UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices and zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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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.
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).
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:
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of August 2, 2021, there were approximately
Benefitfocus, Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2021
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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3 |
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Unaudited Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
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4 |
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5 |
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Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 |
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7 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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32 |
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PART II. OTHER INFORMATION |
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33 |
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33 |
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34 |
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36 |
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2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
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As of June 30, 2021 |
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As of December 31, 2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net |
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Contract, prepaid and other current assets |
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Total current assets |
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Property and equipment, net |
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Financing lease right-of-use assets |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Deferred contract costs and other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable preferred stock and stockholders' deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued compensation and benefits |
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Deferred revenue, current portion |
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Lease liabilities and financing obligations, current portion |
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Total current liabilities |
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Deferred revenue, net of current portion |
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Convertible senior notes |
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Lease liabilities and financing obligations, net current portion |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies |
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Redeemable preferred stock: |
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Series A preferred stock, par value $ authorized, at June 30, 2021 and December 31, 2020, respectively, liquidation preference $ |
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Stockholders' deficit: |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities, redeemable preferred stock and stockholders' deficit |
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$ |
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$ |
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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)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Restructuring costs |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest income |
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Interest expense |
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Other income |
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Total other expense, net |
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( |
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Loss before income taxes |
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Income tax expense |
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Net loss |
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Preferred dividends |
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Net loss available to common stockholders |
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$ |
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$ |
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$ |
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$ |
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Comprehensive loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per common share: |
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Basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic and diluted |
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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)
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Common Stock, |
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Additional |
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Total |
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$0.001 Par Value |
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Paid-in |
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Accumulated |
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Stockholders' |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Deficit |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Stock-based compensation expense |
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Preferred dividends |
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( |
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Net loss |
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( |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Issuance of common stock under Employee Stock Purchase Plan, or ESPP |
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Stock-based compensation expense |
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Preferred dividends |
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( |
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Net loss |
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( |
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Balance, June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock, |
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Additional |
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Total |
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$0.001 Par Value |
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Paid-in |
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Accumulated |
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Stockholders' |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Deficit |
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Balance, December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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Cumulative effect adjustment from adoption of credit standard |
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( |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Stock-based compensation expense |
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Common stock repurchased |
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( |
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( |
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( |
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( |
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Net loss |
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( |
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( |
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Balance, March 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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Issuance of common stock upon vesting of restricted stock units |
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Issuance of common stock under ESPP |
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Stock-based compensation expense |
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Common stock repurchased |
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( |
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( |
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( |
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Preferred dividends |
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( |
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( |
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Net loss |
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( |
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( |
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Balance, June 30, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
5
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
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Six Months Ended June 30, |
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2021 |
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2020 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Accretion of interest on convertible senior notes |
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Interest accrual on finance lease liabilities |
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Rent expense less than payments |
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Non-cash interest income on short-term investments |
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Impairment or loss on disposal of right-of-use assets and property and equipment |
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Provision for doubtful accounts |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Accrued interest on short-term investments |
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( |
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Contract, prepaid and other current assets |
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Deferred costs and other non-current assets |
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Accounts payable and accrued expenses |
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( |
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Accrued compensation and benefits |
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( |
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( |
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Deferred revenue |
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( |
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( |
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Other non-current liabilities |
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Net cash and cash equivalents provided by (used in) operating activities |
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( |
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Cash flows from investing activities |
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Purchases of short-term investments held to maturity |
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( |
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Proceeds from short-term investments held to maturity |
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Purchases of property and equipment |
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( |
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( |
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Net cash and cash equivalents used in investing activities |
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( |
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( |
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Cash flows from financing activities |
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Draws on revolving line of credit |
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|
|
|
|
|
|
|
|
Payments on revolving line of credit |
|
|
|
|
|
|
( |
) |
|
Payments of debt issuance costs |
|
|
|
|
|
|
( |
) |
|
Proceeds from issuance of preferred stock, net of issuance costs |
|
|
|
|
|
|
|
|
|
Payments of preferred dividends |
|
|
( |
) |
|
|
( |
) |
|
Repurchase of common stock |
|
|
|
|
|
|
( |
) |
|
Proceeds from exercises of stock options and ESPP |
|
|
|
|
|
|
|
|
|
Payments on financing obligations |
|
|
( |
) |
|
|
( |
) |
|
Payments of principal on finance lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Net cash and cash equivalents (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
Property and equipment purchases in accounts payable and accrued expenses |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
6
BENEFITFOCUS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Organization and Description of Business
Benefitfocus, Inc. (the “Company”) provides a leading cloud-based benefits management platform for consumers, employers, health plans (also known as insurance carriers) and brokers that is designed to simplify how organizations and individuals transact benefits. The financial statements of the Company include the financial position and operations of its wholly owned subsidiaries, Benefitfocus.com, Inc. and BenefitStore, Inc.
2. Summary of Significant Accounting Policies
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation. The Company is not the primary beneficiary of, nor does it have a controlling financial interest in, any variable interest entity. Accordingly, the Company has not consolidated any variable interest entity.
Interim Unaudited Consolidated Financial Information
The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with GAAP as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information, and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations and comprehensive loss, financial position, changes in stockholders’ deficit and cash flows. The results of operations and comprehensive loss for the three- and six-month period ended June 30, 2021 are not necessarily indicative of the results for the full year or for any other future period. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as amended.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Such estimates include allowances for doubtful accounts and returns, valuations of deferred income taxes, long-lived assets, capitalizable software development costs and the related amortization, incremental borrowing rate used in lease accounting, the determination of the useful lives of assets, and the impairment assessment of acquired intangibles and goodwill. Additionally as described in revenue and deferred revenue below, estimates are utilized in association with revenue recognition, in particular the estimation of variable consideration using the expected value method from insurance broker commissions reported in Platform revenue. Determination of these transactions and account balances are based on, among other things, the Company’s estimates and judgments. These estimates are based on the Company’s knowledge of current events and actions it may undertake in the future as well as on various other assumptions that it believes to be reasonable. Actual results could differ materially from these estimates.
Restructuring Costs
During January 2021, the Company recorded restructuring costs of $
Revenue and Deferred Revenue
The Company derives its revenue primarily from fees for subscription services and professional services sold to employers and health plans as well as platform revenue derived from the value of products sold on its platform. Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Taxes collected from customers relating to services and remitted to governmental authorities are excluded from revenue.
The Company determines revenue recognition through the following steps:
|
|
• |
Identification of each contract with a customer; |
|
|
• |
Identification of the performance obligations in the contract; |
|
|
• |
Determination of the transaction price; |
|
|
• |
Allocation of the transaction price to the performance obligations in the contract; and |
|
|
• |
Recognition of revenue when, or as, performance obligations are satisfied. |
7
Software Services Revenue
Software services revenue consists of subscription revenue and platform revenue.
Subscription Revenue
Subscription revenue primarily consists of monthly or annual subscription fees paid to the Company by its employer and health plan customers for access to, and usage of, cloud-based benefits software solutions for a specified contract term. Fees are generally charged based on the number of employees or subscribers with access to the solution.
Subscription services revenue is generally recognized on a ratable basis over the contract term beginning on the date the subscription services are made available to the customer. The Company’s subscription service contracts are generally three years.
Subscription revenue also includes fees paid for other services, such as event sponsorships and certain data services.
Platform Revenue
Platform revenue is generated from the value of policies or products enrolled in through the Company’s marketplace. Platform revenue from insurance carriers is generally recognized over the policy period of the enrolled products. In arrangements where the Company sells policies to employees of its customers as the broker, it earns broker commissions. Revenue from insurance broker commissions and supplier transactions is recognized at a point in time when the orders for the policies are received and transferred to the insurance carrier or supplier, and is reduced by constraints for variable consideration associated with collectability, policy cancellation and termination risks.
Professional Services Revenue
Professional services revenue primarily consists of fees related to the implementation of software products purchased by customers. Professional services typically include discovery, configuration and deployment, integration, testing, and training. Fees from consulting services and support services are also included in professional services revenue.
The Company determined that implementation services for certain of its health plan customers significantly modify or customize the software solution and, as such, do not represent a distinct performance obligation. Accordingly, revenue from such implementation services with these health plan customers are generally recognized over the contract term of the associated subscription services contract, including any extension periods representing a material right. In certain arrangements, the Company utilizes estimates of hours as a measure of progress to determine revenue.
Revenue from implementation services with employer customers is generally recognized as those services are performed.
Revenue from support and training fees is recognized over the service period.
Contracts with Multiple Performance Obligations
Certain of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are accounted for separately if they are distinct. The Company allocates the transaction price to the separate performance obligations based on their relative standalone selling prices. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the subscription services sold, customer size and complexity, and the number and types of users under the contracts.
Contract Costs
The Company capitalizes contract fulfillment costs directly associated with customer contracts that are not related to satisfying performance obligations. The costs are amortized to cost of revenue expense over the estimated period of benefit, which is generally
The following tables present information about deferred contract costs:
|
Balance of deferred contract costs |
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||
|
Costs to obtain contracts |
|
$ |
|
|
|
$ |
|
|
|
Costs to fulfill contracts |
|
$ |
|
|
|
$ |
|
|
8
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Amortization of deferred contract costs |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Costs to obtain contracts included in sales and marketing expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Costs to fulfill contracts included in cost of revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Marketable Securities
Marketable securities consist of short-term investments in corporate bonds, commercial paper, and U.S. Treasury and agency bonds. To reflect its intention, the Company classifies its marketable securities as held-to-maturity at the time of purchase. As a result, the marketable securities are recorded at amortized cost and any gains or losses realized upon maturity are reported in other expense, net in the consolidated statements of operations and comprehensive loss.
Debt securities classified as held-to-maturity are subject to the expected credit loss model prescribed under Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments”. The Company utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The Company measures expected credit losses on its held-to-maturity portfolio on a collective basis by major security type. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The Company’s credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as its portfolio. An adjustment factor is applied to these credit loss calculations based upon the Company’s assessment of the expected impact from current economic conditions on its investments. The Company monitors the credit quality of debt securities classified as held-to-maturity through the use of their respective credit rating and updates them on a quarterly basis. The allowance for credit losses is discussed in Note 5.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, marketable securities, and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The bank deposits of the Company might at times, exceed federally insured limits and are generally uninsured and uncollateralized. The Company has not experienced any losses on cash and cash equivalents to date.
To manage credit risk related to marketable securities, the Company invests in various types of highly rated corporate bonds, commercial paper, and various United States backed securities with maturities of less than two years. The weighted average maturity of the portfolio of investments must not exceed nine months, per the Company’s investment policy.
To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts. Accounts receivable are unsecured and derived from revenue earned from customers located in the United States.
Allowance for Doubtful Accounts
The Company uses a current expected credit loss model. Accounts receivable and allowance for doubtful accounts are discussed in Note 6.
Capitalized Software Development Costs
The Company capitalizes certain costs related to its software developed or obtained for internal use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Internal and external costs incurred during the application development stage, including upgrades and enhancements representing modifications that will result in significant additional functionality, are capitalized. Software maintenance and training costs are expensed as incurred. Capitalized costs are recorded as part of property and equipment and are amortized on a straight-line basis to cost of revenue over the software’s estimated useful life, which is
The following tables present information about capitalized software development costs:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Capitalized software development costs |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Capitalized |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Amortized |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
9
|
Capitalized software development costs |
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||
|
Net book value |
|
$ |
|
|
|
$ |
|
|
Leases
The Company periodically enters into finance leases for property and equipment. The leasing arrangements for the Company’s office space at its headquarters campus are classified as finance leases. The Company also leases office space under operating leases.
The Company determines if an arrangement is a lease at inception. Right of use, or ROU, assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent an obligation to make lease payments arising from the lease. Leases with a term of 12 months or less are not included in the recognized ROU assets and lease liabilities for all classes of assets.
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Because the Company’s operating leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on information available at commencement date to determine the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives, or initial direct costs. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense. The Company has lease agreements which require payments for lease and non-lease components (e.g. common area maintenance and equipment maintenance) that are accounted for as a single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.
Comprehensive Loss
The Company’s net losses equal comprehensive losses for all periods presented. Presentation of the prior year comprehensive losses has been updated to reflect the exclusion of preferred dividends.
Recently Adopted Accounting Standards
On January 1, 2021, the Company adopted ASU No. 2019-12. The purpose of this ASU is to simplify various aspects related to accounting for income taxes, eliminate certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplify when companies recognize deferred taxes in an interim period, and clarify certain aspects of the current guidance to promote consistent application. ASU No. 2019-12 had no impact on the Company’s consolidated financial statements.
Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It will be effective for the Company beginning January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact of the adoption of ASU 2020-06 on its consolidated financial statements, but anticipates that it will result in a reduction in non-cash interest expense related to its convertible senior notes.
3. Net Loss Per Common Share
Diluted loss per common share is the same as basic loss per common share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss.
The following common share equivalent securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the periods presented:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Anti-Dilutive Common Share Equivalents |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total anti-dilutive common share equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Basic and diluted net loss per common share is calculated as follows:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Preferred dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
4. Fair Value Measurement
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable and other accrued liabilities, and accrued compensation and benefits, approximate fair value due to their short-term nature. The carrying value of the Company’s financing obligations approximates fair value, considering the borrowing rates currently available to the Company with similar terms and credit risks.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
|
|
Level 1. |
Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
|
Level 2. |
Other inputs that are directly or indirectly observable in the marketplace. |
|
|
Level 3. |
Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions. |
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above categories, as of the periods presented.
|
|
|
June 30, 2021 |
|
|||||||||||||
|
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
December 31, 2020 |
|
|||||||||||||
|
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
________________
|
(1) |
|
5. Marketable Securities
Marketable securities consist of corporate bonds, commercial paper and U.S. Treasury and agency bonds, and are classified as held-to-maturity. All marketable securities had contractual maturities of less than one year as of June 30, 2021 and December 31, 2020. The following tables present information about the Company’s marketable securities by major security type.
11
|
|
|
As of June 30, 2021 |
|
|||||||||||||||||||||
|
Sector |
|
Amortized cost |
|
|
Allowance for credit losses |
|
|
Net carrying amount |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||||
|
Industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
As of December 31, 2020 |
|
|||||||||||||||||||||
|
Sector |
|
Amortized cost |
|
|
Allowance for credit losses |
|
|
Net carrying amount |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||||
|
Industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The fair value of marketable securities in the Government major security type is classified as a Level 1 in the Company’s fair value hierarchy described in Note 4. The fair values of the remaining major security types are classified as Level 2.
The Company invests in highly rated securities with maturities of two years or less at the time of purchase. Given the credit quality of the financial assets and the historical loss experience associated with their respective credit ratings as well as the duration of these financial assets and the short time horizon over which to consider expectations of future economic conditions, the Company has assessed that non-collection of the cost basis of these financial assets is remote.
6. Accounts Receivable, net
Accounts receivable, net include:
|
|
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||
|
Accounts receivable |
|
$ |
|
|
|
$ |
|
|
|
Less: Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
|
Less: Allowance for returns |
|
|
( |
) |
|
|
( |
) |
|
Total accounts receivable, net |
|
$ |
|
|
|
$ |
|
|
Accounts receivable are stated at their amortized cost adjusted for any write-offs and net allowances for returns. The Company estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. Expected credit losses are determined individually or collectively depending on whether the accounts receivable balances share similar risk characteristics. The allowance for doubtful accounts is the best estimate of the amount of expected credit losses related to existing accounts receivable. The Company does not have any off-balance sheet credit exposure related to its customers.
|
|
|
Six Months Ended June 30, |
|
|||||
|
Allowance for doubtful accounts |
|
2021 |
|
|
2020 |
|
||
|
Beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
Write-offs and recoveries |
|
|
( |
) |
|
|
( |
) |
|
End of period |
|
$ |
|
|
|
$ |
|
|
The allowances for returns are accounted for as reductions of revenue and are estimated based on the Company’s periodic assessment of historical experience and trends. The Company considers factors such as historical reasons for adjustments, service and delivery issues or delays, and past due customer billings.
7. Convertible Senior Notes
In December 2018, the Company issued $
The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right
12
of payment to the Notes; equal in right of payment to the Company’s unsecured indebtedness that is not subordinated; effectively junior in right of payment to any of the Company’s senior, secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election.
At issuance, the Notes had an initial conversion rate of
Prior to the close of business on September 14, 2023, the Notes will be convertible at the option of holders during certain periods, only upon satisfaction of certain conditions set forth below. On or after September 15, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion price at any time regardless of whether the conditions set forth below have been met.
