HealthEquity, Inc.

Q4 2021 Earnings Conference Call

3/15/2021

spk_0: that afternoon and welcome to help equities disco twenty twenty one or you'd conference call twenty twenty one earning conference call my name is richard putnam and you and after relations for health equity in joining me today of john chancellor president and ceo doctor steve neeleman vice chair and founder of the company darcy lot the company's executive vice president and fi fo titan murdoch executive vice president and deputy cfl and had bloomberg or executive vice president and chief operating officer before i turned the call over the john i have to important reminders first a press release announcing our financial results with issued after the market closed this afternoon the metrics reported in the press release include the contributions from are wholly owned subsidiary wage works and accounts it administers press release also includes definition of certain nine gap financial measures that will reference today a copy it had a press release including reconciliations of these non gaap measures and comparable gap measures at or and the recording arbor webcast can be found at our and dust relations website which is i r dot health equity dot com second our comments and responses to your question today reflect management's view as of today march fifteenth twenty twenty one and will contain forward looking statements as defined by the fcc including predictions expectations estimates are other information that might be considered for lucky there are many important factors relating to our business which could affect the forward looking statements made today and these forward looking statements are subject to risk and uncertainty that may cause our actual results to differ materially from statements made here today as a result we caution you against placing undue reliance on the forward looking statements and we also encourage you to review the discussion of these factors and now the risk that may affect our to results are the market price of our stock that are detailed in our latest annual report on and cake and subsequent periodic
spk_1: ports five with the fcc we assume no obligation to have either update the forward looking statements in light of new information or for future events
spk_0: and at the conclusion of are prepared remarks we will turn the tall over to our operator to provide instructions and a host or q and it on outrun the call over to our ceo john kessler
spk_2: thank you work hard and in deference to my mother's favorite tv show you are my american idol laurie line and thank you for joining us this afternoon today we are announcing strong results for how faculties fiscal fourth quarter and for the focus fiscal twenty twenty one which ended on january thirty first and we're providing guidance for fiscal twenty two after briefly touching on our fiscal twenty one results i will ah after argue that had no review operations and hatch on the recent loom acquisition darcy and tyson we'll tag team the financial results are details of fiscal twenty one and guidance for fiscal twenty two based on the results were reporting today and stevens here to join us for kuna haskell twenty one revenue of seven hundred and thirty four million is up thirty eight percent year over year and along with adjusted even got two hundred forty one million ah is both a record due largely to our wage which acquisition last and scully as reported last month we ended f y twenty one with twelve point eight million total accounts and our five point eight million health equity a to say members ended up like twenty one with fourteen point three billion in a to say assets we were pleased with that growth and results but we hadn't yet seen how those compared to the market devon year are scorekeeper of sorts reported a january a dent him to it's twenty twenty year and report that estimate market why growth of six percent year over year in a to compared to our eleven percent organic growth and twenty two percent market wide a to say asset growth compared to our twenty six percent again a sat crap note the organic numbers exclude losses from the way towards acquisition and migration but either way those are good for beat the market natalie promised that if we continue to hold number one market share of a to saints with nineteen percent and at we're in second place in a to say assets and sixty percent now let's look for while the pandemic remains with us and could result in conditions we are not anticipating while equity team is committed to beating hassle twenty twenty one results lab just rugged demonstrating strategic value of our total solution strategy last month we talked about headwinds felt in fiscal twenty one that might be turning into tailwind for fiscal twenty two and tad in addition to touching on our sales results which are upheld such ourselves results which are an example of that we think so far this year but we're also starting to see other tailwind evidence as well for example we've seen a reversal and bond yields as indicated by the ten year treasury moving from ah you know our around zero point nine percent started january this year to about one point five percent this week lol treasury yields are not directly related to yields that are depository current provide there's a high long term correlation particularly between five and ten year treasury and five a year jumbo cds with our hc cass assets rt for attack assets tassels cash assets already place for fiscal twenty two we don't expect that will see much of an impact for this year's yields but we think a steepening yield curve does bode well for next year and beyond we're also seeing more opportunities them in egg and we think we're well positioned opportunity to mystically attract both portfolio acquisitions and to expand our capabilities to serve our partners or clients and our numbers for example we announce the acquisition of loom last week rumors of sas based technology company that provides a commuter so loosen your monthly passes and then employers are looking for as they need help returning their teams to work safe loons flexible platform supports tail and policy incentive for the post pandemic hybrid workplace and helps employers to thoughtfully approach green initiatives to reduce the carbon footprint of to you we welcome our to our new teammates as as her head will say our luminaries in seattle and we're excited about how they will help our partners fights numbers return to work and finally ah from ahead one's perspective the government passed the third stimulus bill in the last week or so that among other benefits provides for cobra subsidies for six months and increases works as doubles the dependent here fs a spending limits or the twenty one
spk_3: down here
spk_2: both of these provide relief to families who have been impacted by the pandemic and it's effect on access to healthcare and also indicate that legislators and regulators are listening when we talk about opportunities to do the right thing i'll mail turn the call over to cat to review operations head
