a from Board, reflects and with In our medium-term for for I'll execute I longer-term and the our my Once strategy with joining, growth. team, input working of leadership to leaders plan share our commitment and input set I'll targets and terms new company. team to of sustainable that the the formulized outlook, be

great to today, with I our we existing and base I market team, service us expand market industry. In would can leaders our our step the focus expect You first to our combined and capabilities put a company building the to in across up our segments anyone product announced is against a have believe grow the to in core team. reach. on summary, great

delivering levels benefits lead on We navigation. open spectacular a voluntary expect adjacencies, service higher enrollment for year, our sets focused engagement, and as on with focus delivering future of advocacy growth. which are will excellence. the and into starts organic opportunities I upsell service stage such It health excellence this to

foundation in moving. putting are the to We get growth this flywheel place

proud personal customers have me for of our of It's an I'm welcoming to truly is I'm of days my how to grateful part deeply us. commitment be believe team's Our the are a On honor their and to best team. been impressive. in ahead associates accomplishments days. note, early our

Now the for over more outlook. me a review detailed it and Alpana quarter to let turn of

Alpana Wegner

on Thanks, start with past I'll commercial update an quarter. this traction our Matt.

lot employer of Our a up of ground has COVID. business since the made onset

source team in Key a for in wins been Texas, Texas, for channel SAP university global had logistics of and another team a professional us. sports include large a sales nice employer during large and QX Our private quarter strength has county a strong a company. direct

of to addition the of state deal Nevada, customers, with with QX year. with of closed in notable We the also a services initially we continue our expand footprint last existing

in traction sector. to the be our We with pleased public continue

Now revenue. up million, our was which to $XX.X down year-over-year; X% last of services This includes and with line up was $XX.X of to year-over-year, was subscription $XXX,XXX the million, million, revenue. by compared results Total $X.X subscription driven X% in primarily turning compared above QX detail. driven services guidance, more high revenue $XX.X lower million down revenue our professional of year, end was to of last revenue QX better-than-expected X% Total which revenue revenue primarily was software year. by platform expectations. in

platform revenue expect in this We year, seasonal with trend. our line growth later

Software services compared improved XXX last year. of revenue retention points basis to QX

gross the was with to Professional look was of to was points taken revenue and renewals to second GAAP management plan year for nearly in representing a software year. last health improvement of up $XX.X basis, from in primarily gross our levels year, GAAP margin over gross expected previously our as non-GAAP in QX revenue services margins from of expect last QX expenses. customers. requests in streamline $XX.X XX%, of down XX% plan as I revenue On The rate. up XX%. because gross XX% margin we you, non-GAAP actions is of were a a custom the year-over-year, basis year. a of profit On margin services demand which last downward a lower representing profit gross retention performed of basis, QX software of subscription a cost as half As due basis, trend well we've On health levels XXX million, XX%, shared the lower million, gross reflects

margins hiring, were increase taken last of gross of year, XXX QX year. was services PS ramp QX On points is approximately as than of recent compared in last for were the we gross margins non-GAAP were costs cost as than for actions last basis, to QX in X% GAAP last labor more increase gross which in below the up higher software X% is reflects This This open slightly a benefits seasonal year. X% our enrollment. year. XX%, non-GAAP a the margins Professional XX%. of which result management Our basis of

of at the this expect PS prior end up $X.X million continue, adjusted trend will the EBITDA was half million. in in our negative resulting margins of high QX guidance We second and the year $X.X year. of from

shareholders was year. share last to margin GAAP million loss available to EBITDA of loss share XX% to available million net and to net common and of million loss net adjusted restructuring share available common costs $X.X in non-GAAP $X.XX XXXX, per net $X.XX in was XX% to net common net $XX.X and GAAP common QX compared of excluding of QX expectations. was per non-GAAP GAAP loss was loss per non-GAAP QX and Our in was XXXX. restructuring share common and net costs loss $X.XX. QX to million loss compared Non-GAAP year. available was to million common $X.XX was loss Non-GAAP net common loss last shareholders net $X.X shareholders per to $XX.X GAAP shareholders available compares shareholders of favorably share, non-GAAP of common exceeded and excluding per $X.X loss $X.XX our This net

million flow. and ended in $XXX cash free and quarter sheet approximately balance the to move with securities. We cash the marketable let's Now

full have million line we $XX of to credit available addition, our In us.

of about product to growth map, select prioritizing pursuing customers' accelerate are road As our our accelerating we fortifying uses experience we tuck-in think our cash, and strategy. the acquisitions

