Benefitfocus (BNFT) 6 May 222022 Q1 Earnings call transcript

Greetings and welcome to the Benefitfocus First Quarter of 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to have the pleasure of introducing your host, Mr. Doug Kuckelman, Head of Investor Relations.

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

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

Before the you today’s impact cause growth that include me of discussion and uncertainties actual remind involve could differ statements our that risks let materially. results and we will begin, that forward-looking opportunities to and strategy

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

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

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

everyone. good Thank and you, Doug, afternoon,

X-year been As on is path I with anniversary that confident I our Benefitfocus, approach growth. more sustained company have my to achieve a never

the for our shareholders. to further results. focused changes create months. quarter to on are insights to on date value will progress I making Today, plan against Alpana the our our discuss what long-term and We After coming in strategic first and provide necessary will customers expect our that, cover

our a and second our identified for return decisive specific our already to service growth execute Looking intent started back We a set to and importantly, focus proud increasing company involves the hands with strengthening efforts seen. resolutions. The and the safe aspects address improving with on be challenges customers. many of function reposition which necessary half impact work can efficiency of a core, our am in on to implementations team of began at I the our strategy, case actions for to XXXX, customer three-pillar of operational growing taking that be of for number our to of and

and grow leader. efforts on created platform future We look believe and will product week have accomplishments prospects new our meaningful expanding our longer-term Day relationships for on Investor of our next offerings. better XX. leads us additional data business. enhancements improved focused share our these go-to-market strategy, also position to efforts These channel and and solidify We for We interoperability and at enable May market financial forward providing into targets insight to as industry all

on I quarter insight Turning a some where the to number Slide also to strategic I’d operational of X, selling milestones. would update the we an hit like to of like provide the delivering discuss give into how have we our plan. concentrated and commitments. we on have delivering been core, efforts Starting season service we to and are excellence, our strengthen with our on

to references, sustainable improve growth. a to end at increased the to will fueling and As of ARR key the past, customers our customer customer XXXX, retention said is dedication associates’ day. to Having and unique results in customer grateful anticipate End-to-end expect the delivered best for am every growing a now seeing history the open service begin I competitive our excellence for flywheel which into effect in base. all a our translate advantage, do we they have is we relationships, enrollment I strengthening

advanced greater of suite of Health to delivery expanded Tango services, processes. our One data value Tango off a to with and the levels strengthen customers terrific already is core, management our investments acquisition is our start. to delivering administrative the more of

revenue. this new execution I thank to year of and efforts. another on base. and in solutions this I more forms to filing the team bundling stellar, applicable all the We pleased the IRS with quarter Tango XXX% now grow to are started believe states. in us integration the acquisition comprehensive our the with am Tango’s and of this in customer offerings current We platform and robust have will midst the it rates on-time help improve suite cross-sell of achieved customer attachment was that want contracts share of recognize even ACA our our

Benefitfocus expect even to stronger Tango migrate ecosystem also business will who clients offering, the service to us. We in going to excellence which players deliver critical need to we brokers to us are and now enable customer Service refer they key in to forward. confidence to are as third-party beginning levels evaluators legacy is performance our have

seal industry-leading third-party stronger As This a other existing with listing in in shift result key our more and brokers in panel, am business I brokers partners and new drive efforts along our have Connected our segment. Aon’s approval, referrals Benefit the world. included us relationships, to we of recently through employer particularly improve go-to-market top help should the were a and from our to customers, of strategy that both Solutions work from of evaluators helped our our narrative. grateful broker validates company’s from one

with through opportunities we’re deployment, investing right intent thoughtfully the time. grow the on Moving right at to to capital our efforts

this through data offerings, moving expanded up assets doing We’re and leveraging product our market.

product the our our for discovery decisions road quarter, During product we feedback technology customers. and map extensive both plans health This conducted employers. drove research first and and with to related

The Additionally, we has been in of positive. a customer place initial innovative pilots feedback product from in of the very have number engagement. area customers

