Voya Financial, Inc.

Greetings. Welcome to BenefitFocus second quarter 2019 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Michael Bauer. Mr. Bauer, you may begin.

Thank you, Operator. Good afternoon, and welcome to BenefitFocus's second quarter 2019 earnings call. We will be discussing the operating results announced in our press release issued after the close of market today. Joining me today are Ray August, our President and Chief Executive Officer, Stephen Swatt, our Chief Financial Officer, and Luann Gilmore, our VP of Corporate Development. The team will offer some prepared remarks, and then we will open the call for a Q&A session. Before we begin, let me remind you that today's discussion will include forward-looking statements Thank you for joining us. The fluctuation of our financial results The immature and volatile market for our products and services Recruitment and retention of key personnel Risk associated with acquisitions The need to innovate and provide useful products and services Our ability to compete effectively Cybersecurity risk And a changing regulatory environment that could cause actual results to differ materially from expectations For a further discussion of the material risk and other important factors that could affect Our actual results please refer to our annual report on Form 10-K and other SEC filings. During the course of today's call, we will also refer to certain non-GAAP financial measures. You can find important disclosures about those measures in our earnings press release. I'll now turn the call over to Rick.

Thank you, Mike. Good afternoon, everyone. There are three key takeaways from today's call, all centered around growth, innovation, and significant economic value We are creating as a leading AI-powered benefits platform. First, the size and scale of our network is growing. We've grown well beyond 25 million consumer lives. In Q2, we added approximately 1 million net benefit-eligible lives. We signed a major deal in partnership with one of our leading voluntary benefits suppliers. We deepened our relationship with a major Blues partner to deliver voluntary benefits to its members. And brokers are making a notable difference in our lives growth and customer acquisition. Second, the value of our technology investments is accelerating. Our network is accessing data that allows us to personalize offers on our platform, just like Amazon's recommendation engine. Our platform structure improves the consumer experience and dramatically changes how benefits are bought and sold. And with the launch of our standardized API framework, we are removing ecosystem friction and automating file-based and manual processes. Third, the power of our data and data models is taking hold. Our intelligence engine is improving user experience helping consumers make better, smarter decisions and providing value to the entire benefits ecosystem. Finally, I want to emphasize the fact that our new platform strategy is starting to pay off. We executed well against our Q2 financial objectives and updated our estimates for the back half of the year revenue growth, which still is expected to accelerate at a robust pace. Before I highlight the success of our business, This is fundamental. Our transformation continues to mature. It's driving how we describe ourselves and how we run our business. We are shifting from a benefits administration solutions provider to a platform company. We are no longer just a benefits administration software company. We are much more. Our multi-sided platform goes well beyond our robust employer network. We have deep understanding of more than 25 million consumers and employers. We are aligned with hundreds of brokers and growing. We have a strong foundation with medical carriers. And we are regularly adding new life, voluntary, auto, and renters, and specialty providers to expand our benefits place offering. BenefitFocus connects this vast network in a complex environment. Our focus on network connections is driving technology innovations, expanding our data assets, and ultimately amplifying the economic value we create for the entire network. Every part of our platform is growing. Let's now turn to our business highlights and discuss growing our platform. We will discuss our three areas of focus, growing our platform, advancing our leadership, and strengthening our core. We'll start by discussing who matters on our platform, then how we're driving greater economic value, and finally, our business results. In Q2, we added approximately 1 million net benefit eligible lives, a new record for the company and foundational to our growth. Lives growth crossed all areas of our business. Lives on our platform matter, and this is underscored by the value of employers, of brokers, of medical carriers, and our network of carrier sellers and suppliers on our platform. Each market area strengthens and scales our network and drives economic value. To scale our go-to-market approach and accelerate the network effect, we made a purposeful shift to partner with the influential broker channel. This strategy is paying off. In Q2, we added over 160 premier brokers, bringing our total to over 450 premier brokers. This is a 10x improvement over last year when we had 43 premier brokers. Brokers are also making a difference in our lives growth and customer acquisition. For the first half and second quarter, brokers influenced over 70% of all new employer lives added on our platform. This is up from prior year periods and confirms our broker partnership approach creates key network connections. This positions us to scale and advance our market leadership. Now let's go deeper on how we are driving greater economic value through our platform. The strength of our sales leadership and depth of our sales bench is contributing to lives growth. The success in the quarter reflects both larger deal size and favorable timing of transactions that closed earlier in the selling season than our original expectations. Our strong Q2 performance puts us well on course for our full year target of net benefit eligible lives growth. We added large employers, universities and public sector accounts. A highlight of our continued public sector leadership is the addition of the state of Alaska in conjunction with one of our leading voluntary benefits partners, MetLife. This is a clear indication that our ecosystem partners are accelerating network connections. Our partners are contributing in new ways to our platform growth. We are deepening our relationship with another major Blue Cross Blue Shield plan on our platform. This is a strategic partnership. By using our platform and network connections, They are able to deliver voluntary benefits to their large member base, increasing their competitiveness. This helps them grow, innovate, and differentiate. The network effect in action. BenefitFocus serves a significant percentage of leading medical carriers, including three-quarters of the Blue's plans across the nation. We are a market leader in this area, and