Greetings, and welcome to the Benefitfocus Q4 2021 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Doug Kuckelman, you may begin.

Thank you, operator, and good afternoon, and welcome to Benefitfocus' Fourth Quarter 2021 Earnings Call. Joining me today are Matt Levin, President and Chief Executive Officer; and Alpana Wegner, Chief Financial Officer. Matt and Alpana will offer some prepared remarks, then we'll open for questions. Before we begin, let me remind you that today's discussion will include forward-looking statements that involve risks and uncertainties, market developments and opportunities and the impact of our growth strategy that could cause actual results to differ materially. For more information, please refer to risk factors discussed in our most recently filed Form 10-K. We also will refer to certain non-GAAP financial measures. Important disclosures about those measures can be found in today's earnings release. Lastly, we will reference a presentation furnished in an 8-K, which you can also find in our Investor Relations website at investor.benefitfocus.com. With that, I'll turn the call over to Matt.

Thank you, Doug, and good afternoon, everyone. Today, we will discuss our fourth quarter and fiscal year 2021 results. As we close the year and look ahead, I would also like to discuss the significant opportunity we have in front of us to create value for our shareholders. I have never been more confident that Benefitfocus is well positioned for growth and to win in this industry. Benefitfocus has carved out a differentiated position in the benefits administration market. I joined the team with a conviction that we can strengthen our offering and in turn, put ourselves back on a long-term growth trajectory. Last year, I spent a significant amount of time listening to our customers, brokers and third-party evaluators. Based on the feedback from those discussions, it became clear to me that we had some challenges, but also a lot of opportunity. We took that feedback seriously, and we have been transparent in our commitment to make the changes necessary to rebuild our reputation as a safe set of hands for our customers. As an organization, we have been unwavering in our focus and decisive in our actions to transform our business. Today, I will discuss the progress made to date and explain how we are executing against our transformation strategy and what's still to come. In a short period, we have delivered meaningfully against our commitments to improve our service levels, begun strengthening our go-to-market channel relationships and invested in our team with the addition of industry veterans. We are looking forward to providing additional insight into our growth strategy, accomplishments in our mid- and long-term financial targets at our Investor Day on May 10, 2022. If you turn to Slide 5, I'd like to discuss three key takeaways from today. First, I can confidently say that we…

Thanks, Matt. I'll start with an update on our commercial traction this past quarter before getting into the highlights of our Q4 financial results, and then I'll cover guidance for 2022. We continue to be pleased with the SAP channel where you're seeing a trend of increasing ARR deal size. During the fourth quarter, we also saw good momentum in upselling to existing customers and closed several Rx Insights deals with both new and existing customers. And our health plan team renewed five health plans in the fourth quarter at or above existing ARR. Turning to Slide 11 to take a closer look at Q4 revenue. Overall, I'm pleased that we once again delivered results in line with or above guidance. We exceeded our revenue guidance for the quarter and full year. This marks the seventh consecutive quarter in which we have met or beat our revenue guidance. Total revenue for the quarter was $75.1 million due to better-than-expected subscription and platform revenues. The approximate 1% decline in revenue year-over-year was driven primarily by lower professional services and planned reductions in noncore revenue. As a reminder, noncore revenue includes legacy Connecture on-prem and unprofitable professional services revenue and the runoff of the Mercer relationship. Total software services revenue was $63.8 million, up 2% year-over-year. Software services revenue retention improved by almost 300 basis points year-over-year, and software revenue, as a reminder, includes subscription revenue of $44 million and platform revenue of $19.8 million. Subscription revenue was down 2%, better than expected due to lower customer credit and the inclusion of Tango Health. The year-over-year decline was due to two health plan renewals that were at lower levels as expected and the planned reduction of noncore revenue. Platform revenue was up 14% year-over-year, also performing better than expected due to higher…

[Operator Instructions] And our first question comes from the line of Matthew Shea with Piper Sandler. Please proceed with your question.

I appreciate all the color today. Wanted to ask on Tango Health. I know in the past, you've mentioned it taking you from having ACA capabilities to now being able to deliver the full credit answer. Wondering what opportunities specifically does this open up for you that the legacy offering ultimately couldn't?

