UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 6, 2017
BENEFITFOCUS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
| 001-36061 | 46-2346314 | |
| (Commission File Number) | (IRS Employer Identification No.) |
100 Benefitfocus Way, Charleston, South Carolina 29492
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (843) 849-7476
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
Attached hereto as Exhibit 99.1 and incorporated herein by reference is a presentation that Benefitfocus, Inc. plans to use with various investors and analysts.
The information in this Item 7.01 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits |
| Exhibit |
Description | |
| 99.1 | Presentation of March 2017. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BENEFITFOCUS, INC. | ||||||
| Date: March 6, 2017 | /s/ Jeffrey M. Laborde | |||||
| Jeffrey M. Laborde | ||||||
| Chief Financial Officer | ||||||
Benefitfocus Investor Presentation First Quarter 2017 Exhibit 99.1
Safe Harbor This presentation may include forward-looking statements related to the future business and financial performance of Benefitfocus and future events or developments involving Benefitfocus, including our long-term financial model. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “could,” “would,” “should,” “targets,” “projects”, “opportunity” or words of similar meaning. Forward-looking statements can involve a number of risks and uncertainties that could cause actual results to differ materially from those explicit or implicit in the forward-looking statements, including our continuing losses and need to achieve GAAP profitability, fluctuations in our financial results, general economic risks, management of growth, the immature and volatile market for our products and services, the need to innovate and deliver useful products and services, ability to compete effectively, reliance on key personnel, privacy, security, regulatory changes, and other risks associated with our business as set forth from time to time in our filings with the SEC. Some of the products and/or product features discussed in this presentation may be works in progress and not yet generally available for sale. Benefitfocus assumes no obligation and does not intend to update any forward-looking statements. Non-GAAP Financial Measures The company uses certain non-GAAP financial measures in this presentation and the accompanying tables, including adjusted EBITDA. 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. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and expense related to the impairment of goodwill and intangible assets. Please note that other companies might define their non-GAAP financial measures differently than we do. Management presents certain non-GAAP financial measures in this presentation 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 determination of 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 certain 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 certain non-GAAP measures to their most directly comparable GAAP measures provided in this presentation, including in the accompanying tables.
Founded in 2000 | NASDAQ: BNFT | 1,400+ Associates All Your Benefits. One Place. Better Information = Better Decisions = Better Lives A leading Enterprise Base Benefits Administration Platform Single Codebase Cloud Platform SOC 2 Certified | PCI Compliant Our Client Base includes: 830+ Large Employers 50+ Insurance Carriers Our Platform Supports: 1,500+ Data Exchanges 100+ Benefit Types
Benefits & Engagement System of Record Benefitfocus Profile Category leader Multi-tenant SaaS Technology Flexible & Scalable Platform with Mobile First Design Deep solution offering solely focused on benefits Significant and fast ROI Unmatched benefit ecosystem ~100% employee participation Over $250 million annualized revenue run rate 95%+ Revenue Retention 14 public quarters Industry Profile Significant Market Opportunity $23 billion TAM* Expanding product portfolio Strong Partner Ecosystem Favorable Secular Tailwinds Shift to cloud Consumerization/ Personalization of benefits Regulatory change and increasing complexity Focus on bending healthcare cost curve Strong Business Growth Since 2013 IPO Total revenue 31% CAGR Ramping operational scale 49% CAGR in transactions on our platform 65%+ increase in data connections 31% CAGR * TAM estimated by Benefitfocus across all segments $ in millions
Transforming the Way Benefits Are Managed The Benefitfocus Cloud-based Platform Reduces Complexity and Administrative Costs Old Way New Way
Ecosystem Delivering Enterprise Benefits Management Across Markets Marketplace Administration & Compliance Reporting Engine | Analytics Engine Data Cloud Data Exchange Carrier Enterprise Accounts Strategic Accounts Resellers The Benefitfocus Enterprise Benefits Management Platform
Rapidly Growing Blue Chip Customer Base EMPLOYERS CARRIERS
Competitive Factors Internal Solutions* Niche HR Outsources* ERP* Benefitfocus Why We Win Platform Scalability and breadth of functionality Analytics and business intelligence Claims integration Technology Leadership Multi-tenant SaaS Rapid deployment Big Data Domain Expertise Benefits leadership Command of healthcare complexities Network Effect Real-time data exchange Insurance carrier and employer relationships Broad apps ecosystem Configuration & Integration Seamless implementation Highly configurable with other platforms (ERP, HR systems) User Interface Engaging user-experience Mobile first design Why We Win *As estimated by Benefitfocus
Benefitfocus Improves Process, Reduces Complexity & Lowers Costs Lower Costs, Faster Results Efficiency Intelligence Effectiveness Yearly Savings Improve plan fit Productivity Efficiency Automate manual processes & administrative tasks Reduce human error associated with manual processes, data exchange Redeploy HR resources to more strategic activities Verify and manage dependent eligibility Employer Customer ROI Build Benefitfocus Platform Intelligence Inform and support better employee HC selection decisions Increase personalization & expand adoption of alternative plans Enable employer analytics on spend, claims history, adoption, etc. Reduce healthcare costs for both employee and employer Effectiveness Increase employee use of benefits & productivity Improve employee retention & engagement Enhance plan mgmt. (wellness programs, annual changes/enhancements, acquisitions, etc.)
