ARR Bookings Acceleration
Q: How will you achieve double-digit ARR booking growth in the second half?
A: Management expects double-digit ARR bookings growth in the second half despite tougher comparisons to last year. This confidence is based on a larger pipeline, improved go-to-market strategies, higher win rates, and strong momentum in areas like benefits administration and navigation solutions. They anticipate that 60% to 65% of bookings typically occur in the second half, and new products and expanded client relationships will drive this growth. ,

Revenue Dynamics Q3 vs Q4
Q: Can you explain the revenue dynamics between Q3 and Q4?
A: In the second half, recurring revenue growth is expected to accelerate, with the highest growth in Q4 due to the subsiding headwinds from COBRA volumes. Project revenue, however, is anticipated to decline by about 20%, impacting Q4 more significantly due to cost-consciousness among clients. While Q4 revenue will be larger in absolute terms, the growth will be driven more by recurring revenue. ,

Margin Outlook and Cloud Migration Savings
Q: What is the impact of cloud migration on margins in the second half?
A: The company expects significant margin expansion in Q4 from the cloud migration benefits, with approximately $18–$19 million in savings contributing to higher EBITDA margins. They anticipate reaching a run rate of $75 million in annual cost savings starting in Q4. The typical ramp in Q4 margins will be accelerated due to these savings, with Q4 margins slightly higher than last year. , ,

Project Revenue Decline
Q: Is the decline in project revenue cyclical or structural?
A: Management views the decline in project revenue as cyclical rather than structural. Factors such as a cost-conscious environment, lower M&A activity, and fewer regulatory changes have temporarily reduced project volumes. They expect project revenue to normalize as these factors improve, and they emphasize that project work is driven by pipeline and is a derivative of ARR bookings. , ,

CEO Transition
Q: What qualities is the Board looking for in the new CEO?
A: Stephan Scholl is stepping down after five years, having modernized the company's technology platform. The Board is looking for a successor who can continue driving growth and leveraging the company's unique enterprise approach to benefits administration, especially as clients seek to consolidate services and reduce costs in a best-of-breed point solutions environment.

Share Buyback Timing
Q: What is the timing and pacing of the incremental share buyback?
A: The company executed a $75 million accelerated share repurchase program on July 15, expected to run through late August or early September. They have $93 million remaining in share repurchase authorization and plan to be opportunistic in executing additional buybacks throughout the year.

Decision or Go-Live Delays
Q: Are you experiencing any decision or go-live delays?
A: Management does not see any changes or delays in implementations or ongoing delivery. The benefit side of the business has specific timing linked to annual enrollment cycles and contract ends, reducing the likelihood of delays. Prior delays were primarily in the professional services business, which has been divested.

Renewal Season Outlook
Q: How is the upcoming renewal season shaping up compared to last year?
A: The renewal dynamics are consistent with prior years, with a standard set of contracts up for renewal. Management is focused on retention through strong service delivery and differentiation, aiming to maintain high retention rates between 95% and 99%. The cost-conscious environment is helping the company as clients look to consolidate services and adopt an enterprise approach. ,

Pricing Uplift for 2025
Q: Are you considering pricing increases to uplift revenue in 2025?
A: The company does not view pricing as a significant driver of revenue growth. They have rolled out a new pricing model with specific SKUs that include annual increases offsetting typical contract inflation protections. The focus remains on expanding products and solutions with clients rather than pursuing aggressive pricing changes.

Cost Savings and Margin Impact
Q: How will the annual run-rate cost savings from cloud migration impact margins?
A: The cloud migration will deliver $75 million in annual run-rate cost savings, with about $20 million realized this year starting in Q3 and reaching full run rate in Q4. These savings will significantly contribute to the company's goal of achieving 28% EBITDA margins in the midterm by enabling standardized operating models, process efficiencies, and leveraging technology for better service quality.