spk_4: thanks john ah hello everybody we are very pleased with the operating results and we delivered in queue for and for all of his for playing one especially given the very challenging circumstances covert present we are able to make tremendous progress on integrating wage work and we found efficiencies that allowed us to raise or synergy target from fifty million dollars to eighty million dollars with sixty million of run rate synergies achieves to the end of our flights one one we i'm sure member phone calls we completed thirteen migrations with a heavy focus on a to say we saw the or member inclined experience scores improve unified our brand release the first version of are integrated platforms stronger views on both portal and mobile and met or service level commitments during this year's edition
spk_1: there is more work to be done however we're targeting another six migrations the sheer along with integration work to support our newest acquisition of know
spk_4: we intend to roll out the next generation of are integrated platform with features that our clients members and partners are excited about
spk_2: as i mentioned in february our sales result year to date remain ahead of where they were last year
spk_4: we believe this performance can be attributed to market receptiveness of our till the solution the work we have gone building strong distribution partnerships and the incredible work or onboard in team is making new clients feel the purple love this december and january we hope to see the positive trends continue as unemployment bottoms out americans get vaccinated and clients and members return to work and reengage with their benefit solutions
spk_2: speaking of returning to work let me share a little bit about our newest teammates or luminaries in seattle we're so excited to acquire loom to help us drive or commuter benefit beyond monthly transit passes and help solve real back to work challenges for our clients
spk_4: the post co the clear environment will look very different with employers wanting to deliver flexible benefits and sent employee behaviors to manage tight parking solution and make better use of alternative transit loom can also help companies take basic yes she's deaths as they have a proven track record of lowering drive alone rates and reducing parks we believe in that mission and we believe that know will fulfill our commitment to continuously innovate our services to the involving needs of our clients large and small we also see opportunity as legislative and regulatory relief is extended to our members and client to the passing of a one hundred percent cobra subsidy that will help american stay cover he will shortly rollout plans to help our clients to sell their obligations and help our members find the coverage that is right for them while there is a significant operational undertaking to pull this off it is our obligation to serve our clients and members in this capacity there is a lot going on and i would like to thank say thank you
spk_1: two are over three thousand teammates who are working so hard on behalf of our members clients and partners to deliver all the work i referenced above in purple fashion in challenging circumstances now i will turn it over to darcy to talk about our results
spk_5: thank you dad i will review or fourth quarter gap and non get financial results the reconciliation of get measures to non get measures it's found in today's press release a fiscal fourth quarter financially north as you know include the operations of wage words which was acquired in august twenty nine p m included five months including the full full fourth quarter of fiscal year twenty twenty fourth quarter revenue decline six percent as the economic effects of the pandemic impacted each of our three categories service revenue declined nine percent to one hundred and eleven point three million dollars representing fifty nine percent of total revenue in the quarter the decreases primarily attributable to a five percent decline in tdd account that year in including at and over fifty percent decrease in commuter why the growth in agencies helped average it totally cannot remain flat year over year a custodial revenue decrease two percent to forty eight point six million dollars in the fourth quarter representing twenty six percent of revenue in the quarter the decline was primarily due to a thirty one basis point decline in the annualized yield on agency tass with yelled assets partially offset by year over year growth of sixteen percent in average age is a cash with yield and sixty six percent growth and average age of the investments with yield the analyze the interest rate yield was one point nine seven percent
spk_2: on a gets a cash with the of during the fourth quarter this year this year is a blended rate for all ages a cash with yield during the quarter
spk_5: the agency assets table of today's press release provides additional details as previously mentioned we have migrated ninety seven percent of the agency asset to the health equity custodial platform interchange revenue declined five percent to twenty eight point three million dollars representing fifteen percent of total revenue in a corner the interchange revenue decline was primarily due to reduced stand across all platforms in the corner
spk_6: gross profit was one hundred point nine million dollars compared to one hundred and thirteen point seven million dollars in the fourth quarter of last year gross margin was fifty four percent in the quarter
spk_5: operating expenses were one hundred point eight million dollars or fifty four percent of revenue including amortization of acquired intangible assets and merger integration expensive which together represented seventeen percent of revenue income from operations was point one million dollars compared to fourteen point five million dollars in the prior year net income for the fourth quarter was five point four million dollars or seven cents per share on a gap be updated compared to a lot of point two million or a lot and zero cents per share in the prior year are non gaap net income was thirty three point three million dollars for the quarter compared to twenty eight point four million dollars a year ago a seventeen percent increase nine gap net income per share was forty two cents per share compared to forty cents per share last year adjusted leave it up for the quarter decreased eight percent to fifty six point six million dollars and adjusted ebitda margin was thirty percent while operating through the impact of cold and
spk_6: for the for fiscal year revenue was seven hundred and thirty three point six million dollars resulting in gross profit of for forehand and fifteen point three million dollars or a gross profit margin at fifty seven percent