Holders may convert all or a portion of their Notes prior to the close of business on September 14, 2023, in multiples of $
|
|
• |
during any calendar quarter commencing after the calendar quarter ending on March 31, 2019 (and only during such calendar quarter), if the last reported sales price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to |
|
|
• |
during the five business day period after any |
|
|
• |
if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on September 14, 2023; or |
|
|
• |
upon the occurrence of specified corporate events. |
As of June 30, 2021, the Notes were not convertible.
Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, the Company estimated the implied market interest rate of its Notes to be approximately
In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total amount incurred to the liability and equity components in proportion to the allocation of proceeds. Transaction costs attributable to the liability component, totaling $
The Notes consist of the following:
|
|
|
As of |
|
|||||
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Liability component: |
|
|
|
|
|
|
|
|
|
Principal |
|
$ |
|
|
|
$ |
|
|
|
Less: Debt discount, net of amortization |
|
|
( |
) |
|
|
( |
) |
|
Net carrying amount |
|
$ |
|
|
|
$ |
|
|
|
Equity component (a) |
|
|
|
|
|
|
|
|
|
|
(a) |
Recorded in the consolidated balance sheet within additional paid-in capital, net of $ |
13
The following table sets forth total interest expense recognized related to the Notes:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
||||||||||
|
Interest expense |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
||||
|
1.25% coupon |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Amortization of debt discount and transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
As of June 30, 2021, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted price of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s Notes classified in equity) were as follows:
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
|
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
||||
|
Convertible senior notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
In connection with the issuance of the Notes, the Company entered into capped call transactions with certain counterparties affiliated with the initial purchasers and others. The capped call transactions are expected to reduce potential dilution of earnings per share upon conversion of the Notes. Under the capped call transactions, the Company purchased capped call options that in the aggregate relate to the total number of shares of the Company’s common stock underlying the Notes, with an initial strike price of approximately $
In connection with the purchase of the Notes described above, the Company terminated a portion of the capped call transactions which resulted in an immaterial amount of payments to the Company in cash and common stock and was recorded in addition paid-in capital.
Based on the closing price of our common stock of $
8. Revolving Line of Credit
The Company entered into a credit facility with Silicon Valley Bank providing for a revolving line of credit agreement on March 3, 2020. This agreement replaced the Company’s previous agreement with Silicon Valley Bank, which expired on
The obligations of the Company under the credit facility are secured by a first priority lien (subject to certain permitted liens) in substantially all of the personal property assets of the Company and its subsidiaries pursuant to the terms of a Guarantee and Collateral Agreement, dated March 3, 2020 and the other security documents.
The credit facility requires the
There were
9. Commitments
14
|
Cash Paid for Amounts Included in the Measurement of Lease Liabilities |
|
Six Months Ended June 30, 2021 |
|
|
|
Financing cash flows from finance leases |
|
$ |
|
|
|
Operating cash flows from finance leases |
|
$ |
|
|
|
Operating cash flows from operating leases |
|
$ |
|
|
|
ROU Assets Obtained in Exchange for New Lease Obligations |
|
|
|
|
|
Finance lease liabilities |
|
$ |
|
|
|
Operating lease liabilities |
|
$ |
|
|
As of June 30, 2021, the Company had no additional significant operating or finance leases that had not yet commenced.
In April 2021, the Company entered into a non-cancellable sublease agreement for part of
10. Redeemable Preferred Stock
On June 4, 2020, the Company issued and sold
The Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Each share of the Preferred Stock has an initial stated value of $
Each holder of the Preferred Stock has the right, at its option, to convert its shares of the Preferred Stock, in whole or in part, into fully paid and non-assessable shares of the common stock, at any time and from time to time. The number of shares of the common stock into which a share of the Preferred Stock will convert at any time is equal to the quotient obtained by dividing its stated value then in effect plus any accumulated and unpaid Regular Dividends by its conversion price of $
The Company may, at its option, redeem the outstanding shares of the Preferred Stock following the fourth anniversary of its issuance. Redemption by the Company is subject to certain liquidity conditions as well conditions connected with the trading price of its common stock. Upon redemption by the Company, the Company will pay the holder of the Preferred Stock
Unless and until approval of the Company’s stockholders is obtained as contemplated by the NASDAQ listing rules, no holder of the Preferred Stock may convert shares of the Preferred Stock into shares of common stock if and to the extent that such conversion would result in the holder beneficially owning in excess of
15
As long as not less than
Holders of the Preferred Stock generally are entitled to vote with the holders of the shares of the common stock on all matters submitted for a vote of holders of shares of the common stock (voting together with the holders of shares of the common stock as one class) on an as-converted basis, subject to a limitation of ownership of
The Buyer is subject to limitations while it holds at least
In the period of issuance, the Company incurred $
11. Stock-based Compensation
Restricted Stock Units
During the six months ended June 30, 2021, the Company granted
The Company granted
In May 2021, the Company granted
12. Stockholders’ Deficit
Common Stock
The holders of common stock are entitled to one vote for each share. The voting, dividend and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers and preferences of the holders of preferred stock.
|
Outstanding stock options |
|
|
|
|
|
Restricted stock units |
|
|
|
|
|
Available for future issuance under stock award plans |
|
|
|
|
|
Available for future issuance under ESPP |
|
|
|
|
|
Issuable upon conversion of Series A Preferred Stock |
|
|
|
|
|
Total common shares reserved for future issuance |
|
|
|
|
At the Company’s annual meeting of stockholders held in June 2021, the stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, as amended to increase the total number of authorized shares of common stock reserved for issuance thereunder from
16
13. Revenue
Disaggregation of Revenue
The following tables provide information about disaggregation of revenue by service line:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Service line: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Platform |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total software services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Contract Balances
The following table provides information about contract assets and contract liabilities from contracts with customers:
|
|
|
Balance at Beginning of Period |
|
|
Balance at End of Period |
|
||
|
Six Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
Contract assets |
|
$ |
|
|
|
$ |
|
|
|
Contract liabilities: |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
Contract assets |
|
$ |
|
|
|
$ |
|
|
|
Contract liabilities: |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
|
|
|
$ |
|
|
The Company recognizes payments from customers based on contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are recognized as revenue when earned under the contract. The Company had
During the three and six months ended June 30, 2021, there were
Revenue recognized during the three and six months ended June 30, 2021 that was included in the deferred revenue balance at the beginning of the period was $
The Company recorded favorable adjustments to revenue arising from performance obligations satisfied or partially satisfied in previous periods of $
Performance Obligations
As of June 30, 2021, the aggregate amount of the Company’s performance obligations that are unsatisfied or partially unsatisfied were approximately $
14. Income Taxes
The Company’s effective tax rate for the six months ended June 30, 2021 was less than
15. Segments and Geographic Information
The Company views its operations and manages its business as
17
16. Related Parties
Series A Preferred Stock
As described in Note 10, the Company sold
Leasing Arrangements
The Company leases its office space at its Charleston, South Carolina headquarters campus under the terms of three non-cancellable leases from entities affiliated with a former executive who was also a Company director and significant stockholder. The Company’s headquarter campus building leases are accounted for as financing lease ROU assets and lease liabilities on the Consolidated Balance Sheet as of June 30, 2021. The lease agreements have
Other Related Party Expenses
The Company utilizes the services of various companies that are owned and controlled by a former executive who was also a Company director and significant stockholder. The companies provide construction project management services, private air transportation and other services. Expenses related to these companies were $
The Company purchased software and services from a company affiliated with a Company director. Payments related to this agreement were $
17. Subsequent Events
Restricted Stock Units
During July 2021, the Company granted approximately
Common Stock
During July and August 2021, RSUs vested resulting in the issuance of approximately
18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements about our ability to retain and hire necessary associates and appropriately staff our operations; statements about our ability to establish and maintain intellectual property rights; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “will,” “plan,” “project,” “seek,” “should,” “target,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, and the risks discussed in our other SEC filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
As used in this report, the terms “Benefitfocus, Inc.,” “Benefitfocus,” “Company,” “company,” “we,” “us,” and “our” mean Benefitfocus, Inc. and its subsidiaries unless the context indicates otherwise.
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with the financial statements, related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K, as amended for the fiscal year ended December 31, 2020. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, and the risks discussed below and in our other SEC filings.
Overview
Benefitfocus provides industry-leading, cloud-based benefits management technology solutions for employers and health plans. The Benefitfocus enrollment platform simplifies how organizations procure benefits and connect to the necessary benefits products and services that improve the lives of their employees and the American workforce. Our core technology solutions facilitate employee benefits administration and enrollment; our solutions enable working Americans and their families to select and engage in the right benefits products and services for themselves; and our data advantage delivers insights to employers, health plans and their advisors to help control healthcare spending and reduce unnecessary expenses.
The Benefitfocus Platform has a multi-tenant architecture and a user-friendly interface designed for employees to access all of their benefits in one place. Our comprehensive solutions support medical benefit plans and non-medical benefits, such as, dental, life, disability insurance, income protection, digital health and financial wellness. Our platform includes functionality designed to help consumers identify and evaluate benefit options available to them. As the number of employer benefits plans has increased, with each plan subject to many different business rules and requirements, interest in the Benefitfocus Platform is growing.
Our economic model includes a transaction-oriented solution, now known as our Benefit Catalog, that aligns brokers, carriers and suppliers around the needs of employers and employees. In this model, Benefit Catalog sellers, who are carriers and suppliers, offer their voluntary and specialty benefit products in a “marketplace” alongside the benefits enrollment platform. This marketplace is designed to increase the economic value of the employee and consumer lives on our platform by aligning Benefit Catalog products to consumer needs. In exchange for Benefitfocus delivering employee/consumer access, data-driven analysis and operational efficiencies, seller partners pay us a percentage of the purchases completed on our platform. Carrier agreements generally have terms of two to four years and are typically cancellable upon breach of contract or insolvency. Supplier contracts have terms of one year or less and are generally cancellable upon breach of contract, failure to cure, bankruptcy and termination for convenience.
We classify our revenue into three streams – subscription, platform, and professional services revenue. Subscription and platform revenue are combined and reported as software services revenue.
Subscription revenue primarily consists of monthly subscription fees paid to us by our employer and health plan customers for access to, and usage of, cloud-based benefits software solutions for a specified contract term. Subscription fees are generally charged based on the number of employees or subscribers with access to the solution. Subscription revenue accounted for approximately 73% and 70% of our total revenue during the three-month period ended June 30, 2021 and 2020, respectively, and approximately 71% and 70% of our total revenue during the six-month period ended June 30, 2021 and 2020, respectively.
Platform revenue includes Benefit Catalog transactional revenue, which is generated from the value of the policies or products enrolled in through our marketplace. Benefit Catalog revenue from insured products is generally recognized over the policy period of the enrolled products. In arrangements where we sell policies to employees of our customers as the broker, we earn insurance broker commissions. Revenue from insurance broker commissions and Benefit Catalog supplier transactions is generally recognized at the time when open enrollment is complete and the orders for policies are transferred to the supplier. Platform revenue accounted for approximately 10% of our total revenue during each of the three month periods ended June 30, 2021 and 2020, and approximately 11% and 10% of our total revenue during the six-month period ended June 30, 2021 and 2020, respectively.
Our professional services revenue stream is largely derived from the implementation of our customers onto our platform, which typically includes discovery, configuration and deployment, integration, testing, and training. We also provide customer support services and customized media content that supports our customers’ effort to educate and communicate with consumers. Professional services revenue accounted for approximately 18% and 20% of our total revenue during the three-month period ended June 30, 2021 and 2020, respectively, and approximately 18% and 21% of our total revenue during the six-month period ended June 30, 2021 and 2020, respectively.
Expanding our customer base is a key element of our growth strategy. We believe that our continued innovation and solutions, which extend the functionality of our offerings, provide more robust data analytics capabilities and enhance our ability to quickly respond to evolving market needs. We believe these innovative capabilities will help us attract additional lives to our platform through new employer customers, partners and brokers and increase our revenue from existing customers and relationships.
We believe that there is a substantial market for our services, and we have been investing in our services to further expand our offerings over the past several years. In particular, we have continued to invest in technology and services to better serve our larger employer customers, which we believe are an important source of growth for our business. As we have invested in growth, we have had operating losses in each of the last ten years. Although our operating results have improved, we could incur operating losses in
20
future periods. Due to the nature of our customer relationships, which have been stable in spite of some customer losses over the past years, and our hybrid subscription and transaction-based financial model, we believe that our current investment in growth should lead to increased revenue in the long-term, which may allow us to achieve profitability in the relatively near future. Of course, our ability to achieve profitability will continue to be subject to many factors beyond our control.
On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. We continue to actively monitor COVID-19, including the development of COVID-19 variants, and its potential impact on our operations and financial results. In response to the pandemic, we implemented cost management actions in the second quarter of 2020 to maintain our financial health and liquidity through these economic uncertain times. These included actions to reduce our workforce by approximately 17%, renegotiating vendor service contracts and reducing discretionary expenditures such as travel and professional services. These actions also included investing in accelerating automation efforts to gain efficiencies.
During the initial peak of the COVID-19 pandemic in the second quarter of 2020, we experienced sales delays as HR professionals shifted their focus away from procuring technology solutions. We believe the financial impacts from COVID-19 are temporary in nature and do not significantly affect our business model and growth strategy in the long-term. Therefore, we did not consider the COVID-19 pandemic to have been a triggering event to accelerate our annual impairments tests.
We evaluated our goodwill and indefinite-lived intangible assets and determined there were no interim triggering events as it was not more likely than not that the fair value of our reporting units would be less than their respective carrying amounts. Additionally, we evaluated our long-lived assets, including our property, plant and equipment, lease right-of-use assets and other intangible assets. During the second quarter 2021, we recorded an impairment loss as a result of subleasing space based on the excess of carrying value over the calculated fair value of the sublease of one of our headquarter building financing lease ROU assets. As we continue to evaluate our real estate footprint and one that assumes fewer of our associates working from the office on a full-time basis, we may incur additional impairments on our ROU assets as we evaluate options to sublet certain locations.
The impact that the evolving COVID-19 pandemic will have on our consolidated financial statements in 2021 and beyond continues to remain uncertain and ultimately will be determined by the length and severity of the pandemic, as well as the economic recovery and federal, state and local government actions taken in response. We will continue to evaluate the nature and extent of these potential impacts to our business and consolidated financial statements.
While the ultimate impact of the pandemic on our business and financial results remains uncertain, our business has been particularly impacted by new sales. The longer sales cycles we experienced and slowdown in new sales activity in 2020 and the first half of 2021 negatively impacted growth in subscription revenue and platform revenue from new business in 2021 and beyond. In addition, the increase in unemployment has affected the rate at which certain voluntary benefits have been purchased in 2020 and therefore negatively impacted our ability for growth in 2021.
However, as a result of the nature of our customer relationships, the stability of our subscription revenue, the cost restructuring actions taken in the second quarter of 2020 as well as the first and second quarters of 2021, and our ongoing investments in automation, we believe we will continue to generate cash flows from operations in the relatively near future. Of course, our ability to generate cash flows from operations is subject to many risks and factors beyond our control, such as the COVID-19 pandemic.
Key Financial and Operating Performance Metrics
We regularly monitor a number of financial and operating metrics in order to measure our current performance and project our future performance. These metrics help us develop and refine our growth strategies and make strategic decisions. We discuss revenue, gross margin, and the components of operating loss in “Components of Operating Results” below. In addition, we utilize other key metrics as described below.
Adjusted EBITDA
Adjusted EBITDA represents our losses before net interest and other expenses, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation, transaction and acquisition-related costs expensed, restructuring costs, impairment of goodwill, intangible assets, and long-lived assets, gain or loss on extinguishment of debt and costs not core to our business. We believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results. However, adjusted EBITDA is not a measure calculated in accordance with United States generally accepted accounting principles, or GAAP, and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP.
