Notes from the Benefitfocus S-1 IPO Filing

Benefitfocus, a technology-enabled business services company in Charleston, SC, just filed their S-1 to go public. I enjoy reading these documents from technology companies due to all the detailed information. In this case, it’s especially interesting as the company is based in the Southeast, which doesn’t happen that often.

Here are some notes on the Benefitfocus S-1 IPO filing:

• Provider of cloud-based benefits software solutions for consumers, employers, insurance carriers, and brokers (pg. 1)
• Two target markets: insurance companies and employers with over 1,000 employees (pg. 1)
• 823 employees (pg. 2)
• Employer benefits (pg. 2):
  – Simplify benefits enrollment
  – Transition to defined contribution benefits model
  – Reduce cost and increase ROI
  – Attract, retain, and motivate employees
  – Streamline HR processes
  – Integrate seamlessly with other related systems
• Revenue (pg. 8):
  – 2010 – $67.1M
  – 2011 – $68.8M
  – 2012 – $81.7M
  – 2013 1H – $48.2M
• Losses (pg. 8):
  – 2010 – $2.4M
  – 2011 – $14.9M
  – 2012 – $14.7M
  – 2013 1H – $15.2M
• Average sales cycle for employers is four months and for insurance carriers is 15 months (pg. 18)
• 10 largest customers account for 58.6% of revenue in 2012 (pg. 16)
• Benefitfocus is a controlled subsidiary of The Goldman Sachs Group (pg. 29)
• Accumulated deficit of $186.5M (pg. 41)
• Goldman Sachs spent $105.7M in 2007 to buy what is now 66% of the business (pg. 124)
• Oak Investment Partners bought $30M of equity from the two founders in 2010 representing 11.5% of the business (pg. 124)
• The two founders own the Benefitfocus headquarters building and had the company sign a 15 year lease with an aggregate of $47.8M in lease payments (pg. 126)
• Executive Chairman owns a jet charter business and Benefitfocus spent $400,000 on chartered jets through it over the past three years (pg. 126)
• The two founders own roughly 13% each of the company (pg. 131)

This is the popular Software-as-a-Service story: fast growth, high gross margins, and a big market. I believe the stock will do well and the public markets are happy to fund massive losses as long as growth is there. I’m looking forward to watching Benefitfocus go public.

What else? What are your thoughts on the Benefitfocus S-1 IPO filing?