Q2 2020 Benefitfocus Inc Earnings Call
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Good afternoon, ladies and gentlemen, thank you for standing by.
Welcome to benefit focused Q2 2020 earnings call at this time, all participants started with only mode question answer session will follow the formal presentation shouldn't require hoppers system. Starting the conference. Please press star zero to say one operator. Please note. This conference is being recorded.
I'll turn the conference over to your host.
Anyway.
Thank you you may begin.
Thank you operator, good afternoon, and welcome to benefit focuses second quarter 2020 earnings call.
Joining me today, our re August President and Chief Executive Officer, Steve <unk>, Chief Financial Officer.
Right, Steve will provide.
Some prepared remarks, and then we'll open the call up for questions.
Well, we began let remind you that today's discussion will include forward looking statements such a third quarter and well your 2020 got another predictions expectations and information that might be considered forward looking under federal securities laws, including statements about our positioning for the future.
These statements reflect our views as of today, only and should not be considered as representing our views as of any subsequent date.
These statements are subject to volatility and uncertainty in the global economy in financial markets in light of the evolving covered 19 pandemic.
A variety of risks and uncertainties, including are consuming walker and needs to achieve GAAP profitability.
Fluctuation of our financial results.
The amateur and volatile market for our products and services.
Recruitment and retention of key personnel.
Associated with acquisitions.
The need to innovate and provide useful products and services.
Our ability to compete effectively.
Fiber security risks and a changing regulatory environment that could cause actual results to differ materially from expectations.
For further discussion of the material risk another important factors that could affect our actual results. Please refer to our annual report on form 10-K under other FCC filings.
During the course of today's call. We will also refer to certain non-GAAP financial measures.
You can find important disclosures about this measure in our earnings press release.
I'll now turn the call over to Ray.
Thank you Patty and good afternoon, everyone.
Thereby extending well wishes to each of our rights stakeholders.
Customer partners invest or no.
We appreciate you joining the call hope everyone is managing wells.
Uh huh.
There are two key factors are markedly.
First we have dramatically strengthened our financial foundation.
We are executing well against the cost actions, we shared with you last quarter.
Uh huh.
Our decisive actions and strong execution positioned us to enhanced profitability generate free cash flow.
At March.
We have also added substantial liquidity, which helps us whether any potential for an extended recession.
Providing us flexibility to invest for future growth.
This leads us to our second can you take away.
We continue to invest in the business and strengthen our value proposition.
We believe our mission to recruit wives benefits has never been more important more necessary.
We are executing in high impact areas, such as helping our customers reduce healthcare costs.
And enabling health plans to be more Fisher.
We had several key wins in the quarter, demonstrating the power of our value proposition.
Hi, this together, we have the right foundation to accelerate future growth and create significant shareholder value. This is built on our strong performance in the quarter or enhanced liquidity continued investment business and strong execution by our team.
All these factors have cats are competitive differentiation.
Discuss season in more detail.
During the quarter, we focused on strengthening our financial foundation to navigate the potential impact of the pandemic.
As we shared with you last quarter, the macroeconomic environment, a historic levels of unemployment.
Revised revenue forecast for the year.
We have taken sweat and proactive steps to approve our profitability and cash flow.
We're doing so through aggressive expense reductions and automation that drive operational efficiency gross margin expansion.
During the quarter, we greatly enhanced our cash position through the previously announced 80 million dollar investment from the Bill.
The founder and CEO Bill.
There has been a member of our board of directors since 2014, and now serves as our lead independent director.
We are fortunate to have warned on him and his team as investors a business partners their investment strengthens our liquidity.
Represents a strong border offerings, and our strategy, while providing future opportunity to invest in growth.
We believe we have positioned ourselves to emerge from the pandemic stronger more profitable and more efficient than before.
Steve will discuss in detail, our second quarter financial performance was better than expected in almost every area I.
Hi, I'm extremely proud of our team for delivering these results, particularly in the context of a challenging environments that was on thinkable, just six months ago.
