BNFT - Earnings call transcript Q2 2022

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Operator

Good afternoon ladies and gentlemen and welcome to the Benefitfocus Second Quarter of 2022 Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Investor of Head Kuckelman, Relations. Doug Please go ahead.

Doug Kuckelman

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

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

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

For XX-K. more refer factors risk Form our discussed in information, please filed most recently to

will those release. also Important to be measures. earnings financial disclosures measures press We about certain found refer non-GAAP can in today’s

furnished that, I’ll the Matt. will which our a X-K, on find to we you turn With Relations also reference website investor.befitfocus.com. Investor presentation in call over at can Lastly,

Matt Levin

team for for of first personally ensured share set recognize I'm this I and steadfast results. to that want Benefitfocus safe my Today our product good year. the deep second Thank against Alpana we insights the customers a hands team an cover that, achievements, provide our to and everyone. on transformation you, on of have half and put for plan. second our update by during efforts and grateful. will After commercial further what forward I quarter appreciation executing entire remain expect Doug, progress focus strategic their discuss will plan, are from our our provide roadmap afternoon, our the that to-date The on tireless

value. signs commitment our encouraged the setting by I ability second up work long-term quarter, the the During collective our am our shareholder also create demonstrated to and that us is to on deliver financial team continued

packaging in of [ph] in early the are to some rate the improve unwavering our that is in deals We the pipeline, had go-to-market of said track timing While XXXX revenue close expect number year, we starting will on of pushes Fortune and are working. in food in XXX of employer and a into backs larger leads a a improving had electronics a regional global our manufacturer, just fact and indication the excellence the new manufacturer, global year. strategy on includes our bank for second seeing quarter a to sizable that we to half our large next for add to second This rate large in in service That quarter. focus win wins continued we growth improving the name third and win drive the are which few. a the testament

XXXX. momentum continued addition deals has our direct closed year, growth the continued this second move positive of the pipeline the and and sales driver to us important into revenue and the partnership efforts, in In our in SAP to expect benefit we We SAP to both for see going channel relationship be year. the solid for through remains Xx unique The business. half see with channel, we a as generating first growth half sales remainder the of of

to for customers, new pipeline plan existing as continue in We well to our returning upsells pursuit. demand as health

remain half normally optimistic health public in cycle. seasonality season reminder, our and our the in plan, year. while each lost. We As sales current the pipeline; employer place in SAP our occur not takes throughout a of there is the sales market sales about sector, yield through first particularly sentiment the The entire year, channel business, is the

our our particularly complex in in comprise the timing leading sector, cycles shift sales this are closed for and status a seen by more driven indicators which public larger have point, and SAP We the mix shift sales, lengthening positive. towards of deals. a At

to to the continue point through and an balance across expect the growth we inflection of deals sales We year move of various anticipate XXXX. we our as towards channels close the end

offering, our quarter Claims During an delivering administrative our continue features, In ratio to the quarter, Say: commitment. this to offering called bolstering new and include; our I'd on Proof transformation further on delivering an market a plan. Audit Do demonstrate successful against Recovery slide to points our financial second the launch Service. our innovative of update commitments, enhanced share strategy five, the High we like three-pillar data COBRA bringing services & against and

well team, me have going we the we both As when about do our Alpana to rest say is as as to happen. important are something, we make and that in talked of it it the past, we

on excellence an they in service best We focus further we put organization, in the maintained core. our the believe strengthen place is and to are what our team I delivering. industry, As

levels our players resolution Last year-over-year of focus Solutions down well the our implementations have We starts times case they us. impacts enrollment aspects need our critical business in and investment have announced I season, share one anticipate of customer from the will broker both turnaround our case which third-party we partnership XX% new and improvements facilitate a and trends. confidence am panel, augment a into month, up efforts, base in with across seal also Aon’s brokers, partnership industry quarter, our larger inclusion is this furthering strategy validates for and with taste with additional last across the to refer reach in will our listing support efforts. Aon, other we brokers Similar color, sales relationship some the provide lives. to top entered we down partnership are third-party our for new Lockton Lockton, the key of Service excellence our are one to Connected and another and to business open first To go-to-market strategic half evaluators evaluated, These the This including We the of insurance were world's in along existing and to of ecosystem, with seeing additional largest from us from the year. help customers service and expect in set channel. second. more counts key as with that service operation, especially customers our in trending execution employers. approval Benefit approximately referrals and brokers leading many pleased world. of customer the this

greater to has confidence progress broker channel this And than Importantly, on broker us conversions channel has our in year-over-year, sales revenue from XX% our key more component strategy our acquisition of Health, bundles, our a a investments recent customers. our delivering channel improve on increased of are bolt core trajectory. product in paying off. and efforts, I'm activity continued go-to-market our resulted equally already pleased gives expected to Tango which share number our that grown most our value is to our

suite new half we During offerings successfully bundled started Tango contract of current of in ACA our the year, cross-selling and customer through base. it the first customer

