Benefytt (BFYT) Financial Report Summaries

Risks

• Risks Relating to Our Business and Industry
• The marketing and distribution of Medicare plans are subject to numerous, complex and frequently changing laws and regulations, and non-compliance or changes in laws and regulations could harm our business, operating results and financial condition.
• Our ability to enroll individuals during open enrollment periods will materially affect our business.
• Our business practices and the business practices of our third-party licensed distributors and carriers are currently being reviewed by various state insurance regulators and the results of such reviews may adversely affect our business and results of operations.
• Our exploration of strategic alternatives may not be successful.
• The market for health insurance in the United States is rapidly evolving, which makes it difficult to forecast demand for our products.
• Changes and developments in the health insurance system in the United States, in particular Healthcare Reform, could harm our business.
• A substantial portion of our business is concentrated in a small number of carriers, and such concentration could make our business more vulnerable to adverse changes in our relationships with carriers.
• Our business may be harmed if we lose our relationship with health insurance carriers whose Medicare-related health insurance products we distribute or if our relationship with those carriers changes.
• Our business could be harmed if we lose our relationships with independent distributors, fail to maintain good relationships with independent distributors, become dependent upon a limited number of third-party distributors or fail to develop new relationships with third-party distributors.
• We depend on relationships with third-parties for certain services that are important to our business. An interruption or cessation of such services by any third-party could have a material adverse effect on our business.
• If we or our independent distributors fail to comply with the numerous laws and regulations that are applicable to our business, our business and results of operations could be harmed.
• Changes in the quality and affordability of the health insurance plans and products that insurance carriers offer to us for sale through our technology platform could harm our business and results of operations.
• If individuals or insurance carriers opt for more traditional or alternative channels for the purchase and sale of health insurance, our business could be harmed.
• Any legal liability, regulatory penalties, or negative publicity for the information on our platform or that we otherwise distribute or provide could likely harm our business and results of operations.
• Short-term limited duration health insurance ("STLDI") plans have come under increasing scrutiny by certain members of Congress and other members of legislative bodies. This scrutiny may result in actions that have the effect of reducing our revenue or harming our business or reputation.
• Advance commission arrangements between us and some of our third-party distributors could expose us to the credit risks of such distributors, which could in turn have an adverse effect on our business, financial condition, and results of operations.
• Seasonality could cause fluctuations in our financial results.
• If we are unable to successfully introduce new technology solutions or services or fail to keep pace with advances in technology, our business, financial condition and results of operations could be adversely affected.
• Our failure to obtain, maintain and enforce the intellectual property rights on which our business depends, could have a material adverse effect on our business, financial condition and results of operations.
• Assertions by third-parties that we violate their intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
• We are subject to privacy and data protection laws governing the transmission, security and privacy of health information, which may impose restrictions on the manner in which we access personal data and subject us to penalties if we are unable to fully comply with such laws.
• Our business is subject to online security risks, and if we are unable to safeguard the security and privacy of confidential data, our reputation and business could be harmed.
• Our services present the potential for embezzlement, identity theft or other similar illegal behavior by our employees or subcontractors with respect to third-parties.
• System failures or capacity constraints could harm our business and results of operations.
• Our acquisitions and other strategic transactions may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.
• We may not be able to successfully recognize anticipated synergies between TogetherHealth and the Company or retain key TogetherHealth employees.
• Our business may be harmed if we are not successful in executing on our strategic investments and initiatives.
• Our business may be harmed if we do not market Medicare plans effectively or if our marketing materials are not timely approved.
• Our reinsurance subsidiary is highly regulated, and changes in these regulations could negatively affect our business.
• If actual losses exceed our estimated loss reserves, our net income and capital position will be reduced.
• The requirements of being a public company impose costs and demands upon our management, which could make it difficult to manage our business.
• The implementation by us of the new revenue recognition standard on December 31, 2018 (ASC 606) required substantial preparation and expenditures, and our failure to properly implement this standard could result in inaccurate revenue recognition and disclosure and cause us to fail to meet our financial reporting obligations.
• Our operating results will be impacted by factors that impact our estimate of the constrained lifetime value of commissions revenue per approved member.
• The restrictions and obligations under our credit agreement could impact our business and expose us to risks that could affect our liquidity and financial condition.
• Risks Related to Our Structure
• We are a holding company and our only material asset is our interest in HPIH and, accordingly, we are dependent upon distributions from HPIH to pay taxes and other expenses.
• We will be required to pay the holders of Series B Membership Interests of HPIH most of the tax benefits that we may receive as a result of any future exchanges of Series B Membership Interests for our Class A common stock and payments made under the tax receivable agreement itself, and the amounts we pay could be substantial.
• We may not be able to realize all or a portion of the tax benefits that are expected to result from future exchanges of Series B Membership Interests for our Class A common stock and payments made under the tax receivable agreement itself.
• Risks Related to Ownership of Our Class A Common Stock
• We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the purchase price.
• The market price of our Class A common stock could decline due to future sales, or expected sales, of converted shares of Class A common stock, whether upon the exchange of Series B Membership Interests by our founder and largest stockholder or upon exercise of stock appreciation rights granted to employees and directors.
• Our share price may be adversely affected by short sellers and other third-parties who raise questions about the Company.
• We are currently subject to securities lawsuits and we may be subject to similar or other litigation in the future, which may divert management's attention and have a material adverse effect on our business, financial condition and results of operations.
• Some provisions of Delaware law, our amended and restated certificate of incorporation and amended and restated bylaws may deter third-parties from acquiring us.
• We do not anticipate paying any cash dividends in the foreseeable future.
• Our internal control over financial reporting may not be effective in the future, and our independent registered public accounting firm may not be able to certify as to its effectiveness, which could have a significant and adverse effect on our business and reputation.