Customer support Onboarding and implementations are all working.
Our associates have risen to the challenge over a new world of work they maintain high levels of productivity every so.
I want to thank them for their engagement and supportive one another because of that benefit focus is well positioned to serve our customers remotely for as long as necessary.
During the quarter, we accelerated our automation efforts to drive it better.
Our experience and improve margins.
One key area of automation is reducing the time it takes implement renew and had a greater customer.
While there is more to do I am very pleased with our progress today.
Importantly, the financial health of our customers, what's better than expected during the quarter.
That benefit eligible ice for flat sequentially and up 6% compared to the second quarter of 20 Nike.
Which is also better than anticipated given our nation's record up on important.
That said this environment has created additional stress for HR administrators, which in turn is causing warmer than typical flows times.
Turning to our second key take away our continued investment in the business.
During the quarter, we strengthened our value proposition enhanced key product features and extended our competitive differentiation.
For example, this quarter, we made a significant upgrade to our existing helping site solution.
Provides HR administrators with an easy to use in April.
It helps him better understand what's type of medical claims are driving up their cost.
It gives employers a set of actions that are crew their medical spend relative to industry benchmark.
Right within the administrators work flow.
Added transparency and ease of use.
Should be a walk him innovation for HR administrators, particularly during these difficult times.
Today or help insights product lightbridges are massive differentiated data assets.
Including integrated medical claims data it provides transparency and helps identified cost mitigation strategies for employers and employees.
With these insights employers can view and benchmark key health care cost drivers.
They can also identify potential solutions to improve health outcomes.
This includes emergency room is high cost claimants prescription preventive care chronic conditions.
Compared to industry averages one of the employer implements or health inside solution, we see significantly higher participation and high deductible health plans and supplemental benefit products.
Saves self funded employers and their employees money.
While also ensuring that employees are covered and toxicity.
Our health insight products also gives employees cost transparency based on their historical and expected benefits usage. This helps them better understand their planned choices personal financial impact.
It also results in more complete I better coverage for the existing number of people choosing I've talked about health plans to reduce their monthly Craig.
Our compelling value proposition enabled us to close a number of large employer deals and add at new health plan in the second quarter.
We also continue strengthening our relationship with premier broker such as Mercer and they are.
We have enhanced our partnership with that one of the top U.S. brokerage companies by offering them, a greater choice of options and it's better able to serve large employers.
Working closely with dance voluntary benefits a consulting.
Our partnership recently added its first employer customer.
I'll now share a couple of examples from a recent employer with an eye health, but want to illustrate the power of our value proposition.
At the highest level, our employer value proposition translates to lower cost reduce complexity better communication at higher employee retention.
One of our employer highlights included a joint when it was Mercer Atlanta for the G. I O <unk> benefits Trust. This is the association that will be representing health benefits for a large majority of nationwide Chick Fil a franchise operators are consultative approach was a key to one in this.
Contract educating the client on how our system automates the complex process of benefits administration, specifically eligibility and door employment by multiple operators.
Notably our platform rollout Chick Fil, a full and part time workers to access in choose their own voluntary benefits from our benefit catalog for many of these workers it'll be the first time. They can access affordable voluntary benefits. This is a great example, what realizing our mission.
Prove lives with benefits.
If you visit a chick Fil a you'd experience first hand their high quality service, it's gratifying to know those operators and team members and are now able to supplement their medical benefits with a compelling mix of affordable voluntary benefits.
Our data suggests that offering key voluntary benefits correlates to higher employee retention, which contributes to lower employee costs.
I'm also happy to report that all institutions within the University of Texas system are now alive and are currently going through open enrollment.
This implementation represents 125000, you t. system employees, and retirees, who are not reaping the benefits of our state of the art enrollment system.
We are proud to be improving their benefits journey and into words that their executive director benefits deliver phenomenal member communications.
That kind of were robust communications and our reliable user experience is increasingly important for their members and employees.
This is especially true on todays remote work environment.