Our is platform improvement more rate. robust to attack solutions starting comprehensive and in drive

just confident to are best-in-class that getting are component started our compliance continue We Tango's and ACA of product. key be offerings a will

only recently data With Recovery our deploying intent, we moving to product market. launched product CARS our CARS. & We and product, a leveraging Services Audit capital expand to thoughtfully Claims asset with new called grow or efforts our offering errors up our are data, Regarding we additional money ability to to behalf. the deliver a to will back lost go all be to for the providers claims identify our but analyze our value recover our customers clients' not their in to of claims and in on position

incorrectly errors data issue medical XX% the with of their been at contain of to all background, worth positive. entry to are while and assets. and dollars' our and of preliminary market best billions including feedback corrected. are is address administrators many claims is this For product paid offerings innovate product CARS carriers take and these from example This bills has and errors, of or errors, that third-party gain new data quickly identified Each traction our known year The approximately designed miscoding. not do another advantage ability of customers

designed the enhancement for make These of is selected open recent customers voluntary to season. our example with upcoming benefits and engage easier of it to initiatives starting Another release experience. enhancements with growth -- enrollment offerings, are the

grow help participation will will revenue. this platform drive increase expect rate which We our

related our believe we efficiencies, increase that and Finally, satisfaction will Net customer third to operating we help Promoter make technology investments us pillar regarding Scores.

We expect revenue of will cost margins lower across the year. organization our that improve in these and our later efficiencies our

improvements of the voice enabling in-person interactive focus interactions AI are response critical. more For through seamless This example, open our call work a experience support associates and customer most on designed service for cases automation and in customer and focused technologies, this technology. our on process enrollment area facilitate to effort experience, to advanced service our incorporation These enhanced further is in improvement center.

real-time, are technology support improve monitor address but issues cost help user We quality drive all both also which also to These experience, third-party calls designed scores. improvement customer leveraging and satisfaction to in associated of the efforts to efficiencies. operational and are in

I Turning Administration and Benefits grow value we and market. our to presence large said as we proposition before, as compelling we six, slide believe a have growing have the

We the May Investor that on are outlined Day. well strategy underway in delivering we our at

our expect commitment can and through large launch Insight follow second feature. our Health market XXXX, on offerings, our launch of the half to to enhanced us launch billing During you X.X, employer

the in and we of the growth leaders build team industry strategy to business. against continue seasoned execute Our our seeing transformational are momentum

a expand of Associates as recently contributions team. walk is at Associates through new results, offerings, administration most work of at on our I as it Hewitt make He scope will leadership industry, the working than brings Excellerate turning our Hewitt Ed to technology my announce us years ACS, as industry him bswift. Technology amongst work experienced credentialed the and bswift's IAA with in Before the CTOs Xth. the is valuable to the at and CTO HRO, and I'd begin service benefits his the financial Ed having industry. to the Chief view served XX leader our panel craft, to Officer Ed in well addition a Rumzis, to and who in and experience, over and most together scale and like more August well-respected his

the As for With earliest industry. establish foundation to believe to Alpana, ongoing the reposition execution hand our to unrivaled It before, over assemble is like I've against us our was first-class and our in one I'd continues team. and enabling it fuel We financial of that, cover who said future. my support will team and tenure focus, to benefit experience domain priorities of performance. our to strategy, the

Alpana Wegner

the start I'll quarter the with will remainder and for our quarter our guidance Matt. expectations Thanks the I of financial then cover second results and of year. of highlights third

guidance eight range. that results am pleased partial again take I million slide two primarily call. Turning revenue. The was quarter at revenue million discussed last the report in second decline at line our delivered the with Total a quarter compared end that covered quarter's to to $XX.X was and the previously to last high health our once to to our the plan second $XX.X closer for of look quarter renewals in second earnings year. X% related expectations we on we year-over-year

their well XXXX, $XXX first relatively year-over-year, driven were primarily due attrition flat revenue year-over-year, June primarily million or projects year-over-year million revenue is $X.X the revenue expected Platform associated and and which as year-over-year, annual as down customer was the revenue implementations in the Subscription year. as we our a in with customers to of down million. which and the As include year. plan $XX.X the contracted of recurring X% down down with of delivered software ongoing half up was of the to by year-over-year as services continue subscription XXXX, later in Professional quarters timing to and we XXth, year booking was see QX earlier. move revenue of services the us as was difficulty] health $XX revenues XX% through during software through being reminder three revenue [technical services revenue X% X% year-over-year due revenue new is million, expect at to first XX% services impact XXXX. was the platform $X.X engagement Total we software discussed million

