BNFT - Earnings call transcript Q3 2021

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Operator

Greetings, ladies and gentlemen, and welcome to Benefitfocus Third Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] It is now my pleasure to introduce your host, Ms. Patti Leahy. Thank you.

begin. may You

Patti Leahy

Good XXXX operator. welcome Benefitfocus’ to Thank call. afternoon, quarter earnings third you, and

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

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

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

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

those of in And upcoming in events. next virtual Healthcare at You today’s like the Virtual the disclosures Conference. in Piper Credit also Sandler I’d participating Conference. we’ll find earnings investor couple make later release. important note a Suisse the be week to quarter, about measures also We’ll be of press can Healthcare

events I’ll hope call to We’re on to these Matt. Investor available will about With of these Further the and looking events be many to interact webpage. our Relations now you forward turn then. that, with information over

Matt Levin

thank Thank you, and Patti. Good us. you joining for afternoon,

by Let call. today’s me sharing start three objectives for we have

strategy lot and I team which a the are the hear early more about First, growth I’ll next of a provide on, you’ll year. preview working

detail, outlook remainder which year. Alpana the Second, a quarter, we to cover third, taken the strengthen in growth. delivered we’ll to our foundation recap some company of along and for return the of we’ve our actions solid the with will And

plan. team are next our starting intend the a We with plan growth working Let’s overall our to growth our strategy. of through begin opportunities more share our and and preview on I The details of call. actively with

and operational team our on expect improve the are and the it’s urgency important return have a we coupled to methodology growth. sustainable with drive we today, to to leadership this For discipline, brings that excellence acting experience performance. of company you know sense I

compelling Of strategies course, all with mission. start good a

mission lives day. think be level has and the impacted with of an on us increased very how guiding it’s improve months. pandemic This as the mission associates light is along responsibilities every about our and enduring our serves Our we on light over our past in customers. done taken our job is Benefitfocus benefits. as mission of importance all with for at to seriously, This an to the of I, of XX take mind our all has

by Our mission is underpinned core values.

values collective three input and associates. of refined them I’ll for about a with ago tested years highlight couple were today. our from you Our

by of customers actively services. anticipate. the First, to strive in and anticipate the changing to means needs our needs we listening products challenges and with their responding This right

the care making important and as about done. needs anticipate on is If our hands employees a state we what last ability to and growth. excellence we of the right is that our is deliver call, single I believe to their to driver safe to or paramount. this our you biggest company I know good focused and can evolving for members constantly our progress that of we’re a the know return equally get can’t the people that are The It needs the they set listen enough. on health navigate you customers team I customers believe landscape. have service feel

hand-in-hand there. that Another with say-do and with is a It value from me and the It’s ratio value results. driving the it. I improved culture team high executive includes goes cascades I’ll that delivering own starts highlight accountability. believe encompasses a performance-based

including and associates, stakeholders, We have shareholders. our also defined customers, aspirations of partners key for each

is the our the I’ve said by driving before, for For is robust, maximize moving. on Board this value shareholders our hired are we focused main shareholder it sustained growth. of reason avoidance and the the is needle doubt, aspiration to me

And our to urgency before leadership two modernizing both, were will with different brings where As we into heightened stake. drive stakeholders. experience, this enrollment levers, grow create to is disproportionate enrollment our our to down strategy: ahead, than our Drilling our encompasses our see focus, to chosen team enrollment I increase have to customer connect offering customer for base. we which strategy and which few because table what platform the commitment better and our the can listening customer will of core experience enrollment and growing and customer of execution. they best-in-class you if familiar fastest past drive our sense engagement. competencies is be This references, the objective What’s primary base. calls and by they been over growth quarters, number our I value look the you’ve areas you a path is clearly are believe retention may and we heard advancing the These to