The ongoing uncertainty, we all face due to the pandemic.
Moving now plans our value proposition for these customers, it's about driving lower costs enhancing member and broker engagement.
Improving operational efficiencies and then enabling digital transformation through our end to end quote to pay capabilities.
We continue to have good traction in our pipeline as health plans for you our end to end solution as a strategic asset and asset that helps them grow their revenue while controlling costs.
Our recent win with a new health plan medica illustrates the value of our offerings.
America is a multibillion dollar health plan looking to grow their market share within the United States coverage area in the Midwest.
Our platform Attica, we'll be able to enroll and bill for their group markets on one platform, regardless of state or line of business.
The benefit place solution for health plans will modernize medicares product distribution and enrollment solutions will also consolidate systems to improve satisfaction and engagement for brokers employer groups and members.
Other processes and technologies leveraged by health plans today like the integration necessary to complete a cohesive single quote to pay work flow.
Our solution or is it confusion duplicate processes among the their customers.
While the initial opportunity with Medicare was to improve operational inefficiencies. Our relationship is expanding we're helping Medicare grow into new markets with a mater boy digital end to end quote to pay solution.
As we work to bring our platform to America's broker employers members, we expect revenue contribution to begin in the fourth quarter.
As an aside I'd like to report that like most of the opportunities. We close in Q2. This was initiated manage stay close 100% virtually.
We are growing and succeeding by helping our customers grow and succeed.
As health plans accelerate their digital transformation increase operational efficiencies and engage with members that are more meaningful way our end to end solution has a strong differentiator.
Lets us apart.
Closing.
We remain focused on increasing the value of our platform and improving profitability. We are extremely well positioned to manage through the current macro environment, continuing investing and the business to drive long term growth.
We believe we have the resources market leadership, a technical advantage to exit the pandemic stronger and better position.
And we are confident that we're taking the right steps to drive near and long term shareholder value.
With that Steve will now take you through our financials and outlook in them in more detail.
Thank you Ray.
I'm going to start by sharing with you and overall sense for how the business performed this past quarter during the pandemic.
I will then cover Q2 financial highlights.
Q3 guidance.
And our updated full year guidance.
From a high level perspective, the health of our customer base and the impact of unemployment were better than expected.
Resulting in higher than expected net benefit eligible lives revenue adjusted EBITDA and free cash flow.
In the current environment as Ray mentioned, we had several key wins from virtual selling activities.
But we also are seeing that is taking longer than normal to close deals.
This appears to be a matter of timing rather than lost opportunity and we are working hard to bring those deals and close them before the busy open enrollment season begins.
Well most implementations are proceeding as planned we had one health plan customer put their work on hold due to the pressure they are seeing from a weaker SMB market.
We had expectations that there would be some implementation disruption.
And hope as we move forward it remains limited and contained.
So overall from my perspective, I'm quite pleased at this point that our customers and business our weathering the pandemic storm better than originally estimated.
Turning to the second quarter, our results exceeded my expectations.
Total revenue for the quarter was 62.2 million better than our guidance of 55 to 58 million.
This outperformance was primarily due to higher than expected lives on our platform.
However, compared to the second quarter 2019, our total revenue was down 9%.
Mainly driven by lower subscription and professional services revenue.
Subscription revenue exceeded our expectations this quarter due to the financial health of our customers being stronger than planned.
Well it was down 8% compared to the same period last year. This is primarily due to the run off of our legacy agreement with Mercer.
Platform revenue, which represents revenue from voluntary benefits grew 13% year over year to 6.1 million.
This performance was also better than expected against the backdrop of the pandemic.
Professional services came in as expected for Q2 at 12.3 million down 21% compared to the same period last year.
Most of this decline is due to fewer health plan change requests any shift to focusing on higher margin professional services work.
On a GAAP basis grow gross profit was 31.8 million.
Representing a gross margin of 51.1%.
On a non-GAAP basis gross profit was 32.7 million, representing a gross margin of 52.6%, which was down about 100 basis points from last year, primarily due to lower software gross margin.