Investor road our have upcoming and will Day. say about pilot to product our map programs more at We

Lastly, implementation efficiencies. our in reinvested on support improve our while and strategy, operating organization margins the to automate preserving cost are and These customer to the being revenue basis. growth year processes experience to a we full increased service savings continue drive

channel relationships activities, We have SAP. a solid from sales sales pipeline and broker stemming direct improved

that the optimistic over XXXX months. several are result season will next sales successful this, in open enrollment a We strong our plus

season by the prospective for working critical part of final are through employer, and sales Our the are most teams customers. current now made where decisions both

year. our a XXXX, the August throughout As through our impact have plan generally will market health sales employer season whereas sales on much revenues a of go reminder, and meaningful runs for our

continue see market, these cycles. we improvement overall but the longer in too, sales to Here are

financials industry year. of the season our to on in in made in in begin QX recurring look in nature reporting and forward of We earnings call. model, the sales Given revenue of quarter’s next sales our being subscription cycle results on the next our business majority out will the our reflected XXXX the

complex With on value excellence X, years could we expertise presence in to grow than and our be are Turning more XX domain growth believe in a technology we transformation large and platform, unique against we plans Slide excited a and track are of strategy. unique our increasingly service market. compelling the not We investments our us. our of fueling more ahead have opportunity a proposition as about

leaders we executing in our progress goals. against I the our plan. on on am to achieve team I of months proud of industry is XX transformation am seasoned the track that are last focused and confident Our we’ve made

our Before Officer, exceptional turning new to over the current which Kristin priority her Kristin sure our better place plans an continue to excited Benefitfocus Adams, and for make experience a welcome met ambitious talent support on deliver she Chief we and am in to us, team. it has to top to Stanley Kristin to will like I’d make I the walk team. to Alpana People Morgan work have worked when to to I the particularly associate efforts through financial is leadership environment. an even really results, at

expertise to anniversary team. industry my I believe I’d to We that and to our our a success. first unrivaled priorities X-year like the early to approach set cover as financial strategy domain team my largely I who is class in in performance. that, team pleased of the also will over reposition foundation it of complete. it hand continued am for of our Alpana, leadership place will future put of Benefitfocus, Benefitfocus our With and drive was execution and tenure One is our our

our quarter. Thanks, our for financial of start results, I’ll and Matt. first then I’ll with second highlights guidance the quarter cover

decline look of Total am to million. in marks quarter services was Turning at the by driven take which partially met X% revenue results The guidance. report X% the first we quarter. once was at year-over-year This that $XX.X of Tango X revenue, revenue our for range. high software year-over-year. either services our Total to were beat to revenue eighth our revenue, quarter by Slide guidance or which delivered the I pleased consecutive closer offset have primarily again we the down revenue million, addition $XX.X this was quarter software a

of at last quarter and revenue million includes million. $XX.X was of down platform of Services and attrition by Software revenue subscription we XXXX driven year-over-year, the health you. revenue primarily discussed the end with Subscription $X.X revenue X% plan experienced

the historically accelerated move revenue we timing revenue in XX% health in few the plans XXXX. Professional true-ups X% performed to us with year-over-year as scope of reminder, These as see down taken impact year-over-year X and a quarters continue through to true-ups driven later a services of reduced resulted engagement year-over-year, of compare. to primarily the by quarter XXXX timing first the and platform was of down Platform the revenue year, first their place difficult the which in As year-over-year. expected, expect we XXXX. of the in have

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

prior first gross services year prior XX% year XX% versus gross margins XX% and non-GAAP GAAP Software quarter software were in versus the the services in margins were the period in period. XX%

in investments and place improvements in which generate automation fourth sustainable with impacted upcoming efficiencies quarter. have were ongoing Our the the to later margins open we put by beginning process this year enrollment planned

