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May 3, 2018

Benefitfocus Announces First Quarter 2018 Financial Results

Total revenue of $62.4 million grew 8% year-over-year                         

CHARLESTON, S.C., May 03, 2018 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading cloud-based benefits management platform and services provider, today announced its first quarter 2018 financial results.

“I am extremely pleased with Benefitfocus’ accelerated financial momentum, as we achieved our key financial goals during the first quarter,” said Ray August, President and Chief Executive Officer of Benefitfocus.  “2018 and our selling season are off to a solid start.”

August added, “The launch of BenefitsPlace will open new opportunities across our platform and help position Benefitfocus as the technology choice to connect the benefits industry. As we focus on our business strategy, improve our sales execution, and strengthen the core of our operations, we believe our revenue opportunities will continue to expand, along with long-term value for our shareholders.”

First Quarter 2018 Financial Highlights

The prior periods presented have been adjusted to reflect the adoption of the new ASC 606 revenue recognition standard.

Revenue

  • Total revenue was $62.4 million, an increase of 8% compared to the first quarter of 2017.

  • Software services revenue was $48.2 million, an increase of 4% compared to the first quarter of 2017.

  • Professional services revenue was $14.2 million, an increase of 28% compared to the first quarter of 2017.

  • Employer revenue was $40.3 million, an increase of 12% compared to the first quarter of 2017.

  • Insurance carrier revenue was $22.1 million, an increase of 1% compared to the first quarter of 2017.

Net Loss

  • GAAP net loss was ($13.8) million, compared to ($15.6) million in the first quarter of 2017. GAAP net loss per share was ($0.44), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.51) for the first quarter of 2017, based on 30.7 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($8.0) million, compared to ($11.1) million in the first quarter of 2017. Non-GAAP net loss per share was ($0.26), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.36) for the first quarter of 2017, based on 30.7 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was ($1.0) million, compared to ($4.3) million in the first quarter of 2017.

See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.

Balance Sheet

  • Cash and cash equivalents at March 31, 2018 totaled $54.8 million, compared to $55.3 million at the end of the fourth quarter of 2017. 

First Quarter and Recent Business Highlights

  • We ended the quarter with 948 large employer customers, up from 853 at the end of the prior year period, and 920 at the end of the fourth quarter of 2017.

  • We had record attendance at our 8th annual One Place user conference in Orlando, Florida and announced enhancements to the Benefitfocus Platform.   

  • We launched Benefitfocus BenefitsPlace™, a new offering designed to connect the entire U.S. employee benefits industry, uniting brokers, employers, carriers and suppliers on a single platform. BenefitsPlace opens the Benefitfocus platform to create buyer-seller opportunities, provide greater access and choice of benefits, and deliver decision-support tools to consumers for more personalized, informed and hassle-free benefits enrollment and management.

  • We opened a new office in New York City as part of an expansion effort to broaden Benefitfocus’ operations in the key Northeast region of the United States.

  • We published our “State of Employee Benefits 2018 - Regional Edition” report, a snapshot of real, but anonymized employee benefits election data from over 1.2 million consumers.

Business Outlook

Based on information available as of May 3, 2018, Benefitfocus is providing guidance for the second quarter and full year 2018 as indicated below. Our guidance is based on the new ASC 606 revenue recognition standard that is effective beginning January 1, 2018.

Second Quarter 2018:

  • Total revenue is expected to be in the range of $55.5 million to $57.5 million.

  • Non-GAAP net loss is expected to be in the range of ($14.0) million to ($12.0) million, or ($0.44) to ($0.38) per share, based on 31.8 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of ($7.0) million to ($5.0) million.

Full Year 2018:

  • Total revenue is expected to be in the range of $250.0 million to $258.0 million.

  • Non-GAAP net loss is expected to be in the range of ($25.0) million to ($17.0) million, or ($0.79) to ($0.54) per share, based on 31.8 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $5.0 million to $13.0 million.

See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, May 3, 2018, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9039 (domestic) or (201) 689-8470 (international). A live webcast, as well as the replay, of the conference call will be available on the Investor Relations page of the company’s website at http://investor.benefitfocus.com/. After the conference call, a replay will be available until May 10, 2018, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13678853.

Investor Presentation Details

An investor presentation providing additional information on the ASC 605 to ASC 606 accounting change can be found at http://investor.benefitfocus.com

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) provides technology and services that improve the way employers of all sizes manage their benefits investment. Through a combination of powerful cloud-based software, data-driven insights and thoughtfully-designed services, we provide employers, their brokers and insurance carriers with a single partner to deliver a world-class benefits experience. Learn more at www.benefitfocus.com, LinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating income (loss), net loss, net loss per common share, adjusted EBITDA, and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. 

Non-GAAP gross profit, operating income (loss), net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering costs expensed, if any and costs not core to our business, if any.  We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense, expense related to the impairment of goodwill and intangible assets, and costs not core to our business.  We define free cash flow as cash from operations plus purchases of property and equipment.  Please note that other companies might define their non-GAAP financial measures differently than we do.

