Benefitfocus, Inc.
Feb 24, 2015

Benefitfocus Announces Fourth Quarter and Full Year 2014 Financial Results and Strategic Investment Transaction

CHARLESTON, S.C., Feb. 24, 2015 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (Nasdaq:BNFT), a leading provider of cloud-based benefits software solutions, today announced financial results for the fourth quarter and full year 2014.

"Benefitfocus delivered a strong fourth quarter performance that capped a record year for the company. We exceeded expectations on both the top and bottom line during the quarter, with 33% total revenue growth driven by 47% growth in employer revenue, and a 900 basis point sequential improvement in gross margin," said Shawn Jenkins, President and Chief Executive Officer of Benefitfocus. "We delivered a number of exciting achievements in 2014, such as supporting dozens of private exchanges, including the nation's largest; adding 160 new large employer customers; and successfully graduating our first class of third-party systems integrators."

Jenkins added, "Today's announcement with Mercer, which includes a long-term commercial contract expansion and a strategic equity investment in Benefitfocus, is further validation of our leadership in the private exchange and cloud-based benefits administration market. As we look ahead to 2015 we are focused on strengthening our position even more, with a specific emphasis on enhancing our marketplace solutions and creating the first significant upsell opportunity in our employer market with the introduction of several new product offerings. We also expect to continue leveraging the investments we made in 2014 and deliver improvements in profitability. We believe our strong growth profile in a dynamic, multi-billion dollar market, coupled with improving profitability, is a powerful combination that will deliver value for our shareholders."

Fourth Quarter 2014 Financial Highlights

Revenue

Non-GAAP Net Loss and Adjusted EBITDA

Balance Sheet and Cash Flow

Full Year 2014 Financial Highlights

Revenue

Non-GAAP Net Loss and Adjusted EBITDA

Fourth Quarter and Recent Business Highlights

Business Outlook

Based on information available as of February 24, 2015, Benefitfocus is issuing guidance for the first quarter and full year 2015 as indicated below.

First Quarter 2015:

Full Year 2015:

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, February 24, 2015 at 5:00 p.m. Eastern Time to discuss the company's preliminary financial results. To access this call, dial (855) 233-6991 (domestic) or (317) 586-4497 (international) with conference ID 65780947. 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 March 24, 2015.

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, visitwww.benefitfocus.com.

Non-GAAP Financial Measures

The company uses non-GAAP financial measures in this release and its conference call, including non-GAAP operating loss, 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 operating loss, 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.

The guidance provided for 2015 reflects a change in the definition of the company's non-GAAP measures of non-GAAP net loss and net loss per share as compared to the definition above applied for 2014. For 2015, Non-GAAP net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets and offering costs expensed. For comparability purposes with our peer group, we will no longer add back interest expense on building lease obligations to these items.

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, 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.

Forward-Looking Disclaimer

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; our increased reliance on Mercer as a result of the expanded relationship; 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.

 
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,
  2014 2013 2014 2013
Revenue  $ 40,187  $ 30,256  $ 137,420  $ 104,752
Cost of revenue (1)(2)  23,852  19,473  87,470  62,411
Gross profit  16,335  10,783  49,950  42,341
Operating expenses:(1)(2)        
Sales and marketing  11,308  8,976  48,467  36,072
Research and development  11,110  6,708  41,729  23,532
General and administrative  5,823  2,790  18,657  10,974
Change in fair value of contingent consideration  -  -  -  (43)
Total operating expenses  28,241  18,474  108,853  70,535
Loss from operations  (11,906)  (7,691)  (58,903)  (28,194)
Other income (expense):        
Interest income  13  15  77  46
Interest expense on building lease financing obligations  (1,574)  (443)  (3,624)  (1,768)
Interest expense on other borrowings  (206)  (109)  (682)  (381)
Other (expense) income   (11)  (66)  (22)  (95)
Total other expense, net  (1,778)  (603)  (4,251)  (2,198)
Loss before income taxes   (13,684)  (8,294)  (63,154)  (30,392)
Income tax expense (benefit)   5  (12)  25  (31)
Net loss  $ (13,689)  $ (8,282)  $ (63,179)  $ (30,361)
Comprehensive loss  $ (13,689)  $ (8,282)  $ (63,179)  $ (30,361)
         
Net loss per common share:        
Basic and diluted  $ (0.54)  $ (0.34)  $ (2.51)  $ (2.99)
Weighted-average common shares outstanding:        
Basic and diluted  25,569,203  24,474,566  25,207,099  10,144,243
         
(1) Stock-based compensation included in above line items:        
Cost of revenue  367  86  986  274
Sales and marketing  519  78  1,395  171
Research and development  425  66  1,376  255
General and administrative  733  151  1,831  502
         
(2) Amortization of acquired intangible assets included in above line items:        
Cost of revenue  59  58  234  245
Sales and marketing  7  7  27  29
Research and development  9  9  37  40
General and administrative  1  2  7  9
 
 
Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
  As of December 31,
  2014 2013
Assets    
Current assets:    
Cash and cash equivalents  $ 51,074  $ 65,645
Marketable securities  5,135  13,168
Accounts receivable, net   21,311  23,668
Prepaid expenses and other current assets  4,242  4,322
Total current assets   81,762  106,803
Property and equipment, net  54,021  27,444
Intangible assets, net  951  1,256
Goodwill   1,634  1,634
Other non-current assets  1,650  2,474
Total assets  $ 140,018  $ 139,611
Liabilities and stockholders' (deficit) equity    
Current liabilities:    
Accounts payable  $ 5,589  $ 4,354
Accrued expenses  9,171  3,911
Accrued compensation and benefits  17,374  14,183
Deferred revenue, current portion  20,384  15,158
Financing and capital lease obligations, current portion  4,197  4,288
Total current liabilities  56,715  41,894
Deferred revenue, net of current portion  74,126  65,063
Revolving line of credit  17,657  5,757
Financing and capital lease obligations, net of current portion  32,240  14,263
Other non-current liabilities  2,103  1,202
Total liabilities  182,841  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 December 31, 2014 and 2013  --   -- 
Common stock, par value $0.001, 50,000,000 shares authorized, 25,608,937 and 24,495,651 shares issued and outstanding at December 31, 2014 and 2013, respectively  26  24
Additional paid-in capital  223,409  214,487
Accumulated deficit  (266,258)  (203,079)
Total stockholders' (deficit) equity  (42,823)  11,432
Total liabilities and stockholders' (deficit) equity  $ 140,018  $ 139,611
 
 
Benefitfocus, Inc.
Consolidated Statements of Cash Flows
(in thousands)
  Year Ended December 31,
  2014 2013
Cash flows from operating activities    
Net loss  $ (63,179)  $ (30,361)
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:    
Depreciation and amortization  9,493  8,172
Stock-based compensation expense  5,588  1,202
Change in fair value and accretion of warrant  744  892
Interest accrual on financing obligation  3,624  1,768
Change in fair value of contingent consideration  -  (17)
Provision for doubtful accounts   -  (32)
Loss on disposal or impairment of property and equipment  25  65
Changes in operating assets and liabilities:    
Accounts receivable, net  2,357  (10,264)
Accrued interest on short-term investments  162  -
Prepaid expenses and other current assets  833  (1,440)
Other non-current assets  824  -
Accounts payable  (199)  2,625
Accrued expenses  2,469  904
Accrued compensation and benefits  3,192  4,521
Deferred revenue  14,288  22,701
Other non-current liabilities  901  331
Net cash and cash equivalents (used in) provided by operating activities  (18,878)  1,067
Cash flows from investing activities    
Purchases of short-term investments held to maturity  (12,959)  (13,168)
Proceeds from maturity of short-term investments held to maturity  20,830  -
Purchases of property and equipment  (9,824)  (8,918)
Proceeds from sale of property and equipment  -  9
Net cash and cash equivalents used in investing activities  (1,953)  (22,077)
Cash flows from financing activities    
Proceeds from initial public offering, net of issuance costs  -  70,064
Draws on revolving line of credit  14,000  10,757
Payments on revolving line of credit  (2,100)  (5,000)
Proceeds from notes payable borrowing  -  1,465
Repayment of notes payable  -  (7,447)
Proceeds from exercises of stock options  2,817  699
Proceeds from issuance of common stock (excluding IPO)  -  68
Remittance of taxes upon vesting of restricted stock units  (226)  -
Payments of contingent consideration  -  (311)
Payments on financing and capital lease obligations  (8,231)  (3,343)
Net cash and cash equivalents provided by financing activities  6,260  66,952
Net (decrease) increase in cash and cash equivalents  (14,571)  45,942
Cash and cash equivalents, beginning of year  65,645  19,703
Cash and cash equivalents, end of year  $ 51,074  $ 65,645
     
