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Aug 2, 2018

Benefitfocus Announces Second Quarter 2018 Financial Results

Total revenue of $60.6 million grew 10% year-over-year

CHARLESTON, S.C., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading cloud-based benefits management platform and services provider, today announced its second quarter 2018 financial results.

“Benefitfocus had a strong second quarter, highlighted by revenue and profitability that were above expectations,” said Ray August, President and Chief Executive Officer of Benefitfocus.  “We are pleased with our performance in the quarter, and we have a solid foundation to accelerate future recurring revenue growth.”

August added, “The market continues to show strong adoption of our BenefitsPlace platform, which provides a significant new revenue opportunity for Benefitfocus. For the first time, we have a breadth of benefits products to protect consumers’ health, wealth and lifestyle for every stage of life. BenefitsPlace is emerging as the industry’s platform of choice. We are making it far easier for consumers to purchase the right benefits and bring peace of mind to their families.”

Second Quarter 2018 Financial Highlights

Revenue

  • Total revenue was $60.6 million, an increase of 10% compared to the second quarter of 2017.
  • Software services revenue was $48.3 million, an increase of 13% compared to the second quarter of 2017.
  • Professional services revenue was $12.3 million, a decrease of 2% compared to the second quarter of 2017.
  • Employer revenue was $39.4 million, an increase of 17% compared to the second quarter of 2017.
  • Carrier revenue was $21.2 million, a decrease of 1% compared to the second quarter of 2017.

Net Loss

  • GAAP net loss was ($14.3) million, compared to ($13.9) million in the second quarter of 2017. GAAP net loss per share was ($0.45), based on 31.8 million basic and diluted weighted average common shares outstanding, compared to ($0.45) for the second quarter of 2017, based on 31.1 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($7.7) million, compared to ($10.8) million in the second quarter of 2017. Non-GAAP net loss per share was ($0.24), based on 31.8 million basic and diluted weighted average common shares outstanding, compared to ($0.35) for the second quarter of 2017, based on 31.1 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was ($0.6) million, compared to ($3.9) million in the second 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 June 30, 2018 totaled $53.3 million, compared to $54.8 million at the end of the first quarter of 2018. 

Second Quarter and Recent Business Highlights

  • We ended the quarter with 997 large employer customers, up from 893 at the end of the prior year period, and 948 at the end of the first quarter of 2018
  • We ended the quarter with 6 BenefitsPlace Carriers and 12 BenefitsPlace Specialty Product Suppliers.
  • We signed agreements to expand our facilities in both Salt Lake City, Utah and Tulsa, Okla. helping Benefitfocus add new staff to strengthen its relationships with carrier, employer and broker partners, and pursue additional organic growth opportunities.
  • We named Ken Haderer as Executive Vice President, Global Operations to help accelerate our platform strategy.  Prior to joining Benefitfocus, Haderer was President of North America at Mercer, a leading, global brokerage and human resources consulting firm.

Business Outlook               

Based on information available as of August 2, 2018, Benefitfocus is providing guidance for the third quarter and full year 2018 as indicated below.

Third Quarter 2018:

  • Total revenue is expected to be in the range of $58.0 million to $60.0 million.
  • Non-GAAP net loss is expected to be in the range of ($11.0) million to ($9.0) million, or ($0.35) to ($0.28) per share, based on 31.9 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($4.0) million to ($2.0) million.

Full Year 2018:

  • Total revenue is expected to be in the range of $253.0 million to $258.0 million.
  • Non-GAAP net loss is expected to be in the range of ($23.0) million to ($17.0) million, or ($0.72) to ($0.54) per share, based on 31.7 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $7.0 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, August 2, 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 August 9, 2018, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13681546.

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) unifies the entire U.S. benefits industry on a single technology platform to protect consumers' health, wealth and lifestyle. Our powerful cloud-based software, data-driven insights and thoughtfully-designed services, enable employers, insurance brokers and carriers to simplify the complexity of benefits administration and deliver a world-class benefits experience. The Benefitfocus Platform is industry leading in reliability and peak response rate. Learn more at www.benefitfocus.comLinkedIn 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, and adjusted EBITDA. 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, offering cost expensed, and costs not core to our business.  Beginning with the second quarter of 2018 and to align with other non-GAAP financial metrics that we report from time to time, we revised our definition of adjusted EBITDA to also exclude stock offering costs expensed, if any, and have applied this change retrospectively to all periods presented.  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.
843-284-1052 ext. 3527
pr@benefitfocus.com