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

approximately the to our above million we on growth. our to margins expect reposition end continue our full quarter, range. We during basis EBITDA of continue high for million guidance $XX.X Adjusted first was to year preserve gross the as business $X a

that were to of in timing was of quarter. this expenses overachievement first adjusted We second that a expect the the quarter result EBITDA pushed

share interest discussed. by year. common share basis in was diluted million compares This and diluted basis net and of EBITDA average of margin and was weighted the for income of and period periods. XXXX first common stockholders last stockholders average $X.X available the diluted, exceeded was per XX% adjusted on to basic process with primarily for a $X.XX common expense loss to change million loss our XXXX common net and net end to as net $X.XX. available year, for well treatment quarter. GAAP the in quarter the common EPS driven was earlier, range per our discussed in a $X.XX EBITDA in convertible common was weighted $X.X net share on last each a adjusted was of quarter from $X.X overachievement of to non-cash shareholders per for high to the the that due just a We the as notes per and in first Non-GAAP accounting improvement decline basic of QX loss XX%, million available non-GAAP non-GAAP guidance loss the to in income weighted net favorable investments associated GAAP basic same the I automation income net GAAP and GAAP and average Our in

Moving equivalents decline and restricted sheet approximately first Slide allocation capital the capital million working with quarter, fourth on ended in $XX of and our changes. $XX cash, on timing we a approximately the cash quarter to million of from balance the reflecting XX, cash,

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

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

deliver a to $XX are we basis on free on $XX million of cash We to track year million. confident flow are full our guidance

tuck-in think product As accelerate our to plan our to accelerating we continue growth acquisitions road map fortifying prioritize, experience, future our cash, about and uses customer service select pursuing of we strategy. to

on ratio to that XX to of non-GAAP to I’ll and the to and of which million $X $XX per million reflecting adjusted Shifting discuss we outlook of As note our basic to decline $X million, million, revenue XX, the full loss of shares our subscription March between available million debt stockholders between year million outstanding. remains and $X.XX and also for million our over $XX from million, $XX timing the credit largest EBITDA a second based between $X available quarter, line with between was share us. common and X.Xx. shifting non-GAAP revenue QX to adjusted expect Slide again, expenses net EBITDA represents QX $X.XX net XX in loss $X

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

both market service factors: As in a our sustainable details XXXX that, about new credibility health of our turn improved growth, on are solutions; the our to improvements, leading predicated next reminder, brokers to a the our additional Matt am shareholder making take provide longer-term unlock momentum financial have three, recovery you, demand executing employer and our Investor with pleased week. retention. in to customers targets for drive in industry is plan your recognition and during We happy with revenue on progress of and levels from third-party our I to having and With operator. plan two, to we outlook Day over opportunity questions. three strategy are software reestablished value. one, I’ll I’m to excited back I we it substantial evaluators;

Please first ahead The from and Instructions] go question. ask [Operator you. Thank comes Piper of Tassan Sandler. your question Jessica

Hi, the thanks for taking questions.

can reduced how guys, you remaining to and contribution what who of plans happen So revenue engagement and for you their the large you to help contracts? remainder scope for the two of with EBITDA Thanks. those frame is expect just their us the health

Alpana Yes, – on hi, question. Jessica, will question then of why of part thanks the for don’t have first I the comment and and the Why part I question. the the – answer I I’ll second talk don’t

one and that getting the clients and us those remain it with Without ton those of that both still indication – talked two is foreseeable will will obviously they any that are services work. pieces are we the stay clients of plan about from you us a rescope that detail be haven’t of either about, enrollment of of rescoped. health for the us variations feedback the our had the into So future they with with which