Management presents these non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company’s future earnings discussions and, therefore, their inclusion should provide consistency in the company’s financial reporting.

Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release, including in the accompanying tables.

Safe Harbor Statement

Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include: our continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; risks related to changing healthcare and other applicable regulations; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; cyber-security risks;  the immature and volatile market for our products and services; the need to innovate and provide useful products and services; our ability to compete effectively; privacy, security and other risks associated with our business; and the other risk factors set forth from time to time in our SEC filings,  copies of which are available free of charge within the Investor Relations section of the Benefitfocus website at http://investor.benefitfocus.com/sec-filings or upon request from our Investor Relations Department. Benefitfocus assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Source: Benefitfocus, Inc.

 
Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss 
(in thousands, except share and per share data) 
   
    Three Months Ended  
March 31,
    2018     2017  
Revenue   $ 62,363     $ 57,623  
Cost of revenue (1)(2)     31,403       32,202  
Gross profit     30,960       25,421  
Operating expenses:(1)(2)                
Sales and marketing     19,917       18,023  
Research and development     12,023       12,181  
General and administrative     9,693       7,757  
Total operating expenses     41,633       37,961  
Loss from operations     (10,673 )     (12,540 )
Other income (expense):                
Interest income     58       27  
Interest expense on building lease financing obligations     (1,866 )     (1,860 )
Interest expense on other borrowings     (1,317 )     (1,062 )
Other expense           (148 )
Total other expense, net     (3,125 )     (3,043 )
Loss before income taxes     (13,798 )     (15,583 )
Income tax expense     4        
Net loss   $ (13,802 )   $ (15,583 )
Comprehensive loss   $ (13,802 )   $ (15,583 )
                 
Net loss per common share:                
Basic and diluted   $ (0.44 )   $ (0.51 )
Weighted-average common shares outstanding:                
Basic and diluted     31,333,348       30,658,468  
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue   $ 711     $ 661  
Sales and marketing     954       1,332  
Research and development     768       719  
General and administrative     1,892       1,676  
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue   $ 34     $ 36  
Sales and marketing     14       13  
Research and development     12       12  
General and administrative     4       3  
                 


                 
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets 
(in thousands, except share and per share data) 
   
    As of     As of  
March 31, December 31,
2018 2017
Assets                
Current assets:                
Cash and cash equivalents   $ 54,785     $ 55,335  
Accounts receivable, net     29,678       30,091  
Contract, prepaid and other current assets     15,077       15,859  
Total current assets     99,540       101,285  
Property and equipment, net     71,233       72,681  
Intangible assets, net     86       150  
Goodwill     1,634       1,634  
Deferred contract costs and other non-current assets     15,262       16,253  
Total assets   $ 187,755     $ 192,003  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 5,557     $ 4,260  
Accrued expenses     10,599       9,110  
Accrued compensation and benefits     11,288       14,250  
Deferred revenue, current portion     36,167       43,804  
Revolving line of credit, current portion     24,000       24,000  
Financing and capital lease obligations, current portion     3,716       3,423  
Total current liabilities     91,327       98,847  
Deferred revenue, net of current portion     16,733       11,223  
Revolving line of credit, net of current portion     39,246       32,246  
Financing and capital lease obligations, net of current portion     55,724       55,597  
Other non-current liabilities     2,699       2,809  
Total liabilities     205,729       200,722  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized,            
  no shares issued and outstanding at March 31, 2018
  and December 31, 2017
Common stock, par value $0.001, 50,000,000 shares authorized,     31       31  
  31,339,469 and 31,307,989 shares issued and outstanding
  at March 31, 2018 and December 31, 2017, respectively
Additional paid-in capital     357,043       352,496  
Accumulated deficit     (375,048 )     (361,246 )
Total stockholders' deficit     (17,974 )     (8,719 )
Total liabilities and stockholders' deficit   $ 187,755     $ 192,003  
   


                 
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows 
(in thousands) 
   
    Three Months Ended  
March 31,
    2018     2017  
Cash flows from operating activities                
Net loss   $ (13,802 )   $ (15,583 )
Adjustments to reconcile net loss to net cash and cash                
  equivalents used in operating activities:
Depreciation and amortization     3,930       4,005  
Stock-based compensation expense     4,325       4,388  
Interest accrual on financing obligation     1,879       1,873  
Loss on disposal or impairment of property and equipment           148  
Provision for doubtful accounts     359       22  
Changes in operating assets and liabilities:                
 Accounts receivable, net     54       5,654  
 Accrued interest on short-term investments           7  
 Contract, prepaid and other current assets     881       1,092  
 Deferred contract costs and other non-current assets     1,166       1,945  
 Accounts payable and accrued expenses     2,722       (1,039 )
 Accrued compensation and benefits     (2,962 )     (6,593 )
 Deferred revenue     (2,127 )     (3,110 )
 Other non-current liabilities     (108 )     (222 )
Net cash and cash equivalents used in operating activities     (3,683 )     (7,413 )
Cash flows from investing activities                
Proceeds from maturity of short-term investments held to maturity           2,000  
Purchases of property and equipment     (1,641 )     (2,103 )
Net cash and cash equivalents used in investing activities     (1,641 )     (103 )
Cash flows from financing activities                
Draws on revolving line of credit     31,000       28,000  
Payments on revolving line of credit     (24,000 )     (20,000 )
Proceeds from exercises of stock options and ESPP     222       2,454  
Payments on financing and capital lease obligations     (2,448 )     (2,120 )
Net cash and cash equivalents provided by financing activities     4,774       8,334  
Net (decrease) increase in cash and cash equivalents     (550 )     818  
Cash and cash equivalents, beginning of period     55,335       56,853  
Cash and cash equivalents, end of period   $ 54,785     $ 57,671  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 452     $ 200  
Property and equipment purchased with financing and capital lease obligations   $ 713     $  
Post contract support purchased with financing obligations   $ 275     $  
 


