Benefitfocus Investor Presentation
Third Quarter 2020
Safe Harbor
Except for historical information, all of the statements, expectations, and assumptions contained in this presentation are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include: volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic and uncertainties arising from the recent U.S. elections; our continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; our ability to maintain our culture, retain and motivate qualified personnel; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; cyber-security risks; the need to innovate and provide useful products and services; our ability to compete effectively; privacy, security and other risks associated with our business; and the other risk factors set forth from time to time in our SEC filings, copies of which are available free of charge within the Investor Relations section of
the Benefitfocus website at http://investor.benefitfocus.com/sec-filingsor upon request from our Investor Relations Department. Benefitfocus assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating income/loss, net loss/income, net loss/income per common share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company's performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.
Non-GAAP gross profit, operating income/loss, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, if any, restructuring charges, if any, gain or loss on extinguishment of debt, if any, and costs not core to our business, if any. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense, expense related to the impairment of goodwill and intangible assets, transaction and acquisition-related costs expensed, restructuring charges, gain or loss on extinguishment of debt, and costs not core to our business. We define free cash flow as cash used in operating activities less capital expenditures, adjusted to eliminate restructuring charges. Beginning in the third quarter of 2020, we revised our definitions of non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA to also exclude gain or loss of extinguishment of debt. The revisions to these definitions had no impact on our reported non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA for periods prior to the three months ended September 30, 2020. Please note that other companies might define their non-GAAP financial measures differently than we do.
Management presents these non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company's future earnings discussions and, therefore, their inclusion should provide consistency in the company's financial reporting. Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release, including in the accompanying tables.
Our mission is to
improve lives with benefits.
Benefitfocus is one of the largest benefits platforms in the U.S. enabling benefits enrollment and data exchange for Health Plans and Employers
One of the largest benefits platforms in the U.S. and massive, growing market
Delivering value to Health Plan and Employer markets
Diversified recurring revenue, improving operating leverage and disciplined capital strategy
Executing growth strategy to unlock shareholder value
One of the largest benefits platforms in the U.S. and massive, growing market
Vast Opportunity | Attractive Value Proposition |
$3.6T | U.S. health care spend, |
~20% of GDP | |
$20K | Average annual premium for |
employer family plan, rising | |
each year | |
8x | Increase in deductibles |
vs. wages | |
Zero | Consumer personalization |
Sources: $3.6T per cms.gov (2018), $20K (2019) and 8x (2008 to 2018) per kff.org
Health Plans
Lower operational costs, higher member satisfaction and digital transformation
Employers
Lower health care costs, reduced complexity and higher employee retention
Employees and Health Plan Members
Valuable, affordable and personalized benefits
Benefits Enrollment for Health Plans and Employers
Solving complex benefits administration problems with a modern user-friendly interface for employees and health plan members
One of the Largest Benefits Platforms in the U.S.
1 in 12 Americans on the
Benefitfocus Platform
$58B | $800M | 25M+ |
total premium | Benefit Catalog | Lives |
sold | premium sold | |
40 | 150K | 1K |
health plan | employer | premier broker |
customers | customers | partners |
Source: Benefitfocus; $58B total premium and $800M Benefit Catalog premium sold are annual
estimates. All numbers are approximate and estimated as of December 31, 2019
Massive TAM with Significant Opportunity
Software as a Service | Platform |
~$30B
2020 TAM
Source: Benefitfocus as of December 31, 2019
Delivering value to Health Plan and Employer markets
Competitive Differentiation
Market leading data transfer capabilities
AI-powered platform
Vast and unique data assets
Industry leading voluntary benefit products
Market Leading Data Transfer Capabilities
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
HCM
Ben Admin
HCM
HCM
HCM
HCM
HCM
HCM
Brokers
SUPPLIER
SUPPLIER
SUPPLIER
SUPPLIER
SUPPLIER
SUPPLIER
SUPPLIER
SUPPLIER
Industry Leading First Pass Yield
AI-powered Platform: Benefitsaige is the AI that Delivers Insights across our Ecosystem
Personalized Benefits
Consumers connect to the benefits their families need.
Population Health Insights
Employers control healthcare costs and optimize benefit strategy.
Operational Scale
Health Plans gain operational scale with a connected, digital ecosystem
Vast and Unique Data Assets: Powering Outcomes and Results
Benefitfocus has accumulated a massive amount of data for over two decades that helps shape product offerings and buying decisions.
71
40
$20
million health care claims
million pharmacy claims
billion in payroll transactions
Source: Benefitfocus; numbers are approximate and estimated as of December 31, 2019
Industry Leading Products: Comprehensive and Curated Marketplace of Suppliers
Benefit Catalog
Robust portfolio of trusted health, wealth, property and lifestyle voluntary benefits integrated into our enrollment experience.