XXXX additional not Yes. overall expect from expect, sort those really recently in really from our what guidance as there just growth XXXX wouldn’t the we points And And are X XXXX. what for giving in terms contribution, of forward. XXXX near-term. wouldn’t of year-over-year and just to we we I’d It’s is said, sort that think restructured the quantifying impact have the about Matt guide that in fluctuations were ongoing as the and – any XXXX size and we provided say we and of the a is relationships to is any

or in because employer the just sort this then specifically effectively question, is that COVID? pause out going a those And right and much And distracted RFP being to that this in going like built and a XXXX, during level – process to it. of were Got – I pause see did larger kind sorry, mean your RFP now? markets season is but attrition did you higher open in XXXX contracts there just be people in with rebid of year selling or enrollment a that’s catch-up during market

in are within largely employer season. we And that the through be our the you in the season. some it’s those to selling Yes, it’s increasingly how clear that, business, distribution Sure. employer even the obviously the how to clear, or be part are which comments part we and middle is go direct or on repaired of we the around But – of segment, brokers of brokers, selling been have and to of when channel. a our important clients, sell of we lot repairing are relationships heard portion in

Basically ‘XX. lot providing of to the if COVID XX of and in you they that of from the work ‘XX the created manager with the which the of sort of – and activity, benefits the benefits, of a COVID, work April saw time, the expansion in period home, economy that and workaround, labor or entire were March evaporated of just And the leading you slow markets. terms the all plus In put about roughly employer total span magnitude head Recession Great question remember, slammed ‘XX, from time COVID, in head is in up X jobs million the just if during your at of you COVID down. during is answer of jobs weeks HR, a a of particularly yourself hybrid

not out your a was sales normalized priority. definitely to in platform that What of now sort is a just more bidding Admin Ben are activity. we return seeing context, economic of So a level

market connectivity, leads the then and the sales you seeing it between employer XX,XXX are active XX is and and have to market more market, below. more And in jumbo, But is, above plus to have my still However, while. jumbo in connectivity than the activity. levels we back in we they to X,XXX feels much But are X a segment up. then really been nicely. view, are to back where pre-COVID say X and broker and activity, really vibrant the a I’d X XX XX and focus The coming like third-party much still XX of not things to valuator quite XX

And you. then refer success enrollment, as metrics what it open are how when such? thinking should you is, like you Thank to Thanks. it. we about Got defining just be of one the last

Yes, sure.

we things more etcetera. like scores, qualitative client about me of their tell couple their send on that spend participants. lot dimensions. net out a experiences of biggest from a they I personally a in of satisfaction standpoint, different I As the we of we how open is turning of company And service we things my first are priorities. one talked my two of about, enrollment, priorities in customer service basis, a the the and then top measure sort days time SAT with was here one scores, to On promoter results surveys of one the And was basis, excellence quantitative organization and of said, on a a clients that are

to They decisions they made are like to us they of lot benefits we from they example, visit, great feedback of like talk families. feedback voluntary themselves about and and hospital cancer for give people critical came feel how of have enroll times life, their be them using very at things and certain for that a adoption platforms etcetera. their who direct in our moments to So that diagnosis

was it a we us. where them. say we up happy mixture look had terrific and are qualitative year-over-year the this how open So at we for season hit which in, regards, we those it’s – quantitative then how we ever. just going stack was of about when and all metrics best enrollment And metrics We in specific

you. Thank it. Got

Thanks for your questions.

Thank you. JPMorgan. Bora comes of from The Pinjalim next question

direct This Congrats want quarter for your questions. impact of impact thanks and get sentiment? change the everyone plans guys. in the Pinjalim. changed over kind medium-term on of the of mid the to for from Are for single-digit and the And there, is growth any on business macro on of environment Hi, of plan volatile experiencing. taking perspective the seeing that is whether environment [indiscernible] terms in years? any you next just guys I kind does Thanks. couple to macro your current

I you qualitative I’ll don’t most labor – of have a in in some high is fill of first Why that the one give will Yes. very observations, at blanks. markets. then terms Alpana that you tell what fill some level I factors, us in the and impacts macro

per seeing that you So, right Obviously, just layoffs we’re based right now per on problem. charge the market. before, have bankruptcies, Jessica’s a when big are you or we’re now. seeing question What very a recession, tight a on if labor as not during obviously and employee that’s basis, participant

for net be can a – us. So that tailwind and

So of lot is and year, clients with about clients particularly this our We spend what the the are the throughout the in are period time season. time. sales but I intense we talking of middle said, a to of a us like

addition lot and etcetera. are are to lineups, to figure and like health They work from to time things bonuses. clients everything Our cycles compensation a of mental merit benefits spending in on hybrid trying out, benefits

like because attract a on becoming of terms going and CHPs retain rely other with in deductible us proposition, high and higher things employees at and companies they of macro a are of component give particularly benefits sort So increasingly value to a important the adoption an industries to of picture what are help plans. level,