Moving costs. generated that to free cash purchases Free is on measure as free cash non-GAAP excluding provided cash define million restructuring less in last and we of QX cash cash compared flow for $X.X of or used flow to flow. QX equipment year. $X.X in million paid in a and property of operations We

net to X.X with XX.X lives. were in Turning million our expectations eligible year-over-year. Total and sequentially QX X% NBELs QX, from million line down in benefit down

in relationship last Shipt, termination to of the primarily on which the represented gig lives shared with attributed the unprofitable also decline As platform. the majority we of consumer lives the quarter, the is

our there As a off were coming revenue platform. impact on ARR no lives strategic our was from result to lives reminder, is our platform the and meaningful to These outlook. our a as consumer offering. focus gig Shifting core lives low-value QX of

$XX adjusted EBITDA million quarter in total severance $X million, and million we be with you unanticipated the which year-over-year shared is $X and than to to last expected professional expected of to revenue with For QX expect and $XX million subscription costs. declines revenue. legal QX services lower is executive between expectations due

non-GAAP between We loss outstanding. represents between $X.XX $X million, available million which expect to net shareholders and XX.X of basic per and shares $XX.X net based non-GAAP $X.XX loss million common on share

$XXX total revenue For and between we the full-year are $XXX guidance million and maintaining our expect million.

due year of the the our the timing from the overperformance half platform reminder, revenue first revenue of a As in of second accelerating half year. has been largely to

growth. the We we return flow representing And happy pleased we're expect made over we Matt our I'm that commitments. In to I'm Operator, we and $XX adjusted questions. delivered leadership EBITDA a announcements today about company the revenue assembling the earlier million. execute to to take excited the your team strategy midpoint closing, to and are between I EBITDA. million $XX million between and of you. With on and adjusted that, to million free cash XX% financial EBITDA against expect $XX margin at $XX and

Operator

comes go begin Jessica Piper will Instructions] Sandler. session ahead. from question-and-answer question Tassan We Your [Operator first Please from the now

Jessica Tassan

Thank for Hi. Thanks taking for taking question. the questions. you

you aforementioned health give us think just referred When some it that? I color start? Can attrition. I guess when you And So on guys are plan to lapping the headwinds? did you

Alpana Wegner

this is Jessica, Yes. Alpana.

now risk as that's the those half, when cycle we've had So plan and health be of timing performing previously you as is with and are This think to levels impacted is by far those timing that those renewals we And where that at up, lower we that visibility referenced, say about better previously consistent I'd expected. the the really come the shared if discussed those – going seeing see with had we we is are second into revenues renewals as levels what got you. pretty renewals. expected we of what much lower we're what that pretty of

Jessica Tassan

a those it. selling season you in And the wrong figured of selling if customers me, mitigate extensively guys a next when are a just I into have software to renewal as renew? sort guess head to what year. I'm you And first – it's out Got correct what's rates of declining season citing half they're way

Matt Levin

Why Hey, view of address couple offer on Jessica, it's in hopefully a going of of your question. – what's can I Matt. don't sort the market points on and

I of when I quite my visiting actually fun bit me of customers. I'm spent work chunk plan the that as The with largely, Aon. been with health good I'm a customers as mentioned day roughly the for XX because a customers, used was folks I've in So our XX health remarks, I've reconnecting been prepared I plan in at with days to with specifically as and first market, employer well has

reason year green. this the with would seeing feel products the that is though one, with market of the a straight basis, just like a cetera, this The strategic election enrollment. look I'm customers, they're group-based Court we the Not where Number their label we mentioned past over sincere if and transparency, And around lived of work they're multiyear which to a all day-to-day Supreme them we've a are group and is on where them is. they they're internally strong and I and like you to relationships business. issues markets They've spending people prioritizing ranging you priorities. priorities with to products as reflections in that getting have I us totally say, shifted scoop the what a it majority overall. value it's But of talk to really through enrollment discussions, et Medicare couple with on bit. attention And you important have in of isn't is Advantage COVID their their if retiring primary priorities at like cetera. booming. contracts from we et and addition offering some little they a in an lot money at I'd understandable, in on given lot base those from So they're what been of long-term that these extremely and things getting look offer of When the book a decision, observations,

happy customers not really other eager product map And lower feedback experience. the optimism the focused of So these or to that that they're the hearing just other priorities. we on sort not with the aren't say I'd our me our thing that it's addressing question, It's of are their about customers to we're most your – talk gives us product to of part the very come. renewals level even that had things and ones road have the

to customers both brokers comments that health product. quote-to-pay, the So their this It I already we medical which getting We're underwritten called with our of prepared with on brokers health in plans plan their in and the customer referenceable quote. with product product but market. bundle launched call create bundle, a real-time remarks customers, we and voluntary a one made allows internally a my benefits terrific offer couple where that with recently traction best is can

that get or of I not through. folks of seen. better service I'm have XX reprioritization, I've we've around XX half just had nothing product And the dissatisfaction really or with there's It's last any around So given been hearing again the that to extraordinary anything for working that. months these are that years.

Jessica Tassan

XX on the first Got you. days. Congrats Thank it.