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

             
Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
             
    Three Months Ended     Six Months Ended  
June 30, June 30,
    2018     2017     2018     2017  
Revenue   $ 60,581     $ 55,089     $ 122,944     $ 112,712  
Cost of revenue (1)(2)     30,721       29,696       62,124       61,898  
Gross profit     29,860       25,393       60,820       50,814  
Operating expenses:(1)(2)                                
Sales and marketing     18,400       17,863       38,317       35,886  
Research and development     12,128       12,473       24,151       24,654  
General and administrative     10,387       5,877       20,080       13,634  
Total operating expenses     40,915       36,213       82,548       74,174  
Loss from operations     (11,055 )     (10,820 )     (21,728 )     (23,360 )
Other income (expense):                                
Interest income     68       47       126       74  
Interest expense on building lease financing obligations     (1,867 )     (1,861 )     (3,733 )     (3,721 )
Interest expense on other borrowings     (1,415 )     (1,210 )     (2,732 )     (2,272 )
Other expense     13       (1 )     13       (149 )
Total other expense, net     (3,201 )     (3,025 )     (6,326 )     (6,068 )
Loss before income taxes     (14,256 )     (13,845 )     (28,054 )     (29,428 )
Income tax expense     5       5       9       5  
Net loss   $ (14,261 )   $ (13,850 )   $ (28,063 )   $ (29,433 )
Comprehensive loss   $ (14,261 )   $ (13,850 )   $ (28,063 )   $ (29,433 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.45 )   $ (0.45 )   $ (0.89 )   $ (0.95 )
Weighted-average common shares outstanding:                                
Basic and diluted     31,806,972       31,076,995       31,571,468       30,868,888  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 900     $ 460     $ 1,611     $ 1,121  
Sales and marketing     1,257       925       2,211       2,257  
Research and development     841       739       1,609       1,458  
General and administrative     1,676       738       3,568       2,414  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 35     $ 35     $ 69     $ 71  
Sales and marketing     13       13       27       26  
Research and development     11       12       23       24  
General and administrative     5       5       9       8  
                                 

 

             
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
             
    As of     As of  
June 30, December 31,
2018 2017
Assets                
Current assets:                
Cash and cash equivalents   $ 53,292     $ 55,335  
Accounts receivable, net     26,771       30,091  
Contract, prepaid and other current assets     13,776       15,859  
Total current assets     93,839       101,285  
Property and equipment, net     71,382       72,681  
Intangible assets, net     21       150  
Goodwill     1,634       1,634  
Deferred contract costs and other non-current assets     14,426       16,253  
Total assets   $ 181,302     $ 192,003  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 845     $ 4,260  
Accrued expenses     11,299       9,110  
Accrued compensation and benefits     14,707       14,250  
Deferred revenue, current portion     36,868       43,804  
Revolving line of credit, current portion     28,000       24,000  
Financing and capital lease obligations, current portion     4,395       3,423  
Total current liabilities     96,114       98,847  
Deferred revenue, net of current portion     14,100       11,223  
Revolving line of credit, net of current portion     39,246       32,246  
Financing and capital lease obligations, net of current portion     56,765       55,597  
Other non-current liabilities     2,589       2,809  
Total liabilities     208,814       200,722  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017            
Common stock, par value $0.001, 50,000,000 shares authorized, 31,825,997 and 31,307,989 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively     32       31  
Additional paid-in capital     361,765       352,496  
Accumulated deficit     (389,309 )     (361,246 )
Total stockholders' deficit     (27,512 )     (8,719 )
Total liabilities and stockholders' deficit   $ 181,302     $ 192,003  
 

 

