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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

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: 001-36061

 

Benefitfocus, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

46-2346314

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

100 Benefitfocus Way

Charleston, South Carolina 29492

(Address of principal executive offices and zip code)

(843) 849-7476

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 Par Value

BNFT

Nasdaq Global Market

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.    Yes      No  

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).    Yes      No  

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:  

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

 

 

 

 

 

Smaller reporting company

Emerging growth company

 

 

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      No  

As of August 1, 2022, there were approximately 34,236,552 shares of the registrant’s common stock outstanding.

 

 

 


 

 

Benefitfocus, Inc.

Form 10-Q

For the Quarterly Period Ended June 30, 2022

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

3

 

 

Unaudited Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021

4

 

 

Unaudited Consolidated Statements of Changes in Stockholders' Deficit for the Three and Six Months Ended June 30, 2022 and 2021  

5

 

 

Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

6

 

 

Notes to Unaudited Consolidated Financial Statements

7

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

22

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

32

 

 

ITEM 4. CONTROLS AND PROCEDURES

33

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

34

 

 

ITEM 1A. RISK FACTORS

34

 

 

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

34

 

 

 

 

ITEM 6. EXHIBITS

36

 

 

SIGNATURES

37

 

 

 

 

2


 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

As of

June 30,

2022

 

 

As of

December 31,

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,497

 

 

$

31,001

 

Marketable securities

 

 

 

 

 

37,049

 

Accounts receivable, net

 

 

22,342

 

 

 

16,491

 

Contract assets

 

 

12,815

 

 

 

18,051

 

Prepaid and other current assets

 

 

20,743

 

 

 

9,564

 

Total current assets

 

 

107,397

 

 

 

112,156

 

Property and equipment, net

 

 

26,048

 

 

 

27,202

 

Financing lease right-of-use assets

 

 

50,391

 

 

 

56,474

 

Operating lease right-of-use assets

 

 

669

 

 

 

774

 

Intangible assets, net

 

 

18,988

 

 

 

21,134

 

Goodwill

 

 

34,237

 

 

 

34,237

 

Deferred contract costs and other non-current assets

 

 

7,283

 

 

 

8,864

 

Total assets

 

$

245,013

 

 

$

260,841

 

Liabilities, redeemable preferred stock and stockholders' deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,298

 

 

$

10,565

 

Accrued expenses

 

 

17,546

 

 

 

9,451

 

Accrued compensation and benefits

 

 

11,557

 

 

 

16,411

 

Deferred revenue, current portion

 

 

27,808

 

 

 

27,756

 

Lease liabilities and financing obligations, current portion

 

 

6,387

 

 

 

7,378

 

Contingent consideration

 

 

 

 

 

675

 

Total current liabilities

 

 

68,596

 

 

 

72,236

 

Deferred revenue, net of current portion

 

 

2,464

 

 

 

2,377

 

Convertible senior notes

 

 

119,962

 

 

 

107,281

 

Lease liabilities and financing obligations, net current portion

 

 

74,184

 

 

 

75,758

 

Other non-current liabilities

 

 

372

 

 

 

313

 

Total liabilities

 

 

265,578

 

 

 

257,965

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable preferred stock:

 

 

 

 

 

 

 

 

Series A preferred stock, par value $0.001, 5,000,000 shares

  authorized, 1,777,778 and 1,777,778 shares issued and outstanding

  at June 30, 2022 and December 31, 2021, respectively,

  liquidation preference $45 per share as of June 30, 2022 and December 31, 2021, respectively

 

 

79,193

 

 

 

79,193

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Common stock, par value $0.001, 95,000,000 shares authorized,

   34,172,079 and 33,460,545 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

34

 

 

 

33

 

Additional paid-in capital

 

 

382,204

 

 

 

431,874

 

Accumulated deficit

 

 

(481,996

)

 

 

(508,224

)

Total stockholders' deficit

 

 

(99,758

)

 

 

(76,317

)

Total liabilities, redeemable preferred stock and stockholders' deficit

 

$

245,013

 

 

$

260,841

 

 

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)

 

