Benefitfocus, Inc.
Feb 23, 2017

Benefitfocus Announces Fourth Quarter and Full Year 2016 Financial Results

2016 total revenue of $233.3 million grew 26% year-over-year 
2016 employer revenue of $140.5 million grew 48% year-over-year

CHARLESTON, S.C., Feb. 23, 2017 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management solutions, today announced its fourth quarter and full year 2016 financial results.

"The fourth quarter capped a year of numerous accomplishments for the Benefitfocus team," said Shawn Jenkins, Chief Executive Officer of Benefitfocus.  "Driven by strong demand for our platform, during 2016 total revenue grew 26% year-over-year and we improved our profitability.  In addition, once again, our software revenue retention rate was over 95% for both the quarter and year."

Jenkins added, "Our annualized revenue run rate now exceeds $250 million, a threshold that when coupled with the performance of our platform and our continued financial progress on key profitability metrics, we believe reflects a business set to accelerate the benefits of scale. As we look ahead to 2017, we expect our enterprise class system performance and the increasing financial benefits of operational scale to position Benefitfocus exceptionally well for long-term growth."

Fourth Quarter 2016 Financial Highlights

Revenue

Net Loss

Non-GAAP Net Loss and Adjusted EBITDA

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

Balance Sheet

Full Year 2016 Financial Highlights

Revenue

Net Loss

Non-GAAP Net Loss and Adjusted EBITDA

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

Fourth Quarter and Recent Business Highlights

Business Outlook

Based on information available as of February 23, 2017, Benefitfocus is providing guidance for the first quarter and full year 2017 as indicated below.

First Quarter 2017:

Full Year 2017:

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, February 23, 2017, 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/. A replay of this conference call can also be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with replay passcode 13653318 through March 2, 2017.

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) provides a leading cloud-based benefits management platform that simplifies how organizations and individuals shop for, enroll in, manage and exchange benefits. Every day leading employers, insurance companies and millions of consumers rely on our platform to manage, scale and exchange benefits data seamlessly. In an increasingly complex benefits landscape, we bring order to chaos so our clients and their employees have access to better information, make better decisions and lead better lives. Learn more at www.benefitfocus.com, LinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release and the accompanying tables, including non-GAAP gross profit, operating 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 loss, net loss and net loss per share exclude stock-based compensation expenses and amortization of acquisition-related intangible assets and offering costs expensed, 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 and expense related to the impairment of goodwill and intangible assets. 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 determination of 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 profitability; fluctuations in our financial results; general economic risks;  risks related to changing healthcare and other applicable regulations; our ability to maintain our culture and recruit and retain qualified personnel; 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.cfm 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.


Benefitfocus, Inc. 
Consolidated Statements of Operations and Comprehensive Loss 
(in thousands, except share and per share data) 
                 
  Three Months Ended  Year Ended 
  December 31,  December 31, 
   2016   2015   2016   2015 
Revenue $62,647  $54,340  $233,335  $185,143 
Cost of revenue (1)(2)  32,522   30,483   120,681   102,851 
Gross profit  30,125   23,857   112,654   82,292 
Operating expenses:(1)(2)                
Sales and marketing  13,546   13,092   55,488   58,589 
Research and development  13,308   14,244   56,584   52,250 
General and administrative  8,335   7,146   32,750   25,727 
Total operating expenses  35,189   34,482   144,822   136,566 
Loss from operations  (5,064)  (10,625)  (32,168)  (54,274)
Other income (expense):                
Interest income  21   58   138   188 
Interest expense on building lease financing obligations  (1,696)  (1,721)  (6,826)  (7,092)
Interest expense on other borrowings  (404)  (192)  (1,095)  (877)
Other expense  46   (7)  (90)  (4)
Total other expense, net  (2,033)  (1,862)  (7,873)  (7,785)
Loss before income taxes  (7,097)  (12,487)  (40,041)  (62,059)
Income tax expense  2      17   25 
Net loss $(7,099) $(12,487) $(40,058) $(62,084)
Comprehensive loss $(7,099) $(12,487) $(40,058) $(62,084)
                 
Net loss per common share:                
Basic and diluted $(0.24) $(0.43) $(1.35) $(2.19)
Weighted-average common shares outstanding:                
Basic and diluted  30,030,164   29,120,171   29,589,857   28,344,680 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $726  $729  $2,798  $1,950 
Sales and marketing  857   1,115   3,213   2,861 
Research and development  994   647   4,532   2,399 
General and administrative  1,901   332   7,545   3,244 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $36  $49  $147  $218 
Sales and marketing  12   6   42   25 
Research and development  13   8   54   35 
General and administrative  2   2   14   8 


Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
          
  As of December 31,  
  2016  2015  
Assets         
Current assets:         
Cash and cash equivalents $56,853  $48,074  
Marketable securities  2,007   40,448  
Accounts receivable, net  28,340   27,616  
Accounts receivable, related party, net  4,626   2,082  
Prepaid expenses and other current assets  4,449   5,725  
Total current assets  96,275   123,945  
Property and equipment, net  80,518   55,037  
Intangible assets, net  408   665  
Goodwill  1,634   1,634  
Other non-current assets  1,575   838  
Total assets $180,410  $182,119  
Liabilities and stockholders' deficit         
Current liabilities:         
Accounts payable $5,829  $7,953  
Accrued expenses  10,867   10,449  
Accrued compensation and benefits  17,347   20,684  
Deferred revenue, current portion  35,426   37,858  
Revolving line of credit, current portion  20,000   25,000  
Financing and capital lease obligations, current portion  2,604   3,648  
Total current liabilities  92,073   105,592  
Deferred revenue, net of current portion  40,412   55,671  
Revolving line of credit, net of current portion  20,246   5,246  
Financing and capital lease obligations, net of current portion  57,934   31,183  
Other non-current liabilities  3,056   2,436  
Total liabilities  213,721   200,128  
Commitments and contingencies         
Stockholders' deficit:         
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issues and outstanding at December 31, 2016 and 2015  -   -  
Common stock, par value $0.001, 50,000,000 shares authorized, 30,429,014 and 29,194,332 shares issued and outstanding at December 31, 2016 and 2015, respectively  30   29  
Additional paid-in capital  335,059   310,304  
Accumulated deficit  (368,400)  (328,342) 
Total stockholders' deficit  (33,311)  (18,009) 
  Total liabilities and stockholders' deficit $180,410  $182,119  


Benefitfocus, Inc. 
Consolidated Statements of Cash Flows 
(in thousands) 
             
  Year Ended December 31, 
   2016   2015   2014 
Cash flows from operating activities            
Net loss $(40,058) $(62,084) $(63,179)
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:            
Depreciation and amortization  13,073   11,664   9,493 
Stock-based compensation expense  18,088   10,454   5,588 
Change in fair value and accretion of warrant        744 
Interest accrual on financing obligation  6,827   7,092   3,624 
Provision for doubtful accounts  667   22    
Loss on disposal or impairment of property and equipment  141   18   25 
Changes in operating assets and liabilities:            
  Accounts receivable, net  (3,936)  (7,800)  2,357 
  Accrued interest on short-term investments  220   205   162 
  Prepaid expenses and other current assets  1,626   (1,328)  833 
  Other non-current assets  339   1,380   824 
  Accounts payable  (1,849)  3,418   (199)
  Accrued expenses  990   2,961   2,469 
  Accrued compensation and benefits  (3,337)  3,310   3,192 
  Deferred revenue  (17,690)  (1,189)  14,288 
  Other non-current liabilities  2,073   332   901 
Net cash and cash equivalents used in operating activities  (22,826)  (31,545)  (18,878)
Cash flows from investing activities            
Purchases of short-term investments held to maturity  (2,004)  (68,185)  (12,959)
Proceeds from short-term investments held to maturity  40,225   32,667   20,830 
Purchases of property and equipment  (12,705)  (14,727)  (9,824)
Net cash and cash equivalents provided by (used in) investing activities  25,516   (50,245)  (1,953)
Cash flows from financing activities            
Draws on revolving line of credit  84,000   57,492   14,000 
Payments on revolving line of credit  (74,000)  (44,903)  (2,100)
Proceeds from exercises of stock options  6,870   4,229   2,817 
Proceeds from issuance of common stock and warrant, net of issuance costs     74,538    
Payments of deferred financing costs and debt issuance costs  (379)  (566)   
Remittance of taxes upon vesting of restricted stock units  (202)  (2,116)  (226)
Payments on financing and capital lease obligations  (10,200)  (9,884)  (8,231)
Net cash and cash equivalents provided by financing activities  6,089   78,790   6,260 
Net increase (decrease) in cash and cash equivalents  8,779   (3,000)  (14,571)
Cash and cash equivalents, beginning of year  48,074   51,074   65,645 
Cash and cash equivalents, end of year $56,853  $48,074  $51,074 
             