spk_5: income from operations was thirty five point seven million dollars and adjusted ebitda was two hundred and forty point eight million dollars
spk_6: turning to the balance sheet as get january thirty first twenty twenty one we had three hundred and twenty nine million dollars of cash and cash equivalents with nine hundred and eighty seven million i'm a debt outstanding net additions to us
spk_5: with no outstanding amounts drawn on our line of credit
spk_6: i cashed out of course does not include the that not me four hundred and sixty million dollars of additional cash from are actually offering a few weeks ago nor the outflow of been used in the moon acquisition since i will be turning the cfl reigns over to tighten in a couple of weeks i will turn the time over to him to provide the guidance for his first it's clear of responsibility
spk_7: thanks darcy been a pleasure certainly darcy and rog that he's sticking around help us in other areas of the company going forward darcy makes everyone better when he's around okay based on where we ended gift for twenty one and our current view of the economic environment now expected for fiscal twenty two weeks back to generate revenue a skull twenty two and a range between seven hundred and fifty million and seven hundred and sixty million dollars expect or non gaap net income to be between one hundred and fifteen million dollars and one hundred ninety
spk_2: team million dollars with resulting a non gaap they did net income between a dollar thirty seven and a dollar forty two per share based upon an estimated eighty four million shares outstanding for the year we expect health equities adjusted even a to be between two hundred and forty and two hundred and forty six million dollars for fiscal twenty two days guidance includes are most recent estimate of service custodial and interchange revenue a stunt early fiscal twenty two results as well as modest revenue expectations from the acquisition of bloom and cobra uptake based on the recent in fl waited for the latter part of the year guidance office in the yield on each of a cash with the yield of approximately one hundred and seventy five basis points as well as the effect of approximately fifty million dollars have achieved run rate synergies had discussed which will be fully realized in fiscal twenty two
spk_7: the outlook for fiscal twenty two assumes the projected statutory income tax rate of approximately twenty five years as we've done and recent reporting periods are full your guidance include the detailed reconciliation of gap to the non gaap metric i had an earnings release and a definition of off the side and does include at the end of the uninsured in addition while the amortization of acquired intangibles is being excluded non gaap net income the revenue generated from know the quiet and tangible assets is not excluded without altering the call back of the john person closing remarks
spk_2: thanks tyson well done plus one to tags thanks to the team or for a very special year under very unique circumstances and also to tyson's thanks to my friend rc mot your none of you would ever have heard of health actually and purple culture certainly would not be a strong and stable without darcy and he's fourteen years of service to our team and our mission when darcy join a small team of less one hundred team members here health equity had a handful of health and relationships twenty thousand eight essay members and all of twenty million of a to say assets he's remarkable in the truest sense of the work is wisdom and financial talents time the company profitable prepared it for our p o grew it to where we stand here but ah she's a complicated got outwardly mild mannered drive fast as the lot that's true he's a finance guy through and through by he's stepping out of the cfl role and signing up to continue to work just as hard at health equities mission buffer last night well i don't know but i think we've got a great bargain and all of us truly look forward to continuing to work with darcy for as long as we can thank you my friend with that let's open a call up to questions operator
spk_8: ladies and gentlemen if you have a question at this time please press the star and then the number one key onto touch tone telephone and your question has been answered are you wish to remove yourself from the queue please press the pound key again to ought to ask a question the police press star one and we have a question from glad peter is a raymond she's here line is open
spk_2: i wondered afternoon everyone
spk_9: and odd darcy i guess so you're gonna be giving up your responsibilities ah but i guess remember the next best round of golf is right around the corner i think it's ben hogan that said the most important shot and golf as next one and it looks like a good have lot aptitude going forward
spk_10: but i've
spk_9: so what's what's that i guess i am only allowed to ask one question in one part so ah with that on i know you raise the capital are you even now it's the the one transaction we've been hearing in the marketplace about increased interest from others who are well capitalized well funded about interest in doing and the day in the space so the question for you are you john and your management team as do you feel like the multiples for deals is me moving up and do feel like the competition for these deals has increased supply word maybe some of them will not be as attractive as they once might have been
spk_2: well i guess i would say the way we look at for my back of his our plan with regard to the capital that we raised and the capital of that is generated by the way you really have to deploy from an m in a perspective into areas the first is and and at the primary of deployment is around competitive and portfolio type acquisitions and i'll come back to that the second is in areas where we can expand our capability lose and example that take your question is kind of about the first am i do think that there are lots of people who are interested in our market and i'm that should say something to those who i have a factor well they a anyone think there won't be growth york or that's a strong evidence the opposite direction i'm i'm you know that i'm sad are competitive advantage when we look at the transactions that work for us grabbed his that i think that and nobody knows how not no one knows this business better than us and no one knows how to generate synergies broadly speaking that or than us and we've done it time and time and time again from portfolio acquisitions and at on the costs i'd certainly have already done it it with wage works if you think about it as a part of product extension type acquisition so i think we have some real advantages in terms of deploying capital for return i don't doubt that there are other people who will deploy capital what i think our investors are interested in is when we deploy it are we deploy it to generate a high return for them and i have every confidence that we're going to add identify what we have identified and we will successfully pursue a transaction activity that helps us grow take advantage or scale etc and you do what we do well