Yes. Thanks for the question. So as we talked about in the prepared remarks, we're really excited about the acquisition. I'm really proud of the team in identifying it. We've done a really nice job of integrating our associates in Austin and throughout the country. And right now, we're in the middle of ACA season and so far so good in terms of reporting, et cetera. In terms of why we did the deal, it's on a couple of different dimensions. First, their ability to assimilate data and reporting and the accuracy of that we thought was really best-in-class. And we're already seeing evidence of that based on SAT scores and new customers being, both within our base and prospective customers being interested in it. And it also enables us to go more upmarket. So as you have bigger populations and more complexity with those populations, they can just handle larger and more complex cases. As you probably know, some of our historic services in that area were using third-party platforms, and this is just something we wanted to own as part of our core bundle to serve our existing base and like I said, add new customers and so far so good.

Got it. That is super helpful. And then curious, within that business, did the delay in Medicaid redeterminations caused any headwinds for Tango Health? And then as those Medicaid beneficiaries seemingly roll off and would now be seeking an ACA plan, is that a potential tailwind going forward?

That is a great question. I will have to follow up with you. I think the answer is no, but let us get back to you on that.

[Operator Instructions] Our next question comes from the line of Pinjalim Bora with JPMorgan. Please proceed with your question.

Congrats on the quarter. And also good to see the strong open enrollment season that seems like driving a good acceleration on the platform side of the business. But I wanted to ask you on the recurring revenue side, the subscription side. Help us understand what are you seeing in terms of demand from health plans and others going into 2022? Kind of - what has been your conversations with prospective customers? Any color would be helpful.

Yes. So you want more of just sort of a market read of what's going on?

Right.

Yes, sure. So why don't we take it in both divisions and Alpana can pile on in case I missed some stuff. But first, on health plan, as we talked about last year or in prior earnings calls, health plans, if you put yourself in the seat of a health plan CEO, they got to get through COVID, SCOTUS decision and then obviously shifting demographics in the U.S. like retiree markets, et cetera. In our discussions with our health plan customers, they're very - and we referenced it in the earnings call, we have incredibly high customer SAT. This is where the company was founded 21 years ago. We have really privileged relationships with those customers, which, to your point, allows us to have dialogues with them around current needs and prospective needs. I say that in our core business around enrollment, quoting, et cetera, we're still seeing the renewals feel really good to us. That is not a business segment that they are shying away from, but the growth areas we're finding are in new areas that we're excited about. So we spent some time talking to you in the past around some quoting things that we're bringing to market, which will allow our health plan customers to particularly like single-state Blue plans to compete more effectively by bundling their health and welfare programs with other ancillary benefits from other providers and to provide that in a bundled quote that they can offer side-by-side to a broker with some of the national payers. And that's gaining real traction. It's a product that we put in market today and so far, so good. Other similar plans are sharing interest in it, and we're pretty excited about it. I'd say prospectively, the opportunity that we have is on a couple of…

And also, thank you for giving us the contribution from Tango Health for next - for 2022. Was there any contribution for Q4? Or how do we think about the contribution for Q1 as well?

Yes. I'll give you a little bit of both from Q4 and Q1. Very little contribution from a Q4 perspective. We closed on that transaction mid-quarter. And so there's a fraction of the quarter that's included. And then what I would say from a full year perspective, as I mentioned in my comments, to give you some sizing, it's about three points of contribution year-over-year. And I would just think of that as a very - a subscription business that you're going to see kind of evenly spread, not a lot of seasonality to that revenue.

And we have reached the end of the question-and-answer session, and I'll now turn the call back over to President and CEO, Matt Levin, for closing remarks.

Thank you, and thanks, everybody, for the questions today. Before closing out the call, I'd like to quickly summarize a couple of things around the road map and how we are - how we plan to continue to deliver value to our shareholders. Over the past eight months, we quickly addressed many of the underlying issues that impacted our past performance with a priority on achieving service excellence. I'm incredibly proud of our team and what they have accomplished in a short period of time. We are already seeing the green shoots of that work, best exemplified by our strong open enrollment and the upcoming selection on these benefits panels that we talked about. With the stronger foundation in place, we are entering a new phase. We're getting more at-bats in the selling season, more referrals and our reputation in the market is becoming stronger. As a result, we are confident we are on track to return to growth by the fourth quarter. As we stay the course on service excellence, our momentum will continue. Building on this, we know that we need to do to drive further differentiation and accelerate our progress. We know what capabilities we need to build, and we know what we need to buy. We are already starting to put these pieces in place for this phase, and we are already seeing early signs of client demand. We also know we have a lot of work to do, but we are confident that we have the right team and the right strategy to get there. With that, thank you for your time today. We look forward to our next call and the Investor Day in May. Thank you.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.