Our use of adjusted EBITDA as an analytical tool has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are:
|
|
• |
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized might have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
|
|
• |
adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
21
|
|
• |
adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation; |
|
|
• |
adjusted EBITDA does not reflect interest or tax payments that would reduce the cash available to us; and |
|
|
• |
other companies, including companies in our industry, might calculate adjusted EBITDA or a similarly titled measure differently, which reduces their usefulness as comparative measures. |
Because of these and other limitations, you should consider adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, gross profit, net loss and our other GAAP financial results. The following table presents for each of the periods indicated a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measure, net loss (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Reconciliation from Net Loss to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(15,020 |
) |
|
$ |
(11,862 |
) |
|
$ |
(17,117 |
) |
|
$ |
(22,998 |
) |
|
Depreciation |
|
|
3,444 |
|
|
|
3,926 |
|
|
|
7,067 |
|
|
|
7,722 |
|
|
Amortization of software development costs |
|
|
2,159 |
|
|
|
1,727 |
|
|
|
4,321 |
|
|
|
3,246 |
|
|
Amortization of acquired intangible assets |
|
|
569 |
|
|
|
568 |
|
|
|
1,137 |
|
|
|
1,137 |
|
|
Interest income |
|
|
(54 |
) |
|
|
(97 |
) |
|
|
(111 |
) |
|
|
(523 |
) |
|
Interest expense |
|
|
5,646 |
|
|
|
5,862 |
|
|
|
11,201 |
|
|
|
11,753 |
|
|
Income tax expense |
|
|
41 |
|
|
|
6 |
|
|
|
83 |
|
|
|
11 |
|
|
Stock-based compensation expense |
|
|
4,376 |
|
|
|
3,323 |
|
|
|
5,899 |
|
|
|
7,000 |
|
|
Transaction and acquisition-related costs expensed |
|
|
6 |
|
|
|
215 |
|
|
|
160 |
|
|
|
407 |
|
|
Restructuring costs |
|
|
2,727 |
|
|
|
5,616 |
|
|
|
4,127 |
|
|
|
5,616 |
|
|
Impairment of long-lived assets |
|
|
4,003 |
|
|
|
- |
|
|
|
4,003 |
|
|
|
- |
|
|
Costs not core to our business |
|
|
1,717 |
|
|
|
- |
|
|
|
3,598 |
|
|
|
- |
|
|
Total net adjustments |
|
|
24,634 |
|
|
|
21,146 |
|
|
|
41,485 |
|
|
|
36,369 |
|
|
Adjusted EBITDA |
|
$ |
9,614 |
|
|
$ |
9,284 |
|
|
$ |
24,368 |
|
|
$ |
13,371 |
|
Net Benefit Eligible Lives
We are focused on driving revenue growth from adding lives to our platform and driving incremental transaction revenue. We believe the number of net benefit eligible lives is a key indicator of our market penetration, growth and future revenue. We believe net benefit eligible lives is highly correlated to our subscription revenue and is the foundation of our transaction revenue opportunity. We define a net benefit eligible life as a person with access to a benefits enrollment subscription under standard contracting or a freelancer with access to benefits enrollment, plus their estimated dependents, as of the measurement date. This definition excludes lives from other subscription-related contracts.
|
|
|
As of June 30, |
|
||
|
|
|
2021 |
|
2020 |
|
|
|
|
(in millions) |
|
||
|
Net benefit eligible lives |
|
16.3 |
|
17.5 |
|
As previously disclosed, in the second quarter of 2021, we terminated our relationship with Shipt, Inc., which decreased the number of net benefit eligible lives in the second quarter of 2021 by approximately 1.9 million, all of which were freelancers. Excluding Shipt net benefit eligible lives were down slightly compared to the prior period. Freelancers generate only platform revenue by purchasing voluntary benefits and other offerings. The participation rate of freelancers on our platform was historically low and had minimum impact to revenue. As of June 30, 2021, there were no freelancers on our platform. We expect our net benefit eligible lives to trend downward for the remainder of the year as we have certain health plan contracts renewing at lower levels in the second half of 2021.
Software Services Revenue Retention Rate
We believe that our ability to retain our customers and expand the revenue they generate for us over time is an important component of our growth strategy and reflects the long-term value of our customer relationships. We measure our performance on this basis using a metric we refer to as our software services revenue retention rate. We calculate this metric for a particular period by establishing the group of our customers that had revenue for a given period. We then calculate our software services revenue retention rate by taking the amount of software services revenue we recognized for this group in the subsequent comparable period (for which we are reporting the rate) and dividing it by the software services revenue we recognized for the group in the prior period.
22
Our software services revenue retention rate was approximately 95% and greater than 95% for the three and six months ended June 30, 2021, respectively, and greater than 90% for both the three and six months ended June 30, 2020. The lower retention rates in the prior year are primarily the result of the impact on revenue from the renegotiation of a certain customer contract. Excluding this customer, our software revenue retention rate exceeded 95% for all periods. We expect our software revenue retention rate to trend downward for the remainder of the year as we have certain health plan contracts renewing at lower levels in the second half of 2021.
Components of Operating Results
Revenue
We derive the majority of our revenue from monthly subscription fees paid to us by our employer and health plan customers for access to, and usage of, our cloud-based benefits software solutions for a specified contract term. We derive platform revenue from both insurance broker commissions from the sale of voluntary and ancillary benefits policies to employees of our customers and from transaction revenue from life and ancillary insurance carriers and specialty providers. We also derive revenue from professional services fees, which primarily include fees related to the implementation of our customers onto our platform. Our professional services typically include discovery, configuration and deployment, integration, testing, and training.
The following table sets forth a breakdown of our revenue between software services and professional services for the periods indicated (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Subscription |
|
$ |
44,347 |
|
|
$ |
43,780 |
|
|
$ |
89,926 |
|
|
$ |
89,770 |
|
|
Platform |
|
|
5,875 |
|
|
|
6,128 |
|
|
|
13,644 |
|
|
|
12,133 |
|
|
Total software services |
|
$ |
50,222 |
|
|
$ |
49,908 |
|
|
$ |
103,570 |
|
|
$ |
101,903 |
|
|
Professional services |
|
|
10,682 |
|
|
|
12,266 |
|
|
|
22,397 |
|
|
|
26,425 |
|
|
Total revenue |
|
$ |
60,904 |
|
|
$ |
62,174 |
|
|
$ |
125,967 |
|
|
$ |
128,328 |
|
We recognize revenue when control of these services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Taxes collected from customers relating to services and remitted to governmental authorities are excluded from revenues.
We determine revenue recognition through the following steps:
|
|
• |
Identification of each contract with a customer; |
|
|
• |
Identification of the performance obligations in the contract; |
|
|
• |
Determination of the transaction price; |
|
|
• |
Allocation of the transaction price to the performance obligations in the contract; and |
|
|
• |
Recognition of revenue when, or as, performance obligations are satisfied. |
Software Services Revenue
Software services revenue consists of subscription and platform revenue.
Subscription Revenue
Subscription revenue primarily consists of monthly subscription fees paid to us by our customers for access to, and usage of, cloud-based benefits software solutions for a specified contract term. Fees are generally charged based on the number of employees or subscribers with access to the solution.
Subscription revenue is generally recognized on a ratable basis over the contract term beginning on the date the subscription services are made available to the customer. Our subscription service contracts are generally three years.
Subscription revenue also includes fees paid for other services, such as event sponsorships and certain data services.
Platform Revenue
Platform revenue is generated from the value of the policies or products enrolled in through our marketplace. Platform revenue from carriers is generally recognized over the policy period of the enrolled products. In arrangements where we sell policies to employees of our customers as the broker, we earn insurance broker commissions. Revenue from insurance broker commissions and Benefit Catalog supplier transactions is recognized at the point when the orders for the policies are received and transferred to the insurance carrier or supplier, and is reduced by constraints for variable consideration associated with collectability, policy cancellation and termination risks.
Professional Services Revenues
23
Professional services revenue primarily consists of fees related to the implementation of software products purchased by customers. Professional services typically include discovery, configuration and deployment, integration, testing, and training. Fees from consulting services, support services and training are also included in professional services revenue.
We determined that implementation services for certain of our health plan customers significantly modify or customize the software solution and, as such, do not represent a distinct performance obligation. Accordingly, revenue from such implementation services with these health plan customers are generally recognized over the contract term of the associated software services contract, including any extension periods representing a material right. We utilize estimates of hours as a measure of progress to determine revenue for certain types of arrangements.
Revenue from implementation services with employer customers is generally recognized as those services are performed.
Revenue from support and training fees is recognized over the service contract period.
Contracts with Multiple Performance Obligations
Certain of our contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are accounted for separately if they are distinct. The transaction price is allocated to the separate performance obligations based on their relative standalone selling prices. We determine the standalone selling prices based on their overall pricing objectives, taking into consideration market conditions and other factors, including the value of their contracts, the software services sold, customer size and complexity, and the number and types of users within the contracts.
Overhead Allocation
Expenses associated with our facilities, security, information technology, and depreciation and amortization, are allocated between cost of revenue and operating expenses based on employee headcount determined by the nature of work performed.
Cost of Revenue
Cost of revenue primarily consists of salaries and other personnel-related costs, including benefits, bonuses, and stock-based compensation, for employees, whom we refer to as associates, providing services to our customers and supporting our SaaS platform infrastructure. Additional expenses in cost of revenue include co-location facility costs for our data centers, depreciation expense for computer equipment directly associated with generating revenue, infrastructure maintenance costs, professional fees, amortization expenses associated with acquired intangibles and capitalized software development costs, allocated overhead, and other direct costs.
We expense cost of revenue associated with fulfilling performance obligations as we incur the costs. Costs that relate directly to a customer contract that are not related to satisfying a performance obligation are capitalized and amortized to cost of revenue over the estimated period of benefit of the contract asset, which is generally five years.
Subscription and platform revenue are both generated from our platform and result from the same set of assets and activities. As such, we are not able to meaningfully separate and assign costs of revenue to subscription and platform revenue separately.
We expect cost of revenue as a percentage of revenue to decline and gross margins to increase as we realize the full impact of our restructuring activities and increased automation. However, this trend may vary on a quarterly basis.
Operating Expenses
Operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Salaries and personnel-related costs are the most significant component of each of these expense categories. We expect our operating expenses will increase as a percentage of revenue for the remainder of 2021, as we achieve economies of scale and incur additional costs associated with various legal actions described below in general and administrative expenses.
Sales and marketing expense. Sales and marketing expense consists primarily of salaries and other personnel-related costs, including benefits, bonuses, stock-based compensation and commissions, for our sales and marketing associates. Costs to obtain a contract that are incremental, such as sales commissions, are capitalized and amortized to expense over the estimated period of benefit of the asset, which is generally four to five years. Additional expenses include advertising, lead generation, promotional event programs, corporate communications, travel, and allocated overhead. For instance, our most significant promotional event is One Place, which we hold annually.
Research and development expense. Research and development expense consists primarily of salaries and other personnel-related costs, including benefits, bonuses and stock-based compensation, for our research and development associates. Additional expenses include costs related to the development, quality assurance, and testing of new technology, and enhancement of our existing platform technology, consulting, travel, and allocated overhead. We believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We are investing in transforming our development philosophy and practices to that of an agile development organization. We believe this will allow us to more quickly innovate and adapt to changing market conditions and customer needs.
General and administrative expense. General and administrative expense consists primarily of salaries and other personnel-related costs, including benefits, bonuses, and stock-based compensation for administrative, finance and accounting, information
24
systems, legal, and human resource associates. Additional expenses include consulting and professional fees, insurance and other corporate expenses, and travel. We expect our general and administrative expenses to increase in the near-term as we incur professional services expenses in connection with activist shareholder matters, securities class action, and executive employment agreement legal defense, which are not related to our core business.
Restructuring costs. Restructuring costs are comprised of one-time severance charges, continuation of health benefits and outplacement services. During the three and six months ended June 30, 2021, we incurred restructuring costs associated with eliminating certain positions in the organization.
Other Income and Expense
Other income and expense consists primarily of interest income and expense and gain (loss) on disposal of property and equipment. Interest income represents interest received on our cash and cash equivalents. Interest expense consists primarily of the interest incurred on outstanding convertible debt and borrowings under our lease arrangements and credit facility.
Income Tax Expense
Income tax expense consists of U.S. federal and state income taxes. We incurred minimal income tax expense for the three and six months ended June 30, 2021 and 2020.
On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Except for utilizing the deferment of employer social security payments, we did not utilize CARES Act to have a material impact on our financial results.
Results of Operations
Consolidated Statements of Operations Data
The following table sets forth our consolidated statements of operations data for each of the periods indicated (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Revenue |
|
$ |
60,904 |
|
|
$ |
62,174 |
|
|
$ |
125,967 |
|
|
$ |
128,328 |
|
|
Cost of revenue(1) |
|
|
28,030 |
|
|
|
30,397 |
|
|
|
56,623 |
|
|
|
64,309 |
|
|
Gross profit |
|
|
32,874 |
|
|
|
31,777 |
|
|
|
69,344 |
|
|
|
64,019 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing(1) |
|
|
10,921 |
|
|
|
11,828 |
|
|
|
21,812 |
|
|
|
27,458 |
|
|
Research and development(1) |
|
|
11,103 |
|
|
|
11,045 |
|
|
|
21,935 |
|
|
|
22,813 |
|
|
General and administrative(1) |
|
|
17,574 |
|
|
|
9,381 |
|
|
|
27,436 |
|
|
|
19,896 |
|
|
Restructuring costs |
|
|
2,727 |
|
|
|
5,616 |
|
|
|
4,127 |
|
|
|
5,616 |
|
|
Total operating expenses |
|
|
42,325 |
|
|
|
37,870 |
|
|
|
75,310 |
|
|
|
75,783 |
|
|
Loss from operations |
|
|
(9,451 |
) |
|
|
(6,093 |
) |
|
|
(5,966 |
) |
|
|
(11,764 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
54 |
|
|
|
97 |
|
|
|
111 |
|
|
|
523 |
|
|
Interest expense |
|
|
(5,646 |
) |
|
|
(5,862 |
) |
|
|
(11,201 |
) |
|
|
(11,753 |
) |
|
Other income |
|
|
64 |
|
|
|
2 |
|
|
|
22 |
|
|
|
7 |
|
|
Total other expense, net |
|
|
(5,528 |
) |
|
|
(5,763 |
) |
|
|
(11,068 |
) |
|
|
(11,223 |
) |
|
Loss before income taxes |
|
|
(14,979 |
) |
|
|
(11,856 |
) |
|
|
(17,034 |
) |
|
|
(22,987 |
) |
|
Income tax expense |
|
|
41 |
|
|
|
6 |
|
|
|
83 |
|
|
|
11 |
|
|
Net loss |
|
$ |
(15,020 |
) |
|
$ |
(11,862 |
) |
|
$ |
(17,117 |
) |
|
$ |
(22,998 |
) |
|
|
(1) |
Cost of revenue and operating expenses include stock-based compensation expense as follows (in thousands): |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Cost of revenue |
|
$ |
638 |
|
|
$ |
633 |
|
|
$ |
964 |
|
|
$ |
1,300 |
|
|
Sales and marketing |
|
|
927 |
|
|
|
594 |
|
|
|
1,507 |
|
|
|
1,474 |
|
|
Research and development |
|
|
503 |
|
|
|
590 |
|
|
|
621 |
|
|
|
932 |
|
|
General and administrative |
|
|
2,308 |
|
|
|
1,506 |
|
|
|
2,807 |
|
|
|
3,294 |
|
25
The following table sets forth our consolidated statements of operations data as a percentage of revenue for each of the periods indicated (as a percentage of revenue(1)):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
||||
|
Revenue |
|
|
100.0 |
|
% |
|
100.0 |
|
% |
|
100.0 |
|
% |
|
100.0 |
|
% |
|
Cost of revenue |
|
|
46.0 |
|
|
|
48.9 |
|
|
|
45.0 |
|
|
|
50.1 |
|
|
|
Gross profit |
|
|
54.0 |
|
|
|
51.1 |
|
|
|
55.0 |
|
|
|
49.9 |
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
17.9 |
|
|
|
19.0 |
|
|
|
17.3 |
|
|
|
21.4 |
|
|
|
Research and development |
|
|
18.2 |
|
|
|
17.8 |
|
|
|
17.4 |
|
|
|
17.8 |
|
|
|
General and administrative |
|
|
28.9 |
|
|
|
15.1 |
|
|
|
21.8 |
|
|
|
15.5 |
|
|
|
Restructuring costs |
|
|
4.5 |
|
|
|
9.0 |
|
|
|
3.3 |
|
|
|
4.4 |
|
|
|
Total operating expenses |
|
|
69.5 |
|
|
|
60.9 |
|
|
|
59.8 |
|
|
|
59.1 |
|
|
|
Loss from operations |
|
|
(15.5 |
) |
|
|
(9.8 |
) |
|
|
(4.7 |
) |
|
|
(9.2 |
) |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
Interest expense |
|
|
(9.3 |
) |
|
|
(9.4 |
) |
|
|
(8.9 |
) |
|
|
(9.2 |
) |
|
|
Other income |
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Total other expense, net |
|
|
(9.1 |
) |
|
|
(9.3 |
) |
|
|
(8.8 |
) |
|
|
(8.7 |
) |
|
|
Loss before income taxes |
|
|
(24.6 |
) |
|
|
(19.1 |
) |
|
|
(13.5 |
) |
|
|
(17.9 |
) |
|
|
Income tax expense |
|
|
0.1 |
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
Net loss |
|
|
(24.7 |
) |
% |
|
(19.1 |
) |
% |
|
(13.6 |
) |
% |
|
(17.9 |
) |
% |
|
|
(1) |
Rounding may impact the summation of amounts. |
Comparison of Three Months Ended June 30, 2021 and 2020
Revenue
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|||||||
|
|
|
Amount |
|
|
Revenue(1) |
|
|
|
Amount |
|
|
Revenue(1) |
|
|
|
Amount |
|
|
Percentage(1) |
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Subscription |
|
$ |
44,347 |
|
|
|
72.8 |
|
% |
|
$ |
43,780 |
|
|
|
70.4 |
|
% |
|
$ |
567 |
|
|
|
1.3 |
|
% |
|
Platform |
|
|
5,875 |
|
|
|
9.6 |
|
|
|
|
6,128 |
|
|
|
9.9 |
|
|
|
|
(253 |
) |
|
|
(4.1 |
) |
|
|
Total software services |
|
$ |
50,222 |
|
|
|
82.5 |
|
% |
|
$ |
49,908 |
|
|
|
80.3 |
|
% |
|
$ |
314 |
|
|
|
0.6 |
|
% |
|
Professional services |
|
|
10,682 |
|
|
|
17.5 |
|
|
|
|
12,266 |
|
|
|
19.7 |
|
|
|
|
(1,584 |
) |
|
|
(12.9 |
) |
|
|
Total revenue |
|
$ |
60,904 |
|
|
|
100.0 |
|
% |
|
$ |
62,174 |
|
|
|
100.0 |
|
% |
|
$ |
(1,270 |
) |
|
|
(2.0 |
) |
% |
|
|
(1) |
Rounding may impact the summation of amounts. |
Subscription revenue increased by $0.6 million primarily due to $3.3 million in increases from new customer contracts and sales to existing customers, as well as benefits from a lower sales returns allowance. These increases were partially offset by $2.7 million in decreases from the renegotiation of a certain customer contract and subscription terminations.
