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Benefytt Technologies, Inc (BFYT) Q1 2020 Earnings Call Transcript

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BFYT earnings call for the period ending March 31, 2020.

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Benefytt Technologies, Inc (BFYT)
Q1 2020 Earnings Call
May 8, 2020, 9:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, everyone. Welcome to the Benefytt Technologies, Inc. First Quarter 2020 earnings call. [Operator Instructions]

At this time, I would like to turn the conference over to Michael DeVries, Senior Vice President of Finance. Please go ahead.

Michael DeVries -- Senior Vice President of Finance

Thank you, Nicole, and good morning everyone. We are excited to have you join us today for a discussion about Benefytt Technologies first quarter 2020 financial results. By now you should have received a copy of the earnings release and presentation. If you do not have a copy and would like one, please visit our website at

On the call with me we have Gavin Southwell, Benefytt's CEO and President; and Erik Helding, Benefytt's Chief Financial Officer. As a reminder, today's conference call is being recorded and a replay of the call will be available on our Investor Relations website after this call.

We will be making forward looking statements on the call. All statements other than statements of historical facts are forward looking statements. Such statements may describe future plans, objectives or goals. Forward looking statements are subject to future risks and uncertainties, including the risks outlined in the company's Form 10-K.

These risks and uncertainties include, among other things, the potential future impact of the COVID-19 pandemic on the company and its business, the company's ability to maintain relationships and to develop new relationships with health insurance carriers and distributors, its ability to retain its numbers, the amount of commissions paid to the company or changes in the health insurance plan and pricing practices, state regulatory compliance and changes in the United States health insurance systems and laws. Actual results could differ materially from those projected or expected in these forward-looking statements.

Listeners are urged to review and consider the various disclosures made by the company in this conference call and the risk factors disclosed in the company's Annual Report on Form 10-K as well as other reports we have filed with the Securities and Exchange Commission. Copies of the company's SEC reports are available on our website at and on the SEC website. Company disclaims any objection to update any forward looking statements after this call.

With that, I'll turn the call over to our CEO, Gavin Southwell.

Gavin D. Southwell -- President and Chief Executive Officer

Thank you, Mike, and good morning everyone and thank you for joining the call. Compared to most industries which is significantly impacted by the current environment, our markets continue to grow and our technology driven model means we are well positioned for growth as we help consumers connect with Medicare under the health and life insurance products, something that is now more important than ever, in a safe and easy manner via e-commerce or on the telephone with [Indecipherable].

We are working remotely, having successfully executed the move of our entire workforce, including all captive and outsourced agents through a safe and effective work-at-home environment. Building upon our initial Medicare success in 2019, 2020 is a year where we expect to rapidly scale the Medicare business. We made good progress on that in the first quarter and positioned for the 2021 annual enrollment period later this year [Indecipherable]. The Medicare market continues to have significant growth potential, and we are seeing evolving tailwind in the ISP market also.

Before discussing the results for the quarter, let me comment on the ongoing strategic review process. As we had previously announced, we are engaged in an ongoing process to explore, review and evaluate strategic alternatives focused on maximizing shareholder value, and the company is in discussion with interested parties, including both strategic and financial institutions. This review continues and remains open-ended on both duration and potential outcome.

Turning to our first quarter financial results, we outperformed our revenue expectation, while our earnings were slightly below expectations with EBITDA margin impacted by approximately $3.5 million due to accounting adjustments related to prior period lifetime value or LTV. Excluding this impact, adjusted EBITDA would have been largely in line of our expectation.

In Medicare, our business has two parts, demand generation and demand conversion. Demand generation was impacted in March as we saw the cost associated with the new enrollment increasing and this impacted margins, although in April this has shown an improvement as we have developed and rolled out new creatives that further drives demand generation.

Demand conversion or enrollment was impacted mainly by challenges in our BPO or outsource agent relationship, resulting in an underperformance in the period while our captive agent continued to stand alone [Phonetic] and grow as planned. We cannot compare performance to the first quarter of last year as we were not operating in the Medicare market this time last year. However, as a [Indecipherable] the Medicare business that we purchased in mid-2019 generated approximately $8 million of revenue in its first quarter 2019. So, we are now about three times larger or 250% at the same point in 2019 [Phonetic].