                 
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures 
(in thousands, except share and per share data) 
   
    Three Months Ended  
March 31,
    2018     2017  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit   $ 30,960     $ 25,421  
Amortization of acquired intangible assets     34       36  
Stock-based compensation expense     711       661  
Total net adjustments     745       697  
Non-GAAP gross profit   $ 31,705     $ 26,118  
                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                
Operating loss   $ (10,673 )   $ (12,540 )
Amortization of acquired intangible assets     64       64  
Stock-based compensation expense     4,325       4,388  
Costs not core to our business     1,371        
Total net adjustments     5,760       4,452  
Non-GAAP operating income (loss)   $ (4,913 )   $ (8,088 )
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss   $ (13,802 )   $ (15,583 )
Depreciation     2,977       3,110  
Amortization of software development costs     889       831  
Amortization of acquired intangible assets     64       64  
Interest income     (58 )     (27 )
Interest expense on building lease financing obligations     1,866       1,860  
Interest expense on other borrowings     1,317       1,062  
Income tax expense     4        
Stock-based compensation expense     4,325       4,388  
Costs not core to our business     1,371        
Total net adjustments     12,755       11,288  
Adjusted EBITDA   $ (1,047 )   $ (4,295 )
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss   $ (13,802 )   $ (15,583 )
Amortization of acquired intangible assets     64       64  
Stock-based compensation expense     4,325       4,388  
Costs not core to our business     1,371        
Total net adjustments     5,760       4,452  
Non-GAAP net loss   $ (8,042 )   $ (11,131 )
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss   $ (8,042 )   $ (11,131 )
                 
Weighted average shares outstanding - basic and diluted     31,333,348       30,658,468  
Shares used in computing non-GAAP net loss per share - basic and     31,333,348       30,658,468  
  diluted
Non-GAAP net loss per common share - basic and diluted   $ (0.26 )   $ (0.36 )


                                 
                                 
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges 
(in millions, except per share data) 
   
    Second Quarter 2018     Full Year 2018  
    Range     Range  
    Low     High     Low     High  
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                                
Net loss - Guidance range   $ (20.1 )   $ (18.1 )   $ (41.5 )   $ (33.5 )
Depreciation and amortization     4.2       4.2       17.8       17.8  
Interest income     (0.1 )     (0.1 )     (0.2 )     (0.2 )
Interest expense     3.0       3.0       12.7       12.7  
Income tax expense                        
Stock-based compensation expense     5.7       5.7       14.8       14.8  
Costs not core to business     0.3       0.3       1.4       1.4  
Total net adjustments     13.1       13.1       46.5       46.5  
Adjusted EBITDA - Guidance range   $ (7.0 )   $ (5.0 )   $ 5.0     $ 13.0  
                                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                                
Net loss - Guidance range   $ (20.1 )   $ (18.1 )   $ (41.5 )   $ (33.5 )
Amortization of acquired intangible assets     0.1       0.1       0.3       0.3  
Stock-based compensation expense     5.7       5.7       14.8       14.8  
Costs not core to business     0.3       0.3       1.4       1.4  
Total net adjustments     6.1       6.1       16.5       16.5  
Non-GAAP net loss - Guidance range   $ (14.0 )   $ (12.0 )   $ (25.0 )   $ (17.0 )
                                 
Calculation of Non-GAAP Earnings Per Share Guidance:                                
Non-GAAP net loss - Guidance range   $ (14.0 )   $ (12.0 )   $ (25.0 )   $ (17.0 )
                                 
Weighted average shares outstanding - basic and diluted     31.8       31.8       31.8       31.8  
Shares used in computing non-GAAP     31.8       31.8       31.8       31.8  
  net loss per share - basic and diluted
Non-GAAP net loss per common share - basic and diluted   $ (0.44 )   $ (0.38 )   $ (0.79 )   $ (0.54
                                 

Benefitfocus, Inc.
843-284-1052 ext. 3527
pr@benefitfocus.com

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
michael.bauer@benefitfocus.com 

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Source: Benefitfocus, Inc.