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

56,587

 

 

$

60,904

 

 

$

117,812

 

 

$

125,967

 

Cost of revenue

 

 

29,095

 

 

 

28,030

 

 

 

58,981

 

 

 

56,623

 

Gross profit

 

 

27,492

 

 

 

32,874

 

 

 

58,831

 

 

 

69,344

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

10,643

 

 

 

10,921

 

 

 

20,567

 

 

 

21,812

 

Research and development

 

 

12,249

 

 

 

11,103

 

 

 

23,406

 

 

 

21,935

 

General and administrative

 

 

13,517

 

 

 

13,571

 

 

 

22,806

 

 

 

23,433

 

Impairment of lease right-of-use assets

 

 

1,769

 

 

 

4,003

 

 

 

1,769

 

 

 

4,003

 

Change in fair value of contingently returnable consideration

 

 

(719

)

 

 

 

 

 

(719

)

 

 

 

Restructuring costs

 

 

 

 

 

2,727

 

 

 

1,006

 

 

 

4,127

 

Total operating expenses

 

 

37,459

 

 

 

42,325

 

 

 

68,835

 

 

 

75,310

 

Loss from operations

 

 

(9,967

)

 

 

(9,451

)

 

 

(10,004

)

 

 

(5,966

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

72

 

 

 

54

 

 

 

84

 

 

 

111

 

Interest expense

 

 

(2,476

)

 

 

(5,646

)

 

 

(4,958

)

 

 

(11,201

)

Other income

 

 

236

 

 

 

64

 

 

 

482

 

 

 

22

 

Total other expense, net

 

 

(2,168

)

 

 

(5,528

)

 

 

(4,392

)

 

 

(11,068

)

Loss before income taxes

 

 

(12,135

)

 

 

(14,979

)

 

 

(14,396

)

 

 

(17,034

)

Income tax expense

 

 

29

 

 

 

41

 

 

 

45

 

 

 

83

 

Net loss

 

 

(12,164

)

 

 

(15,020

)

 

 

(14,441

)

 

 

(17,117

)

Preferred dividends

 

 

(1,600

)

 

 

(1,600

)

 

 

(3,200

)

 

 

(3,200

)

Net loss available to common stockholders

 

$

(13,764

)

 

$

(16,620

)

 

$

(17,641

)

 

$

(20,317

)

Comprehensive loss

 

$

(12,164

)

 

$

(15,020

)

 

$

(14,441

)

 

$

(17,117

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.40

)

 

$

(0.50

)

 

$

(0.52

)

 

$

(0.62

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

34,028,422

 

 

 

33,080,257

 

 

 

33,764,103

 

 

 

32,787,162

 

 

 

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)

 

 

 

Common Stock,

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

$0.001 Par Value

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2021

 

 

33,460,545

 

 

$

33

 

 

$

431,874

 

 

$

(508,224

)

 

$

(76,317

)

Cumulative effect adjustment from adoption of new accounting standard

 

 

 

 

 

 

 

 

(52,973

)

 

 

40,669

 

 

 

(12,304

)

Issuance of common stock upon vesting of restricted stock units

 

 

60,572

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,189

 

 

 

 

 

 

1,189

 

Preferred dividends

 

 

 

 

 

 

 

 

(1,600

)

 

 

 

 

 

(1,600

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,277

)

 

 

(2,277

)

Balance, March 31, 2022

 

 

33,521,117

 

 

$

33

 

 

$

378,490

 

 

$

(469,832

)

 

$

(91,309

)

Issuance of common stock upon vesting of restricted stock units

 

 

650,962

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,315

 

 

 

 

 

 

5,315

 

Preferred dividends

 

 

 

 

 

 

 

 

(1,600

)

 

 

 

 

 

(1,600

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(12,164

)

 

 

(12,164

)

Balance, June 30, 2022

 

 

34,172,079

 

 

$

34

 

 

$

382,204

 

 

$

(481,996

)

 

$

(99,758

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock,

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

$0.001 Par Value

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2020

 

 

32,327,439

 

 

$

32

 

 

$

427,431

 

 