As we have said in the past, 2020 is the year where we expect to rapidly scale the Medicare business in order to be in a strong position from the 2020 on AEP period later this year. And we made good progress on that in the first quarter despite some of the challenges we were presented with and have since overcome, which I will describe in more detail later in the remarks.

In ISP, the main positive impact was in March where ISP was significantly ahead of plan with the disruption caused by the pandemic to the economy creating significant demand in the ISP market. And that continued through April, which was also significantly ahead of plan. We are tracking this closely and will update our forecast at the end of Q2 once this emerging opportunity becomes more developed. We continue to add new insurance carriers for ISP without any delay and expect to add several new well known brands to our platform throughout 2020. To remind everyone, our ISP business is focused on e-commerce with online enrollments making up most of the business. Our CFO will provide greater detail on the financial results later in the call.

I now want to talk about our demand generation or consumer engagement practice. In the first quarter, we added a new Chief Marketing Officer who joined us after 15 years at AILP [Phonetic], with extensive experience in marketing 15 years across all channels. We are executing on our plan to build out a comprehensive demand generation platform.

A large part of our future Medicare demand generation strategy involves digital marketing, and we are pleased with our progress having already submitted online marketing materials to our carrier partners for review and approval, well in advance of the annual election period. We launched our digital enrollment period in March and this is the first opportunity we have had to develop new enhanced marketing materials for our digital channel.

This is an important step in our innovation. And up until now, as planned, we have relied almost entirely on direct response TV to create consumer engagement. Our Medicare revenue success in the first quarter shows that direct response TV is a great foundation for our business and we will build on this strong foundation with a comprehensive and diversified multi-channel consumer engagement and demand generation model, which we will roll out through the year in coordination with our fund provider partner.

As we ramp up and expand our direct to consumer channel, we are building data analytics which will allow us to better develop targeted and decision making. Throughout the second and third quarters, we will launch new campaigns via paid digital search and other programs that will allow us to scale successful campaign as we head into the important fourth quarter.

Another important part of our demand generation, our consumer engagement platform that we are building with our partnership channel which we created in late 2019 having a senior leader with extensive experience of building strategic relationship with large hospitals and [Indecipherable] groups and a proven track record of success. This channel has the potential to be a substantial driver of new business and we are making great progress so far in 2020 [Indecipherable] becoming revenue generating power later in the year. While production from this channel can take some time to develop, the advantage to this channel is that a small number of strategic partnerships can provide a substantial amount of revenue and earnings when they are realized.

Turning the eCommerce, the launch of in March was a transformational moment for this business and we are pleased with our progress. We have the potential to become a significant growth driver within our Medicare segment. And looking ahead to the fourth quarter, we expect digital demand generation to become an even more important channel as our market evolves and seniors [Phonetic] wish engaged and enrolled in a safe and easy manner.

It is important to note that we are only aware of one there publicly traded, which had the powerful online enrollment capability, and digital is becoming a more important part of consumer engagement. In the second quarter, we will continue to invest in refining and adjusting our FAO and user experience as well as finalize our paid digital marketing campaign strategy for the upcoming [Indecipherable]. This investment in the second quarter will help us get an enhanced return on our pay-per-click digital marketing spend as we progress through the year.

Since the launch of our digital enrollments here in March -- as we continue to build our e-Commerce digital marketing plan with a focus on the fourth quarter, we expect to generate a large amount of consumer demand which will convert to enrollment, be that by fully self-guided online enrollment while supported telephonically by our captive agents. And we look forward to updating investors at the end of Q2.

Turning now to our captive agents, our captive agents have responded well moving to a work-at-home model and we completed the move of all internal and outsourced agents over a few days in mid March. We have experienced operating work-at-home seniors having done this for several years in our history. All of our training and on-boarding material work well in a work-at-home model and we have continued to add new agents including in the last month. We have implemented enhanced reporting capabilities and metrics to track performance of captive agents, most of whom are new. And so, as these agents becomes seasoned, we anticipate to benefit from increased performance over time.