Platform revenue decreased slightly primarily due to certain one-time items associated with timing of premiums recognized from insurance policies.
The decrease in professional services revenue was attributable to a decrease in implementation revenue and lower demand for customer-specific development for health plan customers.
Cost of Revenue
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cost of revenue |
|
$ |
28,030 |
|
|
|
46.0 |
|
% |
|
$ |
30,397 |
|
|
|
48.9 |
|
% |
|
$ |
(2,367 |
) |
|
|
(7.8 |
) |
% |
The decrease in cost of revenue was attributable to decreases in salaries and other personnel-related costs of $2.0 million due to headcount reductions, and costs related to professional services of $0.6 million. These decreases were partially offset by increased depreciation expense of $0.2 million attributable to higher capitalized software development costs. Cost of revenue included $0.6 million of stock-based compensation expense for each of the three-month periods ended June 30, 2021 and 2020, and $4.8 million and $4.6 million of depreciation and amortization for the three-month periods ended June 30, 2021 and 2020, respectively.
26
Gross Profit
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Software services |
|
$ |
32,308 |
|
|
|
64.3 |
|
% |
|
$ |
30,930 |
|
|
|
62.0 |
|
% |
|
$ |
1,378 |
|
|
|
4.5 |
|
% |
|
Professional services |
|
|
566 |
|
|
|
5.3 |
|
|
|
|
847 |
|
|
|
6.9 |
|
|
|
|
(281 |
) |
|
|
(33.2 |
) |
|
|
Gross profit |
|
$ |
32,874 |
|
|
|
54.0 |
|
|
|
$ |
31,777 |
|
|
|
51.1 |
|
|
|
$ |
1,097 |
|
|
|
3.5 |
|
|
The increase in software services gross profit was driven by a $0.3 million, or 0.6%, increase in software services revenue and a decrease in software services cost of revenue of $1.1 million. The decrease in the software services cost of revenue was driven by decreased salary and personnel-related costs and professional services totaling $2.0 million offset by $0.6 million in higher data storage costs. Software services cost of revenue included approximately $0.4 million of stock-based compensation expense for each of the three-month periods ended June 30, 2021 and 2020, and $4.1 million and $3.8 million of depreciation and amortization for the three months ended June 30, 2021 and 2020, respectively.
The decrease in professional services gross profit was driven by a $1.6 million, or 12.9% decrease in professional services revenue and a decrease in professional services cost of revenue of $1.3 million. The decrease in professional services cost of revenue is primarily attributable to decreases in salary and personnel-related costs due to headcount reductions and decreased need for contract labor. Professional services cost of revenue included approximately $0.3 million of stock-based compensation expense for each of the three-month periods ended June 30, 2021 and 2020. In addition, professional services cost of revenue included $0.8 million of depreciation and amortization in each of the three month periods ended June 30, 2021 and 2020.
Operating Expenses
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Sales and marketing |
|
$ |
10,921 |
|
|
|
17.9 |
|
% |
|
$ |
11,828 |
|
|
|
19.0 |
|
% |
|
$ |
(907 |
) |
|
|
(7.7 |
) |
% |
|
|
Research and development |
|
|
11,103 |
|
|
|
18.2 |
|
|
|
|
11,045 |
|
|
|
17.8 |
|
|
|
|
58 |
|
|
|
0.5 |
|
|
|
|
General and administrative |
|
|
17,574 |
|
|
|
28.9 |
|
|
|
|
9,381 |
|
|
|
15.1 |
|
|
|
|
8,193 |
|
|
|
87.3 |
|
|
|
|
Restructuring costs |
|
|
2,727 |
|
|
|
4.5 |
|
|
|
|
5,616 |
|
|
|
9.0 |
|
|
|
|
(2,889 |
) |
|
|
(51.4 |
) |
|
|
The decrease in sales and marketing expense was primarily attributable to a $0.6 million decrease in salaries and personnel-related costs. The decrease in salaries and personnel-related costs was primarily driven by decreased headcount.
The increase in research and development expense is primarily attributable to a $1.1 million decrease in capitalized software development costs partially offset by a decrease in personnel-related costs and external development and engineering consulting of $1.2 million.
The increase in general and administrative expense was primarily attributable to a $3.4 million increase in legal fees primarily related to costs incurred associated with activist shareholder matters, securities class action and executive employment agreement legal defense and a $4.0 million impairment charge related to a sublease of part of one our leased buildings on our headquarter campus.
Current period restructuring costs are the result of the elimination of the office of the executive chairman in June 2021, comprised of one-time costs, including severance charges and continuation of health benefits.
Comparison of Six Months Ended June 30, 2021 and 2020
Revenue
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|
|||||||
|
|
|
Amount |
|
|
Revenue(1) |
|
|
|
Amount |
|
|
Revenue(1) |
|
|
|
Amount |
|
|
Percentage(1) |
|
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Subscription |
|
$ |
89,926 |
|
|
|
71.4 |
|
% |
|
$ |
89,770 |
|
|
|
70.0 |
|
% |
|
$ |
156 |
|
|
|
0.2 |
|
% |
|
|
Platform |
|
|
13,644 |
|
|
|
10.8 |
|
|
|
|
12,133 |
|
|
|
9.5 |
|
|
|
|
1,511 |
|
|
|
12.5 |
|
|
|
|
Total software services |
|
$ |
103,570 |
|
|
|
82.2 |
|
% |
|
$ |
101,903 |
|
|
|
79.4 |
|
% |
|
$ |
1,667 |
|
|
|
1.6 |
|
% |
|
|
Professional services |
|
|
22,397 |
|
|
|
17.8 |
|
|
|
|
26,425 |
|
|
|
20.6 |
|
|
|
|
(4,028 |
) |
|
|
(15.2 |
) |
|
|
|
Total revenue |
|
$ |
125,967 |
|
|
|
100.0 |
|
% |
|
$ |
128,328 |
|
|
|
100.0 |
|
% |
|
$ |
(2,361 |
) |
|
|
(1.8 |
) |
% |
|
|
|
(1) |
Rounding may impact the summation of amounts. |
Subscription revenue increased by $0.2 million primarily due to a $2.0 decrease in customer returns allowances. The increase was partially offset by $1.6 million decrease from the renegotiation of a customer contract.
27
Platform revenue increased from growth in premiums and new products from Benefit Catalog primarily from insurance carriers and specialty products recognized over the policy period. As discussed above in “Components of Operating Results – Revenue”, we recognize platform revenue from carriers and specialty products over the policy period and we recognize commissions revenue at a point in time.
The decrease in professional services revenue was attributable to a decrease in implementation revenue and lower levels of demand for customer-specific development for health plan customers.
We expect total revenue to continue to be less in 2021 compared to 2020 primarily due to the impacts of the COVID-19 pandemic, including a slowed sales cycle in 2020 and the effects of lower revenues associated with our health plan customers. As previously discussed, we experienced longer sales cycles in 2020 and a slowdown in new sales activity which will negatively impact subscription and platform revenue in future periods. Additionally, we expect revenue from health plan customers to continue to decline in 2021 as some customers might renew their agreements with a lower minimum number of covered employees. We also expect professional services revenue to decrease due to lower levels of demand for custom requests from health plan customers, as well as our focus on profitability by managing away from unprofitable work.
Cost of Revenue
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cost of revenue |
|
$ |
56,623 |
|
|
|
45.0 |
|
% |
|
$ |
64,309 |
|
|
|
50.1 |
|
% |
|
$ |
(7,686 |
) |
|
|
(12.0 |
) |
% |
|
The decrease in cost of revenue was attributable to decreases in salaries and other personnel-related costs of $6.4 million, costs related to professional services of $2.0 million, and travel-related expenses of $0.3 million as a result of our restructuring actions. These decreases were partially offset by increased depreciation expense of $0.8 million attributable to an increase in depreciation of capitalized software development costs. Cost of revenue included $1.0 million and $1.3 million of stock-based compensation expense for the six months ended June 30, 2021 and 2020, respectively, and $9.7 million and $8.9 million of depreciation and amortization for the six months ended June 30, 2021 and 2020, respectively.
Gross Profit
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Software services |
|
$ |
68,082 |
|
|
|
65.7 |
|
% |
|
$ |
63,936 |
|
|
|
62.7 |
|
% |
|
$ |
4,146 |
|
|
|
6.5 |
|
% |
|
|
Professional services |
|
|
1,262 |
|
|
|
5.6 |
|
|
|
|
83 |
|
|
|
0.3 |
|
|
|
|
1,179 |
|
|
|
1420.5 |
|
|
|
|
Gross profit |
|
$ |
69,344 |
|
|
|
55.0 |
|
|
|
$ |
64,019 |
|
|
|
49.9 |
|
|
|
$ |
5,325 |
|
|
|
8.3 |
|
|
|
The increase in software services gross profit was driven by a $1.7 million, or 1.6%, increase in software services revenue and a decrease in software services cost of revenue of $2.5 million. The decrease in the software services cost of revenue was driven by decreased salary and personnel-related costs and professional services offset by a $0.9 million increase in amortization of capitalized internally developed software. Software services cost of revenue included $0.5 million and $0.8 million of stock-based compensation expense for the six months ended June 30, 2021 and 2020, respectively, and $8.2 million and $7.3 million of depreciation and amortization for the six months ended June 30, 2021 and 2020, respectively.
Professional services gross profit increased by actively reducing our cost structure to align with the decrease in demand for professional services. The decrease in professional services cost of revenue is primarily attributable to decreases in salary and personnel-related costs due to headcount reductions and decreased use of contract labor. Professional services cost of revenue included $0.4 million and $0.5 million of stock-based compensation expense for the six months ended June 30, 2021 and 2020, respectively. In addition, professional services cost of revenue included $1.5 million and $1.7 million of depreciation and amortization in the six months ended June 30, 2021 and 2020, respectively.
We expect professional services margins on an annual basis to be lower than the prior year due to fewer large implementation projects and increased costs around our support services, slightly offset by shifting to higher margin professional services work.
Operating Expenses
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Percentage of |
|
|
|
Period-to-Period Change |
|
|
|
|||||||
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Revenue |
|
|
|
Amount |
|
|
Percentage |
|
|
|
||||||
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Sales and marketing |
|
$ |
21,812 |
|
|
|
17.3 |
|
% |
|
$ |
27,458 |
|
|
|
21.4 |
|
% |
|
$ |
(5,646 |
) |
|
|
(20.6 |
) |
% |
|
|
Research and development |
|
|
21,935 |
|
|
|
17.4 |
|
|
|
|
22,813 |
|
|
|
17.8 |
|
|
|
|
(878 |
) |
|
|
(3.8 |
) |
|
|
|
General and administrative |
|
|
27,436 |
|
|
|
21.8 |
|
|
|
|
19,896 |
|
|
|
15.5 |
|
|
|
|
7,540 |
|
|
|
37.9 |
|
|
|
|
Restructuring costs |
|
|
4,127 |
|
|
|
3.3 |
|
|
|
|
5,616 |
|
|
|
4.4 |
|
|
|
|
(1,489 |
) |
|
|
(26.5 |
) |
|
|
28
The decrease in sales and marketing expense was primarily attributable to a $4.2 million decrease in salaries and personnel-related costs, including professional fees, a $0.6 million decrease in travel-related costs, and a $0.7 million decrease in the cost of marketing events and advertising expense resulting from of our restructuring actions. These decreases were partially offset by an increase in commissions expense of $0.4 million. The decrease in salaries and personnel-related costs was primarily driven by decreased headcount. The decrease in travel-related costs was driven by travel restrictions imposed in response to the pandemic. The cost of marketing events decreased in part because of lower costs incurred with our annual user conference, One Place, which was planned as a digital event in the current year compared to the prior year when it was planned as an in-person event.
The decrease in research and development expense is primarily attributable to a decrease in personnel-related costs and external development and engineering consulting of $4.0 million resulting from our restructuring actions, partially offset by a $2.8 million decrease in capitalized software development costs.
The increase in general and administrative expense was primarily attributable to a $4.0 million impairment charge related to a sublease of part of one our leased buildings on our headquarter campus and a $3.7 million increase in professional fees primarily related to costs incurred associated with activist shareholder matters, securities class action and executive employment agreement legal defense. These increases were partially offset by a $3.7 million decrease in salaries and personnel-related costs and contract labor driven by decreased headcount.
Current period restructuring costs are the result of a reduction to our workforce in January 2021 and the elimination of the office of the executive chairman in June 2021, comprised of one-time severance charges, continuation of health benefits and outplacement services.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results might differ from these estimates under different assumptions or conditions and, to the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
During the six months ended June 30, 2021, there were no material changes to our accounting policies that are critical to the process of making significant judgements and estimates in the preparation of our consolidated financial statements, which are disclosed in our Annual Report on Form 10-K, as amended for the year ended December 31, 2020.
Liquidity and Capital Resources
Sources of Liquidity
As of June 30, 2021, our primary sources of liquidity were our cash and cash equivalents and marketable securities totaling $193.2 million, $20.9 million in accounts receivables, net of allowances, and our $50.0 million revolving line of credit, the terms of which are described in Note 8 to the financial statements included in this report.
Our cash flow from operations has improved in recent years and was positive for the six months ended June 30, 2021, and the year ended December 31, 2020. Cash flow from operations may fluctuate between positive and negative due to the timing of payments and collections of cash on both a quarterly and annual basis.
Based on our current level of operations and restructured costs, we believe our future cash flow from operating activities and existing balances of cash and marketable securities, and revolving line of credit will be sufficient to meet our cash requirements for at least the next 12 months.
Going forward, we may access capital markets to raise additional equity or debt financing for various business reasons, including required debt payments and acquisitions. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing on favorable terms or at all.
Operating and Capital Expenditure Requirements and Contractual Obligations
There have been no material changes to our operating and capital expenditure requirements and contractual obligations during the six-months ending June 30, 2021.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU also enhances transparency and
29
improves disclosures for convertible instruments and earnings per share guidance. It will be effective for the Company beginning January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact of the adoption of ASU 2020-06 on its consolidated financial statements, but anticipates that it will result in a reduction in non-cash interest expense related to its convertible senior notes.
We are evaluating other accounting standards and exposure drafts that have been issued or proposed by the FASB or other standards setting bodies that do not require adoption until a future date to determine whether adoption will have a material impact on our consolidated financial statements.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument might change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we might enter into exchange rate hedging arrangements to manage the risks described below.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates. Borrowings under our revolving line of credit bear interest at rates that are variable. Increases in the Prime Rate would increase the revolving line of credit.
Interest Rate Sensitivity
We are subject to interest rate risk in connection with borrowings under the revolving line of credit, which are subject to a variable interest rate. At June 30, 2021, we had no amounts outstanding under the revolving line of credit.
31
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on their evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that as of June 30, 2021 our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures as of June 30, 2021.
(b) Changes in Internal Control Over Financial Reporting
No changes in internal control over financial reporting occurred during the most recent fiscal quarter with respect to our operations, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
32
PART II. OTHER INFORMATION.