On a non-GAAP basis, our software gross margin was 63.1% for Q2 2020.
Compared to 70.8% in Q2 last year.
This decline, which was expected as a result of reduced high margin Mercer revenue.
We expect software gross margin will improve as we progress through 2020, and the full impact of our cost management actions and automation efforts continue to take effect.
Professional services gross margin on a non-GAAP basis was 10.2%.
For the quarter.
13 points better than Q1, and 15 point better than prior year.
We are working with our customers to get fairly compensated for our services and are pleased with our progress in this area.
Going forward, we expect continued gradual gross margin expansion as we improve processes and our automation efforts take hold.
In Q2, adjusted EBITDA was 9.3 million, representing an EBITDA margin of 15%.
This exceeded the high end of our guidance and compares favorably to roughly breakeven in Q2 2019.
Our adjusted EBITDA was positively impacted by higher than expected revenue.
And the impact of cost reduction measures, we took place in late April.
We expect some of the favorability to reverse in Q3, as we incur sales costs for bookings that shifted from Q2 two Q3.
Adjusted EBITDA excludes 5.6 million every <unk> up restructuring charges.
GAAP operating loss was 6.1 million and GAAP net loss per share was 38 cents.
This compares favorably to GAAP operating loss of 9.8 million and GAAP net loss per share a 46 cents in Q2 2019.
Now, let's move to the balance sheet and cash flow.
We ended the quarter with a strong cash balance of approximately 183.5 million.
Our cash balance is up substantially from last quarter as a result of the build groups 80 million dollar investment.
Which closed in early June.
In addition, during the quarter, we paid off the 10 million that was outstanding on our line of credit and now have the full 50 million dollar line of credit available to us.
Our enhanced liquidity allows us to continue to make prudent and disciplined capital allocation decisions and opportunistic investment.
This adequate liquidity provides a buffer and helps us whether economic uncertainty even if it last longer than currently expected.
Early in the quarter, we purchased approximately 36000 shares of our common stock at a cost of $285000, representing an average price of roughly $7 a 98 cents per share.
Since initiating our share repurchase program last year, we have purchased slightly more than 1.1 million shares for approximately $9.7 million at an average repurchase price of $8.71 per share.
Approximately 10.3 million remains available under our share repurchase program.
Moving on to free cash flow.
We generated 6.2 million a free cash flow in Q2.
Free cash flow is a non-GAAP measure that we defined as cash provided or used in operations.
Last purchases of property and equipment and excluding restructuring costs.
With this strong performance, we expect to deliver sustained levels of positive free cash flow for the remainder of the year.
Turning to Q3 guidance, we are targeting Q3 2020 total revenue of 59 to 62 million and adjusted EBITDA to be in the range of six to 9 million.
We expect non-GAAP net loss of six to 3 million.
Which represents a non-GAAP net loss per share of between 21 cents and 12 cents per share based on 32.3 basic and diluted weighted average common shares outstanding.
Looking ahead to our full year 2020 guidance our performance in the quarter allows us to narrow the range of our revenue outlook from 250 to 270 million to between 260 and 270 million.
We're also increasing or even a guidance from 25 to 35 million to 35 to 40 million due to improved margins cost reduction actions unexpected automation efficiencies.
We're also raising our free cash flow guidance, we had originally expected to utilize between 10 and 15 million to fund operations and Capex. We now believe we will generate positive free cash flow between 10 and $20 million.
This revised guidance reflects our strong Q2 results and a brighter outlook on collections.
Our EBITDA and free cash flow guidance excludes the impact of restructuring charges.
In conclusion, we are pleased with our operating results given these uncertain times.
We are delivering our offerings in a digital world and are implementing all of the necessary business processes to bring new customers onto our platform without ever physically leaving their homes.
Our expectations to generate higher levels of EBITDA and free cash flow combined with the substantial level of liquidity currently on our balance sheet.
<unk> ample financial flexibility that will benefit us through this Pam pandemic.