Our model with telephonic sales [Indecipherable] our captive agent compared to some competitors who work face to face with consumer and the powerful technology available to those agents makes us an attractive choice in a competitive market to attract the best talent. As we finalize our growth plans in the fourth quarter -- in the second quarter, there is an emerging opportunity for additional growth of captive agents although it is still early to see the potential shift in our market.

Now our BPO, our outsourced relationships. In the first quarter we expanded BPO relationship in keeping with our plan to ramp agent count as we head toward the fourth quarter AEP. Although we were encouraged by our revenue production results, which were in line with guidance, we were not satisfied with operating performance of certain BPO providers which had a negative impact on our Medicare. And so, we proactively took action to scale down one relationship and have made changes to the other and announced we are in improved performance.

Through the first quarter, we worked closely with our outsource providers to increase the timeliness and accuracy of the [Indecipherable] they were providing to us and in Q2 we're in a much stronger position backed by enhanced contract with performance obligations. We expect outsourced BPO agents to be comfortable going forward as a result of the operating improvement and data analytics we put in place. Having progress over the next several months in the lead of setting AEP, we will continue to assess performance and adjust our mix of BPO and captive agents in a manner that enables us to achieve the greatest value.

In summary, our first quarter results show a strong revenue performance despite disruption to the global economy. The Medicare market remains a growing and attractive market, and we see the potential for accelerated growth throughout the rest of 2020. Our model is in a position of strength as our market evolves. Our digital and telephonic model suits the work-at-home model well and our consumer engagement platform are expanding. We continue to build and continue to learn where we can improve.

The key initiative to enhance our key data reporting analysis tool is to better optimize our investments and consumer engagements in the first and second quarters, and we've also worked hard with our outsource BPO partners to get more detailed and more timely reporting having had challenges throughout the first part of the year. We identified the performance issues and we've taken actions to resolve it. We will make investments in the second quarter as we continue to build toward the important fourth quarter, and we are enhancing our model to the potential tailwind we see in our market.

And now, I will hand the call over to our CFO, Erik Helding, who will review our first quarter financial results in more detail.

Erik Magnus Helding -- Chief Financial Officer

Thanks, Gavin, and good morning, everyone. Total reported revenues were strong with significant outperformance in ISP, particularly in March when we improved from acceleration of sales activity. Medicare revenues were in line with guidance. Both segments recorded revenue adjustments related to policies sold in prior period. The ISP segment revenue was impacted in the amount of $2.9 million related to slightly lower persistency and policy cohorts from the fourth quarter of 2018.

Medicare segment revenue was impacted in the amount of $1.9 million related to reconciliation work completed for our first annual election period. That reconciliation was reflected that we had slightly less need of Medicare policy than previously expected. As a reminder, commissions paid on policies that are new to Medicare are significantly higher than it was paid on medical policies that are simply [Indecipherable]. Important to note that the $1.9 million impact represented less than 3% of 2019 revenue.

Excluding the impact on the change in estimate relating to policies sold in the prior period, Medicare revenues would have exceeded the top end of the guidance range. Again, this is very encouraging that together how it generated only $8 million of revenue in the first quarter of last year and nearly 250% increase year-over-year.

We reported a net loss of $50 million in the quarter, driven primarily by a $41 million pre-tax reduction in goodwill associated with the ISP business. The reduction in goodwill was a result of the company taking action in the first quarter of 2020 to execute on its stated objective to de-emphasize the ISP business in order to focus attention on resources when growing the Medicare.

Important to note that the analysis of goodwill through the quantitative GAAP prescribed practice and for which there is little ability to make qualitative assessment, while the writedown eleminated the vast majority of the goodwill related to the ISP business, we believe that our ISP business will continue to create value for shareholders over time. And perhaps most importantly to note, the goodwill reduction is a non-cash items, it has no impact to ongoing operations and has no impact on our debt coverage.