spk_9: them to generate return for you so of cannot feel that
spk_11: thanks for the answer
spk_8: thank you sir
spk_2: and your next question is somewhat robert jones of goldman sachs your line of them
spk_12: that i just a second question i'd i guess it wasn't your just hoping to learn a little bit more about loom yeah i guess just within that you know a little bit more around the the that the type of offering specifically you know the customer overlap cross oh opportunity and and anything you'd be willing to share on
spk_2: and just how the economic model was set up with the offering our the alpha legit just in general though that more on them with the great authored what am i throw this one to you that all right
spk_13: that's great we were to and rock paper scissors for who would get a womb question and i won ah thanks for the question we are enormously excited about moved here here's what we think about operationally and then i'll turn it back over that can see of as he yelling a at strategically of of our commuter businesses by and large monthly friend the past
spk_2: today and to path when we studied the landscape throughout the last year as he watched what happened to the computer business during during prove we realize that the need to the needs that are are critical and players and are you most you know kind of challenging and thoughtful business partners had was for a more holistic foolish by someone that could help them
spk_14: expand the commuter benefit to include daily parking to include alternative modes of transportation to include making sure they're are junior analyst at goldman sachs get home safely if they stay late at night with connected rubber left right all of those types of benefits were sort of where the next year
spk_4: narration
spk_2: commuter benefit was heading for the most discerning point into then we started going on the marketplace to figure out whether me more sense for us to build that those incremental capabilities are to required and we found this amazing company that that with like minded about of what what the demand were in the marketplace had already style
spk_4: kind of are some of the months or forward thinking critically discerning enterprises in the us as their clients and had worked for those clients to build a model that would work and we just felt really good at moon was where op is going on computer and and that sort of kind of how we intend to deploy it would you think they're across all opportunities
spk_15: but you're really just kind of broadening the computer value proposition within our own computer based were you there is no league tables like are with a to save we believe were the largest near the largest ah commuter provider and you ask when a deficit and we have an opportunity to take is awesome know kind of incremental solution to those partners and help
spk_16: i'm canada post coup the community barb deliver for the operational answer john a if you want to add a touch on a and a strategic stuff on top
spk_2: no i think i think that was well put i'm not sure i would add much to that except to say you know about that that we felt like why just two things one is we felt like you know it over the next you really the remainder of this year it's almost as though we are from a members perspective know reintroducing bar computer business now members still have accounts and so forth and there's not much work for him to do but they're busy at the same time we know that our customers are reintroducing for lack of better term members to work and it's funny to think about this way but for a lot of people
spk_17: that's that's a that's a big town and i'm from our perspective the combination of loom and our existing commuter benefits product
spk_2: really is the best way to do that it's the best way to reintroduce people to work from commuting perspective there are lots of other issues out there but on this one we are the best solution and we have the ability to take that to thousands and thousands of clients over time and that's a really attractive think so and will serve as well blog like so when we talk my talk beginning of a conversation about a tailwind to headwinds know yellow era headwinds to tell when i was get
spk_18: i am
spk_8: you know commuter is his is something where it will be great to have tailings again and i think loom really lets us make the most of those dell
spk_19: makes that
spk_2: next question is from tried scale of bletchley ben linus open hey good afternoon guys in thanks for taking the question i guess down what i wanted to ask you is that should we think of loom as little white playbook for deals that might happen in the healthcare space and i might even ask you what you think of as the loom of health care and taco the bit more about where you see the i'm in a white space on the healthcare side of the bill this well first of all i've got a loom of healthcare i'm not gonna announce a year ah am so so i'm not going into that but the and you are going to say that but i i do think that there are elements of this that there are very attractive from a playbook perspective the loom is is not a large company it it it is not bringing with it a bunch of sort of legacy revenue etc
spk_20: and it's a company that has had to ah ah you know kind of
spk_2: let's say that and unless they live or die but the right answer probably as innovate ah we're we're not ever get off the ground i'm faced with some very very new challenges and so they had to come up with some burger you solutions and so i in from from a kind of up the right way to bring in new talent and the right way to bring him or if we're going to do you build a by take things as we add capabilities on the outside on it's exactly how i'd wanna do it i think in general i'm but the white stays on healthcare in my mind continues to be around that consumers role in the financial side of the healthcare so so the concert basically and i got we have not yet cracked the code on
spk_19: helping consumers truly understand everything that's going on with their healthcare finance and making that a process that people are that that is not stress causing and so while that may not be the most interesting thing if you're managed care organization or the most interesting thing
spk_21: if your healthcare provider or the most interesting thing if you're pharma it's really interesting to us in at the that reflects the fact that we occupy a very unique position with in health care and one that the we will continue trying used to drive change and system so
spk_2: the night that's a long way to say yes i think it's the kind of playbook we hope to follow in health care and yes i do think there are opportunities and healthcare yeah and on know they're likely to be centered around the continued effort that we have to connect health and well to assure that consumers