Multiple Distribution Channels Direct Sales Carrier markets: Focused cross-sell & membership growth on our platform Enterprise Accounts: Employers with 10,000+ employees Strategic Accounts: Employers with 1,000 to 10,000 employees Employer Back-to-Base: Focused on cross-sell opportunity Channel Partners Mercer Marketplace Approximately 1.5 million lives Equity investment and expanded commercial relationship SAP: Reseller of Benefitfocus Marketplace as SAP’s U.S. Benefits Admin platform On SAP U.S. price list Tightly integrated and complementary to market-leading core HCM application Benefitstore Voluntary benefit product offerings across: Gap & Income Protection Digital Health Financial Wellness Commission-based revenue model: Increasing employee financial responsibilities drives demand for voluntary benefits Tremendous opportunity to monetize consumer segment System Integrators Trained and certified third parties performing customer implementations Future reseller opportunities Adds another important element to our Benefitfocus Ecosystem Enables focus to remain on high margin recurring software revenue driving margin expansion & cash flow growth
5x $1.6 96 31 $36 Increase over last decade of covered workers with a deductible of $1,000 or more Amount spent on health care in 20111 Percent of employers with 50+ employees offering health insurance in 20132 Benefits as a percent of total employee compensation3 Amount of HSA assets in U.S., up from $1.7 billion in 2006 EBRI.org: Tabulation from Dept. of Commerce, Bureau of Economic Analysis, National Income and Product Accounts of the US and Department of Labor, BLS, CPI Kaiser Family Foundation: Percent of Private Sector Establishment That Offer Health Insurance to Employees, by Firm Size (2013) EBRI.org: EBRI Databook on Employee Benefits, Chapter 3, Employer Costs per Hour Worked for Employee Compensation, Civilian Workers, Selected Years, 2007-2013 (2013) Our Market Overview increase trillion percent percent billion
Enterprise Strategic Mid-Market2 SMB2 <5% ~5% 7% 3% Market Share Employer Market Opportunity Growing our Customer Base = Land Market Penetration 10,000+ Employees 2,146 U.S. Companies 1,000-9,999 Employees 15,583 U.S. Companies 100-999 Employees 99,484 U.S. Companies >100 Employees Over 5.8 million U.S. Companies Market Opportunity 18,000 large employers predominantly on legacy systems 8331 Number of large employer customers as of December 31, 2016 Historically addressed only via Carriers Employer TAM as estimated by Benefitfocus $18 Billion Market Opportunity3
Employer Market Opportunity Increase PEPM Spend = Expand Installed Base Penetration 18% Strength of platform drives value for our customers and increases market opportunity R&D driven organization that is focused on organic innovation Leadership position and employee participation fuels ancillary product ecosystem Back-to-base sales team drives user adoption 95%+ revenue retention rate PEPM Pricing Opportunity 18% of total installed base has 3 or more products
Insurance Carrier Market Opportunity Benefitfocus is Best Positioned for Top Heavy Carrier Market Customer Penetration Increasing the penetration and adoption of our existing customers represents a multi-year growth engine Distribution by Carrier Count $5 billion TAM allocation* Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 50% 4% 2% Benefitfocus Customer Allocation Increase adoption and group penetration < 10% Customers addressable spend penetration Source: Atlantic Information Services Directory of Health Plans: 2013; Excludes Tier 4 * Carrier TAM as estimated by Benefitfocus
New Customer Wins Strategic Employer Enterprise Accounts Mercer SAP Multiple Growth Opportunities Continue to Innovate Benefitstore Certified Carrier Program Analytics Mobile First Design Back to Base Expand Benefitstore penetration Cross-sell and up-sell new solutions Increase carrier group penetration
Multiple Growth Drivers in Two Core Markets Employer Carrier Total Revenue Growth Employer & Carrier Revenue Growth 31% CAGR Achieved Revenue Scale That Enables Profitable Growth $ in millions
Recurring Revenue Drives Margin Expansion 2016 Revenue Allocation 86% Key Drivers Strong Enterprise Account momentum Core Strategic Account growth Extending employee solution portfolio increasing PEPM Productizing carrier services Increasing Carrier adoption 86% Software Revenue 14% Professional Services Revenue 14% 27% CAGR Total Recurring Revenue SaaS Model Provides Strong Visibility into Next 12 months $ in millions
Proven Growth Track Record in Employer Segment Large Employer Customers 51% CAGR Employer Revenue Land & Expand Sales Strategy Focused on Penetrating Employers on Legacy Systems Only Penetrated 5% of Large Employer Market $ in millions
Consistent Margin Improvement $ in millions GAAP Gross Margin Adjusted EBITDA* Key Drivers Strong revenue growth & increased operating efficiencies Productizing carrier services & focus on profitable services revenue System integrator program Use of global resources Q3 2016 achieved adjusted EBITDA profitability * See important disclosures about non-GAAP measures on slide 2 and reconciliation table on slide 21 * Generated GAAP net loss of ($40.1), ($62.1) and ($63.2) during the years ended December 31, 2016, 2015, 2014, respectively Guided FCF positive in 4Q17
Long-Term Financial Model As a % of revenue 4Q 2016 Long-Term Target GAAP Gross Margin 48% 65% GAAP Software Margin 56% 70% Research & Development 21% 10 – 15% Sales & Marketing 22% 25 – 30% General & Administrative 13% 8 – 10% Adjusted EBITDA Margin 5% 20 - 25% * See important disclosures about non-GAAP measures on slide 2 and reconciliation table on slide 21
GAAP to Non-GAAP Reconciliation Table 2016 2015 2014 Reconciliation from Net Loss to Adjusted EBITDA: Net loss $ (40.1) $ (62.1) $ (63.2) Depreciation and amortization 13.1 11.6 9.6 Interest income (0.1) (0.2) (0.1) Interest expense 7.9 8.0 4.3 Income tax expense - - - Stock-based compensation expenses 18.1 10.5 5.6 Total net adjustments 39.0 29.9 19.4 Adjusted EBITDA $ (1.1) $ (32.2) $ (43.8) $ in millions