XX% on margin margins prior gross versus at nine, XX% results slide the in Non-GAAP in our margins the prior XX% year Looking were versus GAAP period. period. XX% gross were

the XX% Software gross margins services in versus second period. GAAP [ph] XX% were quarter prior in

margins are XX% versus from prior software services non-GAAP year. the And XX%

improved with year. investments planned beginning place improvements, process sustainable margins by are drive the automation open impacted an this which putting ongoing Our and we upcoming and generate in are experience in enrollment to customer later efficiencies

delivery the fluctuate quarter As next cycle. based to sales seasonality gross a of business, one on reminder, our given our and our margins the can from

basis full enrollment. implementations year, and common share of in slightly loss diluted last continue of net loss million available QX of platform with our common QX, a EBITDA GAAP basis $X.XX new our customers basic we GAAP was the loss in of on the the year, open growth in loss during [indiscernible] were revenue For $XX.X high in range. to net on intuitive end our basic realize per we guidance of compared million the contribution of GAAP to share from margin million average gross timing or later and as the second realization $XX.X weighted was preserve weighted expect $X.X efficiencies shareholders a net of year. Adjusted shareholders and the quarter, net available above average from GAAP

cost pushed was for driven the XX%, the from by quarter. -- which second the the margin EBITDA Our adjusted primarily quarter first quarter

adjusted for the our is half the margin EBITDA which is line expectations of year-to-date Our XX%, first year. with in

sheet on approximately the slide first our balance million quarter approximately million, XX. on cash -- inclusive capital cash in $X restricted and We the Moving of changes. allocation quarter of and to decline second of a $XX timing capital equivalents, working from with cash entered

cash our customer driven was free $X.X million, During and payments. of by vendor timing the negative flow quarter, the collections

reminder, the quarterly on basis generation business, the a free flow given of cash a can our fluctuate. As seasonality

line basis on $XX $XX credit us. Also to We expect continue $XX to that million our note cash available to remains full deliver to flow free guide our million million. full year of of

this future to experience, customers and about roadmap, pursuing we our service select continue use to discuss plan QX. Shifting our outlook [technical of cash, product think difficulty]. our to we prioritizing As XX, accelerating slide for

XXXX, represents we per non-GAAP million, net basic $X revenue based of million stockholders $X.XX quarter non-GAAP For in between and Adjusted million and between and common $X the EBITDA million revenue. largest to year-over-year net outstanding. million and expect $XX $XX and loss the loss which of subscription $X.XX between million third XX $X available $X decline shares with million, on share

our to unchanged. remains ahead, and growth of look XXXX near full growth end our point we our inflection the low the expectations As single-digit year revenue for in year XXXX, the return

particular closely labor are the prospects. We the macro watching and behaviors in and economic market, customers our trends of buying

growth. prospects significant financial pleased and to for commitments we base for ability we take and our your our to Given this are customer Matt with and question. on not In to impact I I happy long-term seen based our reflect making diversified today. business our current that, the progress our shareholders. executing continue in and we're long-term our delivered value a what know strategy contracts, to we've I'm against expectations Operator? or unlock With outlook closing, drive sustainable and believe on

Operator

JPMorgan. please comes moment name Thank which you. first One question, ahead. last [Operator Instructions] Samuel from of with with the go Please

Anne Samuel

a know their any your I my just and what bit with maybe delve talk employers, Are conversations you Thanks bit expectations are now hoping little you little was from taking could talked but you for and macro, yet? right what about are? like hesitancy seeing about them question. Hi. a further

Matt Levin

the hear Thanks Hey, voice. Anne. to Nice question. your for

So great macro suspected I today. get question that questions a few we'd

So I right of for sort canary coal know everyone's the in that looking mine the now.

around having I’d know, BLS, been say overall confidence, And corporate et market and own canary seeing out, numbers. to it. labor And leading we with GDP lag given that track really stuff as that coal mine, cetera. the in our payroll things all we're carefully, and your various But before, that you in put guys with GDP watched this participant stress. industry very numbers, tend in indicator base markets reports as the labor that like we the the Just not movements confidence, said having and along

of are Our there. question still in of with answer are those terms still the our our prospects There's resignations, directly, labor the labor be tend current clients, To both narratives in book discussions great our out pretty in decision current of a processes, really your observations with course, and and what around the we had slight prospects, due for some war similar and selling made in cycle, year our are markets year, tight. talent, in and normal still are a delay with couple them, slowdowns we making, process, just sales that to in still shortages, and to contracting issues sales any hearing not last we or comments to those before.