spk_4: no one when consumers understand the money side they just make the system better we see that over and over and over and over and so where there's more opportunity there were going to be ready to do it have a child that's about as i have a quick follow up i guess one thing i would ask about as the selling season it's upcoming are we started to hear from some benefits consult other wasn't a lot of movement in calendar twenty calendar twenty one seems to be off with a bang would love any up to the minute comments it be willing to provide around can i sell insurance
spk_15: using an art piece
spk_2: while this is gonna make rag and marco very jealous because they didn't get a a second things i'm not sure i can do that a party but but the head if you wouldn't mind may be commenting on what we're seeing gonna from ourselves fall perspective and also you know in our channel checks with the consultants himself
spk_22: sure and i think what we find our echoes your own channel check as well right which is we've seen a one of the reasons why as i as i stated our our results year to date or ahead of last year to date is in part because some of those slip orestes became close sales in the early part of this year so would say are fine
spk_2: earnings are pretty consistent with with what you're hearing from your or benefits consultant connections and and we certainly hope it continues for thus far with you feel ah
spk_23: a little winded are back early from by perspective
spk_8: that's helpful i appreciate it and jolly guess technically you didn't answer the first one so maybe that's my first question he didn't answer the tech or either i did
spk_4: like you don't drag it's okay it's okay greg i didn't i didn't just let you
spk_2: well project checked next question it's fun candied chocolate security is your line it's open ah thanks very much ah and dot garcia know you're still going to be hanging around but i'm glad that i'm it's the great work in which he says wanted to ought to to share that on i i i think this is only way to john i think as is one question and not your for goes to darcy or for goes to you john or maybe to tyson but i'm going try to wrap it up the web think about sort of that the that puts in takes around ah impacts to to cash flow over the next couple years outside of like were rates go and what accounts you when i feel well i think about one you've got a tickets twenty six ninety or projections of murder merge integration cause i'm pretty sure that ends at the end of this year then you've got to meter is still down fifty percent idiotic we all probably don't ever believe it's called all the way back up because your mind is where can meet our sort of wise
spk_7: and sort of to think about what that lift looks like in then titan he talked it out cobra of being a lifted the end of this year is there up a potentiality that may be going into next year the you're out did that drops off i'm just trying to think about those puts in takes in his we think about sort of day a baseline normalized a bit dark castle a number on just thinking about those three bucket so i think that's one question that that's my best attempt to bringing it into one well done tyson sure i'm at the pretty wholesale question i'll start with the one that was if the number in there and we we talked about of though i'm you an agreement thought my left all the computer was not your stomach by was seventy five and run rate revenue business was a room product and it was the profitable and them so profitably been down over fifty percent so that kind of answer the question and he talked about a with these are all can't tell when that that that group even or cashflow metric you know it certainly in the long term as john pointed out and we can do to point out the rates are one of the largest drivers of that and so even with things like a letter cobra lift middle of this you know middle to latter part of this year
spk_2: our around you know what we need to do for as of overcome notifications and and as from the fees we may get from that you are able to use that effectively that of that kind of youth in the year but the raiders your the thing that's going to drive the long term margin
spk_7: also you know the other thing i'd say is if the interchanges or normalizing that murray i thought about that before as well i'm we're starting to see that normalize it you know it's still not quite like pico ovid levels which to have this q one
spk_8: sort of normalize quarter to get through before that become sort of change relative to those not pandemic quarters
spk_24: i guess the last thing out there that never come out of a pandemic i'm not sure know what the timing will be as far as how everything and comes back together but it's certainly like see some of those right indicators go up because that means a lot to our business given the amount of assets they were able to generate in this last season
spk_2: great in this and that that twenty six million discover and that does that the last of the merge education expenses
spk_24: yeah sorry that was the other point out or yes that is in and were committed that we will be on budget now to be gone relative to the wage worked acquisition at the end of the year and it kept on tractor to make that happen operationally and we're tracking okay great thanks answer that question it's pro mcdonald hooker of keybank her line is open
spk_2: or grade i agree good afternoon good as an up yeah so i guess neither step out there on sandy's question or cash flow just that when you look into next year just to own our models here obviously the balance sheets much better now at the equity offering ah but needed to cone our models in terms of cap acts are just gonna keep a good at what were those kind of a sort of assumptions around topics include them in other system that have one year with the two companies together and and are there any investments you need to make and along or that might elevator the near term that's all i'll common and generally and then generally and then throw to us tyson to talk through kind of what we're expecting from a cat that perspective this year the things that are are driving cap x for us are primarily around the investment that said on the scheme or overseen in the conversion of our clap one to a true a p i driven micro services environment the value of doing that lol me back up the way we're paying for it in the sense of generating sort of bankable return for lack of a better phrase is that it's making our development activity and occur faster in with less hours and
spk_25: and therefore less costs and you can see that to some extent in