Item 1. LEGAL PROCEEDINGS
As previously disclosed, on May 3, 2021, a complaint was filed against Matthew Levin by his former employer, ADP, Inc. (“ADP”), followed on May 5, 2021 by an application for a temporary restraining order and preliminary injunction in the United States District Court for the District of New Jersey (collectively, the “ADP Complaints”). The ADP Complaints allege that in beginning employment with the Company, Mr. Levin would be in violation of restrictive covenant agreements he entered into with ADP while he was employed as its Chief Strategy Officer. The ADP Complaints request, among other things, an injunction from the court barring Mr. Levin’s employment with the Company.
Following a hearing on May 25, 2021, the District Court denied ADP’s application for a temporary restraining order and preliminary injunction. One June 24, 2021, ADP filed an appeal with the U.S. Court of Appeals, Third Circuit. The litigation between ADP and Mr. Levin is ongoing. The Company continues to believe ADP’s claims are without merit and Mr. Levin will continue to vigorously defend himself against these actions.
Item 1A. RISK FACTORS.
There have been no material changes to the risk factors associated with our business previously disclosed in “Item 1A. Risk Factors”, in our Annual Report on Form 10-K, as amended for the period ended December 31, 2020.
33
Item 6. EXHIBITS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Incorporated by Reference (Unless Otherwise Indicated) |
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3.1.1 |
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10-Q |
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001-36061 |
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November 12, 2013 |
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8-K |
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3.1 |
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June 8, 2020 |
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3.1.3 |
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Certificate of Amendment of Restated Certificate of Incorporation of Benefitfocus, Inc., as amended. |
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8-K |
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001-36061 |
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3.1 |
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July 1, 2021 |
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3.2 |
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8-K |
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July 1, 2021 |
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10.1# |
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Employment Agreement, dated April 29, 2021, by and between Benefitfocus.com. and Matthew Levin. |
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8-K |
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001-36061 |
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10.1 |
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May 5, 2021 |
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10.2# |
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8-K |
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001-36061 |
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10.2 |
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May 5, 2021 |
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31.1 |
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Filed herewith |
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Filed herewith |
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32.1 |
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101.INS |
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Inline XBRL Instance Document – the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document. |
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Filed herewith |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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Filed herewith |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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Filed herewith |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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Filed herewith |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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Filed herewith |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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Filed herewith |
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34
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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Filed herewith |
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# Management contract or compensatory plan.
35
SIGNATURES
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 thereunto duly authorized.
Date: August 4, 2021
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Benefitfocus, Inc. |
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By: |
/s/ Alpana Wegner |
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Alpana Wegner |
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Chief Financial Officer |
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(Principal financial and accounting officer) |
36
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Matthew Levin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Benefitfocus, Inc. (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 4, 2021
/s/ Matthew Levin
Matthew Levin
President and Chief Executive Officer
(Principal executive officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Alpana Wegner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Benefitfocus, Inc. (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 4, 2021
/s/ Alpana Wegner
Alpana Wegner
Chief Financial Officer
(Principal financial and accounting officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Matthew Levin, President and Chief Executive Officer (principal executive officer) of Benefitfocus, Inc. (the “registrant”), and Alpana Wegner, Chief Financial Officer (principal financial and accounting officer) of the registrant, each hereby certifies that, to the best of their knowledge:
1. The registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2021, to which this Certification is attached as Exhibit 32.1 (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition of the registrant at the end of the period covered by the Report and results of operations of the registrant for the periods covered by the Report.
Date: August 4, 2021
/s/ Matthew Levin
Matthew Levin
President and Chief Executive Officer
(Principal executive officer)
/s/ Alpana Wegner
Alpana Wegner
Chief Financial Officer
(Principal financial and accounting officer)
Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement Of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 1,777,778 | 1,777,778 |
| Preferred stock, shares outstanding | 1,777,778 | 1,777,778 |
| Liquidation preference per share | $ 45 | $ 45 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 95,000,000 | 50,000,000 |
| Common stock, shares issued | 33,234,786 | 33,234,786 |
| Common stock, shares outstanding | 32,327,439 | 32,327,439 |
Unaudited Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Revenue | $ 60,904 | $ 62,174 | $ 125,967 | $ 128,328 |
| Cost of revenue | 28,030 | 30,397 | 56,623 | 64,309 |
| Gross profit | 32,874 | 31,777 | 69,344 | 64,019 |
| Operating expenses: | ||||
| Sales and marketing | 10,921 | 11,828 | 21,812 | 27,458 |
| Research and development | 11,103 | 11,045 | 21,935 | 22,813 |
| General and administrative | 17,574 | 9,381 | 27,436 | 19,896 |
| Restructuring costs | 2,727 | 5,616 | 4,127 | 5,616 |
| Total operating expenses | 42,325 | 37,870 | 75,310 | 75,783 |
| Loss from operations | (9,451) | (6,093) | (5,966) | (11,764) |
| Other income (expense): | ||||
| Interest income | 54 | 97 | 111 | 523 |
| Interest expense | (5,646) | (5,862) | (11,201) | (11,753) |
| Other income | 64 | 2 | 22 | 7 |
| Total other expense, net | (5,528) | (5,763) | (11,068) | (11,223) |
| Loss before income taxes | (14,979) | (11,856) | (17,034) | (22,987) |
| Income tax expense | 41 | 6 | 83 | 11 |
| Net loss | (15,020) | (11,862) | (17,117) | (22,998) |
| Preferred dividends | (1,600) | (462) | (3,200) | (462) |
| Net loss available to common stockholders | (16,620) | (12,324) | (20,317) | (23,460) |
| Comprehensive loss | $ (15,020) | $ (11,862) | $ (17,117) | $ (22,998) |
| Net loss per common share: | ||||
| Basic and diluted | $ (0.50) | $ (0.38) | $ (0.62) | $ (0.73) |
| Weighted-average common shares outstanding: | ||||
| Basic and diluted | 33,080,257 | 32,058,387 | 32,787,162 | 32,348,673 |
Organization and Description of Business |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
| Organization and Description of Business |
1. Organization and Description of Business Benefitfocus, Inc. (the “Company”) provides a leading cloud-based benefits management platform for consumers, employers, health plans (also known as insurance carriers) and brokers that is designed to simplify how organizations and individuals transact benefits. The financial statements of the Company include the financial position and operations of its wholly owned subsidiaries, Benefitfocus.com, Inc. and BenefitStore, Inc. |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies Principles of Consolidation These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation. The Company is not the primary beneficiary of, nor does it have a controlling financial interest in, any variable interest entity. Accordingly, the Company has not consolidated any variable interest entity. Interim Unaudited Consolidated Financial Information The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with GAAP as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information, and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations and comprehensive loss, financial position, changes in stockholders’ deficit and cash flows. The results of operations and comprehensive loss for the three- and six-month period ended June 30, 2021 are not necessarily indicative of the results for the full year or for any other future period. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as amended. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Such estimates include allowances for doubtful accounts and returns, valuations of deferred income taxes, long-lived assets, capitalizable software development costs and the related amortization, incremental borrowing rate used in lease accounting, the determination of the useful lives of assets, and the impairment assessment of acquired intangibles and goodwill. Additionally as described in revenue and deferred revenue below, estimates are utilized in association with revenue recognition, in particular the estimation of variable consideration using the expected value method from insurance broker commissions reported in Platform revenue. Determination of these transactions and account balances are based on, among other things, the Company’s estimates and judgments. These estimates are based on the Company’s knowledge of current events and actions it may undertake in the future as well as on various other assumptions that it believes to be reasonable. Actual results could differ materially from these estimates. Restructuring Costs During January 2021, the Company recorded restructuring costs of $1,400 from a reduction to its workforce. In June 2021, the Company recorded restructuring costs of $2,727 from the elimination of the office of the executive chairman of the board of directors. Restructuring costs are comprised of one-time severance charges, continuation of health benefits and outplacement services and are presented separately in operating expenses in the consolidated statements of operations and comprehensive loss. Revenue and Deferred Revenue The Company derives its revenue primarily from fees for subscription services and professional services sold to employers and health plans as well as platform revenue derived from the value of products sold on its platform. Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Taxes collected from customers relating to services and remitted to governmental authorities are excluded from revenue. The Company determines revenue recognition through the following steps:
Software Services Revenue Software services revenue consists of subscription revenue and platform revenue. Subscription Revenue Subscription revenue primarily consists of monthly or annual subscription fees paid to the Company by its employer and health plan customers for access to, and usage of, cloud-based benefits software solutions for a specified contract term. Fees are generally charged based on the number of employees or subscribers with access to the solution. Subscription services revenue is generally recognized on a ratable basis over the contract term beginning on the date the subscription services are made available to the customer. The Company’s subscription service contracts are generally three years. Subscription revenue also includes fees paid for other services, such as event sponsorships and certain data services. Platform Revenue Platform revenue is generated from the value of policies or products enrolled in through the Company’s marketplace. Platform revenue from insurance carriers is generally recognized over the policy period of the enrolled products. In arrangements where the Company sells policies to employees of its customers as the broker, it earns broker commissions. Revenue from insurance broker commissions and supplier transactions is recognized at a point in time when the orders for the policies are received and transferred to the insurance carrier or supplier, and is reduced by constraints for variable consideration associated with collectability, policy cancellation and termination risks. Professional Services Revenue Professional services revenue primarily consists of fees related to the implementation of software products purchased by customers. Professional services typically include discovery, configuration and deployment, integration, testing, and training. Fees from consulting services and support services are also included in professional services revenue. The Company determined that implementation services for certain of its health plan customers significantly modify or customize the software solution and, as such, do not represent a distinct performance obligation. Accordingly, revenue from such implementation services with these health plan customers are generally recognized over the contract term of the associated subscription services contract, including any extension periods representing a material right. In certain arrangements, the Company utilizes estimates of hours as a measure of progress to determine revenue. Revenue from implementation services with employer customers is generally recognized as those services are performed. Revenue from support and training fees is recognized over the service period. Contracts with Multiple Performance Obligations Certain of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are accounted for separately if they are distinct. The Company allocates the transaction price to the separate performance obligations based on their relative standalone selling prices. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the subscription services sold, customer size and complexity, and the number and types of users under the contracts. Contract Costs The Company capitalizes costs to obtain contracts that are considered incremental and recoverable, such as sales commissions. Payments of sales commissions generally include multiple payments. The Company capitalizes only those payments made within an insignificant time from the contract inception, typically three months or less. Subsequent payments are expensed as incurred. The capitalized costs are amortized to sales and marketing expense over the estimated period of benefit of the asset, which is generally four to five years. The Company expenses the costs to obtain a contract when the amortization period is less than one year. Deferred costs related to obtaining contracts are included in deferred contract costs and other non-current assets. The Company capitalizes contract fulfillment costs directly associated with customer contracts that are not related to satisfying performance obligations. The costs are amortized to cost of revenue expense over the estimated period of benefit, which is generally five years. Deferred fulfillment costs are included in deferred contract costs and other non-current assets. The following tables present information about deferred contract costs:
Marketable Securities Marketable securities consist of short-term investments in corporate bonds, commercial paper, and U.S. Treasury and agency bonds. To reflect its intention, the Company classifies its marketable securities as held-to-maturity at the time of purchase. As a result, the marketable securities are recorded at amortized cost and any gains or losses realized upon maturity are reported in other expense, net in the consolidated statements of operations and comprehensive loss. Debt securities classified as held-to-maturity are subject to the expected credit loss model prescribed under Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments”. The Company utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The Company measures expected credit losses on its held-to-maturity portfolio on a collective basis by major security type. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The Company’s credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as its portfolio. An adjustment factor is applied to these credit loss calculations based upon the Company’s assessment of the expected impact from current economic conditions on its investments. The Company monitors the credit quality of debt securities classified as held-to-maturity through the use of their respective credit rating and updates them on a quarterly basis. The allowance for credit losses is discussed in Note 5. Concentrations of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, marketable securities, and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The bank deposits of the Company might at times, exceed federally insured limits and are generally uninsured and uncollateralized. The Company has not experienced any losses on cash and cash equivalents to date. To manage credit risk related to marketable securities, the Company invests in various types of highly rated corporate bonds, commercial paper, and various United States backed securities with maturities of less than two years. The weighted average maturity of the portfolio of investments must not exceed nine months, per the Company’s investment policy. To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts. Accounts receivable are unsecured and derived from revenue earned from customers located in the United States. No customer exceeded 10% of accounts receivable as of June 30, 2021 and December 31, 2020. No customer exceeded 10% of total revenue in any of the three and six-month periods ended June 30, 2021 and 2020. Allowance for Doubtful Accounts The Company uses a current expected credit loss model. Accounts receivable and allowance for doubtful accounts are discussed in Note 6. Capitalized Software Development Costs The Company capitalizes certain costs related to its software developed or obtained for internal use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Internal and external costs incurred during the application development stage, including upgrades and enhancements representing modifications that will result in significant additional functionality, are capitalized. Software maintenance and training costs are expensed as incurred. Capitalized costs are recorded as part of property and equipment and are amortized on a straight-line basis to cost of revenue over the software’s estimated useful life, which is three years. The Company evaluates these assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The following tables present information about capitalized software development costs:
Leases The Company periodically enters into finance leases for property and equipment. The leasing arrangements for the Company’s office space at its headquarters campus are classified as finance leases. The Company also leases office space under operating leases. The Company determines if an arrangement is a lease at inception. Right of use, or ROU, assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent an obligation to make lease payments arising from the lease. Leases with a term of 12 months or less are not included in the recognized ROU assets and lease liabilities for all classes of assets. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Because the Company’s operating leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on information available at commencement date to determine the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives, or initial direct costs. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense. The Company has lease agreements which require payments for lease and non-lease components (e.g. common area maintenance and equipment maintenance) that are accounted for as a single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. Comprehensive Loss The Company’s net losses equal comprehensive losses for all periods presented. Presentation of the prior year comprehensive losses has been updated to reflect the exclusion of preferred dividends. Recently Adopted Accounting Standards On January 1, 2021, the Company adopted ASU No. 2019-12. The purpose of this ASU is to simplify various aspects related to accounting for income taxes, eliminate certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplify when companies recognize deferred taxes in an interim period, and clarify certain aspects of the current guidance to promote consistent application. ASU No. 2019-12 had no impact on the Company’s consolidated financial statements. Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It will be effective for the Company beginning January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact of the adoption of ASU 2020-06 on its consolidated financial statements, but anticipates that it will result in a reduction in non-cash interest expense related to its convertible senior notes. |
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Net Loss Per Common Share |
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| Net Loss Per Common Share |
3. Net Loss Per Common Share Diluted loss per common share is the same as basic loss per common share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. The following common share equivalent securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the periods presented:
Basic and diluted net loss per common share is calculated as follows:
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Fair Value Measurement |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurement |
4. Fair Value Measurement The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable and other accrued liabilities, and accrued compensation and benefits, approximate fair value due to their short-term nature. The carrying value of the Company’s financing obligations approximates fair value, considering the borrowing rates currently available to the Company with similar terms and credit risks. The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made. The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above categories, as of the periods presented.
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Marketable Securities |
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| Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities |
5. Marketable Securities Marketable securities consist of corporate bonds, commercial paper and U.S. Treasury and agency bonds, and are classified as held-to-maturity. All marketable securities had contractual maturities of less than one year as of June 30, 2021 and December 31, 2020. The following tables present information about the Company’s marketable securities by major security type.
The fair value of marketable securities in the Government major security type is classified as a Level 1 in the Company’s fair value hierarchy described in Note 4. The fair values of the remaining major security types are classified as Level 2. The Company invests in highly rated securities with maturities of two years or less at the time of purchase. Given the credit quality of the financial assets and the historical loss experience associated with their respective credit ratings as well as the duration of these financial assets and the short time horizon over which to consider expectations of future economic conditions, the Company has assessed that non-collection of the cost basis of these financial assets is remote. |
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Accounts receivable, Net |
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| Accounts Receivable, Net |
6. Accounts Receivable, net Accounts receivable, net include:
Accounts receivable are stated at their amortized cost adjusted for any write-offs and net allowances for returns. The Company estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. Expected credit losses are determined individually or collectively depending on whether the accounts receivable balances share similar risk characteristics. The allowance for doubtful accounts is the best estimate of the amount of expected credit losses related to existing accounts receivable. The Company does not have any off-balance sheet credit exposure related to its customers.