We reported $900,000 of adjusted EBITDA in the quarter, which was slightly below our expectation. EBITDA margin were negatively impacted by approximately $3.5 million from the previously mentioned adjustments related to prior period. Excluding these impacts, adjusted EBITDA would have been $4.4 million in the quarter, which was largely in line with our expectation. We saw higher EBITDA in our ISP segment with outperformance in revenue, but this was offset by lower margins in our Medicare segment.

As Gavin mentioned, in our Medicare -- in Medicare our revenue hit guidance but earnings were below expectation. We saw higher cost per call as a result of a lower response rate through our DirecTV ad at the height of the pandemic outbreak, which contributed approximately a $1.5 million negative carry-forward. In addition, as we were executing on our plan to rapidly scale and diversify our BPO relationship, our partners experienced some challenges that started taking longer than planned and this also had an approximate $1.5 million negative variance as well.

So in total, the estimated impact of Medicare EBITDA as a result of the structure noted above was approximately $3 million in the quarter. These issues have since been addressed as we have modified [Indecipherable], developed new creatives specifically tailored to address COVID-19 impact and have taken actions to address the mix of agents, both in our BPO relationship and our captives.

We ended the quarter with approximately $5 million in cash, up slightly from the previous quarter. We were expecting cash flow to be approximately breakeven for the quarter after getting consideration to approximately $15 million of payments related to regeneration activity in Medicare from the fourth quarter annual election period. However, cash flows from operations ended up in negative by approximately $12 million in the quarter. The main drivers of the variance was approximately $9 million of lower ISP cash flows, primarily as a result of judicial [Phonitic] advances related to the significantly higher sales than expected.

As a reminder, for most producers we did not stop [Indecipherable] until March 1st and for our e-commerce [Indecipherable] producers continued to make advancements. As we progressed in the quarter and events related to the COVID-19 outbreak unfolded, we saw an acceleration of ISP sales in the month of March.

Also during the quarter, we continued to work diligently to address certain legacy issue and this led to approximately $30 million of higher legal and professional service expenses. So while we spent more money in the quarter than we expected, we believe that was money well spent to generate growth and reduce risks.

As previously disclosed, we expected to generate approximately $18 million of positive cash flow from tax refund throughout the year. As a result of the passage of the CARES Act, we now expect that number to be approximately $24 million as a result of being able to carry back intraval. That said, because we were dependent on the $24 million of tax refunds to fund growth in 2020 and there is some level of uncertainty related to the timing, but not the ultimate receipt of those refunds, we decided to draw the remaining $15 million of our revolving credit facility down to $3 [Phonitic] million in order to keep investing in our growth.

And with that, I'll turn it back over to Gavin.

Gavin D. Southwell -- President and Chief Executive Officer

Thank you, Erik. As we wrap up our prepared remarks before moving on to Q&A some key takeaways are, the first quarter ended with an unprecedented period of disruption, which has impacted all of our lives with challenges that have continued until today. Compared to most industries which are significantly impacted by the current environment, our markets continue to grow and our technology driven model means we are well positioned to continue to grow as we help consumers connect with Medicare and other health and life insurance products make them now as more important than ever in a safe and easy manner, either digitally via e-Commerce or on the telephone with the licenses. Building upon our Medicare success in 2019, 2020 was a year where we expected to stay over the Medicare business in order to be in a strong position of the 2021 AEP period later this year and we made good progress on that in the first quarter.

So with that, we will now open the line for Q&A. Operator?

Questions and Answers:


Thank you. [Operator Instructions]. We'll take our first question from Randy Binner with B. Riley.

Randy Binner -- B. Riley FBR -- Analyst

Hey, good morning. Thanks. Even though you addressed this somewhat in the opening remarks, but I'm still struggling a little bit with what the right level of marketing and advertising spend is kind of through the middle part of the year, understanding it's going to ramp again in the fourth quarter, but can we just dig a little bit deeper and kind of help us size the right level for that in the model for this second and third quarter this year?

Erik Magnus Helding -- Chief Financial Officer

Yeah, Randy, this is Erik. I think the marketing with -- for Medicare spend was roughly over [Indecipherable] million in the first quarter. We did have some sort of carryover marketing for ISP which [Indecipherable] such as reduced turnover for first, second and be a much smaller number.