spk_2: what we released over the last quarter with plum sort of of the wanna run one i guess he and the fact that we've committed to over a dozen new release items over the course of this year that that's what that's about the and that will be something that will pay dividends for us for a long time forward though not just in that cost savings but also when we do transactions and room as an example we ah well i think we will have a little bit of spend on moon in the short term we think that we can get this done a lot more effectively today
spk_7: then we could have gotten it done two years ago and you know that will be a great if assuming we can do it better be a great lesson and no impact what else were willing to do because we can integrate more effectively with what we already have so that that's really the bulk of where our investment is going beyond areas like security and so forth that that we all know that kind of continue to have to be yeah
spk_24: we have to be keeping up with the big boys no matter how you want to find big boys on that one
spk_26: tyson you on it was speak a little bit to where we that directional you were we see tap that this year old as the last
spk_8: yeah it i mean that it has got a little bit and it's gonna be a noble say ten percent of revenue approximately in that area and and all the things that john outlined or true mean we're gonna win those investments technology or really the thing that's driving not and so we got our our foot on the gaff there to make those improvements in them and
spk_27: also tracking what we think the returns you know will be as well tonight so excited to get that done and and and really afraid or technology great the allowed be well darcy thank you
spk_28: like an idea
spk_27: since the next question is from stephanie the this of as of the be leaving here line is so thing thank you like a level question question how tight the obviously a very well deserved move but you will be about and that
spk_7: five percent are transitioning from etsy about the at me that the correct height and about my and question though not a bad time though of course he didn't you through it that have been a press release that sounds like you guys are executing wow much energy as as twenty million mark unamid yeah that profitability get a little the topic is this assumption of the expectations for a strong selling season which was no talked about the paired mark hot kind of upsetting the wage saving is it some be investment he talked about before or is there really anything else to call out maybe some conservative and ah the back to work at adoption version yeah i do yes your honor and scrappy where i would go with this is it's really you go back to the rates right and the and the and where we generate a part of our profitability is when those rates start to improve in of course you now see here would darcy announced on were requested two hundred gifts for the quarter but you know it'll be a hundred and seventy five before the annual period and you have seen that he knows you track was the you see that come down over the course the of the decline and interest rates and so i think about that that's really one of the things that no tempers that margin improvement now you know
spk_27: think the computer come back with we get some of that you know
spk_29: those dollars back up to that said if i know i think when helps is potentially do that math not included in there because i just i haven't seen that happen and it's something that i you know if i really think it's going to happen it would maybe be in the latter half of year and and when i see some movement there will of course talk about that and that's that's been as you know that's one of the things as tempered that a lot
spk_2: mean luma really add anything from as for margin perspective it says they'll start up with minimal revenue and and really it's reinvesting that back into the business and so you don't get much there and so the other kind of the top three things and i would think at really is the reason why we're so we're still we're we're kind of where we're at you and in i think yeah you gotta get and of the year and and being consistent with that on what we're kind of pushes is pretty getting his a skin based from off of i understand that one quick follow john on i need to hear how you definetly know that that he tried that that the current a lot very important you armed he's taken me a that and if it's less processed way if it's not the fastest car and a lot the fastest car is very well good i'm pretty sure that everyone him in and by the way it's not the first by eat this is he used to have the fastest one and he got faster one so can you know what up but for for those who are concerned about the environment i believe it's a hybrid at some sort so so it's not one of them tesla into some kind other
spk_8: cause it's a hybrid of some sort so he's he's running fast but he's running point
spk_30: thank you cause up the cars up you know cards up provo canyon his
spk_31: you know he's a he's a he's dragster what i trying to seven and allows us there may be bigger cause but i don't think our festival
spk_2: operator we lose your job next question it's from t that lives of the i t your line is open i'm a wasn't regulations hi congratulations on a yeah third quarter to any talk a little bit about how loomis priced i'm like the i mean it does the revenue coming from loom depend on people actually commuting to work or is it more of a subscription sort of model and let's say half of your customers were to purchase loom what sort of revenue runway could you get to let's say five years from now you're bringing up to seventy five million five years not just any color around that would be very helpful facts yeah i'll give this one a shot and then ask a ted said said to to add to it maybe he'll add the coherent part
spk_32: that looms a primary business is a
spk_2: of have a subscription side business so more said somewhat similar to the core of cobra words depending on the number of team members or employees you have as opposed to who's who's driving a would have you in that's because the solution have something to offer for kind everybody so he a one item for example that that ted the hadn't touched on his sir i didn't catch on as compensation is that the he knows the opportunity to help employers to the extent that we see for example i'm work from home cos reimbursement mandates come on out know we have some capabilities in that area and that again sort of like the theory is it's you know it's being there for every commute or no can you at all and so that's how how loomis priced and so it does provide and the broader computer business some stability related to very he ability and commuting am i don't know that i will have done the calculation you asked for and so i would not wanna do it on the fly on but i will say that ah ah what i think is i'll say one other thing which is i i think what's particularly interesting also about moon is that because we are a it is that it it can make a meaningful contribution to the return of this computer business mean one thing i might have said in response to greg's question is one thing i like about this transaction from the perspective of our shareholders is i am absolutely certain that it will yield in a certain as i can be that it will yield material return expressed in terms of iraq for return on best capital or what have you ah a for our shareholders uncertain of that know whether whether the percentage will be big and the numbers loan is is to be seen but but the i is gonna work here and i think one reason for that as your comments chests is that