The allowances for returns are accounted for as reductions of revenue and are estimated based on the Company’s periodic assessment of historical experience and trends. The Company considers factors such as historical reasons for adjustments, service and delivery issues or delays, and past due customer billings. |
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Convertible Senior Notes |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Senior Notes |
7. Convertible Senior Notes In December 2018, the Company issued $240,000 aggregate principal amount of 1.25% convertible senior notes (“Notes”) due December 15, 2023, unless earlier repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2019. The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s unsecured indebtedness that is not subordinated; effectively junior in right of payment to any of the Company’s senior, secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. At issuance, the Notes had an initial conversion rate of 18.8076 shares of common stock per $1 principal amount of Notes, which represented an initial effective conversion price of approximately $53.17 per share of common stock and 4,513,824 shares issuable upon conversion. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited circumstances. Accrued but unpaid interest will be deemed to be paid by cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock paid or delivered, as the case may be, to the holder upon conversion of Notes. Prior to the close of business on September 14, 2023, the Notes will be convertible at the option of holders during certain periods, only upon satisfaction of certain conditions set forth below. On or after September 15, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion price at any time regardless of whether the conditions set forth below have been met. Holders may convert all or a portion of their Notes prior to the close of business on September 14, 2023, in multiples of $1 principal amount, only under the following circumstances:
As of June 30, 2021, the Notes were not convertible. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, the Company estimated the implied market interest rate of its Notes to be approximately 7.30%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component of the Notes, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $181,500 upon issuance, calculated as the present value of future contractual payments based on the $240,000 aggregate principal amount. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense over the term of the Notes. The $58,500 difference between the gross proceeds received from issuance of the Notes of $240,000 and the estimated fair value of the liability component represented the equity component of the Notes and was recorded in additional paid-in capital. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total amount incurred to the liability and equity components in proportion to the allocation of proceeds. Transaction costs attributable to the liability component, totaling $4,808, are being amortized to expense over the term of the Notes, and transaction costs attributable to the equity component, totaling $1,550, are included with the equity component in stockholders’ deficit.
The Notes consist of the following:
The following table sets forth total interest expense recognized related to the Notes:
As of June 30, 2021, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted price of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s Notes classified in equity) were as follows:
In connection with the issuance of the Notes, the Company entered into capped call transactions with certain counterparties affiliated with the initial purchasers and others. The capped call transactions are expected to reduce potential dilution of earnings per share upon conversion of the Notes. Under the capped call transactions, the Company purchased capped call options that in the aggregate relate to the total number of shares of the Company’s common stock underlying the Notes, with an initial strike price of approximately $53.17 per share, which corresponds to the initial conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, and have a cap price of approximately $89.98. The cost of the purchased capped calls of $33,024 was recorded to stockholders’ deficit and will not be re-measured provided it continues to meet the conditions for equity classification. In connection with the purchase of the Notes described above, the Company terminated a portion of the capped call transactions which resulted in an immaterial amount of payments to the Company in cash and common stock and was recorded in addition paid-in capital. Based on the closing price of our common stock of $14.10 on June 30, 2021, the last trading day of the quarter, the if-converted value of the Notes was less than the principal amount. |
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Revolving Line of Credit |
6 Months Ended |
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Jun. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| Revolving Line of Credit |
8. Revolving Line of Credit The Company entered into a credit facility with Silicon Valley Bank providing for a revolving line of credit agreement on March 3, 2020. This agreement replaced the Company’s previous agreement with Silicon Valley Bank, which expired on February 20, 2020. The agreement has a borrowing limit of $50,000, with the ability for the Company to increase it to up to $100,000. Interest is payable monthly. Advances under the agreement bear interest at (a) the higher of (i) the prime rate as published in the Wall Street Journal or (ii) the federal funds effective rate plus 0.50%, plus (b) an applicable margin ranging from (0.50%) to 0.50% based on the Company’s Average Daily Usage (“ADU”) of the credit facility in the preceding month. The Company also is charged for amounts unused under this arrangement at a rate ranging from 0.00% to 0.40% based on the Company’s ADU in the preceding month. Any outstanding principal is due at the end of the term. The obligations of the Company under the credit facility are secured by a first priority lien (subject to certain permitted liens) in substantially all of the personal property assets of the Company and its subsidiaries pursuant to the terms of a Guarantee and Collateral Agreement, dated March 3, 2020 and the other security documents. The credit facility requires the Company to maintain a Consolidated Adjusted Quick Ratio (“AQR”) of (i) Consolidated Quick Assets to (ii) Consolidated Current Liabilities minus the current portion of Deferred Revenue of at least 1.25 to 1.00 as of the last day of any fiscal quarter, and, if the AQR is less than 2.00 to 1.00, a Minimum Consolidated EBITDA of at least $1.00 for any such fiscal quarter calculated on a trailing 12 month basis. The Company has also agreed to fiscal year dollar limits on its capital expenditures. If an event of default occurs, the lender would be entitled to take various actions, including the acceleration of amounts due under the credit facility and all actions permitted to be taken by a secured creditor. There were no amounts outstanding under the Company’s revolving line of credit as of June 30, 2021 and December 31, 2020. The amount available to borrow was $50,000 and the interest rate was 2.75% as of June 30, 2021. No amounts were borrowed or repaid under the credit facility during the six months ended June 30, 2021. The Company borrowed and repaid $10,000 under the credit facility during the six months ended June 30, 2020. |
Commitments |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Commitments And Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| Commitments |
9. Commitments Supplemental cash flow information related to the Company’s operating and finance leases was as follows:
As of June 30, 2021, the Company had no additional significant operating or finance leases that had not yet commenced. In April 2021, the Company entered into a non-cancellable sublease agreement for part of one building on its headquarters campus. The sublease term expires May 31, 2028 and may be renewed at the option of the sublessee through November 30, 2031. Because market conditions and value have declined since the Company entered into its lease, in part due to the COVID-19 pandemic, payments to the Company under the sublease are less than its current obligation for the asset. Accordingly, the Company recorded an impairment loss of the financing lease ROU asset of $4,003 based on the excess of the carrying amount over the calculated fair value of the sublease. This impairment expense was included in operating expenses in the Company’s consolidated statements of operations and comprehensive loss for the period ended June 30, 2021.
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Redeemable Preferred Stock |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Equity [Abstract] | |
| Redeemable Preferred Stock |
10. Redeemable Preferred Stock On June 4, 2020, the Company issued and sold 1,777,778 shares of its newly created series of preferred stock, par value of $0.001 per share, designated as “Series A Convertible Preferred Stock” (the “Preferred Stock”) to BuildGroup LLC (the “Buyer”) at a purchase price of $45 per share, resulting in total gross proceeds for the Company of approximately $80,000. A member of the Company’s Board of Directors is the Chief Executive Officer of the Buyer. The Buyer also has a second representative on the Board. The Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Each share of the Preferred Stock has an initial stated value of $45 per share. Holders of shares of the Preferred Stock are entitled to a dividend equal to 8.00% per annum (the “Regular Dividends”), payable quarterly, beginning on June 30, 2020. The Regular Dividends are payable in cash or in kind, at the Company’s option. In the event a Regular Dividend is paid in kind, the stated value of each share of the Preferred Stock will be increased by an amount equal to the accrued Regular Dividend not paid in cash. As of June 30, 2021, the Company had paid all dividends on the Preferred Stock in cash. Holders of the Preferred Stock are also entitled to participate in and receive any dividends declared or paid on the common stock on an as-converted basis, and no dividends may be paid to holders of the common stock unless full participating dividends are concurrently paid to the holders of the Preferred Stock. Each holder of the Preferred Stock has the right, at its option, to convert its shares of the Preferred Stock, in whole or in part, into fully paid and non-assessable shares of the common stock, at any time and from time to time. The number of shares of the common stock into which a share of the Preferred Stock will convert at any time is equal to the quotient obtained by dividing its stated value then in effect plus any accumulated and unpaid Regular Dividends by its conversion price of $15.00. The conversion price is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events. At closing, before payment of any dividends in kind, the 1,777,778 shares of the Preferred Stock were convertible into 5,333,334 shares of common stock. The Company may, at its option, redeem the outstanding shares of the Preferred Stock following the fourth anniversary of its issuance. Redemption by the Company is subject to certain liquidity conditions as well conditions connected with the trading price of its common stock. Upon redemption by the Company, the Company will pay the holder of the Preferred Stock 105% of the initial stated value of such share plus any increase in the stated value from the initial stated value plus accumulated and unpaid Regular Dividends. If the Company undergoes a change of control as defined in the purchase agreement, the Company must redeem all of the then-outstanding shares of the Preferred Stock for cash consideration equal to the greater of the amount due for redemption as described above and the amount such holder of shares of the Preferred Stock would have received in respect of the number of shares of the Common Stock that would be issuable upon conversion of such share of the Preferred Stock. Unless and until approval of the Company’s stockholders is obtained as contemplated by the NASDAQ listing rules, no holder of the Preferred Stock may convert shares of the Preferred Stock into shares of common stock if and to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of the then-outstanding shares of the common stock. As long as not less than 60% of the shares of the Preferred Stock originally issued remain outstanding, the holders of a majority of the then-outstanding shares of the Preferred Stock, voting together as a single class, have the right at any election of directors to elect two directors if the Board consists of nine or fewer directors or three directors if the Board consists of 10 directors. At any time, such elected director(s) may be removed with or without cause only by the affirmative vote or written consent of a majority of the holders of the Preferred Stock entitled to elect such director. Holders of the Preferred Stock generally are entitled to vote with the holders of the shares of the common stock on all matters submitted for a vote of holders of shares of the common stock (voting together with the holders of shares of the common stock as one class) on an as-converted basis, subject to a limitation of ownership of 19.9% of common stock. Additionally, certain matters require the approval of the holders of a majority of the outstanding shares of the Preferred Stock, voting as a separate class. The Buyer is subject to limitations while it holds at least 10% of the Preferred Stock originally purchased. Furthermore, until the earliest of May 30, 2024 and receipt of a notice of redemption, the Buyer cannot sell, transfer or otherwise dispose of the shares of the Preferred Stock or the underlying shares of the common stock, subject to limited exceptions that include exceptions in the case of transfers to certain permitted transferees. For so long as the Buyer and its affiliates collectively hold at least 60% of the shares of the Preferred Stock originally purchased by it or the common stock issuable upon conversion thereof, the Company will pay the Buyer a fee of $400 for the first year following closing and $200 per year thereafter. These management and oversight fees are expensed over the period incurred. In the period of issuance, the Company incurred $807 in issuance costs related to the sale of the Preferred Stock, including $150 of reimbursement to the Buyer for reasonable fees and out-of-pocket expenses incurred by the Buyer in connection with the transaction. The issuance costs were netted against the proceeds from this transaction. |
Stock-based Compensation |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
| Stock-based Compensation |
11. Stock-based Compensation Restricted Stock Units During the six months ended June 30, 2021, the Company granted 1,406,984 restricted stock units, or RSUs, to employees and officers with an aggregate grant date fair value of $19,583. These RSUs generally vest in equal annual installments over various periods ranging from three to four years from the grant date, subject to continued service to the Company. The Company amortizes the grant date fair value of the stock subject to the RSUs on a straight-line basis over the period of vesting. The weighted-average vesting period for these RSUs is approximately 3.98 years from the date of grant. The Company granted 699,504 performance RSUs with an aggregate grant date fair value of $9,693 during the six months ended June 30, 2021. The aggregate grant date fair value of the performance RSUs assuming target achievement was $7,349. The number of performance RSUs that will vest will be determined upon the achievement of certain financial targets for 2021, and vesting will then occur in equal annual installments over various periods ranging from less than one year to up to four years from the grant date. The actual number of shares issued upon vesting could range between 0% and 100% of the number of awards granted. The grant date fair value of the stock subject to the performance RSUs is amortized to expense on an accelerated basis over the period of vesting. The weighted-average vesting period for these performance RSUs is approximately 3.15 years from the date of grant. In May 2021, the Company granted 106,640 performance RSUs with an aggregate derived fair value of $1,069. The performance RSUs vest in a single installment if the Company’s closing stock price is at least $23.00 for a period of 20 consecutive trading days occurring after the second anniversary of the grant and prior to the fifth anniversary of the grant. If this price-based requirement is met before the third anniversary of the grant date, then the performance RSUs will vest on the third anniversary of the grant date subject to continued service to the Company. If this price-based requirement is met after the third anniversary but prior to the fifth anniversary of the grant date, then the performance RSUs will vest on the date the price requirement is met subject to continued service to the Company. The Company will amortize the aggregate derived fair value of the stock subject to the performance RSUs on a straight-line basis over the derived service period of 2.30 years from the date of grant. |
Stockholders' Deficit |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||
| Stockholders' Deficit |
12. Stockholders’ Deficit Common Stock The holders of common stock are entitled to one vote for each share. The voting, dividend and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers and preferences of the holders of preferred stock. At June 30, 2021, the Company had reserved a total of 11,111,633 of its authorized 95,000,000 shares of common stock for future issuance as follows:
At the Company’s annual meeting of stockholders held in June 2021, the stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, as amended to increase the total number of authorized shares of common stock reserved for issuance thereunder from 50,000,000 to 95,000,000 shares.
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Revenue |
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| Revenue From Contract With Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue |
13. Revenue Disaggregation of Revenue The following tables provide information about disaggregation of revenue by service line:
Contract Balances The following table provides information about contract assets and contract liabilities from contracts with customers:
The Company recognizes payments from customers based on contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are recognized as revenue when earned under the contract. The Company had no asset impairment charges related to contract assets during the six months ended June 30, 2021 and 2020. During the three and six months ended June 30, 2021, there were no significant changes in the contract assets outside of standard revenue and billing activity. Revenue recognized during the three and six months ended June 30, 2021 that was included in the deferred revenue balance at the beginning of the period was $13,168 and $20,608, respectively. The Company recorded favorable adjustments to revenue arising from performance obligations satisfied or partially satisfied in previous periods of $576 and $2,104 during the three and six months ended June 30, 2021, respectively. Performance Obligations As of June 30, 2021, the aggregate amount of the Company’s performance obligations that are unsatisfied or partially unsatisfied were approximately $210,000, of which a majority are expected to be satisfied within the next three years. The Company excludes from its population of performance obligations contracts with original durations of one year or less, contract renewal periods that renew automatically, and amounts of variable consideration that are allocated to wholly unsatisfied distinct service that forms part of a single performance obligation and meets certain variable allocation criteria. |
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Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
14. Income Taxes The Company’s effective tax rate for the six months ended June 30, 2021 was less than one percent, primarily as a result of estimated tax losses for the fiscal year-to-date offset by the increase in the valuation allowance in the net operating loss carryforwards. Current tax expense relates to estimated state income taxes and indefinite life intangibles. The limitation on the utilization of net operating losses in the indefinite life period is limited to 80% of taxable income because of provisions in the Tax Cuts and Jobs Act. |
Segments and Geographic Information |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Segment Reporting [Abstract] | |
| Segments and Geographic Information |
15. Segments and Geographic Information The Company views its operations and manages its business as one operating segment. Segment information matches the consolidated financial information for the current period and prior periods reported. |
Related Parties |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| Related Parties |
16. Related Parties Series A Preferred Stock As described in Note 10, the Company sold 1,777,778 shares of Preferred Stock to an entity whose Chief Executive Officer is a member of the Company’s Board of Directors. The Company paid dividends of $1,600 and $462 to the buyer for the three months ended June 30, 2021 and 2020, respectively and $3,200 and $462 for the six months ended June 30, 2021 and 2020, respectively. Additionally, the Company paid management oversight fees of $86 and $186 to the Buyer for the three and six months ended June 30, 2021, respectively. There were no management oversight fees paid in the three and six months ended June 30, 2020. In connection with this transaction, the Company reimbursed the Buyer $150 for fees incurred in closing the sale of the Preferred Stock in June 2020. The significant terms of the Preferred Stock are described in Note 10. Leasing Arrangements The Company leases its office space at its Charleston, South Carolina headquarters campus under the terms of three non-cancellable leases from entities affiliated with a former executive who was also a Company director and significant stockholder. The Company’s headquarter campus building leases are accounted for as financing lease ROU assets and lease liabilities on the Consolidated Balance Sheet as of June 30, 2021. The lease agreements have 15-year terms ending on December 31, 2031, with Company options to renew for five additional years. The arrangements provide for 3.0% fixed annual rent increases. Payments under these agreements were $574 and $2,573 for the three months ended June 30, 2021 and 2020, respectively and $1,241 and $9,931 for the six months ended June 30, 2021 and 2020, respectively. In the six months ended June 30, 2020, the Company prepaid rent in the amount of $3,993 for periods during the first half of 2021, representing an approximately 17% discount on the amounts due. Other amounts due to these related parties were $334 and $667 as of June 30, 2021 and December 31, 2020, respectively, and were recorded in “Accrued expenses”. Other Related Party Expenses The Company utilizes the services of various companies that are owned and controlled by a former executive who was also a Company director and significant stockholder. The companies provide construction project management services, private air transportation and other services. Expenses related to these companies were $18 and $7 for the three months ended June 30, 2021 and 2020, respectively and $37 and $127 for the six months ended June 30, 2021 and 2020, respectively. Amounts due to these companies were de minimus as of June 30, 2021 and December 31, 2020. The Company purchased software and services from a company affiliated with a Company director. Payments related to this agreement were $27 and $25 for the three months ended June 30, 2021 and 2020, respectively and $53 and $51 for the six months ended June 30, 2021 and 2020, respectively. Amounts due to this company were $28 and de minimus as of June 30, 2021 and December 31, 2020, respectively. |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
17. Subsequent Events Restricted Stock Units During July 2021, the Company granted approximately 126,417 RSUs with an aggregate grant date fair value of approximately $1,791. These RSUs generally vest in equal annual installments over various periods ranging from one to four years from the grant date. Common Stock During July and August 2021, RSUs vested resulting in the issuance of approximately 111,502 shares of the Company’s common stock.
