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Nov 1, 2018

Benefitfocus Announces Third Quarter 2018 Financial Results

Total revenue grew 8% year-over-year to $61.0 million                         

CHARLESTON, S.C., Nov. 01, 2018 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a leading cloud-based benefits management platform and services provider, today announced its third quarter 2018 financial results. The company posted another strong quarter with better than expected bookings growth and 11% software services growth compared to the prior year period.  Business highlights from the quarter include: 

  • Ended the quarter with 1,013 large employer customers, up from 903 at the end of the prior year period.
  • Signed Aetna, MetLife and the largest healthcare insurance carrier in the United States in the third quarter. This brings the total number of BenefitsPlace carriers to 9 at quarter-end.
  • Improved gross margin by over 360 basis points.

“Benefitfocus delivered strong third quarter results that exceeded our expectations,” said Ray August, President and Chief Executive Officer of Benefitfocus.  “We’ve had four consecutive quarters of strong execution and are very pleased with the direction of our business.  We anticipate our 2019 total revenue growth percentage to be in the mid-to-high teens compared to the prior year, and for our business to generate meaningful positive free cash flow in the upcoming year.”

August added, “The Benefitfocus platform is simplifying benefits purchasing decisions for consumers, which is driving strong demand.  Our benefits selection and enrollment process are designed to bring clarity and peace of mind to consumers as they shop for the right benefits for themselves and their families. We have assembled the highest-quality benefits offering through BenefitsPlace, giving consumers and employers better choice and easier access to the industry’s flagship brands.”

Third Quarter 2018 Financial Highlights

Revenue

  • Total revenue was $61.0 million, an increase of 8% compared to the third quarter of 2017.

  • Software services revenue was $46.9 million, an increase of 11% compared to the third quarter of 2017.

  • Professional services revenue was $14.1 million, an increase of 2% compared to the third quarter of 2017.

Net Loss

  • GAAP net loss was ($11.6) million, compared to ($14.0) million in the third quarter of 2017. GAAP net loss per share was ($0.36), based on 31.9 million basic and diluted weighted average common shares outstanding, compared to ($0.45) for the third quarter of 2017, based on 31.2 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($7.2) million, compared to ($9.2) million in the third quarter of 2017. Non-GAAP net loss per share was ($0.23), based on 31.9 million basic and diluted weighted average common shares outstanding, compared to ($0.29) for the third quarter of 2017, based on 31.2 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was ($0.0) million, compared to ($2.3) million in the third 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 September 30, 2018 totaled $51.1 million, compared to $53.3 million at the end of the second quarter of 2018. 

Business Outlook               

Based on information available as of November 1, 2018, Benefitfocus is providing guidance for the fourth quarter and full year 2018 as indicated below.

Fourth Quarter 2018:

  • Total revenue is expected to be in the range of $71.0 million to $74.0 million.

  • Non-GAAP net income is expected to be in the range of $2.0 million to $5.0 million, or $0.06 to $0.15 per share, based on 32.6 million diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $8.5 million to $11.5 million.

Full Year 2018:

  • Total revenue is expected to be in the range of $255.0 million to $258.0 million.

  • Non-GAAP net loss is expected to be in the range of ($21.0) million to ($18.0) million, or ($0.66) to ($0.57) 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 $10.0 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, November 1, 2018, at 5:00 p.m. Eastern Time to discuss the company’s financial results, including segment results. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (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 November 8, 2018, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13683837.

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, transaction 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, transaction costs expensed, and costs not core to our business.  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; the immature and volatile market for our products and services; 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 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
September 30,
    Nine Months Ended
September 30,
 
    2018     2017     2018     2017  
Revenue   $ 61,006     $ 56,251     $ 183,950     $ 168,963  
Cost of revenue (1)(2)     31,740       31,310       93,864       93,208  
Gross profit     29,266       24,941       90,086       75,755  
Operating expenses:(1)(2)                                
Sales and marketing     17,661       16,467       55,978       52,353  
Research and development     10,676       12,568       34,827       37,222  
General and administrative     9,263       6,853       29,343       20,487  
Total operating expenses     37,600       35,888       120,148       110,062  
Loss from operations     (8,334 )     (10,947 )     (30,062 )     (34,307 )
Other income (expense):                                
Interest income     73       55       199       129  
Interest expense on building lease financing obligations     (1,868 )     (1,864 )     (5,601 )     (5,585 )
Interest expense on other borrowings     (1,458 )     (1,254 )     (4,190 )     (3,526 )
Other expense     2       9       15       (140 )
Total other expense, net     (3,251 )     (3,054 )     (9,577 )     (9,122 )
Loss before income taxes     (11,585 )     (14,001 )     (39,639 )     (43,429 )
Income tax expense     13       5       22       10  
Net loss   $ (11,598 )   $ (14,006 )   $ (39,661 )   $ (43,439 )
Comprehensive loss   $ (11,598 )   $ (14,006 )   $ (39,661 )   $ (43,439 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.36 )   $ (0.45 )   $ (1.25 )   $ (1.40 )
Weighted-average common shares outstanding:                                
Basic and diluted     31,883,029       31,181,141       31,678,360       30,974,116  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 542     $ 682     $ 2,153     $ 1,803  
Sales and marketing     759       1,319       2,970       3,575  
Research and development     494       743       2,103       2,200  
General and administrative     1,552       1,652       5,120       4,068  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 12     $ 34     $ 81     $ 105  
Sales and marketing     4       12       31       38  
Research and development     4       14       27       38  
General and administrative     2       5       11       13  



Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)

    As of
September 30,
2018
    As of
December 31,
2017
 
Assets                
Current assets:                
Cash and cash equivalents   $ 51,065     $ 55,335  
Accounts receivable, net     27,624       30,091  
Contract, prepaid and other current assets     10,780       15,859  
Total current assets     89,469       101,285  
Property and equipment, net     70,208       72,681  
Intangible assets, net           150  
Goodwill     1,634       1,634  
Deferred contract costs and other non-current assets     13,838       16,253  
Total assets   $ 175,149     $ 192,003  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 6,868     $ 4,260  
Accrued expenses     10,582       9,110  
Accrued compensation and benefits     13,182       14,250  
Deferred revenue, current portion     37,711       43,804  
Revolving line of credit, current portion     30,000       24,000  
Financing and capital lease obligations, current portion     4,115       3,423  
Total current liabilities     102,458       98,847  
Deferred revenue, net of current portion     9,873       11,223  
Revolving line of credit, net of current portion     39,246       32,246  
Financing and capital lease obligations, net of current portion     56,664       55,597  
Other non-current liabilities     2,480       2,809  
Total liabilities     210,721       200,722  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized,
  no shares issued and outstanding at September 30, 2018
  and December 31, 2017
           
Common stock, par value $0.001, 50,000,000 shares authorized,
  31,899,960 and 31,307,989 shares issued and outstanding
  at September 30, 2018 and December 31, 2017, respectively
    32       31  
Additional paid-in capital     365,303       352,496  
Accumulated deficit     (400,907 )     (361,246 )
Total stockholders' deficit     (35,572 )     (8,719 )
Total liabilities and stockholders' deficit   $ 175,149     $ 192,003  



Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

    Nine Months Ended
September 30,
 
    2018     2017  
Cash flows from operating activities                
Net loss   $ (39,661 )   $ (43,439 )
Adjustments to reconcile net loss to net cash and cash
  equivalents used in operating activities:
               
Depreciation and amortization     11,912       11,848  
Stock-based compensation expense     12,346       11,646  
Interest accrual on financing obligation     5,639       5,623  
Loss on disposal or impairment of property and equipment           157  
Provision for doubtful accounts     364       142  
Changes in operating assets and liabilities:                
Accounts receivable, net     2,103       (443 )
Accrued interest on short-term investments           7  
Contract, prepaid and other current assets     5,179       9,561  
Deferred contract costs and other non-current assets     2,590       4,372  
Accounts payable and accrued expenses     4,385       (6,560 )
Accrued compensation and benefits     (1,068 )     (5,422 )
Deferred revenue     (7,443 )     (1,809 )
Other non-current liabilities     (328 )     (751 )
Net cash and cash equivalents used in operating activities     (3,982 )     (15,068 )
Cash flows from investing activities                
Proceeds from maturity of short-term investments held to maturity           2,000  
Purchases of property and equipment     (5,855 )     (6,151 )
Net cash and cash equivalents used in investing activities     (5,855 )     (4,151 )
Cash flows from financing activities                
Draws on revolving line of credit     97,000       81,000  
Payments on revolving line of credit     (84,000 )     (61,000 )
Proceeds from exercises of stock options and ESPP     462       3,572  
Payments on financing and capital lease obligations     (7,895 )     (6,633 )
Net cash and cash equivalents provided by financing activities     5,567       16,939  
Net decrease in cash and cash equivalents     (4,270 )     (2,280 )
Cash and cash equivalents, beginning of period     55,335       56,853  
Cash and cash equivalents, end of period   $ 51,065     $ 54,573  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 83     $ 878  
Property and equipment purchased with financing and capital lease obligations   $ 3,739     $  
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
September 30,
    Nine Months Ended
September 30,
 