spk_31: there are a lot of clients who really never had to think about these issues and it about about or never thought about come you're benefits because most of their people were either driving solo are driving a car pools or whatever but you know now with return to work some of the examples had offered their things to think about and
spk_33: then with the sg and all of that i mean nobody i don't think anyone wants the outcome of the pandemic to be that we all abandon alternative commute modes and everyone drives to work alone so
spk_31: you know there's that too i think about neil for example loom has a solution for a close carpool reservation so that the of let's say you have a staggered work schedule and you want to do carpooling only with people on your work schedule that's the kind of thing that that you can do with womb and so am i think those are really neat their the kind the things that know folks who are are out there and hungry and really focused do and
spk_34: we're we're happy to bring that solution to a much larger audience
spk_8: okay great thanks very much and then just one more quick one arm with the synergies from wage going to be it i think eighty million by the end of fiscal twenty two so that should we expect to see a pretty sizable increase in adjusted ebitda in fiscal twenty three
spk_7: assuming that in other some improvement in yield and at a minimum or doesn't get worse
spk_6: act because it's like this victory modest adjusted ledger growth from twenty one twenty two so i mean we're we're not we're not giving we're not giving guidance here but i would share hopes up
spk_9: okay thanks very much
spk_35: internet to question is from mark martin of bear carolina so thin it's a good afternoon and darcy congratulate marks it's been truly a pleasure
spk_7: you know working with you since the i piano and you will be missed by the it's it's been fantastic and hope we can stay in contact ah
spk_35: thank you mark thank you i mean what you've done has been remarkable i thought john said it's incredibly well but it's it's
spk_24: it really is something on
spk_2: the questions on on zoom i'm just wondering you know as you're thinking about it at the first law how much of a contribution will it make for this year in any sort of parameters eat and give us in terms of up a revenue expectation and he bet he but ah marjan expectation just a
spk_36: any sort of framing of just the kind size i know it's small and then strategically at what i'm wondering is you know to what extent is there an opportunity to sell it as a standalone didn't additive to your existing client base and to what extent will it end up helping you in our of peace
spk_4: from a commuter perspective but also on to to greater differentiate all of your on cd be ah you know offerings on a holistic manner where you're you're really showing hey we're really been forward thinking in terms of on you know being comprehensive and holistic or with regards to are solutions and and thinking about areas that are going to be important in the future
spk_2: ted why don't you take the second half of that question and then and then we'll come back tyson for the first
spk_4: sure thanks we have high hopes for our lose ability to a
spk_7: be added to our existing many thousands of computer clients not you not all of them will be certain types of clients will lend themselves more to a more comprehensive solution like moon is offering but that's definitely one of our deal hypotheses and and and we're pretty excited about it and then you know who we have can i concur with your in a implied assessment which is that in the rfp process is were you know deepening are distribution relationships being able to offer something as part of a benefit package that really no one else can we think will help right exactly how much it'll help nhs a sale we we don't know right but we think it'll get us into more conversations it'll make our are a few responses and out a little bit our preliminary conversations with not fire to prospective clients are definitely in a lot of sort of i'm intrigued tell me more which has been excited and we're just getting warmed up to balloon team ah
spk_2: they are exceptional their thought for go to market people and they have you great idea he have some great ideas you are looking for to it together i feel pretty optimistic that i'll turn over to tyson to and your your economic yet markets it's small and it doesn't drive margin and there but but there's upside right i think damn refuse to go take a look at their website use your kind of quiet partnerships they had you know dave that there's a good market check their on to their to their working with and i think i'm a dozen there's a nice opportunity there to support us can climb back through given to know jim its leader business back through because it's and i think it's gonna think up nicely with that because of the way the cards in a great in those type of things but a small from urban a perspective that to begin with i say one other thing about this and not pile on longer but not sawyer and a team or accomplish got they've been the and any and at well guns using the term guys colloquial it's a it's an accomplished t ah so i did real and scheme did real stuff and microsoft and then a really saw this area as an area that said they felt fashioned about
spk_37: yeah and what what's really underneath it is a passion for it gave me and using the employee relationship as up a away got engagements other actually underneath the covers
spk_8: a lot of a lot of talent commonalities and a lot of sort of philosophical commonalities among our teams in the focus on engagement
spk_38: the use of technology to drive that engagement on the opportunity to do well while doing good
spk_2: and so i it it it really felt like a good fit and and as sort of the first of this type of transaction that we've ever done
spk_15: as well as public company i'm like something we could do that would work for investors and that would give us a lot of room to grow explore and be successful together
spk_2: terrific thank you
spk_39: oh good question is concerned tons of rbc capital markets your line itself and