Diversified recurring revenue, improving operating leverage and disciplined capital strategy
Diverse Revenue Streams
Multiple Sources of Lives | Recurring & Repeatable Revenue |
Health Plans | Subscription |
Platform
Employers
Professional Services
GO-TO-MARKET | REVENUE SOURCES |
Proactively Managing Impact of COVID-19
Decisive cost management actions;
Focused on highly profitable revenue
Improving margins, adjusted EBITDA and Free Cash Flow
Investing in efficiencies and automation to deliver exceptional customer experience
Recurring and Repeatable Revenue
14% Revenue CAGR since IPO ($M)
$265
$105
2013A* 2014A* 2015A* 2016A 2017A 2018A 2019A 2020E
~80% Recurring and Repeatable Revenue ($M)
$67 | |
$52 | $56 |
$34 | |
$15 | $23 |
$265
$170$180$195
2017A | 2018A | 2019A | 2020E | |||
Subscription | Platform | Services | ||||
Note: *Period prior to adoption of ASC 606 have not been restated; 2020 estimate based on midpoint of full year guidance provided November 5, 2020
Recurring and Repeatable Revenue
Adjusted EBITDA ($M) | Free Cash Flow ($M) | |||||
$38 | $15 | |||||
$1 | ||||||
2017A | 2018A | 2019A | 2020E | |||
$19 | -$14 | |||||
-$32 | ||||||
$10 | ||||||
2017A | 2018A | 2019A | 2020E | |||
-$5 |
Note: 2020 estimate based on midpoint of full year guidance provided November 5, 2020; See important disclosures on
non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 27.
Disciplined Capital Strategy
Growth and Innovation
- Invest in core enrollment platform, foundation for other key growth drivers
- Invest in automation to increase customer satisfaction and expand gross margin
- Invest organically and inorganically to extend market leadership
Strong Balance Sheet
- Cash balance of $175M
- Convertible debt of $220M due December 2023; $89M of lease obligations
- Net debt and lease obligations to EBITDA ~3.5x
Return of Capital
- Equity: Repurchased $9.7M (1.1M shares at a cost $8.71/share)
- Debt: Repurchased $18.8M of convertible debt at cost of $14.6M
Note: All data as of 09/31/20; 32.3M Common Shares Outstanding; EBITDA is 2020 estimate based on midpoint of full year guidance provided November 5, 2020; See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 27.
Executing growth strategy to unlock shareholder value
Strategic Priorities to Unlock Shareholder Value
Deliver on Customer Promises
Industry leading NPS
Expand profitability
Industry leading margins
Invest for growth
Focused on enrollment, engagement and data
Investing for Growth
Enrollment | Engagement | Data |
Deliver flawless OE and | Create stickier, higher | Expand connections and deliver |
operational excellence | value relationships | smarter insights |
Extend Market Leadership
One of the largest benefits platforms in the U.S. and massive, growing market
Delivering value to Health Plan and Employer markets
Diversified recurring revenue, improving operating leverage and disciplined capital strategy
Executing growth strategy to unlock shareholder value
GAAP to non-GAAP Reconciliation
Unaudited Reconciliation of GAAP to non-GAAP ($ in thousands)
Year Ended | |||
December 31, | |||
2019 | 2018 | 2017 | |
Reconciliation from Net Loss to Adjusted EBITDA: | |||
Net loss | $ (45,515) | $ (52,627) | $ (50,294) |
Depreciation | 15,288 | 11,721 | 12,391 |
Amortization of software development costs | 5,130 | 3,944 | 3,257 |
Amortization of acquired intangible assets | 1,933 | 150 | 258 |
Interest income | (2,613) | (250) | (182) |
Interest expense | 23,524 | 5,685 | 4,931 |
Income tax expense | 27 | 28 | 15 |
Interest expense on building lease financing obligations (prior to adoption of ASC 842) | - | 7,471 | 7,450 |
Stock-based compensation expense | 19,572 | 28,868 | 16,137 |
Transaction and acquisition-related costs expensed | 1,035 | 507 | - |
Restructuring costs | - | - | - |
Costs not core to our business | 649 | 4,843 | 1,058 |
Total net adjustments | 64,545 | 62,967 | 45,315 |
Adjusted EBITDA | $ 19,030 | $ 10,340 | $ (4,979) |
Reconciliation of Free Cash Flow: | |||
Net Cash (used in) provided by operating activities | $ (18,375) | $ 8,981 | $ (5,937) |
Less: Purchase of property and equipment | (13,248) | (8,290) | (8,279) |
Add back: Restructuring Costs | - | - | - |
Free Cash Flow | $ (31,623) | $ 691 | $ (14,216) |
Note: Management has not reconciled forward-lookingnon-GAAP gross profit, adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of GAAP gross profit, GAAP net loss or GAAP operating cash flows. This is because management cannot predict with reasonable certainty the ultimate outcome of the various necessary GAAP components of such reconciliations, including, for example, those related to compensation, acquisition transactions and integration, or others that may arise during the year, without unreasonable effort. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts.
Benefitfocus Investor Presentation
Third Quarter 2020
Attachments
- Original document
- Permalink
Disclaimer
Benefitfocus Inc. published this content on 10 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 November 2020 22:50:01 UTC