       
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
       
    Six Months Ended  
June 30,
    2018     2017  
Cash flows from operating activities                
Net loss   $ (28,063 )   $ (29,433 )
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:                
Depreciation and amortization     7,957       7,945  
Stock-based compensation expense     8,999       7,250  
Interest accrual on financing obligation     3,758       3,747  
Loss on disposal or impairment of property and equipment           149  
Provision for doubtful accounts     364       61  
Changes in operating assets and liabilities:                
Accounts receivable, net     2,956       5,112  
Accrued interest on short-term investments           7  
Contract, prepaid and other current assets     2,182       5,017  
Deferred contract costs and other non-current assets     2,003       3,041  
Accounts payable and accrued expenses     (1,110 )     (3,197 )
Accrued compensation and benefits     458       (2,669 )
Deferred revenue     (4,059 )     (2,959 )
Other non-current liabilities     (218 )     (467 )
Net cash and cash equivalents used in operating activities     (4,773 )     (6,396 )
Cash flows from investing activities                
Proceeds from maturity of short-term investments held to maturity           2,000  
Purchases of property and equipment     (3,561 )     (3,825 )
Net cash and cash equivalents used in investing activities     (3,561 )     (1,825 )
Cash flows from financing activities                
Draws on revolving line of credit     59,000       53,000  
Payments on revolving line of credit     (48,000 )     (41,000 )
Proceeds from exercises of stock options and ESPP     270       3,161  
Payments on financing and capital lease obligations     (4,979 )     (4,398 )
Net cash and cash equivalents provided by financing activities     6,291       10,763  
Net (decrease) increase in cash and cash equivalents     (2,043 )     2,542  
Cash and cash equivalents, beginning of period     55,335       56,853  
Cash and cash equivalents, end of period   $ 53,292     $ 59,395  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 272     $ 732  
Property and equipment purchased with financing and capital lease obligations   $ 3,085     $  
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     Six Months Ended  
June 30, June 30,
    2018     2017     2018     2017  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 29,860     $ 25,393     $ 60,820     $ 50,814  
Amortization of acquired intangible assets     35       35       69       71  
Stock-based compensation expense     900       460       1,611       1,121  
Total net adjustments     935       495       1,680       1,192  
Non-GAAP gross profit   $ 30,795     $ 25,888     $ 62,500     $ 52,006  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                                
Operating loss   $ (11,055 )   $ (10,820 )   $ (21,728 )   $ (23,360 )
Amortization of acquired intangible assets     64       65       128       129  
Stock-based compensation expense     4,674       2,862       8,999       7,250  
Offering costs expensed     257             257        
Costs not core to our business     1,524       121       2,895       121  
Total net adjustments     6,519       3,048       12,279       7,500  
Non-GAAP operating income (loss)   $ (4,536 )   $ (7,772 )   $ (9,449 )   $ (15,860 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (14,261 )   $ (13,850 )   $ (28,063 )   $ (29,433 )
Depreciation     2,999       3,081       5,976       6,192  
Amortization of software development costs     964       794       1,853       1,624  
Amortization of acquired intangible assets     64       65       128       129  
Interest income     (68 )     (47 )     (126 )     (74 )
Interest expense on building lease financing obligations     1,867       1,861       3,733       3,721  
Interest expense on other borrowings     1,415       1,210       2,732       2,272  
Income tax expense     5       5       9       5  
Stock-based compensation expense     4,674       2,862       8,999       7,250  
Offering costs expensed     257             257        
Costs not core to our business     1,524       121       2,895       121  
Total net adjustments     13,701       9,952       26,456       21,240  
Adjusted EBITDA   $ (560 )   $ (3,898 )   $ (1,607 )   $ (8,193 )
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (14,261 )   $ (13,850 )   $ (28,063 )   $ (29,433 )
Amortization of acquired intangible assets     64       65       128       129  
Stock-based compensation expense     4,674       2,862       8,999       7,250  
Offering costs expensed     257             257        
Costs not core to our business     1,524       121       2,895       121  
Total net adjustments     6,519       3,048       12,279       7,500  
Non-GAAP net loss   $ (7,742 )   $ (10,802 )   $ (15,784 )   $ (21,933 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (7,742 )   $ (10,802 )   $ (15,784 )   $ (21,933 )
                                 
Weighted average shares outstanding - basic and diluted     31,806,972       31,076,995       31,571,468       30,868,888  
Shares used in computing non-GAAP net loss per share - basic and diluted     31,806,972       31,076,995       31,571,468       30,868,888  
Non-GAAP net loss per common share - basic and diluted   $ (0.24 )   $ (0.35 )   $ (0.50 )   $ (0.71 )

 

             
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
             
    Third Quarter 2018     Full Year 2018  
    Range     Range  
    Low     High     Low     High  
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                                
Net loss - Guidance range   $ (16.6 )   $ (14.6 )   $ (46.7 )   $ (40.7 )
Depreciation and amortization     4.1       4.1       17.7       17.7  
Interest income                 (0.1 )     (0.1 )
Interest expense     3.0       3.0       12.7       12.7  
Income tax expense                        
Stock-based compensation expense     4.8       4.8       18.8       18.8  
Offering costs expensed                 0.3       0.3  
Costs not core to business     0.7       0.7       4.3       4.3  
Total net adjustments     12.6       12.6       53.7       53.7  
Adjusted EBITDA - Guidance range   $ (4.0 )   $ (2.0 )   $ 7.0     $ 13.0  
                                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                                
Net loss - Guidance range   $ (16.6 )   $ (14.6 )   $ (46.7 )   $ (40.7 )
Amortization of acquired intangible assets     0.1       0.1       0.3       0.3  
Stock-based compensation expense     4.8       4.8       18.8       18.8  
Offering costs expensed                 0.3       0.3  
Costs not core to business     0.7       0.7       4.3       4.3  
Total net adjustments     5.6       5.6       23.7       23.7  
Non-GAAP net loss - Guidance range   $ (11.0 )   $ (9.0 )   $ (23.0 )   $ (17.0 )
                                 
Calculation of Non-GAAP Earnings Per Share Guidance:                                
Non-GAAP net loss - Guidance range   $ (11.0 )   $ (9.0 )   $ (23.0 )   $ (17.0 )
                                 
Weighted average shares outstanding - basic and diluted     31.9       31.9       31.7       31.7  
Shares used in computing non-GAAP net loss per share - basic and diluted     31.9       31.9       31.7       31.7  
Non-GAAP net loss per common share - basic and diluted   $ (0.35 )   $ (0.28 )   $ (0.72 )   $ (0.54 )
                                 

 

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Source: Benefitfocus, Inc.