We acknowledge the current environment not only makes forward projections difficult, but we'll likely cause short term pressure on revenue growth over the next few quarters.
Because businesses are moving at a slower pace and our visibility is lower than normal.
We will continue to closely monitored the timing of bookings bookings traction on our platform business and the macro economic recovery and we'll update you accordingly.
Most importantly, we have the people technology products data scale and financial resources to profitably grow our company and deliver increase shareholder value over the long term.
Thank you now I'll turn it over to the operator for questions.
Thank you at this time, we will be conducting a question answer session.
I'd like to asking a question. Please press star one on her telephone keypad.
Confirmation tomo indicate your line is then the question Q if at any time you wish to remove your question from the Q. Please press star to participants using speaker equipment, and maybe necessary to pick up your had said before pressing the star keys. One moment. Please call me poll for questions.
[laughter].
Our first question is from Alex Sklar with Raymond James.
Great. Thank you Ray you gave a couple of examples in your prepared remarks, but based on the flat lives commentary in this environment or could you just give a little bit more color on the Q2 selling season, how the results of that are setting you up for growth in the back half of the year in into next year. Thanks.
Yeah sure. Thanks, Alex appreciate it you know.
As we've looked at the impact of Cove, It and what it was gonna due to the economy and the fact that we have you know we get paid basically through the number of people on our platform and the number of people that pay us.
Who use our platform it became very obvious so we had to take Swift and aggressive action to make sure that we were we're driving the right activities in our company as we did that one of things that was very very important was that we had a very solid foundation for our business as we entered into this whole season.
So as we entered into Q2 on or selling season. The market is responding very very well to our overall value proposition and you know if you look at our mission of improving lives benefit. It became very apparent that this mission really is more important now than ever for employers we serve their employees are families.
And the health plans at our overall customers and what we're hearing back from that market is that our value proposition is extremely strong.
Companies are looking for their ability to communicate with their employees will account for the ability to demystify the complexities of health care, they're looking to save money and they're looking to offer benefits to their employees. So they can keep those bounded gives us employees motivated and motivated employees increased customer retention.
And I I pointed to a couple of great examples.
In this in the script about where we really saw some wins in the marketplace. One of my favorites is the check play opportunity, where our solution is allowing people to buy benefits and get benefits more than they ever had in the past. So it's really making an impact both chick Fil a employees.
For way on the help him on the health plan perspective health plans are really focused on serving their members and they're looking to drive operational efficiency organizational effectiveness and they're telling us our platform is doing just that we announced the signing of medica, that's our fourth.
Major health plan transaction and as many quarters. So the health plans are really.
Seeing our our solution our value proposition has very very needed and something that there are very much interested and so you know as we look at the selling season or at we exited the selling season, where our company has never been on a stronger financial footing, we're seeing expanded margins, we really felt it up.
Our balance sheet with a built group acquisition with adult group investment and that's giving us the ability to play offense. During these uncertain times, but with that said, we really are an unprecedented time, we have limited visibility, we really don't know what we don't know none of US do when we looked at the overall economy.
Our buyers are distracted the buyers of our solution, whether they be health plans, who are working on serving their members for HR administrators, who are working on servicing their employees their distracting to focus on that.
That area, which is very important tall them and what this is doing is leading to a longer sales cycles for us as a company. So as an overall company, we're really controlling what we could control we are having positive free cash flow EBITDA margin expansion that you know the things like having.
Very high gross margin for our professional services.
Puts us in a very strong position so going forward, we're cautiously optimistic about the opportunity or keeping a close eye on the overall market, we're saying very very close to our customers. We're continuing to invest in innovation, because we really believe that in the near term that will be well positioned both with our expanded EBITDA.
To accelerate our revenue growth.
Okay, Great and then I'm not ready or Steve on this one a couple of parts. This but the for health plan deals that you kinda signed up in the past nine month or so now including medical can you just help us understand the expected progression of getting those lives onto the platform and I think I heard you say medical will be offering a your voluntary Ben.
