Benefitfocus, Inc.
Apr 27, 2017

Benefitfocus Announces First Quarter 2017 Financial Results

Total revenue of $64.2 million grew 17% year-over-year

CHARLESTON, S.C., April 27, 2017 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management software, today announced its first quarter 2017 financial results.

"Benefitfocus delivered a strong start to 2017, as our revenue and profitability exceeded the high-end of our guidance," said Shawn Jenkins, Chief Executive Officer of Benefitfocus. "Demand for our platform drove 26% growth in our employer revenue and, once again, our software revenue retention rate was over 95%."

Jenkins added, "Benefitfocus continues to make great strides toward establishing our cloud-based platform as the market standard. Our Q1 results reflect our ability to leverage the investments we have made in our products, technology and distribution to drive strong top-line growth and margin expansion, which we believe can generate long-term value for our shareholders."  

First Quarter 2017 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

First Quarter and Recent Business Highlights

Business Outlook

Based on information available as of April 27, 2017, Benefitfocus is providing guidance for the second quarter and full year 2017 as indicated below.

Second 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, April 27, 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/. After the conference call, a replay will be available until May 4, 2017, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13659163.

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 the consumers they serve 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, 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.  Beginning in the first quarter of 2017, we revised our definition of adjusted EBITDA to also exclude costs not core to our business.  The revision to the definition of adjusted EBITDA had no material impact on our reported adjusted EBITDA for the three months ended March 31, 2017 or prior periods.  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 profitability; our ability to maintain our culture and recruit and retain qualified personnel; fluctuations in our financial results; general economic risks;  the immature and volatile market for our products and services; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; 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.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
  
  Three Months Ended
March 31,
 
  2017  2016 
Revenue $64,171  $54,792 
Cost of revenue (1)(2)  31,601   29,297 
Gross profit  32,570   25,495 
Operating expenses:(1)(2)        
Sales and marketing  17,277   13,574 
Research and development  12,181   15,015 
General and administrative  7,757   8,395 
Total operating expenses  37,215   36,984 
Loss from operations  (4,645)  (11,489)
Other income (expense):        
Interest income  27   56 
Interest expense on building lease financing obligations  (1,860)  (1,716)
Interest expense on other borrowings  (1,062)  (198)
Other expense  (148)   
Total other expense, net  (3,043)  (1,858)
Loss before income taxes  (7,688)  (13,347)
Income tax expense     5 
Net loss $(7,688) $(13,352)
Comprehensive loss $(7,688) $(13,352)
         
Net loss per common share:        
Basic and diluted $(0.25) $(0.46)
Weighted-average common shares outstanding:        
Basic and diluted  30,658,468   29,213,198 
         
         
(1) Stock-based compensation included in above line items:        
Cost of revenue $662  $548 
Sales and marketing  1,332   632 
Research and development  718   1,468 
General and administrative  1,676   2,085 
         
(2) Amortization of acquired intangible assets included in above line items:        
Cost of revenue $36  $36 
Sales and marketing  13   10 
Research and development  12   15 
General and administrative  3   3 
         


Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  As of
March 31,
2017
  As of 
December
31, 
2016
 
Assets        
Current assets:        
Cash and cash equivalents $57,671  $56,853 
Marketable securities     2,007 
Accounts receivable, net  23,898   28,340 
Accounts receivable, related party, net  3,393   4,626 
Prepaid expenses and other current assets  5,838   4,449 
Total current assets  90,800   96,275 
Property and equipment, net  78,032   80,518 
Intangible assets, net  343   408 
Goodwill  1,634   1,634 
Other non-current assets  1,227   1,575 
Total assets $172,036  $180,410 
Liabilities and stockholders' deficit        
Current liabilities:        
Accounts payable $5,024  $5,829 
Accrued expenses  10,133   10,867 
Accrued compensation and benefits  10,754   17,347 
Deferred revenue, current portion  29,545   35,426 
Revolving line of credit, current portion  14,000   20,000 
Financing and capital lease obligations, current portion  3,154   2,604 
Total current liabilities  72,610   92,073 
Deferred revenue, net of current portion  39,366   40,412 
Revolving line of credit, net of current portion  34,246   20,246 
Financing and capital lease obligations, net of current portion  57,137   57,934 
Other non-current liabilities  2,834   3,056 
Total liabilities  206,193   213,721 
Commitments and contingencies        
Stockholders' deficit:        
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2017 and December 31, 2016      
Common stock, par value $0.001, 50,000,000 shares authorized, 30,786,234 and 30,429,014 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively  30   30 
Additional paid-in capital  342,292   335,059 
Accumulated deficit  (376,479)  (368,400)
Total stockholders' deficit  (34,157)  (33,311)
Total liabilities and stockholders' deficit $172,036  $180,410 
         


Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
  Three Months Ended
March 31,
 