Supplemental disclosure of non-cash investing and financing activities            
Property and equipment purchases in accounts payable and accrued expenses $699  $1,489  $4,226 
Property and equipment purchased with financing and capital lease obligations $28,032  $914  $21,739 
Post contract support purchased with financing obligations $1,048  $272  $754 
Allocation of proceeds to deferred revenue from issuance of common stock based on relative selling price $-  $207  $- 
Supplemental disclosure of cash flow information            
Income taxes paid $7  $18  $38 
Interest paid $6,655  $6,525  $2,449 


Benefitfocus, Inc. 
Reconciliation of GAAP to Non-GAAP Measures 
(unaudited, dollars in thousands except share and per share data) 
                 
  Three Months Ended
December 31,
  Year Ended
December 31,
 
  2016  2015  2016  2015 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $30,125  $23,857  $112,654  $82,292 
Amortization of acquired intangible assets  36   49   147   218 
Stock-based compensation expense  726   729   2,798   1,950 
Total net adjustments  762   778   2,945   2,168 
Non-GAAP gross profit $30,887  $24,635  $115,599  $84,460 
                 
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                
Operating loss $(5,064) $(10,625) $(32,168) $(54,274)
Amortization of acquired intangible assets  63   65   257   286 
Stock-based compensation expense  4,478   2,823   18,088   10,454 
Offering costs expensed     77      560 
Total net adjustments  4,541   2,965   18,345   11,300 
Non-GAAP operating loss $(523) $(7,660) $(13,823) $(42,974)
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(7,099) $(12,487) $(40,058) $(62,084)
Depreciation  2,615   2,311   9,959   8,791 
Amortization of software development costs  776   602   2,857   2,587 
Amortization of acquired intangible assets  63   65   257   286 
Interest income  (21)  (58)  (138)  (188)
Interest expense on building lease financing obligations  1,696   1,721   6,826   7,092 
Interest expense on other borrowings  404   192   1,095   877 
Income tax expense  2      17   25 
Stock-based compensation expense  4,478   2,823   18,088   10,454 
Total net adjustments  10,013   7,656   38,961   29,924 
Adjusted EBITDA $2,914  $(4,831) $(1,097) $(32,160)
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(7,099) $(12,487) $(40,058) $(62,084)
Amortization of acquired intangible assets  63   65   257   286 
Stock-based compensation expense  4,478   2,823   18,088   10,454 
Offering costs expensed     77      560 
Total net adjustments  4,541   2,965   18,345   11,300 
Non-GAAP net loss $(2,558) $(9,522) $(21,713) $(50,784)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(2,558) $(9,522) $(21,713) $(50,784)
                 
Weighted average shares outstanding - basic and diluted  30,030,164   29,120,171   29,589,857   28,344,680 
Shares used in computing non-GAAP net loss per share - basic and diluted  30,030,164   29,120,171   29,589,857   28,344,680 
Non-GAAP net loss per common share - basic and diluted $(0.09) $(0.33) $(0.73) $(1.79)


Benefitfocus, Inc. 
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges 
(in millions, except per share data) 
                
 First Quarter 2017  Full Year 2017 
 Range  Range 
 Low  High  Low  High 
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:               
Net loss - Guidance range$(9.1) $(8.1) $(31.7) $(27.7)
Depreciation and amortization 4.0   4.0   14.9   14.9 
Interest income           
Interest expense 2.6   2.6   10.0   10.0 
Income tax expense           
Stock-based compensation expense 4.5   4.5   19.8   19.8 
Total net adjustments 11.1   11.1   44.7   44.7 
Adjusted EBITDA - Guidance range$2.0  $3.0  $13.0  $17.0 
                
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:               
Net loss - Guidance range$(9.1) $(8.1) $(31.7) $(27.7)
Amortization of acquired intangible assets 0.1   0.1   0.4   0.4 
Stock-based compensation expense 4.5   4.5   19.8   19.8 
Total net adjustments 4.6   4.6   20.2   20.2 
Non-GAAP net loss - Guidance range$(4.5) $(3.5) $(11.5) $(7.5)
                
Calculation of Non-GAAP Earnings Per Share Guidance:               
Non-GAAP net loss - Guidance range$(4.5) $(3.5) $(11.5) $(7.5)
                
Weighted average shares outstanding - basic and diluted 30.6   30.6   30.9   30.9 
Shares used in computing non-GAAP net loss per share - basic and diluted 30.6   30.6   30.9   30.9 
Non-GAAP net loss per common share - basic and diluted$(0.15) $(0.11) $(0.37) $(0.24)
Benefitfocus, Inc.
843-284-1052 ext. 3527
pr@benefitfocus.com 

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