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation |
Principles of Consolidation These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation. The Company is not the primary beneficiary of, nor does it have a controlling financial interest in, any variable interest entity. Accordingly, the Company has not consolidated any variable interest entity. |
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| Interim Unaudited Consolidated Financial Information |
Interim Unaudited Consolidated Financial Information The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with GAAP as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information, and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations and comprehensive loss, financial position, changes in stockholders’ deficit and cash flows. The results of operations and comprehensive loss for the three- and six-month period ended June 30, 2021 are not necessarily indicative of the results for the full year or for any other future period. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as amended. |
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| Use of Estimates |
Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Such estimates include allowances for doubtful accounts and returns, valuations of deferred income taxes, long-lived assets, capitalizable software development costs and the related amortization, incremental borrowing rate used in lease accounting, the determination of the useful lives of assets, and the impairment assessment of acquired intangibles and goodwill. Additionally as described in revenue and deferred revenue below, estimates are utilized in association with revenue recognition, in particular the estimation of variable consideration using the expected value method from insurance broker commissions reported in Platform revenue. Determination of these transactions and account balances are based on, among other things, the Company’s estimates and judgments. These estimates are based on the Company’s knowledge of current events and actions it may undertake in the future as well as on various other assumptions that it believes to be reasonable. Actual results could differ materially from these estimates. |
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| Restructuring Cost |
Restructuring Costs During January 2021, the Company recorded restructuring costs of $1,400 from a reduction to its workforce. In June 2021, the Company recorded restructuring costs of $2,727 from the elimination of the office of the executive chairman of the board of directors. Restructuring costs are comprised of one-time severance charges, continuation of health benefits and outplacement services and are presented separately in operating expenses in the consolidated statements of operations and comprehensive loss. |
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| Revenue and Deferred Revenue |
Revenue and Deferred Revenue The Company derives its revenue primarily from fees for subscription services and professional services sold to employers and health plans as well as platform revenue derived from the value of products sold on its platform. Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Taxes collected from customers relating to services and remitted to governmental authorities are excluded from revenue. The Company determines revenue recognition through the following steps:
Software Services Revenue Software services revenue consists of subscription revenue and platform revenue. Subscription Revenue Subscription revenue primarily consists of monthly or annual subscription fees paid to the Company by its employer and health plan customers for access to, and usage of, cloud-based benefits software solutions for a specified contract term. Fees are generally charged based on the number of employees or subscribers with access to the solution. Subscription services revenue is generally recognized on a ratable basis over the contract term beginning on the date the subscription services are made available to the customer. The Company’s subscription service contracts are generally three years. Subscription revenue also includes fees paid for other services, such as event sponsorships and certain data services. Platform Revenue Platform revenue is generated from the value of policies or products enrolled in through the Company’s marketplace. Platform revenue from insurance carriers is generally recognized over the policy period of the enrolled products. In arrangements where the Company sells policies to employees of its customers as the broker, it earns broker commissions. Revenue from insurance broker commissions and supplier transactions is recognized at a point in time when the orders for the policies are received and transferred to the insurance carrier or supplier, and is reduced by constraints for variable consideration associated with collectability, policy cancellation and termination risks. Professional Services Revenue Professional services revenue primarily consists of fees related to the implementation of software products purchased by customers. Professional services typically include discovery, configuration and deployment, integration, testing, and training. Fees from consulting services and support services are also included in professional services revenue. The Company determined that implementation services for certain of its health plan customers significantly modify or customize the software solution and, as such, do not represent a distinct performance obligation. Accordingly, revenue from such implementation services with these health plan customers are generally recognized over the contract term of the associated subscription services contract, including any extension periods representing a material right. In certain arrangements, the Company utilizes estimates of hours as a measure of progress to determine revenue. Revenue from implementation services with employer customers is generally recognized as those services are performed. Revenue from support and training fees is recognized over the service period. Contracts with Multiple Performance Obligations Certain of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are accounted for separately if they are distinct. The Company allocates the transaction price to the separate performance obligations based on their relative standalone selling prices. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the subscription services sold, customer size and complexity, and the number and types of users under the contracts. |
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| Contract Costs |
Contract Costs The Company capitalizes costs to obtain contracts that are considered incremental and recoverable, such as sales commissions. Payments of sales commissions generally include multiple payments. The Company capitalizes only those payments made within an insignificant time from the contract inception, typically three months or less. Subsequent payments are expensed as incurred. The capitalized costs are amortized to sales and marketing expense over the estimated period of benefit of the asset, which is generally four to five years. The Company expenses the costs to obtain a contract when the amortization period is less than one year. Deferred costs related to obtaining contracts are included in deferred contract costs and other non-current assets. The Company capitalizes contract fulfillment costs directly associated with customer contracts that are not related to satisfying performance obligations. The costs are amortized to cost of revenue expense over the estimated period of benefit, which is generally five years. Deferred fulfillment costs are included in deferred contract costs and other non-current assets. The following tables present information about deferred contract costs:
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| Marketable Securities |
Marketable Securities Marketable securities consist of short-term investments in corporate bonds, commercial paper, and U.S. Treasury and agency bonds. To reflect its intention, the Company classifies its marketable securities as held-to-maturity at the time of purchase. As a result, the marketable securities are recorded at amortized cost and any gains or losses realized upon maturity are reported in other expense, net in the consolidated statements of operations and comprehensive loss. Debt securities classified as held-to-maturity are subject to the expected credit loss model prescribed under Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments”. The Company utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The Company measures expected credit losses on its held-to-maturity portfolio on a collective basis by major security type. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The Company’s credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as its portfolio. An adjustment factor is applied to these credit loss calculations based upon the Company’s assessment of the expected impact from current economic conditions on its investments. The Company monitors the credit quality of debt securities classified as held-to-maturity through the use of their respective credit rating and updates them on a quarterly basis. The allowance for credit losses is discussed in Note 5. |
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| Concentrations of Credit Risk |
Concentrations of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, marketable securities, and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The bank deposits of the Company might at times, exceed federally insured limits and are generally uninsured and uncollateralized. The Company has not experienced any losses on cash and cash equivalents to date. To manage credit risk related to marketable securities, the Company invests in various types of highly rated corporate bonds, commercial paper, and various United States backed securities with maturities of less than two years. The weighted average maturity of the portfolio of investments must not exceed nine months, per the Company’s investment policy. To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts. Accounts receivable are unsecured and derived from revenue earned from customers located in the United States. No customer exceeded 10% of accounts receivable as of June 30, 2021 and December 31, 2020. No customer exceeded 10% of total revenue in any of the three and six-month periods ended June 30, 2021 and 2020. |
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| Allowance for Doubtful Accounts |
Allowance for Doubtful Accounts The Company uses a current expected credit loss model. Accounts receivable and allowance for doubtful accounts are discussed in Note 6. |
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| Capitalized Software Development Costs |
Capitalized Software Development Costs The Company capitalizes certain costs related to its software developed or obtained for internal use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Internal and external costs incurred during the application development stage, including upgrades and enhancements representing modifications that will result in significant additional functionality, are capitalized. Software maintenance and training costs are expensed as incurred. Capitalized costs are recorded as part of property and equipment and are amortized on a straight-line basis to cost of revenue over the software’s estimated useful life, which is three years. The Company evaluates these assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The following tables present information about capitalized software development costs:
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| Leases |
Leases The Company periodically enters into finance leases for property and equipment. The leasing arrangements for the Company’s office space at its headquarters campus are classified as finance leases. The Company also leases office space under operating leases. The Company determines if an arrangement is a lease at inception. Right of use, or ROU, assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent an obligation to make lease payments arising from the lease. Leases with a term of 12 months or less are not included in the recognized ROU assets and lease liabilities for all classes of assets. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Because the Company’s operating leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on information available at commencement date to determine the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives, or initial direct costs. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense. The Company has lease agreements which require payments for lease and non-lease components (e.g. common area maintenance and equipment maintenance) that are accounted for as a single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. |
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| Comprehensive Loss |
Comprehensive Loss The Company’s net losses equal comprehensive losses for all periods presented. Presentation of the prior year comprehensive losses has been updated to reflect the exclusion of preferred dividends. |
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| Recently Adopted Accounting Standards |
Recently Adopted Accounting Standards On January 1, 2021, the Company adopted ASU No. 2019-12. The purpose of this ASU is to simplify various aspects related to accounting for income taxes, eliminate certain exceptions to the general principles in ASC Topic 740 related to intra-period tax allocation, simplify when companies recognize deferred taxes in an interim period, and clarify certain aspects of the current guidance to promote consistent application. ASU No. 2019-12 had no impact on the Company’s consolidated financial statements. |
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| Accounting Standards Not Yet Adopted |
Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. It will be effective for the Company beginning January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact of the adoption of ASU 2020-06 on its consolidated financial statements, but anticipates that it will result in a reduction in non-cash interest expense related to its convertible senior notes. |
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Summary Of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Contract Costs |
The following tables present information about deferred contract costs:
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| Schedule of Capitalized Software Development Costs |
The following tables present information about capitalized software development costs:
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Net Loss Per Common Share (Tables) |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Share Equivalent Securities Excluded from Calculation of Weighted-Average Common Shares Outstanding |
The following common share equivalent securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the periods presented:
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| Basic and Diluted Net Loss per Common Share |
Basic and diluted net loss per common share is calculated as follows:
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Fair Value Measurement (Tables) |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets and Liabilities Measured at Fair Value on Recurring Basis |
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above categories, as of the periods presented.
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Marketable Securities (Tables) |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Marketable Securities |
Marketable securities consist of corporate bonds, commercial paper and U.S. Treasury and agency bonds, and are classified as held-to-maturity. All marketable securities had contractual maturities of less than one year as of June 30, 2021 and December 31, 2020. The following tables present information about the Company’s marketable securities by major security type.
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Accounts receivable, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Account Receivable, Net |
Accounts receivable, net include:
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| Schedule of Allowance for Doubtful Accounts |
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Convertible Senior Notes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Notes |
The Notes consist of the following:
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| Summary of Recognized Interest Expense |
The following table sets forth total interest expense recognized related to the Notes:
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| Schedule of Fair Value and Carrying Value of Convertible Senior Notes |
As of June 30, 2021, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted price of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s Notes classified in equity) were as follows:
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Commitments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of Supplemental Cash Flow Information Related to Operating and Finance Leases | Supplemental cash flow information related to the Company’s operating and finance leases was as follows:
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Stockholders' Deficit (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||
| Shares of Common Stock Reserved for Future Issuance | At June 30, 2021, the Company had reserved a total of 11,111,633 of its authorized 95,000,000 shares of common stock for future issuance as follows:
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Revenue (Tables) |
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| Revenue From Contract With Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Disaggregation of Revenue by Service Line with Reportable Segments |
The following tables provide information about disaggregation of revenue by service line:
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| Summary of Contract Assets and Contract Liabilities |
The following table provides information about contract assets and contract liabilities from contracts with customers:
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Schedule of Deferred Contract Costs (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Condensed Income Statements Captions [Line Items] | |||||
| Deferred contract costs and other non-current assets | $ 9,011 | $ 9,011 | $ 10,259 | ||
| Sales and Marketing Expense | |||||
| Condensed Income Statements Captions [Line Items] | |||||
| Deferred contract costs and other non-current assets | 4,775 | 4,775 | 5,624 | ||
| Costs to obtain contracts included in sales and marketing expense | 778 | $ 831 | 1,523 | $ 1,712 | |
| Cost of Revenue | |||||
| Condensed Income Statements Captions [Line Items] | |||||
| Deferred contract costs and other non-current assets | 3,268 | 3,268 | $ 3,639 | ||
| Costs to obtain contracts included in sales and marketing expense | $ 339 | $ 307 | $ 690 | $ 682 | |
Schedule of Capitalized Software Development Costs (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Accounting Policies [Abstract] | |||||
| Capitalized | $ 1,991 | $ 3,100 | $ 3,739 | $ 6,572 | |
| Amortized | 2,159 | $ 1,727 | 4,321 | $ 3,246 | |
| Net book value | $ 17,360 | $ 17,360 | $ 17,942 | ||
Basic and Diluted Net Loss per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2020 |
|
| Numerator: | |||||||
| Net loss | $ (15,020) | $ (2,097) | $ (11,862) | $ (11,136) | $ (17,117) | $ (22,998) | $ (22,998) |
| Preferred dividends | (1,600) | (462) | (3,200) | (462) | (462) | ||
| Net loss available to common stockholders | $ (16,620) | $ (12,324) | $ (20,317) | $ (23,460) | $ (23,460) | ||
