Benefitfocus : Investor Presentation Q2 2020

Benefitfocus Investor Presentation

Q2 2020

© 2020 Benefitfocus.com, Inc.

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; 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 presentation, including non-GAAP gross profit, 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 excludes stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, if any, restructuring charges, 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 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. 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 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 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 presentation, including in the accompanying tables.

© 2020 Benefitfocus.com, Inc.

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Our mission is to

improve lives with benefits.

Benefitfocus is one of the largest benefits platforms in the U.S. uniting Consumers, Employers and Health Plans with benefits.

© 2020 Benefitfocus.com, Inc.

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Investment Highlights

One of the largest benefits platforms in the

U.S. and massive, growing market

Highly differentiated from competition by providing value to entire Benefits ecosystem

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

Executing long-term,high-value growth strategy

© 2020 Benefitfocus.com, Inc.

Investment Highlights

One of the largest benefits platforms in the U.S. and massive, growing market

© 2020 Benefitfocus.com, Inc.

One of the Largest Benefits Platforms in the U.S.

1 in 12 Americans (8%) 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; numbers are approximate and estimated as of December 31, 2019

© 2020 Benefitfocus.com, Inc.

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Massive TAM with Significant Opportunity

Software as a Service

Platform

~$30B

2020 TAM

Source: Benefitfocus as of December 31, 2019

© 2020 Benefitfocus.com, Inc.

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Investment Highlights

Highly differentiated from competition by providing value to entire Benefits ecosystem

© 2020 Benefitfocus.com, Inc.

Connected Ecosystem: Creating Value

for the Entire Benefits Ecosystem

Consumers

Employers

Health Plans

Suppliers

Brokers

© 2020 Benefitfocus.com, Inc.

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Our Value Proposition

Health Plans

Lower operational costs, higher member satisfaction and digital transformation

Employers

Lower health care costs, reduced complexity and higher employee retention

Consumer

Valuable, affordable and personalized benefits

© 2020 Benefitfocus.com, Inc.

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Competitive Differentiation

Industry leading products

AI-powered platform

Vast & unique data assets

© 2020 Benefitfocus.com, Inc.

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Industry Leading Products: Comprehensive and

Curated Marketplace of Suppliers

Benefit Catalog

Robust portfolio of trusted health, wealth, property and lifestyle benefits integrated into our enrollment experience.

© 2020 Benefitfocus.com, Inc.

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AI-poweredPlatform: 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

© 2020 Benefitfocus.com, Inc.

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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

© 2020 Benefitfocus.com, Inc.

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Investment Highlights

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

© 2020 Benefitfocus.com, Inc.

Diverse Revenue Streams

Multiple Sources of Lives

Recurring & Repeatable Revenue

Health Plans

Employers

Consumers

Subscription

Platform

Professional

Services

Go-to-Market

Revenue Sources

© 2020 Benefitfocus.com, Inc.

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Proactively Managing Impact of COVID-19

Well-positioned to Successfully Navigate Challenging Conditions

Decisive cost management actions;

Focused on highly profitable revenue

Improving margins, adjusted EBITDA and Free Cash Flow

Accelerating innovating and automation to address emerging Ecosystem needs

© 2020 Benefitfocus.com, Inc.

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Improving Profitability and Growth Focus

Adjusted EBITDA ($M)

$38

$19

$10

2017A 2018A 2019A 2020E

-$5

~80% Recurring and Repeatable Revenue ($M)

		$296	Estimated
	$259		Impact of
$237	$67	COVID-19
$56
$52	$34
$23
$15
			$265
$170	$180	$195

2017A	2018A		2019A		2020E
		Subscription		Platform		Services

Note: 2020 estimate based on midpoint of full year guidance provided August 5, 2020; See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 29-30.

© 2020 Benefitfocus.com, Inc.

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Accelerating Free Cash Flow Growth

Free Cash Flow ($M)	$15

$1

2017A

2018A

2019A

2020E

-$14

-$32

Note: 2020 estimate based on midpoint of full year guidance provided August 5, 2020; See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 29-30.

© 2020 Benefitfocus.com, Inc.

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Disciplined Capital Strategy

Growth and

Innovation

• Invest in R&D to support innovation
• Invest in automation to increase customer satisfaction and expand gross margin
• Opportunistically invest in acquisitions to accelerate strategy

Maintain Strong

Balance Sheet

• Cash balance of $183M
• Convertible debt of $240M due December 2023; $89M of lease obligations
• Net debt and lease obligations to EBITDA <3.9x

Return of

Capital

• Board approved share repurchase program: $20M authorized, ~$10M available
• Opportunistically repurchase debt at discount to par

Note: All data as of 06/30/20; 32.3M Common Shares Outstanding; EBITDA is 2020 estimate based on midpoint of full year guidance provided August 5, 2020;

See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 29-30.

© 2020 Benefitfocus.com, Inc.

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Investment Highlights

Executing long-term,high-value growth strategy

© 2020 Benefitfocus.com, Inc.

Revenue Growth

$265

$105

2013A*

2014A*

2015A*

2016A

2017A

2018A

2019A

2020E

Note: *Period prior to adoption of ASC 606 have not been restated; 2020 estimate based on midpoint of full year guidance provided August 5, 2020

© 2020 Benefitfocus.com, Inc.

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Accelerate Strategic Investment of Capital

Improve	Expand	Target
customer loyalty via	Platform and	value enhancing
automation	operating scale	acquisitions

© 2020 Benefitfocus.com, Inc.

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Expand Revenue per Life

Benefit Catalog for Health Plans

• 3 Health Plan Customers in Delivery
• Significant growth opportunity with 35+ Health Plans customers

© 2020 Benefitfocus.com, Inc.

Personalized

Engagement via AI

• 3.3M personalized Smart Moments messages sent in 2019
• 70% more employees choose Critical Illness with access to Health Insights

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Accelerate Lives Growth

Health Plans		Employers
Operational Efficiency with		Differentiation via healthcare
Quote-to-Pay solution		costs savings
4 strategic Health Plan deals in		Health Insights powering
last 12 months		smart decisions

© 2020 Benefitfocus.com, Inc.

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Long-term Growth Targets

>20%

>65%

>20%

Revenue Growth

Non-GAAP Gross Margin

Adjusted EBITDA Margin

© 2020 Benefitfocus.com, Inc.

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Investment Highlights

One of the largest benefits platforms in the U.S. and massive, growing market

Highly differentiated from competition by providing value to entire Benefits ecosystem

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

Executing long-term,high-value growth strategy

© 2020 Benefitfocus.com, Inc.

GAAP to non-GAAP Reconciliation

© 2020 Benefitfocus.com, Inc.

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.

© 2020 Benefitfocus.com, Inc.

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Benefitfocus Investor Presentation

August 2020

© 2020 Benefitfocus.com, Inc.