Mercer Takes 10% Stake In Benefitfocus, Invests $75 Million In Company

Global health investment and consulting firm Mercer is taking a 9.9% stake and making a nearly $75 million investment in Daniel Island-based Benefitfocus.

Mercer's stake expands its commercial relationship with Benefitfocus. Mercer purchased common stock at $26.50 per share for about $74.7 million in cash. The company has an option to grow its stake in the cloud-based benefits software company over time.

Benefitfocus CEO Shawn Jenkins "We are proud of our efforts that have helped position the Mercer marketplace as one of the largest broker-led private exchanges in the country," Benefitfocus CEO Shawn Jenkins said during a fourth quarter earnings call Tuesday. "We are excited by the significant expansion of our relationship with Mercer and look forward to partnering with them to drive additional growth on the Mercer marketplace in years ahead."

The 800-employee benefits firm founded in 2000 in Mount Pleasant provides software benefits products to employers and insurance carriers who then offer it to their employees and customers. Employees use Benefitfocus platforms to compare, sign-up for and manage their medical and life insurance benefits.

Amid revenue growth, Benefitfocus is expanding its Daniel Island campus, most recently with the opening of its 145,800-square-foot Customer Success Center last week. The new, four-story building houses 500 employees with plans to accommodate 250 more new hires.

During the earnings call, Benefitfocus reported a net loss of $13.7 million for the fourth quarter, compared to an $8.3 million loss during the same time in 2013. Full-year losses were $63.2 million.

Total revenue was $40.2 million in the fourth quarter, up 33% from the same time in 2013. Full-year 2014 revenue increased 31% from the year prior to $137.4 million.

Of that, software revenue was $36.1 million, up 28%; professional services revenue was $4.1 million, up 107%; and employer revenue was $19.5 million, up 47% from the fourth quarter in 2013.

"Benefitfocus delivered a strong fourth quarter performance that capped a record year for the company," Jenkins said.

Benefitfocus ended 2014 with 533 large-employer customers, up from 393 in 2013, and 43 insurance carrier customers, up from 40 in 2013. During the fourth quarter, the state of Delaware, Capella Education Co., Lane Construction Co., Summerwood Corp., Omnicell Inc. and Schneider Electric signed on as employer customers.

"We delivered a number of exciting achievements in 2014, such as supporting dozens of private exchanges, including the nation's largest; adding 160 new large employer customers; and successfully graduating our first class of third-party systems integrators," Jenkins said.

Looking ahead to 2015, Jenkins said the company is focused "on enhancing our marketplace solutions and creating the first significant upsell opportunity in our employer market with the introduction of several new product offerings."