Benefitfocus : Investor Presentation Q3 2020

Benefitfocus Investor Presentation

Third Quarter 2020

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 and uncertainties arising from the recent U.S. elections; 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 release, including non-GAAP gross profit, operating income/loss, net loss/income, net loss/income per common share, 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, operating income/loss, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, if any, restructuring charges, if any, gain or loss on extinguishment of debt, 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, gain or loss on extinguishment of debt, 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. Beginning in the third quarter of 2020, we revised our definitions of non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA to also exclude gain or loss of extinguishment of debt. The revisions to these definitions had no impact on our reported non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA for periods prior to the three months ended September 30, 2020. 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 release 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 release, including in the accompanying tables.

Our mission is to

improve lives with benefits.

Benefitfocus is one of the largest benefits platforms in the U.S. enabling benefits enrollment and data exchange for Health Plans and Employers

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

Delivering value to Health Plan and Employer markets

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

Executing growth strategy to unlock shareholder value

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

Vast Opportunity

Attractive Value Proposition

$3.6T	U.S. health care spend,
~20% of GDP
$20K	Average annual premium for
employer family plan, rising
	each year
8x	Increase in deductibles
	vs. wages
Zero	Consumer personalization

Sources: $3.6T per cms.gov (2018), $20K (2019) and 8x (2008 to 2018) per kff.org

Health Plans

Lower operational costs, higher member satisfaction and digital transformation

Employers

Lower health care costs, reduced complexity and higher employee retention

Employees and Health Plan Members

Valuable, affordable and personalized benefits

Benefits Enrollment for Health Plans and Employers

Solving complex benefits administration problems with a modern user-friendly interface for employees and health plan members

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

1 in 12 Americans 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; $58B total premium and $800M Benefit Catalog premium sold are annual

estimates. All numbers are approximate and estimated as of December 31, 2019

Massive TAM with Significant Opportunity

Software as a Service

Platform

~$30B

2020 TAM

Source: Benefitfocus as of December 31, 2019

Delivering value to Health Plan and Employer markets

Competitive Differentiation

Market leading data transfer capabilities

AI-powered platform

Vast and unique data assets

Industry leading voluntary benefit products

Market Leading Data Transfer Capabilities

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

HCM

Ben Admin

HCM

HCM

HCM

HCM

HCM

HCM

Brokers

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

SUPPLIER

Industry Leading First Pass Yield

AI-powered Platform: 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

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

Industry Leading Products: Comprehensive and Curated Marketplace of Suppliers

Benefit Catalog

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

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

Diverse Revenue Streams

Multiple Sources of Lives

Recurring & Repeatable Revenue

Health Plans

Subscription

Platform

Employers

Professional Services

GO-TO-MARKET

REVENUE SOURCES

Proactively Managing Impact of COVID-19

Decisive cost management actions;

Focused on highly profitable revenue

Improving margins, adjusted EBITDA and Free Cash Flow

Investing in efficiencies and automation to deliver exceptional customer experience

Recurring and Repeatable Revenue

14% Revenue CAGR since IPO ($M)

$265

$105

2013A* 2014A* 2015A* 2016A 2017A 2018A 2019A 2020E

~80% Recurring and Repeatable Revenue ($M)

	$67
$52	$56
$34
$15	$23

$265

$170$180$195

2017A	2018A		2019A		2020E
		Subscription		Platform		Services

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

Recurring and Repeatable Revenue

	Adjusted EBITDA ($M)		Free Cash Flow ($M)
			$38			$15
				$1
			2017A	2018A	2019A	2020E
		$19	-$14
				-$32
	$10
2017A	2018A	2019A	2020E
-$5

Note: 2020 estimate based on midpoint of full year guidance provided November 5, 2020; See important disclosures on

non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 27.

Disciplined Capital Strategy

Growth and Innovation

• Invest in core enrollment platform, foundation for other key growth drivers
• Invest in automation to increase customer satisfaction and expand gross margin
• Invest organically and inorganically to extend market leadership

Strong Balance Sheet

• Cash balance of $175M
• Convertible debt of $220M due December 2023; $89M of lease obligations
• Net debt and lease obligations to EBITDA ~3.5x

Return of Capital

• Equity: Repurchased $9.7M (1.1M shares at a cost $8.71/share)
• Debt: Repurchased $18.8M of convertible debt at cost of $14.6M

Note: All data as of 09/31/20; 32.3M Common Shares Outstanding; EBITDA is 2020 estimate based on midpoint of full year guidance provided November 5, 2020; See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 27.

Executing growth strategy to unlock shareholder value

Strategic Priorities to Unlock Shareholder Value

Deliver on Customer Promises

Industry leading NPS

Expand profitability

Industry leading margins

Invest for growth

Focused on enrollment, engagement and data

Investing for Growth

Enrollment

Engagement

Data

Deliver flawless OE and	Create stickier, higher	Expand connections and deliver
operational excellence	value relationships	smarter insights

Extend Market Leadership

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

Delivering value to Health Plan and Employer markets

Diversified recurring revenue, improving operating leverage and disciplined capital strategy

Executing growth strategy to unlock shareholder value

GAAP to non-GAAP Reconciliation

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.

Benefitfocus Investor Presentation

Third Quarter 2020