| Denominator: | |||||||
| Basic and diluted | 33,080,257 | 32,058,387 | 32,787,162 | 32,348,673 | 32,348,673 | ||
| Basic and diluted | $ (0.50) | $ (0.38) | $ (0.62) | $ (0.73) | $ (0.73) | ||
Schedule of Marketable Securities (Detail) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Marketable Securities [Line Items] | ||
| Amortized cost | $ 95,107 | $ 95,085 |
| Allowance for credit losses | 0 | 0 |
| Net carrying amount | 95,107 | 95,085 |
| Gross unrealized gains | 4 | 6 |
| Gross unrealized losses | 0 | (5) |
| Fair value | 95,111 | 95,086 |
| Industrial | ||
| Marketable Securities [Line Items] | ||
| Amortized cost | 4,538 | 8,993 |
| Allowance for credit losses | 0 | 0 |
| Net carrying amount | 4,538 | 8,993 |
| Gross unrealized gains | 0 | 0 |
| Gross unrealized losses | 0 | 0 |
| Fair value | 4,538 | 8,993 |
| Financial | ||
| Marketable Securities [Line Items] | ||
| Amortized cost | 60,487 | 55,943 |
| Allowance for credit losses | 0 | 0 |
| Net carrying amount | 60,487 | 55,943 |
| Gross unrealized gains | 2 | 0 |
| Gross unrealized losses | 0 | (5) |
| Fair value | 60,489 | 55,938 |
| Government | ||
| Marketable Securities [Line Items] | ||
| Amortized cost | 30,082 | 30,149 |
| Allowance for credit losses | 0 | 0 |
| Net carrying amount | 30,082 | 30,149 |
| Gross unrealized gains | 2 | 6 |
| Gross unrealized losses | 0 | 0 |
| Fair value | $ 30,084 | $ 30,155 |
Summary of Account Receivable, Net (Detail) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|---|---|
| Accounts Receivable Net [Abstract] | ||||
| Accounts receivable | $ 24,125 | $ 26,791 | ||
| Less: Allowance for doubtful accounts | (218) | (200) | $ (298) | $ (155) |
| Less: Allowance for returns | (3,021) | (4,351) | ||
| Total accounts receivable, net | $ 20,886 | $ 22,240 |
Schedule of Allowance for Doubtful Accounts (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Accounts Receivable Net [Abstract] | ||
| Beginning of period | $ 200 | $ 155 |
| Provision for credit losses | 44 | 187 |
| Write-offs and recoveries | (26) | (44) |
| End of period | $ 218 | $ 298 |
Convertible Senior Notes - Additional Information (Detail) |
6 Months Ended | 12 Months Ended |
|---|---|---|
|
Jun. 30, 2021
USD ($)
shares
Day
$ / shares
|
Dec. 31, 2018
USD ($)
|
|
| Common Stock | ||
| Debt Instrument [Line Items] | ||
| Closing price of our common stock | $ / shares | $ 14.10 | |
| 1.25% Convertible Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, aggregate principal amount | $ 240,000 | $ 240,000 |
| Debt instrument, interest rate | 1.25% | |
| Debt instrument, maturity date | Dec. 15, 2023 | |
| Initial effective conversion price of debt instrument | $ / shares | $ 1 | |
| Consecutive trading period | Day | 5 | |
| Interest rate conversion notes | 7.30% | |
| Fair value of the liability conversion notes | $ 181,500 | |
| Gross proceeds received from issuance of the notes | 240,000 | |
| Difference between gross proceeds received from issuance of the notes and estimated fair value of notes | 58,500 | |
| Transaction costs attributable to the liability component | 4,808 | |
| Transaction costs attributable to the equity component | $ 1,550 | |
| 1.25% Convertible Senior Notes | Call Option | ||
| Debt Instrument [Line Items] | ||
| Initial strike price | $ / shares | 53.17 | |
| Cap price | $ / shares | 89.98 | |
| Purchase of convertible note capped call hedge | $ 33,024 | |
| 1.25% Convertible Senior Notes | Maximum | ||
| Debt Instrument [Line Items] | ||
| Conversion price percentage | 1.30 | |
| Percent of Senior notes Principal amount to trigger Conversion as product of stock price and conversion rate | 98.00% | |
| 1.25% Convertible Senior Notes | Common Stock | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, conversion ratio | 18.8076 | |
| Initial effective conversion price of debt instrument | $ / shares | $ 53.17 | |
| Number shares issuable upon conversion | shares | 4,513,824 |
Schedule of Convertible Notes (Detail) - 1.25% Convertible Senior Notes - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Debt Instrument [Line Items] | ||
| Principal | $ 221,250 | $ 221,250 |
| Less: Debt discount, net of amortization | (31,161) | (36,942) |
| Net carrying amount | 190,089 | 184,308 |
| Equity component (a) | $ 56,539 | $ 56,539 |
Schedule of Convertible Notes (Parenthetical) (Detail) - 1.25% Convertible Senior Notes |
Jun. 30, 2021
USD ($)
|
|---|---|
| Debt Instrument [Line Items] | |
| Transaction costs attributable to the equity component | $ 1,550 |
| Additional Paid-in Capital | |
| Debt Instrument [Line Items] | |
| Transaction costs attributable to the equity component | $ 1,550,000 |
Summary of Recognized Interest Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Debt Instrument [Line Items] | ||||
| Total | $ 5,646 | $ 5,862 | $ 11,201 | $ 11,753 |
| 1.25% Convertible Senior Notes | ||||
| Debt Instrument [Line Items] | ||||
| 1.25% coupon | 692 | 750 | 1,383 | 1,500 |
| Amortization of debt discount and transaction costs | 2,912 | 2,970 | 5,780 | 5,894 |
| Total | $ 3,604 | $ 3,720 | $ 7,163 | $ 7,394 |
Schedule of Fair Value and Carrying Value of Convertible Senior Notes (Detail) - 1.25% Convertible Senior Notes - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Fair Value | $ 209,583 | $ 192,587 |
| Carrying Value | $ 190,089 | $ 184,308 |
Revolving Line of Credit - Additional Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | ||
|---|---|---|---|
Mar. 03, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Line Of Credit Facility [Line Items] | |||
| Payments on revolving line of credit | $ 0 | $ 10,000 | |
| Revolving Line of Credit Agreement | |||
| Line Of Credit Facility [Line Items] | |||
| Amount outstanding under credit facility | 0 | ||
| Line of credit facility current borrowing capacity available | $ 50,000 | ||
| Interest rate | 2.75% | ||
| Payments on revolving line of credit | $ 0 | $ 10,000 | |
| Revolving Line of Credit Agreement | Silicon Valley Bank | |||
| Line Of Credit Facility [Line Items] | |||
| Line of credit facility expiration date | Feb. 20, 2020 | ||
| Line of credit facility, expiration period | 3 years | ||
| Line of credit facility current maximum borrowing capacity | $ 50,000 | ||
| Line of credit facility expanded maximum borrowing capacity | $ 100,000 | ||
| Description of customary representations and warranties and restrictive covenants | Company to maintain a Consolidated Adjusted Quick Ratio (“AQR”) of (i) Consolidated Quick Assets to (ii) Consolidated Current Liabilities minus the current portion of Deferred Revenue of at least 1.25 to 1.00 as of the last day of any fiscal quarter, and, if the AQR is less than 2.00 to 1.00, a Minimum Consolidated EBITDA of at least $1.00 for any such fiscal quarter calculated on a trailing 12 month basis. The Company has also agreed to fiscal year dollar limits on its capital expenditures. | ||
| Federal funds effective rate plus | 0.50% | ||
| Revolving Line of Credit Agreement | Silicon Valley Bank | Minimum | |||
| Line Of Credit Facility [Line Items] | |||
| Interest rate margin to be added on prime rate | (0.50%) | ||
| Line of credit facility, unused capacity, commitment fee percentage | 0.00% | ||
| Adjusted Quick Ratio | 1.25 | ||
| EBITDA | 1.00 | ||
| Revolving Line of Credit Agreement | Silicon Valley Bank | Maximum | |||
| Line Of Credit Facility [Line Items] | |||
| Interest rate margin to be added on prime rate | 0.50% | ||
| Line of credit facility, unused capacity, commitment fee percentage | 0.40% | ||
| Adjusted Quick Ratio | 2.00 | ||
Schedule of Supplemental Cash Flow Information Related to Operating and Finance Leases (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Commitments And Contingencies Disclosure [Abstract] | ||
| Financing cash flows from finance leases | $ 2,558 | $ 3,993 |
| Operating cash flows from finance leases | 721 | |
| Operating cash flows from operating leases | 240 | |
| ROU Assets Obtained in Exchange for New Lease Obligations | ||
| Finance lease liabilities | 15 | |
| Operating lease liabilities | $ 0 | |
Commitments - Additional Information (Details) $ in Thousands |
1 Months Ended |
|---|---|
|
Apr. 30, 2021
USD ($)
Building
| |
| Commitments And Contingencies Disclosure [Abstract] | |
| Extended leases, expiration date | May 31, 2028 |
| Number of buildings leased | Building | 1 |
| Finance lease, impairment loss | $ | $ 4,003 |
Redeemable Preferred Stock - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 04, 2020 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Schedule Of Stockholders Equity [Line Items] | ||||
| Preferred stock, shares issued | 1,777,778 | 1,777,778 | ||
| Preferred stock, par value | $ 45 | |||
| Preferred stock,dividend rate | 8.00% | |||
| Preferred stock,intial stated value | 105.00% | |||
| Shares will beneficially own in excess of shares of Common Stock outstanding. | 19.90% | |||
| Common stock shares ownership | 19.90% | |||
| Percentage of hold shares of preferred stock originally purchased. | 10.00% | |||
| Preferred Stock | ||||
| Schedule Of Stockholders Equity [Line Items] | ||||
| Buyer and its affiliates descriptions | For so long as the Buyer and its affiliates collectively hold at least 60% of the shares of the Preferred Stock originally purchased by it or the common stock issuable upon conversion thereof, the Company will pay the Buyer a fee of $400 for the first year following closing and $200 per year thereafter. These management and oversight fees are expensed over the period incurred. | |||
| Minimum holding percentage of preferred stock | 60.00% | |||
| Conversion of stock, amount fee | $ 400 | |||
| Conversion of stock amount, thereafter | 200 | |||
| Issuance costs related to sale of stock | 807 | |||
| Additional reimbursed reasonable fees | $ 150 | |||
| Maximum | ||||
| Schedule Of Stockholders Equity [Line Items] | ||||
| Preferred stock,originally issued remain outstanding | 60.00% | |||
| Series A Preferred Stock | ||||
| Schedule Of Stockholders Equity [Line Items] | ||||
| Preferred stock, shares issued | 1,777,778 | |||
| Preferred stock, par value | $ 0.001 | |||
| Preferred stock,purchase price per share | $ 45 | |||
| Total gross proceeds | $ 80,000 | |||
| Preferred stock shares converted into common stock shares | 5,333,334 | |||
| Conversion of Preferred Stock | ||||
| Schedule Of Stockholders Equity [Line Items] | ||||
| Initial effective conversion price of debt instrument | $ 15.00 | |||
| Preferred stock shares converted into common stock shares | 5,333,334 |
Stock-Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Thousands |
1 Months Ended | 6 Months Ended |
|---|---|---|
|
May 31, 2021
USD ($)
shares
|
Jun. 30, 2021
USD ($)
Day
$ / shares
shares
|
|
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Debt instrument consecutive trading days | Day | 20 | |
| Restricted Stock Units (RSUs) | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Number of restricted stock units, granted | shares | 1,406,984 | |
| Restricted stock units, aggregate grant date fair value | $ 19,583 | |
| Stock plan vesting period | 3 years 11 months 23 days | |
| Restricted Stock Units (RSUs) | Minimum | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock plan vesting period | 3 years | |
| Restricted Stock Units (RSUs) | Maximum | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock plan vesting period | 4 years | |
| Performance Based Restricted Stock Units R S Us | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Number of restricted stock units, granted | shares | 106,640 | 699,504 |
| Restricted stock units, aggregate grant date fair value | $ 1,069 | $ 9,693 |
| Restricted stock units, aggregate grant date fair value assuming target achievement | $ 7,349 | |
| Weighted average vesting period | 3 years 1 month 24 days | |
| Stock plan, expense amortizing period | 2 years 3 months 18 days | |
| Performance Based Restricted Stock Units R S Us | Minimum | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock plan vesting period | 1 year | |
| Shares issued vesting percentage | 0.00% | |
| Closing price of our common stock | $ / shares | $ 23.00 | |
| Performance Based Restricted Stock Units R S Us | Maximum | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock plan vesting period | 4 years | |
| Shares issued vesting percentage | 100.00% |
Stockholders' Deficit - Additional Information (Detail) - shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Stockholders Equity Note [Abstract] | ||
| Common stock, authorized shares reserved for future issuance | 11,111,633 | |
| Common stock, shares authorized | 95,000,000 | 50,000,000 |
Common Stock for Future Issuance (Detail) |
Jun. 30, 2021
shares
|
|---|---|
| Class Of Stock [Line Items] | |
| Outstanding stock options | 97,553 |
| Restricted stock units | 3,351,575 |
| Total common shares reserved for future issuance | 11,111,633 |
| Series A Preferred Stock | |
| Class Of Stock [Line Items] | |
| Preferred stock shares converted into common stock shares | 5,333,334 |
| Stock Award Plans | |
| Class Of Stock [Line Items] | |
| Common stock available for future issuance | 2,235,423 |
| ESPP | |
| Class Of Stock [Line Items] | |
| Common stock available for future issuance | 93,748 |
Summary of Disaggregation of Revenue by Service Line with Reportable Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Disaggregation Of Revenue [Line Items] | ||||
| Revenue | $ 60,904 | $ 62,174 | $ 125,967 | $ 128,328 |
| Subscription | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Revenue | 44,347 | 43,780 | 89,926 | 89,770 |
| Platform | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Revenue | 5,875 | 6,128 | 13,644 | 12,133 |
| Total Software Services | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Revenue | 50,222 | 49,908 | 103,570 | 101,903 |
| Professional Services | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Revenue | $ 10,682 | $ 12,266 | $ 22,397 | $ 26,425 |
Summary of Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|---|---|
| Revenue From Contract With Customer [Abstract] | ||||
| Contract assets | $ 9,722 | $ 15,105 | $ 9,704 | $ 16,685 |
| Contract liabilities: | ||||
| Deferred revenue | $ 31,589 | $ 32,204 | $ 35,658 | $ 38,508 |
Revenue - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |
|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Revenue From Contract With Customer [Abstract] | |||
| Asset impairment charges related to contract assets | $ 0 | $ 0 | |
| Changes in the contract assets outside of standard revenue and billing activity | $ 0 | 0 | |
| Revenue recognized included in deferred revenue beginning balance | 13,168,000 | 20,608,000 | |
| Favorable adjustments to revenue arising from performance obligations satisfied or partially satisfied in previous periods | 576,000 | 2,104,000 | |
| Aggregate amount of unsatisfied or partially unsatisfied performance obligations | $ 210,000,000 | $ 210,000,000 | |
Revenue - Additional Information (Detail1) |
Jun. 30, 2021 |
|---|---|
| Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01 | |
| Disaggregation Of Revenue [Line Items] | |
| Performance obligations expected satisfaction period | 3 years |
Income Taxes - Additional Information (Detail) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Income Taxes [Line Items] | |
| Percentage of taxable income on utilization of net operating loss in indefinite life period | 80.00% |
| Maximum | |
| Income Taxes [Line Items] | |
| Effective tax rate | 1.00% |
Segments and Geographic Information - Additional Information (Detail) |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
Segment
| |
| Segment Reporting [Abstract] | |
| Number of Operating Segments | 1 |
Related Parties - Additional Information (Detail) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Apr. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Related Party Transaction [Line Items] | ||||||||
| Dividends on preferred stock | $ 1,600 | $ 1,600 | $ 462 | |||||
| Extended leases, expiration date | May 31, 2028 | |||||||
| Lease operating expenses | 574 | 2,573 | $ 1,241 | $ 9,931 | ||||
| Payment for future rent due in the first half of 2021 | 2,558 | $ 3,993 | ||||||
| Due to related party, current | $ 334 | 334 | 334 | $ 667 | ||||
| Prepaid rent discount rate | 17.00% | |||||||
| Stockholders and Executives | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Service from related party | 18 | 7 | 37 | $ 127 | ||||
| Company Director | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Due to related party, current | $ 28 | 28 | 28 | |||||
| Service from related party | $ 27 | 25 | $ 53 | 51 | ||||
| Related Party Leasing Arrangements | Non-Cancellable Leases | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Lease renewal option term | 5 years | 5 years | 5 years | |||||
| Lessee operating lease term of contract | 15 years | 15 years | 15 years | |||||
| Extended leases, expiration date | Dec. 31, 2031 | |||||||
| Percentage of fixed annual rent increases | 3.00% | |||||||
| Series A Preferred Stock | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Issuance of series A preferred stock for cash, net of issuance costs (in shares) | 1,777,778 | |||||||
| Dividends on preferred stock | $ 1,600 | 462 | $ 3,200 | 462 | ||||
| Management and oversight fees | $ 86 | $ 0 | $ 186 | $ 0 | ||||
| Temporary equity stock issuance fees | $ 150 | |||||||
Subsequent Events - Additional Information (Detail) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Aug. 31, 2021 |
Jul. 31, 2021 |
May 31, 2021 |
Apr. 30, 2021 |
Jun. 30, 2021 |
|
| Subsequent Event [Line Items] | |||||
| Lease expiration date | May 31, 2028 | ||||
| Subsequent Event | |||||
| Subsequent Event [Line Items] | |||||
| Issuance of common stock upon exercises of stock option and vesting of restricted stock units | 111,502 | 111,502 | |||
| Performance Based Restricted Stock Units R S Us | |||||
| Subsequent Event [Line Items] | |||||
| Number of restricted stock units, granted | 106,640 | 699,504 | |||
| Restricted stock units, aggregate grant date fair value | $ 1,069 | $ 9,693 | |||
| Restricted stock units, aggregate grant date fair value assuming target achievement | $ 7,349 | ||||
| Weighted average vesting period | 3 years 1 month 24 days | ||||
| Performance Based Restricted Stock Units R S Us | Minimum | |||||
| Subsequent Event [Line Items] | |||||
| Shares issued vesting percentage | 0.00% | ||||
| Stock plan vesting period | 1 year | ||||
| Performance Based Restricted Stock Units R S Us | Maximum | |||||
| Subsequent Event [Line Items] | |||||
| Shares issued vesting percentage | 100.00% | ||||
| Stock plan vesting period | 4 years | ||||
| Restricted Stock Units (RSUs) | |||||
| Subsequent Event [Line Items] | |||||
| Number of restricted stock units, granted | 1,406,984 | ||||
| Restricted stock units, aggregate grant date fair value | $ 19,583 | ||||
| Stock plan vesting period | 3 years 11 months 23 days | ||||
| Restricted Stock Units (RSUs) | Subsequent Event | |||||
| Subsequent Event [Line Items] | |||||
| Number of restricted stock units, granted | 126,417 | ||||
| Restricted stock units, aggregate grant date fair value | $ 1,791 | ||||
| Restricted Stock Units (RSUs) | Minimum | |||||
| Subsequent Event [Line Items] | |||||
| Stock plan vesting period | 3 years | ||||
| Restricted Stock Units (RSUs) | Minimum | Subsequent Event | |||||
| Subsequent Event [Line Items] | |||||
| Stock plan vesting period | 1 year | ||||
| Restricted Stock Units (RSUs) | Maximum | |||||
| Subsequent Event [Line Items] | |||||
| Stock plan vesting period | 4 years | ||||
| Restricted Stock Units (RSUs) | Maximum | Subsequent Event | |||||
| Subsequent Event [Line Items] | |||||
| Stock plan vesting period | 4 years | ||||