I great wouldn’t is impacted say that I’ll quantitative So we are I’d you. like Alpana how let regard, we pretty talent with macro a sort on issues say say just headwind of stuff? I But wars, for that managing us. and industry. the us. that I’ll factor etcetera I that are I’d direct with through some comment just in for everybody But has The the some did of an net miss outlier else and are it. in resignation be everyone labor with factors the that, am big happy Alpana, very

on No, think costs there, labor covered it market I are close of are of the Yes. the we From standpoint, labor Matt. cost a eye keeping you structure most our something terms certainly, in efficiencies that of those several costs. focus have increasing that us And will feel business in offset the Matt referenced. areas certainly terms of like we do of we to targeted of allow some

I that very perspective think some somewhat market mindful into I as health a of that of insulation in fact a that’s think a minimums our the into also ongoing sectors. with between macro the need are customer we monitor super do but to health impacts benefits predominantly that the we as our some pervasive Matt’s the do some contracts that and to continuing the we enterprise are and are care that only would We then put of impact But structured spaces standpoint get way we ensure that customer small the demand And have business are our look we We we the diversity various but can the are and it the for haven’t attributed of opposed within have saw serve can’t control and our us. much minimums, selling our do the is industry in forward We from enterprise, we on something that we that not serve. can. what in it level we we trends metrics necessarily from business diversity that environment to demand, season. base look of protection. contracts the PEPM give COVID. to And are at insulation, seen plan as inflationary just us from a corporates of from environments from point, basis, during I to an across some mindful are say We of see near-term it. base.

Great. well. Thank little you then guys you that. on you. sounds I detail. appreciate contribution And And follow-up going color can guys from there anymore a terms Tango, are like of Thanks. just provide just it’s more a It sharing anything in them?

guided we are that we They When did year-over-year. to points business. share of X about XXXX, subscription-based Tango would Yes. contribute growth very

throughout And that being is spread business as expected. year that can and so think of – performing the you that we as evenly

we with are portfolio that and it. service on to result this our results. seeing what much with good our of product we a very quarter very delivering as and addition line shared, also team delivery the Matt outcomes as really was So initial are expecting the pleased in And that’s are customers some

thing quick to add shout his huge to team them I base. which I The out But shout gave a sold why again, I to that they and Scott that leadership already team are is there. Austin out. the only is the the sure would and back am product in listening, being is just,

It’s in of definitely on regards, the done. that in top I it new XX% my lot the in in all this. And done in a of I are tuck-in ones have have deals. We career all acquisitions bundling

that to kudos team. huge So,

Thank clear. you. very was That

to the Ladies hand to question-and-answer I would and we gentlemen, for Matt like closing over reached you. end Thank have the Mr. back of the floor comments. now session. Levin

attending questions. you everybody your Thank thank and you thanks and today for for

progress to value. like to call, summarize the out closing plans shareholder Before and quickly create I’d our

we we past made and performance year, We of seeing impacted quickly Over efforts. progress delivering consistent and on excellence. many of addressed past meaningful are our our have issues that service underlying benefits a believe the priority the with improving

forward work lot the reputation market We have more have We are execute of We that, thank our progress operator, Tuesday are time transformation we to-date. it And on of the our referrals you. Investor course, I but at-bats next we today. that we the see season, will ways hand still with you York to your confident is strengthening. week many for right to on getting With and Day. the strategy look to a next in to more are for back do, in quarterly pleased With team in hope selling and you update. our of again our New to that,

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

may Thank you disconnect for your now You participation. lines. your