Oh or any of the other plant health plans also can be offering benefit place to selling to the season. Thanks. Yeah. You know, we're very pleased with what's going on with health plans are really uniquely position in that marketplace and as you said I'm really proud the for health plans have chosen benefitfocus over the last four quarters, which is really.
Terrific run for us as <unk> as a company you know as a health care as health plans are taking care of their members as health plans are really thinking about how can they do more with class health care costs are rising and a tremendous amount. It to do is really compiled by the operational efficiencies that are system is providing them and then.
The case of Medicare There you know they really see our system, creating growth for them. They serve a nine different states and they see this is an opportunity to grow and enhance their overall revenue proposition. So.
Our value proposition for these health plans is very very strong we're seeing that.
As you mentioned that our solution allows them to offer voluntary benefits to their members and many of our health plans are offering that capability as well.
You know the for health plans that we added over the last four quarters.
All the implementations are on track with one exception as a company that Steve you've noted that the pause or implementation for for the for hopefully for short term as they're working on some company difficulties, but every single one implementation is going great and we remain extremely optimistic about the health plan.
Right.
Yeah, and you should see those this is Steve you should see those start going live in Q4.
Alright, great. Thank you.
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Our next question comes from Sean Wilan with Piper Jaffray.
Hi, Thanks, I just want to Ted.
Maybe digging a little bit more on that the impacts the lengthening of the sales cycle. If you could give US you know maybe some some quantitative quantitative measures around that and.
Are you seeing that there's a a rest for somebody sales cycles to possibly be delaying the deal into the next benefit year. William you lose this open enrollment cycle.
Hi, Sean this is Steve.
We are seeing we are seeing a lengthening of the cycle I will say it was.
Within the context of what we model.
Do you see the the in your revenue impact.
And in your revenue wasn't impacted.
My comments were more compared to our normal cycle, it's longer not compared to what we estimated in cove. It.
And and as I mentioned in my comments it there, they're mostly they look to be slippage not losses, you know and and we are seeing a number of instances where something moved out of one quarter into they are there and then closed and so.
I actually I can't answer explicitly your question with math because.
Because the deals are still coming in in this case that that deadline is a bit time as our friend time will motivate closures between now and let's say the end of August and I have a better sense to answer your question after that I I will say relative to our normal cycles, we are seeing it going.
Longer entry show on one or things that.
It was pretty interesting. During this process is we have some deals that slipped out of Q1 in fact, one deal. We thought we lost that kinda runoff as loss that was an airline and this airline I thought we would see him again another are coming back they're important part of our our pipeline are working to close.
Pretty soon here so what were what what that's really telling US is our solution is needed so regardless of the company regardless of their financial situation. They have this need to communicate with their employees and this new to focus on.
Looking at health care costs, and the need to demystify the complexity of health care and and you know so we have a much needed system and we're really pleased to see the activity. So makes us feel good about the opportunities.
Okay. Thanks for that and then Oh, just a quick one on the the a the book to Bill pay capability or do I hear it right that that that Medicare signed up for that if you can maybe update us on the number of a plans that have signed up for that.
Matt This is Steve Medicaid Medicare signed up for an enrollment a product that included voluntary benefits.
And in there there are some upsell opportunity still left with that account to to extend even deeper our product offering.
Okay. Thank you very much yes.
Our next question comes from that cost with JP Morgan.
Hi, good afternoon. Thank you for taking my questions.
I guess as you look at the performance in Q2 was really better than you feared.
Better than guidance on what were some of the I guess elements that surprise you to the upside and then when you're thinking about the year last quarter I'm, what elements that you're worried about sort of still remain with us.
Hi, Matt This is Steve the health of the customer.
All of our customer base was better than expected and as I said that shows itself through more lives on the platform, which also shows itself for more customers paying us subscription revenue.
It also came through in collections that were above expectations. Our D.S., so actually declined sequentially, which was not expected and so and again, if you kind of double click underneath that it's their employees our customers employee base.
