Brookfield-based Connecture Inc. has received another cash infusion led by Francisco Partners, this time for $17.5 million.
[caption id="attachment_142740" align="alignright" width="300"] Surges[/caption]
The health insurance marketplace software developer will use the investment to move forward with its 2017 operating plan and expand its Private Exchange, Enterprise Commercial and Medicare businesses.
In May, Connecture received a $52 million equity investment from San Francisco-based Francisco Partners and Chrysalis Ventures.
The newest investment is from Francisco Partners IV LP, Francisco Partners IV-A LP and Chrysalis Ventures II LP. Connecture has issued 17,500 shares of series B convertible preferred stock to the investors. Francisco Partners now holds about 56 percent of Connecture’s outstanding securities and has the right to designate a proportional share of the board.
As part of the investment agreement, the Connecture board has been expanded from seven to eight directors. The new director will be chosen by Francisco Partners.
Connecture also reported its fourth quarter and full-year results late Tuesday.
The company reported a net loss of $6.2 million in the fourth quarter, or 32 cents lost per share, compared with net income of $4.3 million, or 19 cents per share, in the fourth quarter of 2015.
Revenue totaled $20.9 million in the fourth quarter, down from $29.1 million in the same period the prior year.
Connecture’s fourth quarter operating loss was $5.3 million, compared with operating income of $5.9 million in the fourth quarter of 2015.
For the full year, Connecture reported a net loss of $26.5 million, compared with a net loss of $7.3 million in 2015.
Full-year revenue totaled $81.9 million, down from $95.8 million in the prior year.
Connecture’s 2016 operating loss was $20.9 million, compared with an operating loss of $1.5 million in 2015.
The company plans to exit the Enterprise State segment, which had just one remaining customer as of Dec. 31. It also has hired a new chief financial officer, Vincent Estrada, effective Jan. 1. And it renegotiated a credit agreement to provide about $2.5 million in additional liquidity for 2017.
Earlier this month, BizTimes reported on the shareholder pushback Connecture has received as it has turned in less than stellar earnings reports. One of those shareholders, Dr. Jeffrey Jay, senior managing member of Great Point Partners LLC, which owns about 18.5 percent of the company, last month wrote a letter to Jeffrey Surges, chief executive officer of Connecture, criticizing his management of the company and asking him to review its strategic options, such as splitting Connecture into two companies, selling the company, cutting costs significantly or partnering its commercial enterprise business. The board of directors also received the letter, according to an SEC filing by GPP.
“The fourth quarter of 2016 capped a year of challenges and transitions for the company,” Surges said. “On the positive side, we added notable new logos to our customer base, enabled our clients to experience another successful open and annual enrollment period, and empowered over 20 million Americans to make smarter purchase decisions regarding their health insurance and drug benefits. However, the uncertain political status of the Affordable Care Act and proposed health plan merger activity created market headwinds, which impacted our growth expectations. Additionally, our profitability significantly suffered from greater than expected resources required to support certain customers through the 2016 enrollment period and disappointing volume in our variable revenue arrangements. To address the issues impacting our financial results, we implemented substantial cost reductions in the fourth quarter, which are expected to meaningfully improve our financial performance beginning in 2017. With a new leadership team, a laser focus on achieving profitability through an emphasis on fixing our pricing and cost structure, and an expected improvement in the general market conditions, we expect to build upon our customer successes while also improving our financial performance.”