Q3 2020 Benefitfocus Inc Earnings Call

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Question.

Before we begin let me remind you that today's discussion will likely forward looking statements such as fourth quarter and full year 2020 guidance and other 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.

Delivering on promises to our customers.

Second increasing our profitability and third refining our strategies to accelerate growth.

We expect some of this will produce short term results others mid and longer term, but all are intended to drive market leadership deliver superior financial results in increased shareholder value.

Additionally, weighted toward profitability.

Our goals to create the most efficient and profitable company in our industry.

To that and we are continuing our automation and process improvement initiatives, both of which contribute to a more efficient and scalable business model.

Okay manage and use their benefits.

We will work to increase engagement by creating more personalized product recommendations more flexible workflows.

And delivering better insights that leverage are unique healthcare claims and benefits data.

This is important because greater engagement can lead to higher customer satisfaction longer customer relationships and higher lifetime values.

Our third area of investment is to accelerate our data advantage.

Our excellent team of associates and empower them with.

Key hires to drive success.

Already we have announced some great additions to our leadership team.

Robin Kirby.

Robyn joined us from USAA before that she was with Infosys and Symantec.

Robin has a deep understanding of business operations, a keen eye for talent and a sophisticated approach to hiring and retaining talent.

She also shares my commitment to develop an engaged and inclusive culture that is known for delivering on the companys priorities.

In addition to these key new hires we are fortunate to have a very talented and committed base of associates.

When enrollment goes for our benefit catalog business.

And estimating the impact of current covert trends as part of our 2021 planning.

And I look forward to getting to know you all in the months to come.

Exceeding the top end of our guidance of $62 million. This.

Gross margin reflects the cost management actions taken in Q2 to streamline our expenses redirect resources to increase automation improve efficiencies and continue innovating.

On a GAAP basis software gross margins were 64.2% down from 68.1 in Q3 of last year.

Our non-GAAP software gross margins came in generally as expected for the third quarter at 66% Thats.

Thats up from prior quarter, but down from 69.3% in Q3 of last year.

This decline is the result of reduced high margin Mercer revenue.

We expect softer margins will improve next quarter as we realize the benefits of seasonally higher platform revenue.

In addition, we continue to have our full $50 million line of credit available to us.

Our enhanced liquidity allows us to continue to make prudent and disciplined capital allocation decision.

During the quarter, we repurchased $18.8 million in face value of our convertible preferred debt at a cost of $14.6 million, which resulted in a gain of $1.1 million.

Moving on to free cash flow, we generated $11.3 million of free cash flow in Q3 free cash flow is a non-GAAP measure that we define as cash provided are used in operations less purchases of property and equipment and excluding restructuring costs.

On strategic priorities and create a more efficient and more profitable business, which should unlock substantial shareholder value. Thank.

Thank you and with that I will now turn it over to the operator for questions.

Thank you.

She would like to register a question. Please press star one followed by the four on your telephone you'll hear three total pump to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three one moment for the first question.

On the first question comes from the line of.

Sean Wieland.

From Piper Sandler. Please go ahead.

Hey, Thanks, This is Matt Shea on for Sean.

Just curious what the Q4 revenue guide range is pretty wide I'm just wondering what explains the range is its furloughs.

Curious on assumptions at the top and bottom end. Thanks.

Yeah, Hey, Matt This is al Panna so.

Thanks for the question, yes, we.

Yeah. The business has been performing as we had anticipated when we.

That our annual guidance, reflecting the expected impacts of curve it instead.

So I <unk> you know as we look ahead to Q4, we continue to see what.

What we expect in terms of impacts for our platform revenue.

For the first time really we haven't seen those in the earlier quarters. This year because of the seasonality of that platform.

Okay. Thank you operator, I recognize there's a lot going on in our world right. Now I. Appreciate you joining the call and I look forward to talking to you all in the coming weeks. Thank you very much.

That does conclude the conference call for today, we thank you for your participation assay. Please disconnect your lines.

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