So I think in general, second quarter will change, should be in the $15-ish million range and then it will be something similar, maybe a little bit higher in the third quarter and then significantly higher in the fourth quarter. So for obvious reasons, [Indecipherable] So, that's how we're looking at it.

Randy Binner -- B. Riley FBR -- Analyst

Okay. And then on legal, you said it was $3 million higher, that line item legal indemnity was $7 million in the quarter. So is there kind of a run rate legal cost that we should be modeling, we were not -- we have not been modeling that high a number but is that going to run in kind of $3 million or $4 million?

Erik Magnus Helding -- Chief Financial Officer

Yeah, Randy. It's a good point. We definitely front-loaded a lot of our legal spend here in the first quarter. And so, there was a lot of work that happened in the tail end of the fourth quarter and into -- a lot in this first quarter. So, I don't expect that line to be roughly $7 million going forward, it should be roughly half of that.

Randy Binner -- B. Riley FBR -- Analyst

Okay. And just one more if I can. Just the free -- so ISP revenues are higher and[Indecipherable] all those to be higher, there is some cash flow drag I guess in this quarter from advances. But generally speaking, I think that, that has been a more cash flow positive business than Medicare. So if ISP sales continue to grow like this, you are well ahead of your pay through guide. Would that be kind of cash flow positive over the course of the year? How would that work?

Erik Magnus Helding -- Chief Financial Officer

Yeah, Randy, the short answer is, it depends upon the manner in which we move forward and not have even -- a big piece of that is watching kind of how events unfold here in the second quarter and how we choose to respond. And so, in my remarks I made note that we really didn't shut down the bulk of our advances until March 1st. And in March, we continued to advance with a couple of producers that had very big month. And so, that is a big part of the drag on cash flow. So, we continue to advance on this program. So the question then is, what do we do about advances, not if we want to take advantage of an opportunity there in the ISP space. So, it's too early to answer that question. We're working on it. Obviously, we're looking at it and we'll have a better beat on that -- handle on that when we get our second quarter results.

Randy Binner -- B. Riley FBR -- Analyst

All right, thanks.


And we'll move on to our next question from Mark Argento with Lake Street Capital Markets.

Mark Argento -- Lake Street Capital Markets -- Analyst

Hey, Gavin. Hey, Eric. Just a couple of quick ones. I don't know if you mentioned it, but the ISP strength you saw in March, has that carried through in April? And I'm guessing that just applies to the volatility, employment and people looking for alternatives on the short-term medical side. And then just quickly on distribution, I know you talked about kind of captive BPO, etc, call centers. Could you just refresh us, what your distribution footprint looks like right now in terms of in-house third party Medicare versus ISP? Thanks.

Gavin D. Southwell -- President and Chief Executive Officer

Thanks. Great question. And so first one on the ISP, it's an evolving situation. We did see ISP's continue to be significantly ahead at the start of Q2. It didn't change our overall strategy with remaining focused on rapidly growing out the Medicare fees. But we will capitalize on the -- this emerging opportunity in ISP. ISP is really built on e-commerce. So it's very scalable without to having to build anything here, it's already in place.

And then to the second part of your question, kind of captive and BPO, we said in the prior quarter about adding additional BPO partners, the first quarter is the perfect time to do that. We identified areas of improvement and we took proactive action. And we're on track with our captive build. We've added agents this month. Our training materials work well to keep adding agents in our work-at-home environment, but we also -- we now have three locations with basically our technology. So we're also looking forward to welcome an agent back when able. Erik?

Erik Magnus Helding -- Chief Financial Officer

Mark, this is Erik, just a couple of thoughts specifically on the ISP, so then it's worth noting. So remember there that we didn't shut off the advances on a broad basis until March 1st and so we had essentially all of our distribution in place for the first two months of the first quarter. After the shut off advances for most of those, a significant portion if not -- it wasn't all of them but a significant portion of them have stopped producing.

