UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices and zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 1, 2022, there were approximately
Benefitfocus, Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2022
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
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As of June 30, 2022 |
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As of December 31, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net |
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Contract assets |
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Prepaid and other current assets |
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Total current assets |
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Property and equipment, net |
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Financing lease right-of-use assets |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Deferred contract costs and other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable preferred stock and stockholders' deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued compensation and benefits |
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Deferred revenue, current portion |
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Lease liabilities and financing obligations, current portion |
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Contingent consideration |
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Total current liabilities |
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Deferred revenue, net of current portion |
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Convertible senior notes |
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Lease liabilities and financing obligations, net current portion |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies |
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Redeemable preferred stock: |
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Series A preferred stock, par value $ authorized, at June 30, 2022 and December 31, 2021, respectively, liquidation preference $ |
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Stockholders' deficit: |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities, redeemable preferred stock and stockholders' deficit |
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$ |
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$ |
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The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
3
Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Impairment of lease right-of-use assets |
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Change in fair value of contingently returnable consideration |
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Restructuring costs |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest income |
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Interest expense |
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Other income |
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Total other expense, net |
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Loss before income taxes |
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Income tax expense |
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Net loss |
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Preferred dividends |
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Net loss available to common stockholders |
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$ |
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$ |
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$ |
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$ |
( |
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Comprehensive loss |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss per common share: |
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Basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic and diluted |
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The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
4
Benefitfocus, Inc.
Unaudited Consolidated Statements of Changes in Stockholders’ Deficit
(in thousands, except share and per share data)
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Common Stock, |
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Additional |
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Total |
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$0.001 Par Value |
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Paid-in |
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Accumulated |
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Stockholders' |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Deficit |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Cumulative effect adjustment from adoption of new accounting standard |
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Issuance of common stock upon vesting of restricted stock units |
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Stock-based compensation expense |
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Preferred dividends |
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Net loss |
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( |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock upon vesting of restricted stock units |
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Stock-based compensation expense |
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Preferred dividends |
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( |
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Net loss |
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( |
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Balance, June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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Common Stock, |
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Additional |
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Total |
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$0.001 Par Value |
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Paid-in |
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Accumulated |
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Stockholders' |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Deficit |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Stock-based compensation expense |
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Preferred dividends |
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( |
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( |
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Net loss |
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( |
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( |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Issuance of common stock under Employee Stock Purchase Plan, or ESPP |
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Stock-based compensation expense |
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Preferred dividends |
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( |
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( |
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Net loss |
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( |
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( |
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Balance, June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
5
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
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Six Months Ended June 30, |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Accretion of interest on convertible senior notes |
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Interest accrual on finance lease liabilities |
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Rent expense less than payments |
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Change in fair value of contingently returnable assets |
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Non-cash accretion income from investments |
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Impairment or loss on disposal of right-of-use assets and property and equipment |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
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Accrued interest on investments |
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( |
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Contract, prepaid and other current assets |
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Deferred costs and other non-current assets |
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Accounts payable and accrued expenses |
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( |
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Accrued compensation and benefits |
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( |
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( |
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Deferred revenue |
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Other non-current liabilities |
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Net cash (used in) provided by operating activities |
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( |
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Cash flows from investing activities |
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Purchases of investments held-to-maturity |
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Proceeds from short-term investments held-to-maturity |
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Maturities of investments available-for-sale |
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Sales of investments available-for-sale |
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Business combination, net of cash acquired |
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( |
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Purchases of property and equipment |
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( |
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( |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities |
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Payments of preferred dividends |
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( |
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( |
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Payments of contingent consideration |
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( |
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Proceeds from exercises of stock options and ESPP |
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Payments on financing obligations |
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( |
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( |
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Payments of principal on finance lease liabilities |
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( |
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( |
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Net cash used in financing activities |
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( |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash investing and financing activities |
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Property and equipment purchases in accounts payable and accrued expenses |
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$ |
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$ |
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The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
6
BENEFITFOCUS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Organization and Description of Business
Benefitfocus, Inc. (the “Company”) provides a leading cloud-based benefits management platform for consumers, employers, health plans (also known as insurance carriers) and brokers that is designed to simplify how organizations and individuals transact benefits. The financial statements of the Company include the financial position and operations of its wholly owned subsidiaries, Benefitfocus.com, Inc., BenefitStore, LLC (formerly, BenefitStore, Inc.) and Tango Health, Inc.
2. Summary of Significant Accounting Policies
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation. The Company is not the primary beneficiary of, nor does it have a controlling financial interest in, any variable interest entity. Accordingly, the Company has not consolidated any variable interest entity.
Interim Unaudited Consolidated Financial Information
The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with GAAP as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information, and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations and comprehensive loss, financial position, changes in stockholders’ deficit and cash flows. The results of operations and comprehensive loss for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the results for the full year or for any other future periods. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as amended.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Such estimates include allowances for credit losses and returns, valuations of deferred income taxes, long-lived assets, capitalizable software development costs and the related amortization, contingent consideration, incremental borrowing rate used in lease accounting, the determination of the useful lives of assets, and the impairment assessment of right-of-use assets, acquired intangibles and goodwill. Additionally, as described in revenue and deferred revenue below, estimates are utilized in association with revenue recognition, in particular the estimation of variable consideration using the expected value method from insurance broker commissions reported in Platform revenue. Determination of these transactions and account balances are based on, among other things, the Company’s estimates and judgments. These estimates are based on the Company’s knowledge of current events and actions it may undertake in the future as well as on various other assumptions that it believes to be reasonable. Actual results could differ materially from these estimates.
Restructuring Costs
Restructuring costs are comprised of one-time severance charges, continuation of health benefits and outplacement services and are presented separately in operating expenses in the consolidated statements of operations and comprehensive loss. The Company recorded restructuring costs of $
Revenue and Deferred Revenue
The Company derives its revenue primarily from fees for subscription services and professional services sold to employers and health plans as well as platform revenue derived from the value of products sold on its platform. Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Taxes collected from customers relating to services and remitted to governmental authorities are excluded from revenue.
The Company determines revenue recognition through the following steps:
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Identification of each contract with a customer; |
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Identification of the performance obligations in the contract; |
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Determination of the transaction price; |
7
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Allocation of the transaction price to the performance obligations in the contract; and |
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