Benefitfocus, Inc.
Aug 7, 2014

Benefitfocus Announces Second Quarter 2014 Financial Results

Total revenue of $32.3 million grew 33% year-over-year

Employer revenue of $14.3 million grew 59% year-over-year

CHARLESTON, S.C., Aug. 7, 2014 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (Nasdaq:BNFT), a leading provider of cloud-based benefits software solutions, today announced its second quarter 2014 financial results.

"Benefitfocus reported strong second quarter results from both a revenue and profitability perspective," said Shawn Jenkins, President and Chief Executive Officer of Benefitfocus. "We believe that employers and carriers are increasingly embracing Benefitfocus' cloud-based solutions to capitalize on the changes in the benefits market to drive improved employee engagement and cost management."

Jenkins added, "The transformation of the benefits administration market continues to accelerate. This is enabling employers and carriers to innovate and create new ways to deliver the benefits package that is right for an employee's individual circumstances. The market is in the early stages of this transformation and we are making investments to position Benefitfocus to capitalize on this multi-billion dollar opportunity."

Second Quarter 2014 Financial Highlights

Revenue

Loss from Operations

Net Loss

Adjusted EBITDA

Balance Sheet and Cash Flow

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables accompanying this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Second Quarter and Recent Business Highlights

Business Outlook

Based on information available as of August 7, 2014, Benefitfocus is providing guidance for the third quarter and updating full year 2014 as indicated below.

Third Quarter 2014:

Full Year 2014:

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, August 7, 2014 at 5:00 p.m. Eastern Time to discuss the company's financial results. To access this call, dial (855) 233-6991 (domestic) or (317) 586-4497 (international) with conference ID 72817790. 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 (855) 859-2056 (domestic) or (404) 537-3406 (international) until September 7, 2014.

About Benefitfocus

Benefitfocus, Inc. (Nasdaq:BNFT) is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus has served more than 23 million consumers on its platform that consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus Platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits including core medical, dental and other voluntary benefits plans as well as wellness programs. For more information, visit www.benefitfocus.com.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP loss from operations, net loss, net loss per share, adjusted gross profit, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow, 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 loss from operations, net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering costs expensed and interest associated with building lease financing obligations. Adjusted gross profit excludes stock-based compensation, amortization of acquisition-related intangible assets, amortization of software development costs, and depreciation. 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. We define free cash flow as cash flow from operations less capital expenditures and capitalized software. 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, the inclusion of the non-GAAP financial measures 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: fluctuations in our financial results; 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 maintain our culture and recruit and retain qualified personnel; our ability to compete effectively; privacy, security and other risks associated with our business; general economic risks; 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.

         
         
Benfitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
         
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2014 2013 2014 2013
         
         
Revenue  $ 32,337  $ 24,332  $ 63,033  $ 48,179
Cost of revenue (1)(2)  21,037  14,322  40,263  26,767
Gross profit  11,300  10,010  22,770  21,412
Operating expenses:(1)(2)        
 Sales and marketing  14,067  10,604  25,054  19,742
 Research and development  10,372  5,758  19,150  10,297
 General and administrative  4,272  2,742  7,801  5,561
 Change in fair value of contingent consideration  -  (13)  -  (43)
 Total operating expenses  28,711  19,091  52,005  35,557
Loss from operations  (17,411)  (9,081)  (29,235)  (14,145)
Other income (expense):        
 Interest income  24  10  50  23
 Interest expense  (797)  (523)  (1,385)  (1,043)
 Other expense  (1)  (14)  (3)  (38)
 Total other expense, net  (774)  (527)  (1,338)  (1,058)
Loss before income taxes   (18,185)  (9,608)  (30,573)  (15,203)
Income tax expense   15  20  29  40
Net loss  $ (18,200)  $ (9,628)  $ (30,602)  $ (15,243)
Comprehensive loss  $ (18,200)  $ (9,628)  $ (30,602)  $ (15,243)
         
Net loss per common share:        
 Basic and diluted  $ (0.72)  $ (2.00)  $ (1.23)  $ (3.17)
Weighted-average common shares outstanding:        
 Basic and diluted  25,200,093  4,809,518  24,872,545  4,803,812
         