and we’re Our focus to few also done burden permission areas of with on is strategic is activating interact brand by discussions other such for way on right a view compliance, we drive on and or as help our our portfolio. the to can in customers down their advantage process, partnerships beyond paths customers both navigation about, believe as data excited and we part is the enrollment them areas the organically and emerging example this gives and health of our is way the Engagement a strategy involved. strategies. higher-level around a assets for customers, see administrative us is through in to benefits, accomplish additional includes voluntary engagement. competitive costs our current We that assets we reduce data benefits well, for the lives acquisition. of adjacencies product believe also enrollment, enabler in everyone through One It employees exchange to advocacy, strategies. and revenue via which health and and particularly platform Data our categories our the and growth priorities. area us key have data industry-leading allowing drive of delivering rounding engagement select that our insights critical services care a out a administrative better utilize enrollment Leveraging

them consultants serve excellence service the Underneath among our these customers. are to customer particularly the focus operational efficiencies, growth valuable given sets, others. addition, ranging increasingly our to experience, richness levers joint our throughout on we claims to and with opportunity strategic decisions, data the enrollment connected specific brokers In drivers of believe have help be better to the we and partners ecosystem, from

performance. Investor You in sharing I metrics along with gives more us our you can this for this these the for can execution be hold on successful I because accountable operational in improved performance sense our before. growth next leadership has been believe executing drive here team key are that and our of at hope part this Day. laid. framework a groundwork strategic been drivers framework has And using the team detail to we already

team I’ll the recap to is for on call, foundation taken has which the in we put to of actions today’s So the build place. objective have some to the briefly turn second

diversity, in of enhanced Shield governance a a talent and color the the experience flexibility. North we perspective, debt, enhanced opportunistic in discuss and taken. months, wealth we’ve with healthier more independence past modernizing in Brad and Over Most with XX people financial base, our former provide Board. plan repurchase strengthened added our been Alpana six Blue our Carolina. preserving of our of a health CEO have From to leverage and resulting repurchase governance, our debt we’ve the governance recently, begun more the We’ve of our moment, on Cross Wilson, and the detail while will substantially platform addition experience of Blue actions also President I’ll of we platform.

I have approval We said our we our a improved that, shareholders at including of the leaders team. world-class our the believe proposal in and just call, Board. on with last have building starts the shareholder also as From the perspective, people Meeting of some experts a I done world-class rights, to Annual a declassify industry. building last best attracting company by

for improving by inclusiveness, quality results. and We our dynamic are delivering creating culture are meritocracy and defined on a customers focused service

the continued product our processes modernize to also platform. development our improve of have performance and We

about We’re current briefly products. new in the benefits we this service off excited for plan, handing affairs, before the I’ll expect of the early cover improvements our which customers, including days us to are but of to state of delivery executing faster That Alpana. and brings

growth. I priority top mentioned is This starts service before, As to our excellence. drive with

this year, largest, far. in that We our puts our has ultimate our I’m are height open to test. Early pleased enrollment that customers feedback for positive. well including enrollment, open a the from so at capabilities it’s the to of service some experience customers, going invested been of enhancing the currently We’ve share and period

We also get lead regarding next payoff The year to the to this encouraging delivering am user more outstanding believe pleased revenue good our open and enrollment continue sign are more with year, which progress improving. a I the to to this exposure translates opportunities with is experience. and trends that feedback growth. an more should long-term references

excellence efforts many to on ecosystem, around road brokers, honest transparent We overall in these involved included friction eliminate with as This partners outreach has as and have been commitments product doubled our to our I the down influencers. consultants personally also and of advisers. in including discussions. discussions have well maps service and these around

But summary, I history excellence. encouraged feel XX-year the In it’s positive. good we upon am we in over Here, to who product and trajectory innovation into and Benefitfocus. received it will is are detail. building and feedback results too, segue service Alpana, our have a of by the outlook our That’s deeper of dive to new a be more hand to clear, day

Alpana Wegner

Thanks, Matt.

a remaining market the on success influencing our most State of see The the continue with which which Plan has our of I’ll cover third that majority you the win of I’ll help large quarter. then to serve roughly revenue. market markets been earlier our the Before key in the first, Included revenue results customers, two-third represents is to I start market market today. we health Wisconsin recently the an and employer of in better each Health growing drivers employer represents two market. in our our our the healthy which this understand TAM. update share to each employer are size with discuss plan, we I’ll quarter,

of and terrific the also market are We our with which serves the SAP, a relationship strength employer continues be to with pleased partner.

While seeing level seen buying return we market employer to the new the levels. customers pre-COVID we decisions of haven’t gain are traction, from

large strength represents, plan We this opportunity and manage market, complex percentage of to needs in heritage customers’ represents a health and optimize the on of to our total benefits, strong the enrollment. group In of continue average, which a and about been one-third given we believe which have compliance for employee the compensation market an costs. have our revenue, smaller leader industry their

are durable Our low with customer attrition. contracts typically that relationships historically multiyear, are with

discrete are near the As in renewals we’ve we part shared term. business expecting of instances before, of lower our to this experience

also seeing plans We of as enrollment, health are on of initiatives demand are spend group are redirecting marketplaces instead tempered today. where such we levels individual because focused

compelling proposition, a plans plans remains part as how with and as for solution value as quote-to-pay strategy certain growth Blue’s they of regional engage well especially brokers. their Our

solution contribute will growth continue long-term to strategy. expect the We the to

you further exploring with on early this plan longer-term overall product We our we share our augment to portfolio. come are year. next also as More plan health adjacencies to

focus revenue the last million our guidance. results excellence. result year, customer performed the primarily a revenue the service QX and end due our than by on to better of high reduction to was turning down expected as compared service revenue the quarter. noncore Now lower revenue. credits above Subscription $XX planned for lower of X% professional driven in services of was to Total

million, on-prem As subscription XX% which the Connecture, million, and year. which professional Mercer. revenue year-over-year Total roughly platform and of revenue flat $XX.X revenue up from X% $XX.X is This compared million, a up reminder, noncore was services revenue unprofitable of includes includes revenue $X.X runoff was year-over-year. software services and legacy last to

gross levels points in last a was gross QX services GAAP for to Software of customers. health approximately retention performed a QX demand as On services XXX from Professional XX% down basis year-over-year plan basis, lower representing revenue due requests expected, primarily compared XX%, continued $XX.X million, I’ll customer to revenue a margin margins, improved which basis, profit gross year. the moment. which services’ million, a This detail approximately more non-GAAP XXX to was by the driven of gross in $XX.X profit of decline prior discuss in a down XX%. year. is points gross compared a margin On representing decline is primarily professional basis

year year. slightly of We margins last QX expect a gross gross margins XX%, the XX% were basis, to from and software last in than GAAP down QX On full for year. be better

margins approximately These resources gross is a focus in termination. excellence within as gross second year. XX%, are of last additional OE lower related which margins Our contract cost the points service software largely result non-GAAP decline and the The is year. acceleration half part in impacts vendor timing on software were XXX the our of basis of to than investments

our We previously the reflects also expect later the expect forward shared negative activities QX we acceleration in for from enrollment. of negative as slightly professional below from as Consistent an margins a QX gross year the in ramp-up be software costs On X%, margins year, well our seasonal of with some GAAP of as prior we the costs services year was million, margins full non-GAAP $X.X better basis, hiring seasonality above for to of last labor the for with of services year. you was were year and XX%, pull open last $XX.X expected as year. and to gross million. continue that business, in from negative the Professional margins This at X% our last which gross into than of down QX of adjusted PS guidance increase in XX%. QX came down QX. EBITDA midpoint we

as was last reflects and loss loss well compared of exceeded was last EBITDA million of $X.XX of non-GAAP net of available was the Non-GAAP share GAAP loss the to in GAAP and million loss GAAP was $X compared of just loss adjusted shared. year. $X.X to QX shareholders loss fees available as $X.XX loss $X.XX, available costs severance share Non-GAAP which the to loss XXXX and per common our of per margin $XX.X year, common XX% net was I and to legal timing QX common and to $X.XX. per expectations. net in to Our GAAP shareholders common net million shareholders was net per QX impact shareholders common available non-GAAP net expected was which share common XX% net net $X.X million share

marketable $XX.X convertible than QX the move to notes. let’s with free We was in down cash the securities, million cash sheet which pay Now balance quarter million and $XX.X reflects approximately partial flow. ended our lower and the of and

XX% $XX Specifically, principal for convertible outstanding. approximately amount million aggregate $XXX we The in repurchased in repurchase principal aggregate amount approximately principal represent amount $XXX of our notes the outstanding a approximately million. leaving cost notes of million of

enables turns to debt by four times. a six two from level debt. face do cash discount that generate prudent strong ratio with portion to disciplined reduce and combined capital us to the proactive opportunistically to position, at was to pay it our business our believe fact a this We decision down of our Our to reduce the and cash, value. were We continues able so substantial be debt-to-EBITDA and to a times

we we select remains us. and accelerating map, our As cash, product continue also our strategy. tuck-in credit our growth $XX about to service fortifying road line accelerate uses our of to prioritize I’ll experience acquisitions customers note, to available pursuing full million of think

purchases prepaid last in timing flow the software The equipment excluding $XX.X paid to cash that of relates free licensees. QX or decline year measure flow. legal and provided expenses restructuring We Moving as free cash free define generated cash $X.X flow a non-GAAP million compared used of cash in of in and compared cash operations, is flow less Free year. cash and on million to for to property costs. last to we

benefit focus QX and our with in from unprofitable certain decline decision driven were relationship consistent with expectations, Turning Total in the lower terminate life. The with eligible on the renewals our our lives. our to from outlook. down of to net first, to core the ARR our $XX QX, with platform gig associated and down plans; million X% second, QX sequentially line NBELs year-over-year QX and two level factors: Shifting offerings by in year-over-year. expected is XX% Shipt health

we expect revenue $XX QX, to million of $XX total For million.

transactional range the and Our of variability reflects voluntary QX during enrollment. revenue benefits open nature guidance enrollment

color help a share more guidance with me you your this little on Let to modeling.

this QX the year not levels largest the a same revenue. we seeing to plan We volume represented year. decline services quest, of has to compared which last expect in be are professional Historically, at seasonally QX high health customer

a reduction subscription revenue. planned renewals We trend of expect also downward noncore revenue levels the plan the to of in due and health lower

as in million. line expected a revenue. to QX is be million percentage $XX seasonal EBITDA We with to perform adjusted total between and revenue trends approximately expect QX platform of $XX

non-GAAP income of loss common net of shareholders available common expect represents net We available and income non-GAAP net non-GAAP to non-GAAP between share share loss million, net which of $X.X to $X.XX. shareholders and $XXX,XXX per per $X.XX

We of shares of expect XX.X outstanding diluted outstanding. and basic XX.X million shares million

maintaining For guidance. the are year, full we our

between revenue We $XXX million. and million expect $XXX total

million $XX margin We expect of flow adjusted between at And adjusted and $XX and EBITDA million. XX% revenue EBITDA. million $XX and we expect between midpoint representing free $XX EBITDA the million, cash

our more we closing, long-term are hasn’t the year our of performance reminder, half the sharing up that from target, today guidance. of revenue changed. half in XXXX than revenue Overall, accelerating we the that and pleased sustainable confident was year. us largely in to I’m a I the timing better in forward February second growth. As the to actions platform for of over due line or We our In first taking look results outlook setting am on are delivered

to preserving invest that, execution strategy. and good of growth With Matt happy sheet de-levering made your to questions. flexibility in while the I the Operator? are our take progress also We balance

Operator

are would appears turn floor comments. the Instructions] there closing to It Matt back you. questions Thank today. no like [Operator for I to

Matt Levin

our In closing, Thank working business growth. return to we are to you. diligently

and strengthening important time focused substantial we’re open hands This as starts the a influencers with resources delivering enrollment, excellence, service of on safe be to industry. set during investing our with We’re relationships especially customers. our our in for

us, our We personal making all and like is offer have working focus who are to to on good time things, our associates our I’d of work customers progress. to the cut during we’re believe I a our to but thanks also deliver busiest out for right hard so our year.

dedication, Your that, see all of wanted I say With we’ll us I’m us, February. doing. today, inspires energy for just and passion to and and for you’re grateful all thanks you joining in

Operator

Ladies you. this concludes gentlemen, and teleconference. today’s Thank

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

Benefitfocus (BNFT) 3 Nov 212021 Q3 Earnings call transcript