And then Q2 is -- we had our first quarter, tends to be seasonally strong annually, so I think it's important for you and everyone [Indecipherable]. We still expect ISP in the second quarter to be down year-over-year, but it's also likely even with the strength that it's going to be down sequentially during the first quarter as well.

Mark Argento -- Lake Street Capital Markets -- Analyst

That's helpful. Thanks guys.


And our next question comes from Mike Grondahl with Northland Securities.

Mike Grondahl -- Northland Securities -- Analyst

Yeah. Thanks, guys. Maybe specifically, how many captive brokers do you have at the end of this quarter? And how many are planned for 4Q open enrollment?

Erik Magnus Helding -- Chief Financial Officer

Yeah, hey Mike, this is Erik. So at the end of the first quarter, we had our Tampa captive, I believe we another one in Texas and then we have our South Florida captive that was just getting started. And so, I believe we actually just started ceding agent here in the last week or two and they're now out of home. So at the moment, that's our plan, is to have three basically captive ready to go. And we've got a lot of space in those locations to basically keep agents, so by the time we [Indecipherable] the three captive slots, with the seats available we should have plenty of agents for ASP.

Mike Grondahl -- Northland Securities -- Analyst

Got it. And in terms of customer acquisition costs on the Medicare side, how do you handicap those in the quarter and how do you think about those going forward?

Erik Magnus Helding -- Chief Financial Officer

Yeah, so that was -- that customer acquisition cost per athlete [Phonetic], that's where the lower response rate that we experienced in the quarter really shows up. So, no, it's not that we actually spent more money than we expected. It's just that a number of consumers that basically picked up a phone and enrolled in a Medicare Advantage Policy. It was bit lower because of the pandemic outbreak, and basically just the fear that ensued.

And if you think about suicide, obviously, Medicare Advantage Policy, they're no was if people turning 55 and over. And so, this is the most accurate portion of the population. So, it's somewhat understandable that people were worried about other things and just not picking up the phone as mentioned. So, that's really what drives the higher sort of unit cost there.

Gavin D. Southwell -- President and Chief Executive Officer

And as we go through the year, direct response TV is a great foundation, so we are building out a comprehensive and diversified multi-channel consumer engagement and demand generation model, which we are rolling out through the year, which is always going to become a much bigger part. And we've submitted a lot of marketing material for approval with our [Indecipherable] partners, and what we -- we're rolling out this omnichannel approach as we go through the year.

Erik Magnus Helding -- Chief Financial Officer

I'd also add that we're looking at our stand in our response rate at a pretty granular level pretty much on a daily basis. And so, we're modifying and pivoting pretty quickly now based on what we're seeing. And I mentioned this in my remarks as well, we're modifying our spots as well. So, we've been testing a couple of new ones that we just created and they've been tested pretty well. And we're going to be rolling this out here within the next week or so nationally.

Randy Binner -- B. Riley FBR -- Analyst

Got it. And then just lastly, can you repeat what you've said about sort of expected cash flow or usage for the year kind of on a overall basis?

Erik Magnus Helding -- Chief Financial Officer

Yeah, I think my thoughts on cash flow, it's not very different than it was when we -- back in early March when we gave guidance on what we were expecting. Obviously, the first quarter came in little hot versus it typically been, but I think the rest of the year should largely come in line with what we were expecting. I think the two things that I'm sort of looking at the hardest is; one is the timing of the tax refunds. And again, there is no doubt about the $24 million and we're going to collect that, the only question is -- and that's owed to us, there's no doubt about it. The only question is when is it going to happen, because IRS agent, just like a number of us -- most of us also had to stay at home and a large percentage of them couldn't work. And so, there's just a big backlog right now. So, we're just not really sure when we're going to get our $24 million.

And the other item that we're looking at really is kind of this ISP dynamic and what that's going to look like through the second quarter, and if there is an opportunity to do more there, how are we sort of addressing advances.

Mike Grondahl -- Northland Securities -- Analyst

Got it. Okay, thank you.

Gavin D. Southwell -- President and Chief Executive Officer

Thanks, Mike.


Our next question comes from Richard Close with Canaccord Genuity.