we are accelerating the delivery of an end-to-end solution for medical carriers. By pairing our best-of-breed platform capabilities with our acquired next-generation rating and quoting assets acquired from Connecture, we are introducing the industry's first quote-to-bill solution. Market interest in this unmatched solution is strong and it validates our lives growth strategy. With a large and growing life space and an ever-increasing network, we are well-positioned to accelerate growth in specialty and voluntary benefit offerings through the medical carrier segment. Our end-to-end offering allows medical carriers to bring innovation to their members, which in turn drives life growth and the network effect for benefit focus. Through larger transactions with medical carriers, Large enterprises and public sector employers, we are thoughtfully scaling our business and lives growth. These larger opportunities are the most efficient way for us to grow both the lives on our platform and to connect those lives to a network of benefits that generate transactions. These large opportunities position us to capture long-range, greater economic value. While these larger deals have numerous attributes, they also have staged longer implementation timelines. Go-lives and revenue recognition begin one or two years later. They are strategic deals and bring long-lasting value. This speaks to our visibility of future revenue and the lag of future subscription and transaction-based revenue from bookings. Our platform is growing significantly, and we are strengthening our technology. It is very clear employers and employees need voluntary benefits to complete their overall benefit portfolio. This is driving greater traction and increasing the value of Benefits Place. In Q2, Benefits Place revenue doubled, and during the quarter, we continued to grow our product catalog. We added four life and ancillary carriers and another specialty supplier, bringing our total benefits place suppliers to 50. This is nearly triple the number of 18 suppliers in Q2 2018. Earlier this year, we launched a new benefits place offering for consumer-directed health, or CDH. In Q2, we signed partnerships with market leaders, WageWorks and Payflex. CDH availability further expands the benefits place total addressable market. It also drives demand as a number of employers offering high deductible health plans continue to grow. Our scale requires us to automate and seamlessly integrate technologies. For too long, there have been technology integration limitations between benefits, administration, Payroll and Leading HCM Systems. Absent a well-established single system of record, benefit administrators are frustrated, and internal employer technical teams encounter points of friction industry-wide. In Q2, we advanced our platform's technology capabilities with the launch of our Enterprise Human Capital Management API. Ultimate Software is our first API integrated partner and will officially announce the details of our partnership in the near future. Our enterprise HCM API capabilities eliminate the integration friction and replace traditional file-based systems with a standardized, deeply integrated logic framework. This framework automates manual processes and creates a better and more reliable experience. The end result is reduced administrative burden, improved efficiency, a single system of record experience with near instant data exchange, and greater data accuracy. Now let's turn to our third priority, strengthening the core of our business. Data is core to our business. The number of transactions we are processing is in the billions. and we can scale this seamlessly as we continue improving interactions across all areas of our ecosystem. Our focus extends beyond products and features. We are advancing our business model innovation to drive network value through data analytics, insights and outcomes. Our artificial intelligence engine called Benefit Sage and the depth of our platform data analytics are powering platform growth. These allow employers to better understand their workforce and offer the right products at the right time to their employees. They allow brokers to strengthen their role as a trusted advisor for benefits strategy and expand their business through higher benefit enrollment. They allow medical carriers to increase the value they can offer to their employer and member customers. And they allow Life and Ancillary, Property and Casualty, and Voluntary Suppliers to expand their reach to consumers. Ultimately, employees and consumers will make better, smarter decisions providing value to the entire benefits ecosystem. SAGE uses data analytics guided by user preferences and machine learning to identify key events in a person's life, what we call smart moments. This creates our user-friendly Amazon-like shopping experience. To help consumers shop for relevant benefits 365 days of the year, we proactively notify an individual about a key event on the horizon. Paired with simple product explanations, we help educate consumers about benefit options offered by their employer. These interactions result in the network effect Thank you for joining us. and generates more data that enhances insights and key metrics across the ecosystem. Data is core to our business and our business model innovation. Through data, analytics and insights, we are driving greater value across our network. The power of our AI and analytics infrastructure is significant. Over 250 terabytes of usable data is our primary source for consumer decision support data products. The result from the growth in our network, technology leadership, and data assets are in Q2, we exceeded our revenue and profitability targets. Total revenue grew by 13%, and we increased our non-GAAP software gross margin to 71%. To continue achieving these results, We need and are able to attract and retain top talent across all parts of our company. This quarter, we made several key additions and I'm very excited to welcome two experienced executives to BenefitFocus. Steve Malmy will serve as our Senior Vice President of Platform Strategy. Steve has extensive experience bringing new products to market and has held numerous roles spanning product management, Marketing and Sales for Enterprise Software Companies, companies like Microsoft and IBM. And Steve Swad started as our Chief Financial Officer on July 22nd. As many of you are aware, Steve was a member of our Board of Directors since our IPO in 2013 and brings more than 35 years of experience leading executive and finance teams. He already has a deep understanding of our company and has held numerous CFO roles and he was formerly a public company CEO. I would also like to thank Luann Gilmore for her leadership as our interim CFO. She will remain a key leader of our company as our VP of Corporate Development. From here, I'll turn the call over to our new CFO, Steve Swad, for his introductory remarks. Then Luann will cover Q2 financial results and I'll conclude today's call with guidance. Steve?