Was less impacted by a unemployment than than we had anticipated.
So that's that's the core and then.
Like looking forward, we made adjustments to our guidance to reflect our best estimates a as would close out the year. As you know these are still challenging times and visibility is low, but but we do have now wonderful quarter under our belt, and which was up from zero quarters under our belt. The last time, we spoke.
The other thing yes, there's one other there's one other topic as we go into the has the second half is we still we still got benefit catalog that.
The the voluntary benefit marketplace, we've got that coming in Q4, and thatll be or a big data point in in the back half the year assumes a range of outcomes with without offering again, we've never done a voluntary benefit marketplace in a pandemic.
But those those are my those are kind of top of mind as I finish out there.
Thank you very much.
As a reminder, it seems like to ask a question. Please press star one of your telephone keypad. Our next question is from David Larsen, What's our C.
Hi, Congrats on a kid quarter can you talk a little bit about your ability to deploy your solutions in a remote manner like do you actually have to be on site or not.
Thanks very much.
Yeah I know.
Thanks, Chris Thanks for that.
Our solution is 100% in the cloud SaaS based solution, which is you don't have to be physically present to configure it.
The one of things that our customers really enjoy as the fact that it doesn't have a foot credit at their company and our customers can [noise].
Take advantage of our solution no matter, where they are today.
In the script I talked about you Ts and 125000 members who are using our solution today and that really phenomenal increase in communication communication capabilities that all the members the Bcf and now experiencing and all those members are probably 125000 different locations today.
So our solution can be deployed remotely I'd also say that.
Different health plans that were implementing right now all of those implementations of course are being done and conducted remotely and all the deals that we closed the many deals in Q2 were down 100% virtually so.
We're extremely.
Strong at either be virtual selling virtual implementations or or people utilizing our solution from any device, whether that's a desktop web browser or mobile device.
Okay, Great and then do you usually give an update on like the number of brokers that I've joined the platform any thoughts there and then when do we actually lap the unfavorable impact of that the change in the Mercer contract.
Yes, I'll handle the first part of that and pass over to Steve on the Mercer contract, but from a broker perspective, you know brokers are we really institutionalize, where they're an important part of our business today. There are embedded in all our business processes are embedded in there our go to market and we really think about those and enjoying unified.
In this quarter I, you know we've talked about the.
Chick Fil a opportunity that was an opportunity that we went to market with with Mercer and their Atlanta office.
You know talked about our expanding relationship with a on.
Can you to add a number of brokers, but it's really part of our flow in one of things that we're seeing when it comes to brokers is we have the exact same goals as or brokers. We are very focused on making sure were given the right products to the employers in their employees and making sure that were really focus on the right.
In cost of health care amusing population health or analytics artificial intelligence to really drive down the cost of health care for for all of our customers on the employer side and that's exactly what brokers are focused on so were 100% along with them. So we see them as a key an important part of our strategy or go to market and.
Implementation.
Yes. This is Steve with respect to Mercer just to remind you that 2019 Mercer revenue was like roughly 26 million in 2020 I didn't mention in earlier call was pacing more toward eight and so that.
That that headwind is will be behind US you know that significant headwind I can't give you precision on 2020 ones Mercer numbers, yet because we will get estimates from them on what's going to be on on our platform in 2021, but I can tell you.
That's the the level of headwind it will not be anything like what we're seeing this year.
Okay, great. Thanks very much.
Ladies and gentlemen, we have reached the end of the question and answer session.
Ill turn the call back to re August for closing remarks.
Thank you operator, and I'd like to thank all of you for joining us this evening.
Focus as a strong financial foundation, expanding margins and is generating free cash flow. This solid foundation gives us the ability to weather a prolonged pandemic, but it also allows us to go on the offense and invest to grow our business over the long term driving shareholder value.
I would like to thank our team for their commitment to our customers and to one another together we will continue to work hard to drive strong performance. We look forward to updating you on our progress next quarter Tonight.
This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.