$

(476,058

)

 

$

(48,595

)

Exercise of stock options

 

 

15,000

 

 

 

1

 

 

 

154

 

 

 

 

 

 

155

 

Issuance of common stock upon vesting of restricted stock units

 

 

173,731

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,523

 

 

 

 

 

 

1,523

 

Preferred dividends

 

 

 

 

 

 

 

 

(1,600

)

 

 

 

 

 

(1,600

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,097

)

 

 

(2,097

)

Balance, March 31, 2021

 

 

32,516,170

 

 

$

33

 

 

$

427,508

 

 

$

(478,155

)

 

$

(50,614

)

Exercise of stock options

 

 

9,250

 

 

 

 

 

 

102

 

 

 

 

 

 

102

 

Issuance of common stock upon vesting of restricted stock units

 

 

704,543

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under Employee Stock Purchase Plan, or ESPP

 

 

4,823

 

 

 

 

 

 

65

 

 

 

 

 

 

65

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,376

 

 

 

 

 

 

4,376

 

Preferred dividends

 

 

 

 

 

 

 

 

(1,600

)

 

 

 

 

 

(1,600

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(15,020

)

 

 

(15,020

)

Balance, June 30, 2021

 

 

33,234,786

 

 

$

33

 

 

$

430,451

 

 

$

(493,175

)

 

$

(62,691

)

 

The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.

 

 

5


 

 

Benefitfocus, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended

June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(14,441

)

 

$

(17,117

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,462

 

 

 

12,525

 

Stock-based compensation expense

 

 

6,504

 

 

 

5,899

 

Accretion of interest on convertible senior notes

 

 

377

 

 

 

5,780

 

Interest accrual on finance lease liabilities

 

 

22

 

 

 

3,244

 

Rent expense less than payments

 

 

(54

)

 

 

(27

)

Change in fair value of contingently returnable assets

 

 

(719

)

 

 

 

Non-cash accretion income from investments

 

 

29

 

 

 

506

 

Impairment or loss on disposal of right-of-use assets and property and equipment

 

 

1,769

 

 

 

4,048

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(5,851

)

 

 

1,354

 

Accrued interest on investments

 

 

284

 

 

 

(101

)

Contract, prepaid and other current assets

 

 

4,016

 

 

 

2,410

 

Deferred costs and other non-current assets

 

 

1,582

 

 

 

1,249

 

Accounts payable and accrued expenses

 

 

(6,025

)

 

 

3,520

 

Accrued compensation and benefits

 

 

(4,853

)

 

 

(4,907

)

Deferred revenue

 

 

139

 

 

 

(615

)

Other non-current liabilities

 

 

60

 

 

 

159

 

Net cash (used in) provided by operating activities

 

 

(3,699

)

 

 

17,927

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of investments held-to-maturity

 

 

 

 

 

(48,427

)

Proceeds from short-term investments held-to-maturity

 

 

 

 

 

48,000

 

Maturities of investments available-for-sale

 

 

22,045

 

 

 

 

Sales of investments available-for-sale

 

 

14,691

 

 

 

 

Business combination, net of cash acquired

 

 

(500

)

 

 

 

Purchases of property and equipment

 

 

(3,911

)

 

 

(4,483

)

Net cash provided by (used in) investing activities

 

 

32,325

 

 

 

(4,910

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Payments of preferred dividends

 

 

(3,200

)

 

 

(3,200

)

Payments of contingent consideration

 

 

(675

)

 

 

 

Proceeds from exercises of stock options and ESPP

 

 

 

 

 

322

 

Payments on financing obligations

 

 

(2

)

 

 

(224

)

Payments of principal on finance lease liabilities

 

 

(4,253

)

 

 

(2,559

)

Net cash used in financing activities

 

 

(8,130

)

 

 

(5,661

)

Net increase in cash and cash equivalents

 

 

20,496

 

 

 

7,356

 

Cash and cash equivalents, beginning of period

 

 

31,001

 

 

 

90,706

 

Cash and cash equivalents, end of period

 

$

51,497

 

 

$

98,062

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities