This morning, Benefitfocus (BNFT 52.42, +0.56, +1.08%), a provider of cloud-based benefits management software, is hosting its Investor Day. Prior to its presentation, the company publicly released its presentation slides, in which it provided plenty of bullish data points -- including raising its guidance for FY18.
Specifically, BNFT said
it is now expecting revenue growth of 8%, as opposed to its prior guidance of
revenue being essentially flat yr/yr to $253-$258 mln. At 8% growth, revenue
now is expected to hit $277 mln, sharply better than its prior outlook and the
$257 mln consensus.
Furthermore, BNFT stated that it is anticipating gross margin improvement in both 2018 and 2019, while also providing some bullish longer-term targets. There are a few main catalysts that have led to the improved outlook.
The company has shifted
its focus towards driving ARPU and gross margin higher, by expanding up-sell,
cross-sell, and product expansion opportunities. For example, this past March,
BNFT launched its BenefitPlace platform, which it says is already providing meaningful
unites brokers, employers, carriers, and suppliers on one platform, while
offering consumers a variety of benefits products for personal well-being and
security at any stage in life. From the perspective of employers
implementing BenefitPlace, they receive a complete benefits package with top
health, medical, life, financial, and specialty products from tier one brands,
all on a single platform, reducing the amount of time spent on benefits
The success of this platform is evidenced by the fact that net employer buyers growth is a solid +33% since 3Q17. Also, the company has added 50 premium brokers and 29 BenefitsPlace sellers.
In addition to shifting its focus, one of BNFT's main objectives now is to "strengthen its core." By that, it means driving margin expansion by capitalizing on operational efficiencies. It has delivered on this goal, too, as Non-GAAP gross margin has ramped higher by 420 basis points yr/yr to 50%, and with Adjusted EBITDA margins surging by 530 basis points. As a result, its free cash flow performance has also improved substantially. BNFT is on track for free cash flow of ($9.8) mln in FY18, as compared to ($21.2) mln in FY17.
In its presentation slides, the company also provided some long-term financial targets. Impressively, it is looking for revenue growth to accelerate to 20%+, after achieving mid-to-high teens growth next year. The company believes it can reach that goal by continually expanding ARPU and new customers, in addition to acquiring new products and services. Additionally, BNFT is forecasting gross margin to expand to 65% in the long-term, a considerable improvement from the current 50% it is generating.
Overall, BNFT is clearly feeling very bullish about its future prospects as it looks to further penetrate an estimated total addressable market of $90 bln.