    2018     2017     2018     2017  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 29,266     $ 24,941     $ 90,086     $ 75,755  
Amortization of acquired intangible assets     12       34       81       105  
Stock-based compensation expense     542       682       2,153       1,803  
Total net adjustments     554       716       2,234       1,908  
Non-GAAP gross profit   $ 29,820     $ 25,657     $ 92,320     $ 77,663  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                                
Operating loss   $ (8,334 )   $ (10,947 )   $ (30,062 )   $ (34,307 )
Amortization of acquired intangible assets     22       65       150       194  
Stock-based compensation expense     3,347       4,396       12,346       11,646  
Transaction costs expensed                 257        
Costs not core to our business     1,027       359       3,922       480  
Total net adjustments     4,396       4,820       16,675       12,320  
Non-GAAP operating income (loss)   $ (3,938 )   $ (6,127 )   $ (13,387 )   $ (21,987 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (11,598 )   $ (14,006 )   $ (39,661 )   $ (43,439 )
Depreciation     2,888       3,054       8,864       9,246  
Amortization of software development costs     1,045       784       2,898       2,408  
Amortization of acquired intangible assets     22       65       150       194  
Interest income     (73 )     (55 )     (199 )     (129 )
Interest expense on building lease financing obligations     1,868       1,864       5,601       5,585  
Interest expense on other borrowings     1,458       1,254       4,190       3,526  
Income tax expense     13       5       22       10  
Stock-based compensation expense     3,347       4,396       12,346       11,646  
Transaction costs expensed                 257        
Costs not core to our business     1,027       359       3,922       480  
Total net adjustments     11,595       11,726       38,051       32,966  
Adjusted EBITDA   $ (3 )   $ (2,280 )   $ (1,610 )   $ (10,473 )
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (11,598 )   $ (14,006 )   $ (39,661 )   $ (43,439 )
Amortization of acquired intangible assets     22       65       150       194  
Stock-based compensation expense     3,347       4,396       12,346       11,646  
Transaction costs expensed                 257        
Costs not core to our business     1,027       359       3,922       480  
Total net adjustments     4,396       4,820       16,675       12,320  
Non-GAAP net loss   $ (7,202 )   $ (9,186 )   $ (22,986 )   $ (31,119 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (7,202 )   $ (9,186 )   $ (22,986 )   $ (31,119 )
                                 
Weighted average shares outstanding - basic and diluted     31,883,029       31,181,141       31,678,360       30,974,116  
Shares used in computing non-GAAP net loss per share - basic and diluted     31,883,029       31,181,141       31,678,360       30,974,116  
Non-GAAP net loss per common share - basic and diluted   $ (0.23 )   $ (0.29 )   $ (0.73 )   $ (1.00 )



Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)

    Fourth Quarter 2018     Full Year 2018  
    Range     Range  
    Low     High     Low     High  
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                                
Net loss - Guidance range   $ (5.0 )   $ (2.0 )   $ (44.7 )   $ (41.7 )
Depreciation and amortization     3.8       3.8       15.8       15.8  
Interest income     (0.1 )     (0.1 )     (0.3 )     (0.3 )
Interest expense     2.8       2.8       12.7       12.7  
Income tax expense                        
Stock-based compensation expense     6.0       6.0       18.3       18.3  
Transaction costs expensed                 0.3       0.3  
Costs not core to business     1.0       1.0       4.9       4.9  
Total net adjustments     13.5       13.5       51.7       51.7  
Adjusted EBITDA - Guidance range   $ 8.5     $ 11.5     $ 7.0     $ 10.0  
                                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Income (Loss) Guidance:                                
Net loss - Guidance range   $ (5.0 )   $ (2.0 )   $ (44.7 )   $ (41.7 )
Amortization of acquired intangible assets                 0.2       0.2  
Stock-based compensation expense     6.0       6.0       18.3       18.3  
Transaction costs expensed                 0.3       0.3  
Costs not core to business     1.0       1.0       4.9       4.9  
Total net adjustments     7.0       7.0       23.7       23.7  
Non-GAAP net income (loss) - Guidance range   $ 2.0     $ 5.0     $ (21.0 )   $ (18.0 )
                                 
Calculation of Non-GAAP Earnings Per Share Guidance:                                
Non-GAAP net income (loss) - Guidance range   $ 2.0     $ 5.0     $ (21.0 )   $ (18.0 )
                                 
Weighted average shares outstanding - basic and diluted     31.9       31.9       31.7       31.7  
Shares used in computing non-GAAP
  net income (loss) per share - basic
    31.9       31.9       31.7       31.7  
Shares used in computing non-GAAP
  net income (loss) per share - diluted
    32.6       32.6       31.7       31.7  
Non-GAAP net income (loss) per common share - basic   $ 0.06     $ 0.16     $ (0.66 )   $ (0.57 )
Non-GAAP net income (loss) per common share - diluted   $ 0.06     $ 0.15     $ (0.66 )   $ (0.57 )


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

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

Benefitfocus logo.jpg

Source: Benefitfocus, Inc.