         
(1) Stock-based compensation included in above line items:        
 Cost of revenue  $ 213  $ 69  $ 292  $ 131
 Sales and marketing  371  34  535  64
 Research and development  366  67  515  133
 General and administrative  401  114  549  209
         
(2) Amortization of acquired intangible assets included in above line items:        
 Cost of revenue  $ 59  $ 63  $ 117  $ 127
 Sales and marketing  6  9  13  16
 Research and development  10  10  19  20
 General and administrative  2  2  4  4
     
 
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
     
 As of
June 30,
2014
As of
December 31,
2013
Assets    
Current assets:    
 Cash and cash equivalents  $ 55,225  $ 65,645
 Marketable securities  16,468  13,168
 Accounts receivable, net   21,367  23,668
 Prepaid expenses and other current assets  5,293  4,322
 Total current assets   98,353  106,803
Property and equipment, net  37,739  27,444
Intangible assets, net  1,103  1,256
Goodwill   1,634  1,634
Other non-current assets  2,181  2,474
 Total assets  $ 141,010  $ 139,611
     
Liabilities and stockholders' (deficit) equity    
Current liabilities:    
 Accounts payable  $ 2,955  $ 4,354
 Accrued expenses  4,152  3,911
 Accrued compensation and benefits  19,083  14,183
 Deferred revenue, current portion  15,838  15,158
 Financing and capital lease obligations, current portion  3,994  4,288
 Total current liabilities  46,022  41,894
     
Deferred revenue, net of current portion  73,359  65,063
Revolving line of credit  12,757  5,757
Financing and capital lease obligations, net of current portion  21,597  14,263
Other non-current liabilities  1,864  1,202
 Total liabilities  155,599  128,179
Commitments and contingencies    
     
Stockholders' (deficit) equity:    
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2014 and December 31, 2013  -  -
Common stock, par value $0.001, 50,000,000 shares authorized, 25,437,722 and 24,495,651 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively  25  24
Additional paid-in capital  219,067  214,487
Accumulated deficit  (233,681)  (203,079)
 Total stockholders' (deficit) equity  (14,589)  11,432
 Total liabilities and stockholders' (deficit) equity  $ 141,010  $ 139,611
     
     
Benefitfocus.com, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
     
 Six Months Ended
June 30,
 2014 2013
Cash flows from operating activities    
 Net loss  $ (30,602)  $ (15,243)
 Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:    
 Depreciation and amortization  5,000  3,885
 Stock-based compensation expense  1,891  537
 Change in fair value and accretion of warrant  446  446
 Interest accrual on financing obligation  1,107  884
 Change in fair value of contingent consideration  -  (24)
 Provision for doubtful accounts   -  51
 Loss on disposal or impairment of property and equipment  5  27
 Changes in operating assets and liabilities:    
 Accounts receivable, net  2,301  (5,471)
 Accrued interest on short-term investments  93  -
 Prepaid expenses and other current assets  (368)  (673)
 Other non-current assets  293  -
 Accounts payable  (2,055)  1,628
 Accrued expenses  125  (323)
 Accrued compensation and benefits  4,900  5,643
 Deferred revenue  8,977  8,653
 Other non-current liabilities  662  168
Net cash and cash equivalents (used in) provided by operating activities  (7,225)  188
Cash flows from investing activities    
 Purchases of short term investments held to maturity  (12,959)  -
 Proceeds from maturity of short-term investments held to maturity  9,566  -
 Purchases of property and equipment  (3,730)  (3,419)
Net cash and cash equivalents used in investing activities  (7,123)  (3,419)
Cash flows from financing activities    
 Draws on revolving line of credit  7,000  -
 Proceeds from notes payable borrowing  -  1,465
 Repayment of notes payable  -  (1,240)
 Proceeds from exercises of stock options  2,244  30
 Proceeds from issuance of common stock (excluding IPO)  -  68
 Payments of deferred financing costs  -  (1,508)
 Payments on financing and capital lease obligations  (5,316)  (1,614)
Net cash and cash equivalents provided by (used in) financing activities  3,928  (2,799)
Net decrease in cash and cash equivalents  (10,420)  (6,030)
Cash and cash equivalents, beginning of period  65,645  19,703
Cash and cash equivalents, end of period  $ 55,225  $ 13,673
     