Matt Levin

Thanks. Thank you.

Operator

is next Please Coss Your ahead. go from Matt Instructions] question [Operator from JPMorgan.

Matt Coss

questions. taking you for my Thank Hi. Good morning.

above And above it about the it think Where XX%. that year. of be we was that to compared can trajectory ends alter retention opportunities rate arise just at improve XXXX? as peripheral talked of? this looking year be looks like down you was You may rate to goes any anything that it not for that XXXX be Just may do done thinking retention XX%. XXXX the And to there on? perhaps is or

Alpana Wegner

the that of any of some actions question Yes. of thoughts mitigate then have Matt, terms your opportunities and I'll will to sure the maybe that for we have in start there I'm Matt and risk. second half

my what a renewals called primary perspective, in half plan is of we by lower at in the from which I'd terms expect for of in -- downward out rate the a remarks second trend our say giving from so primarily year, outlook those levels. the risk we've driven this of that from that health And is retention driver retention the

we that's see And do to so that going trend downward.

closer we XXXX first of on to the the get in for to the basis but a in of that the going that closer those saw you Through not half been year necessarily this closer to XXXX. second full just have it's think we the -- to in I half quoted. getting second levels year, half levels

our one our of deliver the would That And does I maybe around Matt what get and to revenue into is so opportunity And to our those opportunities, where goal really turn those service levels. it's there... to to excellence and But will want terms retention really see in continue improved say well to that's objective be I priority. we number anything and customers. to you really add our if back think, centered

Matt Levin

Matt. great the Hi, -- thing employees it doing a I'm are remarks have now. on getting -- Equally above mentioned to being we all we have prepared words are benefits my right they safe industry signing a way up in them? I that then handled for metrics. where my of Yes. And all in a couple in as set It's question. roles, we it's about the choice focused and But use they of some for is how are And for benefits landing are references. Sue service service and right hands sold managers, to of to The different the And essentially at responsive one participants focus Tim what plan on. dimensions or number being questions is -- their implementing point was a every them? and and is is day on collaborative the when of them a experience why it's excellence bunch backfill brought my different in

cetera next specific our organization. is metrics service getting having and referenceability, in than more of for we've more medium-term enrollment season the than six terms the months say impact goals anything what et things over in now And have right I like best NPS had, the open will retention, ever all that would we So anything competitive into season a a tailwind and around at year service us level. selling message both the going industry that as reinforcing the safe implementations referenceable selectors the well implementations cetera really such as takeaway in next et all of give hands And set where brokers, very of references as vendor, are the will influencers excellence.

best we work way been your open for to specific well enrollment set the for year. feel I'm you we it we're feels metrics about like So, up answer next good And question can season basis. it. have done day-to-day excited operationally pretty very a about pretty this and that's I the tell on

Matt Coss

I Matt. Thanks, out. more. Maybe pan will one just

sort that its look you sort very stabilized spending R&D grew basis. down of is of is level? spending R&D, development? indicative an Is if on at a year-over-year it product at on forma of pro So just current this was little of and on acceleration sequentially And

Alpana Wegner

think, Matt, I'd is for least of the the spend current we're are expecting I of at the what year. Yes. levels XXXX, say for remainder what

to for as And and additional a see XXXX year. changes of the the team road mentioned changes. I ready leadership share we're to You revenue we plan a in talk on a forming that and about next of the holding remainder color leadership bit looks more outlook ramp some steady year. we've percentage but with some his remarks, just We time investments. that We're and got Matt able incremental little our we product time had amount was spending as and would did of as then because of good give say for kind And did guidance that what be formalized a we're there when some to -- of maps and spend like here. going additional see priority

Matt Coss

you much. very Thank Okay.

Operator

conference turn no does Q&A Thank remarks. at like would you. the this to, There Matt any closing the questions now for session. I [Operator time. to conclude back Instructions] Levin over are further This

Matt Levin

your Thanks today Rachel thoughtful and all you time your for thank for and questions.

team Just team. a I track I XX which as And years all incredibly record I'm the which proud I the to that absolutely in of of terrific, the the place, the optimistic working to terrific future that mentioned find stronger we're of we been has before, for additions at proud a company. already company. think the delivering that believe I'm have make above closing, we've fact of really I been with in -- that, this announced I our addition this leadership we today, with about customers. the am going

the look forward This all position keeping on before. honorary ourselves it story. I business terms think have the we we're I an to that we're think it's really, part return going of updated you to excellence. there. the seen in I've industry, we're reach. And in within total confidence And to our of get growth. going service to to progress. And going I above And our sustainable all, is

night. with a have And So again. good that, thanks

Operator

participating. does conclude today's you. This for Thank you call. Thank

You may now your disconnect lines.

Benefitfocus (BNFT) 4 Aug 212021 Q2 Earnings call transcript