Brian Hoffman -- Canaccord Genuity -- Analyst

This is Brian Hoffman on for Richard. Thanks for are all the detail that you guys provided, it's been very helpful. If I could ask one more on the ISP guide, asked slightly different. I'm curious why there was no change to the guidance given the strength that we saw in 1Q and continue to see in 2Q? And can we think about the guide this year as being conservative or perhaps you have a greater likelihood of achieving the high end?

Gavin D. Southwell -- President and Chief Executive Officer

It's a great question, and I think really it's an evolving situation. So, we certainly see tailwinds, so we're -- and we're tracking it very closely. So, it's something that we think is really still emerging. I think Eric can...

Erik Magnus Helding -- Chief Financial Officer

Yeah. I mean really it is evolving, but there is things beyond the second quarter that we also have to keep an eye on, right, what's the outcome of the presidential election and what does that mean for the ISP space. That have in the past been a question, so we've got to be careful about that. And the other typical thing what I just mentioned -- the previous question is, how do we go forward in ISP, given ISP looks very different now than it did three months ago? And what does that model look like in terms of advancing and distribution partner, something like that. So those are just question marks that we've got to get through over the quarter. And I think what will better line of sight on what 2020 looks like in total once we get second quarter.

Brian Hoffman -- Canaccord Genuity -- Analyst

Great, thank you. And one more on the Medicare business. It really looks like your BPO relationships, you scaled one down and made some changes to the other. If you could just give us a bit more color on what happened there, that'd be helpful. Thank you.

Gavin D. Southwell -- President and Chief Executive Officer

I mean the plan of course is the -- is stronger growth and expansion early in the year. Q1 is the perfect time to add new partners. And when we saw underperformance issues, we quickly took action. It's the right time to take action, so scaling down one of the relationships, making improvement to the other. But generally, partners taking longer than anticipated to get set up and not being able to hit the target expected, which is something that we had to responsible, it's as simple as that.

Brian Hoffman -- Canaccord Genuity -- Analyst

Great. Thank you very much.

Gavin D. Southwell -- President and Chief Executive Officer



And we'll take our final question from Steven Halper with Cantor Fitzgerald.

Steven Halper -- Cantor Fitzgerald -- Analyst

Hi, good morning. So in light of COVID and your work from home, have you sort of rethought your views on where the new captive agents that you plan to hire -- do they have to be call center based or are there certain advantages just keeping them work from home? I'd love your thoughts on that.

Gavin D. Southwell -- President and Chief Executive Officer

Yeah, it's a really interesting point. I mean we're adding a lot of new agents this year and previously it was probably one of three locations and now with a work at home model, we could obviously add agents from a much broader and bigger pool of people, which is an advantage. And we're operating just fine in a work at home model. So, I think for a business where we are rapidly growing the number of agents, we do get benefit from agents becoming seasoned. And so, having people into our spaces and helping them season and become more effective, we see an advantage of them being in that call center environment.

So I think there are a couple of pieces to it. I think it's helpful to have a model available. I think that's certainly helpful. But I think that overall, as we are growing quickly with these new agents, so they could season and become as effective as possible. There are long advantages to being able to put them into that environment with the support structure around them.

Steven Halper -- Cantor Fitzgerald -- Analyst

Great, thank you.


And that concludes today's Q&A session. I would like to turn the conference back over to Gavin Southwell for any concluding remarks.

Gavin D. Southwell -- President and Chief Executive Officer

Thank you. And thank you, everybody for your interest in our business. We look forward to updating you on our progress as we go through the year. Everybody, stay safe, and have a great day.


[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Michael DeVries -- Senior Vice President of Finance

Gavin D. Southwell -- President and Chief Executive Officer

Erik Magnus Helding -- Chief Financial Officer

Randy Binner -- B. Riley FBR -- Analyst

Mark Argento -- Lake Street Capital Markets -- Analyst

Mike Grondahl -- Northland Securities -- Analyst

Brian Hoffman -- Canaccord Genuity -- Analyst

Steven Halper -- Cantor Fitzgerald -- Analyst

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Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

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