10-Q
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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 September 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 November 4, 2022, there were approximately 34,420,618 shares of the registrant’s common stock outstanding.

 

 

1


 

Benefitfocus, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

3

 

 

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

3

 

 

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

4

 

 

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

5

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 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

23

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

34

 

 

ITEM 4. CONTROLS AND PROCEDURES

34

 

 

PART II. OTHER INFORMATION

 

ITEM 1A. RISK FACTORS

34

 

 

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

36

 

 

ITEM 6. EXHIBITS

37

 

 

SIGNATURES

38

 

 

 

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
September 30,
2022

 

 

As of
December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,124

 

 

$

31,001

 

Marketable securities

 

 

 

 

 

37,049

 

Accounts receivable, net

 

 

27,598

 

 

 

16,491

 

Contract, prepaid and other current assets

 

 

18,307

 

 

 

27,615

 

Total current assets

 

 

101,029

 

 

 

112,156

 

Property and equipment, net

 

 

24,728

 

 

 

27,202

 

Financing lease right-of-use assets

 

 

48,445

 

 

 

56,474

 

Operating lease right-of-use assets

 

 

615

 

 

 

774

 

Intangible assets, net

 

 

17,915

 

 

 

21,134

 

Goodwill

 

 

34,237

 

 

 

34,237

 

Deferred contract costs and other non-current assets

 

 

6,744

 

 

 

8,864

 

Total assets

 

$

233,713

 

 

$

260,841

 

Liabilities, redeemable preferred stock and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,064

 

 

$

10,565

 

Accrued expenses

 

 

7,552

 

 

 

9,451

 

Accrued compensation and benefits

 

 

15,208

 

 

 

16,411

 

Deferred revenue, current portion

 

 

30,443

 

 

 

27,756

 

Long-term debt, current portion

 

 

5,186

 

 

 

 

Lease liabilities and financing obligations, current portion

 

 

6,607

 

 

 

7,378

 

Contingent consideration

 

 

 

 

 

675

 

Total current liabilities

 

 

71,060

 

 

 

72,236

 

Deferred revenue, net of current portion

 

 

2,364

 

 

 

2,377

 

Convertible senior notes

 

 

6,836

 

 

 

107,281

 

Long-term debt, net of current portion

 

 

105,349

 

 

 

 

Lease liabilities and financing obligations, net of current portion

 

 

72,581

 

 

 

75,758

 

Other non-current liabilities

 

 

392

 

 

 

313

 

Total liabilities

 

 

258,582

 

 

 

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

 

 

79,193

 

 

 

79,193

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock, par value $0.001, 95,000,000 shares authorized,
   
34,392,269 and 33,460,545 issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

34

 

 

 

33

 

Additional paid-in capital

 

 

384,886

 

 

 

431,874

 

Accumulated deficit

 

 

(488,982

)

 

 

(508,224

)

Total stockholders' deficit

 

 

(104,062

)

 

 

(76,317

)

Total liabilities, redeemable preferred stock and stockholders' deficit

 

$

233,713

 

 

$

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
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

56,190

 

 

$

62,026

 

 

$

174,002

 

 

$

187,993

 

Cost of revenue

 

 

29,864

 

 

 

31,247

 

 

 

88,845

 

 

 

87,870

 

Gross profit

 

 

26,326

 

 

 

30,779

 

 

 

85,157

 

 

 

100,123

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

10,029

 

 

 

12,669

 

 

 

30,596

 

 

 

34,481

 

Research and development

 

 

12,376

 

 

 

11,062

 

 

 

35,782

 

 

 

32,997

 

General and administrative

 

 

10,455

 

 

 

12,156

 

 

 

33,261

 

 

 

35,589

 

Impairment of lease right-of-use assets

 

 

 

 

 

 

 

 

1,769

 

 

 

4,003

 

Change in fair value of contingently returnable consideration

 

 

 

 

 

 

 

 

(719

)

 

 

 

Restructuring costs

 

 

 

 

 

 

 

 

1,006

 

 

 

4,127

 

Total operating expenses

 

 

32,860

 

 

 

35,887

 

 

 

101,695

 

 

 

111,197

 

Loss from operations

 

 

(6,534

)

 

 

(5,108

)

 

 

(16,538

)

 

 

(11,074

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

223

 

 

 

52

 

 

 

307

 

 

 

163

 

Interest expense

 

 

(2,918

)

 

 

(5,556

)

 

 

(7,876

)

 

 

(16,757

)

Gain (loss) on repurchase of convertible senior notes

 

 

1,930

 

 

 

(7,520

)

 

 

1,930

 

 

 

(7,520

)

Other income

 

 

362

 

 

 

120

 

 

 

844

 

 

 

142

 

Total other expense, net

 

 

(403

)

 

 

(12,904

)

 

 

(4,795

)

 

 

(23,972

)

Loss before income taxes

 

 

(6,937

)

 

 

(18,012

)

 

 

(21,333

)

 

 

(35,046

)

Income tax expense

 

 

49

 

 

 

42

 

 

 

94

 

 

 

125

 

Net loss

 

 

(6,986

)

 

 

(18,054

)

 

 

(21,427

)

 

 

(35,171

)

Preferred dividends

 

 

(1,600

)

 

 

(1,600

)

 

 

(4,800

)

 

 

(4,800

)

Net loss available to common stockholders

 

$

(8,586

)

 

$

(19,654

)

 

$

(26,227

)

 

$

(39,971

)

Comprehensive loss

 

$

(6,986

)

 

$

(18,054

)

 

$

(21,427

)

 

$

(35,171

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.25

)

 

$

(0.59

)

 

$

(0.77

)

 

$

(1.21

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

34,279,464

 

 

 

33,354,624

 

 

 

33,937,778

 

 

 

32,978,394

 

 

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

)

Issuance of common stock upon vesting of restricted stock units

 

 

212,265

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

7,925

 

 

 

 

 

 

58

 

 

 

 

 

 

58

 

Cancellation of convertible senior note capped call hedge

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,218

 

 

 

 

 

 

4,218

 

Preferred dividends

 

 

 

 

 

 

 

 

(1,600

)

 

 

 

 

 

(1,600

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,986

)

 

 

(6,986

)

Balance, September 30, 2022

 

 

34,392,269

 

 

$

34

 

 

$

384,886

 

 

$

(488,982

)

 

$

(104,062

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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