with we'll the right the vocal to it I up business same we you And do but at seeing, and factors, It's just on as basis, in as other buying that I'm and just for if what cycles markets, having macro in they component clients course, right sort than factors now. least right decisions they're particularly, yet. just about their But mine, post-COVID, really us. also, are now. we're overall, based coal see canary season, not relates for wake do, morning benefits with the really I'd in So really talking discussions and because key seeing been on also retain because own health say matter downturns, in with well. I'd having are impacting prospects and But associates important they this, as uncertainty with and of now. from an associates. I’d And just be not vehicle are looking as seeing at change, now, things while, new a this it in look, my GDP attract say, we're a macro the say but critical, sales customers of and probably at experience benefits usual, every both both very And really to share sales a retaining day-to-day it. and are about

Anne Samuel

something really was a business against hoping and speak the launch to on competing hear, I maybe business? launch? And I recovery to a made if there? you services you you little wondering this bit who to to audit different. color. little helpful bit more great could follow-up claims and was That's decide What are

Matt Levin

Yes, great question.

I'm assets Tina to company, What transactions I our new take mean on So purposes every able platform, the that do to we and team and team really by find a is, it. day, is product that doing, data of uses like a our that of we're of her is for are things company proving hallmark and work the based the technology be technology data. that proud a underpin

products launched a market, datasets. of within Tina we've Rx these to around these year year, we I'm done product our and here. team. product, in of Last build So the last I done, taking the proud are year, and -- from advantage really getting cycles ideation launched it is saving, are this reason And getting

cetera. And share as mined of into data to estimates data and the gain see. potential client sit listening we then pretty on and customers, claims know to the So, happens there on improper And around a then in we -- errors. top upwards of the et experience, around where our industry, XX% that we with incidences basically cost information, because fraud, the recovery. that own be them have healthcare we good could customers, get transaction the we we our that every feel do for a enrollment and go sense with with we there's result, based that of from billing say, And savings information the along basically the we look, a

partner natively. our at of with play of claims, In us, of HCIT answer Most Ben admin competitors my services and but do not or none this these claims offered may pure to competitors are these our your a services. terms have standalone those capability directly, direct technology offer most of by oriented question like least of some Administrator competition, to Benefits companies, knowledge,

Anne Samuel

Great. Thank you.

Matt Levin

Thank your Cool. question. you for

Operator

comes Tassan next The the ahead. Sandler. Instructions] [Operator last from with of name go Piper question Please

Jessica Tassan

you so Thank the questions. for Hi. taking much

exactly the some at I Can wanted bit first describe as sooner? So direct factoring entails? to into just launch of And then to enhanced follow-up incremental XXXX, that XXXX? just costs then the kind a the you expect what you're marketing kind offering. and offering that And half what of development should the with just that on of point of it intent to just are little in that guidance Or the in offering? we launch drive revenue associated employer

Matt Levin

talk of thanks the answer question part let question. for about offer Sure. your sort second first I'll the -- now. the of And the I'll question. you address I'll Alpana

I of the I've being I'm about, wanted that as and So able goal be about when say this really, talking is we talked employer on of here, within first mine, months job, been business. since XX the a to to the

the or employers, And health side, on December, which also wanted I being XX through direct your me our job, I are to initiatives within question important first employer. the to product important to was was sure make have What which for too, the We to because was very core to what of is plan on core -- do equal it about me superior takes were positive with. we the needed feedback. that, we're those really competitor. ACA, bundle that acquisition, improve, very which and Tango administrative as the felt great pleased find we address And good intuitive, it as get to very define services, reviews, areas of about we to in where about The UI enrollment our people always gets before in we've our UX I lots talked we're we we the months which core engine.

out market plan we -- coming with are or And Over by past is than market. the consolidated year, solution the better solutions of been COBRA with having to end to a months, solutions round that revised the our have that few billing we billing native. to directly the equal

think which further So fixing compete we services and of the the to effectively. way hope our we're by all completed the an bundles ability end provide of of admin will more it year, to of have roughly two-third

we prominently products we critical made products our used some participants And care as with And make slight that, our directly products. offer tweaks in trying -- health DB products carrier to our to offerings. that issues. your DB to what also third be to address addition constantly the I is are the evolve eligible working some how along those to are In address would core partners, are were feature investments, word we for our is point these and experience, to we've to And the we're say, question, there their hospital do of indemnity, buys et cetera. who during to so with those enrollment that relevant, of illness, them most those trying like health sure --

round those the were the for be me, So, that's is, what sort end about we equal really by to our enrollment, prepared our to in of bundle What's out. be is this or or it year, that's of could it important to as better will admin services equal core better, DB remarks. talking comments competitors, really to in employers and than

Alpana development cost I'll a distribution. few and on So, let comments make

Alpana Wegner

Yes.

And that, of of and operational efficiencies is investment of some in investments the expect that continue Matt relates we last COBRA in acquisition Whether was investments, business in Matt what the that investments as would said, voluntary making advancement an product strategy, to that Tango to we're the they're that, of to we terms strategy to Obviously, within it able the referenced. what inorganic we've benefits. did our we've bring in terms it's mentioned an and from year, the So to so growth I as gain. been organic past, that and/or technology say a market for was for standpoint.

strategy included our outlook and we were XXXX, in areas that enhancement it's that, shared. in perspective product say a would contemplated for I from our so And these

been And they're outlook with our so what is for we've point targeting on and XXXX. what -- for also overall

Jessica Tassan

-- helpful. guess, understand just single products? then in I XXXX, revenue year-over-year XXXX, the ancillary Thank benefit with to the XXXX is market. then really benefit the to of digit you. that number get ancillary expectations your you expected question just growth And in incremental the to prior for Okay. again in in order on And us XXXX? growth help Thank That's respect you. following included maybe on of employer kind sales up the for can sales what low

Alpana Wegner

Yes, we I'm that. to certainly happy -- yes, answer

reenroll place you activities the our As know, like the and product anchored our base revenue how that that product products, said, catalog. you platform heavily with enrollment participants they ancillary the on take on and is enroll in rely the and platform in life open or

employer driver in now, terms The Matt of is right seeing for it us the what from labor of back what seeing markets And kind the saying was we're of a lives to so is growing. end what platform, there on result down, of shared we're anchors perspective. the and to and employer health think Overall, a partial bells our base that, grow. base past as year-over-year But that the I are plan continuing is we've within in terminations. the

year-over-year. And so the voluntary as participation a assuming see benefits that quarter, from that we in growth fourth translate in would flat to base, expect perspective we enrollment the

lives on platform a so start terms And that indicators it the we We've to we our of for And XXXX unless specific to kind that expectations show we're be confident this would believe of see providing then XXXX in some revenue that's how about take really think we're contemplate within year. may shared sort and and different in outlook right continue now any point. place in XXXX, And trend, be of the into our single-digit of to translates continue guidance that we not in terms will at for what growth, that this us. low outlook. our how

Jessica Tassan

That's Okay. Got it. helpful.

XXXX, relative revenue number the participation terms total assuming percent and on verify, to base? for -- in lower in lives person? to participation Flat it's of we're per flat of just it's a historical So

Alpana Wegner

minimis we've the point would Higher a of down. total before, -- participation participation employer, voluntary of flat de are catalog. health life think in benefits plan, I time kind about inclusive health talked which in Yes, lives, plan But for correct. is has so know, be and as at effectively this you

Jessica Tassan

again. Got it. Thanks,

Matt Levin

That's distinction primarily our an products are employer bought that these in important segment.

relevant total this bells So call the calculation. for less are it, end

Operator

I'll are at turn no presentation There continue now this further the you. to time. Please call your back remarks. questions closing with and/or

Matt Levin

thanks, you, got. we good the appreciate questions really us joining and Thank today, for and everybody, really

value create the to call, going I'm our our to plans Before summarize progress for closing quickly out just shareholders. and

addressed As year, we the that issues improving of the we strategically consistent past and with talked our over a underlying have past priority impacted excellence. service on about performance, many delivering

the the including brokers, activity increased our service key head of sales metrics seeing and as improved are we We year-over-year open with season. go-to-market customer our benefits indicating is efforts, working enrollment into strategy

We with the is prospects more or market our add referrals in backs strengthening. reputation getting and are

to and just say with that, thanks for strategy, work Thanks of their on there is you. every for continue day us transformation again remain associates team quarterly right look While we all want plenty progress place next pleased still we update. we to and all have all confident today. With to forward are that they executing of and hard date. Thank I the the we work, your in our do, to to our for to time do for the

Operator

thank for please you That the We call does conference for disconnect conclude that your line. participation, today. ask you your and

Benefitfocus (BNFT) 4 Aug 222022 Q2 Earnings call transcript