Supplemental disclosure of non-cash investing activities    
 Property and equipment acquisitions in accounts payable and accrued expenses  $ 772  $ -
 Property and equipment acquired with financing and capital lease obligations  $ 10,646  $ 1,102
 Post contract support acquired with financing obligations  $ 604  $ -
         
         
Benefitfocus, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited, dollars in thousands except share and per share data)
         
 Three Months Ended
June 30, 
Six Months Ended
June 30,
 2014201320142013
         
Reconciliation from Gross Profit to Adjusted Gross Profit:        
Gross profit  $ 11,300  $ 10,010  $ 22,770  $ 21,412
Depreciation  1,385  1,026  2,733  2,020
Amortization of software development costs  767  639  1,463  1,242
Amortization of acquired intangible assets  59  63  117  127
Stock-based compensation expense  213  69  292  131
Adjusted gross profit  $ 13,724  $ 11,807  $ 27,375  $ 24,932
         
Reconciliation from Operating Loss to Non-GAAP Operating Loss:        
Operating loss  $ (17,411)  $ (9,081)  $ (29,235)  $ (14,145)
Amortization of acquired intangible assets  77  84  153  167
Stock-based compensation expense  1,351  284  1,891  537
Offering costs expensed  424  --   424  -- 
Total net adjustments  1,852  368  $ 2,468  $ 704
Non-GAAP operating loss  $ (15,559)  $ (8,713)  $ (26,767)  $ (13,441)
         
Reconciliation from Net Loss to Adjusted EBITDA:        
Net loss  $ (18,200)  $ (9,628)  $ (30,602)  $ (15,243)
Depreciation  1,712  1,257  3,384  2,476
Amortization of software development costs  767  639  1,463  1,242
Amortization of acquired intangible assets  77  84  153  167
Interest income  (24)  (10)  (50)  (23)
Interest expense on building lease financing obligations  648  442  1,107  885
Interest expense on other borrowings  149  81  278  158
Income tax expense  15  20  29  40
Stock-based compensation expense  1,351  284  1,891  537
Total net adjustments  4,695  2,797  $ 8,255  $ 5,482
Adjusted EBITDA  $ (13,505)  $ (6,831)  $ (22,347)  $ (9,761)
         
Reconciliation from Net Loss to Non-GAAP Net Loss:        
Net loss  $ (18,200)  $ (9,628)  $ (30,602)  $ (15,243)
Amortization of acquired intangible assets  77  84  153  167
Stock-based compensation expense  1,351  284  1,891  537
Interest expense on building lease financing obligations  648  442  1,107  885
Offering costs expensed  424  --   424  -- 
Total net adjustments  2,500  810  3,575  1,589
Non-GAAP net loss  $ (15,700)  $ (8,818)  $ (27,027)  $ (13,654)
         
Calculation of Non-GAAP Earnings Per Share:        
Non-GAAP net loss  $ (15,700)  $ (8,818)  $ (27,027)  $ (13,654)
         
Weighted average shares outstanding - basic and diluted  25,200,093  4,809,518  24,872,545  4,803,812
Additional weighted average shares giving effect to conversion of convertible preferred stock at the beginning of the period  --  16,496,860  --  16,496,860
Shares used in computing non-GAAP net loss per share - basic and diluted  25,200,093  21,306,378  24,872,545  21,300,672
Non-GAAP net loss per common share - basic and diluted  $ (0.62)  $ (0.41)  $ (1.09)  $ (0.64)
CONTACT: Benefitfocus, Inc.

         843-284-1052 ext. 6846

         pr@benefitfocus.com

         

         Investor Relations:

         ICR for Benefitfocus, Inc.

         Brian Denyeau

         646-277-1251

         brian.denyeau@icrinc.com