  2017  2016 
Cash flows from operating activities        
Net loss $(7,688) $(13,352)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:        
Depreciation and amortization  4,005   3,043 
Stock-based compensation expense  4,388   4,733 
Interest accrual on financing obligation  1,873   1,716 
Loss on disposal or impairment of property and equipment  148    
Provision for doubtful accounts  22   (22)
Changes in operating assets and liabilities:        
Accounts receivable, net  5,654   (3,562)
Accrued interest on short-term investments  7   130 
Prepaid expenses and other current assets  (1,389)  (2)
Other non-current assets  349   (508)
Accounts payable  (899)  (3,911)
Accrued expenses  (140)  2,715 
Accrued compensation and benefits  (6,594)  (5,304)
Deferred revenue  (6,927)  (5,419)
Other non-current liabilities  (222)  (75)
Net cash and cash equivalents used in operating activities  (7,413)  (19,818)
Cash flows from investing activities        
Purchases of short-term investments held to maturity     (2,004)
Proceeds from maturity of short-term investments held to maturity  2,000   26,525 
Purchases of property and equipment  (2,103)  (2,610)
Net cash and cash equivalents (used in) provided by investing activities  (103)  21,911 
Cash flows from financing activities        
Draws on revolving line of credit  28,000    
Payments on revolving line of credit  (20,000)  (25,000)
Proceeds from exercises of stock options and ESPP  2,454   163 
Remittance of taxes upon vesting of restricted stock units     (202)
Payments on financing and capital lease obligations  (2,120)  (2,875)
Net cash and cash equivalents provided by (used in) financing activities  8,334   (27,914)
Net increase (decrease) in cash and cash equivalents  818   (25,821)
Cash and cash equivalents, beginning of period  56,853   48,074 
Cash and cash equivalents, end of period $57,671  $22,253 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $200  $428 
Property and equipment purchased with financing and capital lease obligations $  $733 
Post contract support purchased with financing obligations $  $1,048 
         


Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)
    
  Three Months Ended
March 31,
 
  2017  2016 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:        
Gross profit $32,570  $25,495 
Amortization of acquired intangible assets  36   36 
Stock-based compensation expense  662   548 
Total net adjustments  698   584 
Non-GAAP gross profit $33,268  $26,079 
         
Reconciliation from Operating Loss to Non-GAAP Operating Loss:        
Operating loss $(4,645) $(11,489)
Amortization of acquired intangible assets  64   64 
Stock-based compensation expense  4,388   4,733 
Total net adjustments  4,452   4,797 
Non-GAAP operating loss $(193) $(6,692)
         
Reconciliation from Net Loss to Adjusted EBITDA:        
Net loss $(7,688) $(13,352)
Depreciation  3,111   2,353 
Amortization of software development costs  830   626 
Amortization of acquired intangible assets  64   64 
Interest income  (27)  (56)
Interest expense on building lease financing obligations  1,860   1,716 
Interest expense on other borrowings  1,062   198 
Income tax expense     5 
Stock-based compensation expense  4,388   4,733 
Total net adjustments  11,288   9,639 
Adjusted EBITDA $3,600  $(3,713)
         
Reconciliation from Net Loss to Non-GAAP Net Loss:        
Net loss $(7,688) $(13,352)
Amortization of acquired intangible assets  64   64 
Stock-based compensation expense  4,388   4,733 
Total net adjustments  4,452   4,797 
Non-GAAP net loss $(3,236) $(8,555)
         
Calculation of Non-GAAP Earnings Per Share:        
Non-GAAP net loss $(3,236) $(8,555)
         
Weighted average shares outstanding - basic and diluted  30,658,468   29,213,198 
Shares used in computing non-GAAP net loss per share - basic and diluted  30,658,468   29,213,198 
Non-GAAP net loss per common share - basic and diluted $(0.11) $(0.29)
         


Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
       
  Second Quarter 2017  Full Year 2017 
  Range  Range 
  Low  High  Low  High 
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                
Net loss - Guidance range $(9.9) $(8.9) $(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  4.8   4.8   19.8   19.8 
Total net adjustments  11.4   11.4   44.7   44.7 
Adjusted EBITDA - Guidance range $1.5  $2.5  $13.0  $17.0 
                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                
Net loss - Guidance range $(9.9) $(8.9) $(31.7) $(27.7)
Amortization of acquired intangible assets  0.1   0.1   0.4   0.4 
Stock-based compensation expense  4.8   4.8   19.8   19.8 
Total net adjustments  4.9   4.9   20.2   20.2 
Non-GAAP net loss - Guidance range $(5.0) $(4.0) $(11.5) $(7.5)
                 
Calculation of Non-GAAP Earnings Per Share Guidance:                
Non-GAAP net loss - Guidance range $(5.0) $(4.0) $(11.5) $(7.5)
                 
Weighted average shares outstanding - basic and diluted  31.0   31.0   30.9   30.9 
Shares used in computing non-GAAP net loss per share - basic and diluted  31.0   31.0   30.9   30.9 
Non-GAAP net loss per common share - basic and diluted $(0.16) $(0.13) $(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