spk_6: they said good at you and it takes on said it it the hi everyone on the device is that the a couple of has a rich and or one of the bigger than a long transferring factors for margins and and johnson you accurately noted that the rise and in tenure that we've seen a guild probably don't impact ah you much this year but but but maybe could should future years to neatest aloe walk us through how quick and in what extent do these moves typically flowed through to you i i know taken time to affect the answer instrument your benchmarks a minute
spk_40: it's how after you place the new cast of the is it only annually many you it in three four years or be your you you get them rolling off to that and been replaced but i get a bit of a quick ridge occasions given a admitted for the first i rather think the be encouraged that a on the i had a great outlet
spk_41: or darcy wanted to take this one
spk_6: i'm sure i'd be happy to i'm when we were him a letter to the most of our placements occur in canada december time with december january timeframe so when tyson guided that know you are right for one seventy five it's because most of the money that we anticipate this is already you know we have deposit during good agreement in place
spk_5: to take care of that
spk_12: because of the
spk_8: the wage migration live past year we did enter into some newer contract more midyear than we normally would and so were no start rolling off in the future there might be a little bit more midyear movement
spk_2: but on the other hand we're always looking for opportunities of of getting yelled announcements are some of these contracts you know have some ability to in a movie in between
spk_4: contract because they have made the max's the clara so if the right environment starts increasing that would be helpful but as we said on the car most of that benefit will come to to next year based on placement that we do in december and january that make sense
spk_2: yeah that makes sense thank you oh answering a question of can ah on a lot of bank of america on line his cellphone thanks for taking the questions i get the follow up there added a two year treasury is only about fifteen basis his and a five year has act of i think it's kind of what you were mentioning at the top the call her almost a person or that he added points to there's a big spread between the two year and a five year i guess when you can't talk about the optimism that you had a that is based off of the treasury our movement being a potential precursor to improvements in cds or are you actually having more positive conversations with depository institutions that wait place rates yeah we yeah well or or this is a little bit of a quiet period in terms of our conversations because i'm not using a terminal it's legal sense but because we've we've done a lot of placement over the course of five december and january and but but i will say during that period as we got into january things are did did from up quite a bit
spk_42: and and the n n and as to what we're talking about now is really to some extent know we're we're we're a previewing with are now i believe it's twenty partners
spk_2: ah what what our needs are going to be for next year and yeah so there's been a ton of interest in that
spk_43: i think that interest is bounded primarily by
spk_2: questions on the part of different depository partners about know what loan volume is gonna be and and in particular you know where and what duration that loan is values that come from so i can't say there are questions but i do think that the conversations are certainly relative to what we were seeing when we were having the same conversations last march and april or that was tough this is better so
spk_7: you know obviously a ways to go this year but the fact that we're talking about reflation and that were seen evidence of reflation that we've seen about fifty percent of the jobs lost have come back his are all good things broadly for this company and and for opportunity on placement
spk_15: okay great and then the revenue increase that ten million dollars as innocence we spoke a few weeks guy get what is i were you can break out said aware that improvement is coming from a belief the cobra from gloom and more comments on the reopen
spk_7: just if he could kind of bucket that for us banks yeah tyson on alley were in a bucket it but i'm going to break out too much of a tyson that want to give some color on
spk_44: yeah i mean who what where we started on this as we know we we promised we'd go topline growth if we have the opportunity here post coveted a nice because we raise that be we thought we did right and i think you did mention the things that talking about a mean they're certainly not still that that keep our challenges that we face the revenue was still down every category
spk_8: and before you know to to force the we're still in is covered quarters we still have that he won it will be sorted and a similar a similar vein
spk_2: you know that's right we get well you know we'll work through cobra we're gonna rip you know over the last are the ever going to get something from that certainly loom provide a little that it like i said before though it's small but i think the upside on that is there's potential and them and it's not something that we necessarily you know have to wait for for season like the rest were business the media and in the latter half year we get outside from that and then i think that them i think overall again that sort of that nato mixing that bag up with that yeah we're we're figure out you know things like a snail an increasing commuter maybe in the last part of the year a little bit right that not very much we just you know you see some of the on watch the news like everybody else looking forward to get vaccinated and i'm in a major that changes the way people move around a little that relative to what we've been seeing which just you know hasn't hasn't moved at this point so it is that is those things got it thank you i got there are no further questions at this time i would like to attend the conference of a to try closing when like ah thanks everyone again for joining us please i know things are getting better but that let's all just stay safe and same add one more comment on darcy you know and darcy or the dodgers fan and while i'm not sure i'm is keen on bleeding blue as purple i would note this which is that i believe it's the case that the
spk_6: hi of bad percentage among any dodger a brooklyn
spk_45: or los angeles is we really killer and i think it's three fifty two may be treated six am so darcy is now with an inch or two taller than willie keeler but beyond that
spk_8: ah yes he is leaving this role i believe i may be wrong about this but i believe his batting a thousand and term serve meeting your earnings expectations on a quarterly basis
spk_7: and as i suggest a lawyer mark that kind of stability and ability to look around corners and to make promises that you can deliver on is something that that is is darcy is unique and strong contribution to our culture and though he will not be in this role
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