Benefitfocus : Investor Presentation Q4 2020

Benefitfocus Investor Presentation

Fourth 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 athttp://investor.benefitfocus.com/sec-filings or 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, 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, restructuring charges, expense related to the impairment of goodwill, intangible assets and long-lived assets, gain or loss on extinguishment of debt, and costs not core to our business. 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, intangible assets and long-lived 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 fourth quarter of 2020, we revised our definition of non-GAAP net loss/income and net loss/income per common share to also exclude expense related to the impairment of goodwill, intangible assets and long-lived assets. Additionally, we revised our definition of adjusted EBITDA to also exclude expense related to the impairment of long-lived assets, restructuring charges and gains or loss on 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 December 31, 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 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.

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 and enhancing ESG to unlock shareholder value

Benefits Enrollment for Health Plans and Employers

One of the Largest Benefits

Platforms in the U.S.

Massive TAM with Significant Opportunity

Software as a Service

Platform

~$30B

TAM

Competitive Differentiation

Market Leading Data Transfer Capabilities

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.

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.

Diverse Revenue Streams

Recurring and Repeatable Revenue

10% Revenue CAGR since IPO ($M)

~80% Recurring and Repeatable Revenue ($M)

$297

2013A* 2014A* 2015A* 2016A 2017A 2018A 2019A 2020A 2021E

2017A

2018A

Subscription

Note: *Period prior to adoption of ASC 606 have not been restated; 2021 estimate based on midpoint of full year guidance provided March 8, 2021

2019A

Platform

2020A

Services

2021E

Driving Operating Leverage

Proactively managed impact of COVID through decisive cost management actions

Focused on profitable revenue growth; expanding margins, increasing adjusted EBITDA and Free Cash Flow

Investing in automation to drive efficiencies and deliver

exceptional customer experience

Driving Operating Leverage

Adjusted EBITDA ($M) and Adj. EBITDA Margin (%)

Free Cash Flow ($M)

$50

-$10

$40

$30

$20

$10

$0

20%

15%

10%

5%

0%

-5% 2021 estimates based on midpoint of full year guidance provided March 8, 2021; See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 29.

Mid-term 2023 Financial Targets

• • Opportunity to accelerate growth through strategic acquisitions

• • All targets assume return to pre-pandemic business conditions

Disciplined Capital Strategy

Strong Balance Sheet

Potential Uses of Capital

• • Cash balance of $185M

• • Convertible debt of $220M due December 2023; $85M of lease obligations

• • Net debt and lease obligations to EBITDA ~3.3x

• • Invest inorganically to extend market leadership

• • Opportunistically repurchase debt and equity

Note: All data as of 03/08/21; 32.3M Common Shares Outstanding; EBITDA is based on 2020 full year actuals See important disclosures on non-GAAP financial measures and GAAP to non-GAAP reconciliation on slides 2 and 29.

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

Extend Market Leadership

Enhancing ESG Policies and Practices

• • Published first sustainability report which highlights, among other things, strength of data privacy, cybersecurity and human capital policies and practices

• • Recent governance enhancements include:

  • 1. Naming new independent female director

  • 2. Retaining global search firm to identify additional qualified and independent board candidates

  • 3. Putting forth shareholder proposal to declassify Board at 2021 Annual Shareholder Meeting

  • 4. Implementing majority voting standard for director elections

• • Benefitfocus remains committed to building a world class company with best-in-class governance practices and policies

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 and enhancing ESG to unlock shareholder value

GAAP to non-GAAP Reconciliation

Unaudited Reconciliation of GAAP to non-GAAP ($ in thousands)

Year Ended

December 31, 2020 2019 2018 2017

Reconciliation from Net Loss to Adjusted EBITDA: Net loss

$(24,297)

• $(45,515) $ (52,627) $ (50,294)

Depreciation

Amortization of software development costs Amortization of acquired intangible assets Interest income

15,285 7,455 2,274

15,288 5,130 1,933

11,721 12,391

3,944 3,257

150 258

• (632) (2,613)

  (250) (182)

  Interest expense Income tax expense

• 23,071 23,524

5,685 4,931

Interest expense on building lease financing obligations (prior to adoption of ASC 842) Stock-based compensation expense

22 -

27

28 15

- 7,471 7,450

14,537

Transaction and acquisition-related costs expensed Restructuring costs

450

5,616

Impairment of long-lived assets

916

Gain on repurchase of convertible senior notes Costs not core to our business

(1,138)

19,572 1,035 - - -

28,868 16,137

507 - - -

- - - -

457

• 649 4,843 1,058

  Total net adjustments Adjusted EBITDA

  68,313 $44,016

• 64,545 62,967 45,315

$ 19,030

• $ 10,340

  • $ (4,979)

    Reconciliation of Free Cash Flow:

    Net Cash (used in) provided by operating activities Less: Purchase of property and equipment

    $27,651 $ (18,375)

    (13,085)

    (13,248)

• $ 8,981 (8,290)

• $ (5,937) (8,279)

Add back: Restructuring Costs

5,342

-

-

-

Free Cash Flow

$19,908 $ (31,623)

$ 691 $ (14,216)

Note: Management has not reconciled forward-looking adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of 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

Fourth Quarter 2020