Supplemental disclosure of non-cash investing and financing activities    
Property and equipment acquisitions in accounts payable and accrued expenses  $ 4,226  $ 524
Property and equipment acquired with financing and capital lease obligations  $ 21,739  $ 5,440
Post contract support acquired with financing obligations  $ 754  $ 3,872
 
 
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,
  2014 2013 2014 2013
Reconciliation from Gross Profit to Adjusted Gross Profit:        
Gross profit  $ 16,335  $ 10,783  $ 49,950  $ 42,341
Depreciation  1,408  1,186  5,459  4,257
Amortization of software development costs  43  714  2,257  2,618
Amortization of acquired intangible assets  59  58  234  245
Stock-based compensation expense  367  86  986  274
Adjusted gross profit  $ 18,212  $ 12,827  $ 58,886  $ 49,735
         
Reconciliation from Operating Loss to Non-GAAP Operating Loss:        
Operating loss  $ (11,906)  $ (7,691)  $ (58,903)  $ (28,194)
Amortization of acquired intangible assets  76  76  305  323
Stock-based compensation expense  2,044  381  5,588  1,202
Offering costs expensed  -  -  708  -
Total net adjustments  2,120  457  $ 6,601  $ 1,525
Non-GAAP operating loss  $ (9,786)  $ (7,234)  $ (52,302)  $ (26,669)
         
Reconciliation from Net Loss to Adjusted EBITDA:        
Net loss  $ (13,689)  $ (8,282)  $ (63,179)  $ (30,361)
Depreciation  1,774  1,456  6,931  5,231
Amortization of software development costs  43  714  2,257  2,618
Amortization of acquired intangible assets  76  76  305  323
Interest income  (13)  (15)  (77)  (46)
Interest expense on building lease financing obligations  1,574  443  3,624  1,768
Interest expense on other borrowings  206  109  682  381
Income tax (benefit) expense  5  (12)  25  (31)
Stock-based compensation expense  2,044  381  5,588  1,202
Total net adjustments  5,709  3,152  $ 19,335  $ 11,446
Adjusted EBITDA  $ (7,980)  $ (5,130)  $ (43,844)  $ (18,915)
         
Reconciliation from Net Loss to Non-GAAP Net Loss:        
Net loss  $ (13,689)  $ (8,282)  $ (63,179)  $ (30,361)
Amortization of acquired intangible assets  76  76  305  323
Stock-based compensation expense  2,044  381  5,588  1,202
Interest expense on building lease financing obligations  1,574  443  3,624  1,768
Offering costs expensed  -  -  708  -
Total net adjustments  3,694  900  10,225  3,293
Non-GAAP net loss  $ (9,995)  $ (7,382)  (52,954)  (27,068)
         
Calculation of Non-GAAP Earnings Per Share:        
Non-GAAP net loss  $ (9,995)  $ (7,382)  $ (52,954)  $ (27,068)
Weighted average shares outstanding - basic and diluted  25,569,203  24,474,566  25,207,099  10,144,243
Additional weighted average shares giving effect to conversion of convertible preferred stock at the beginning of the period  -  -  -  12,022,369
Shares used in computing non-GAAP net loss per share - basic and diluted  25,569,203  24,474,566  25,207,099  22,166,612
Non-GAAP net loss per common share - basic and diluted  $ (0.39)  $ (0.30)  $ (2.10)  $ (1.22)
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
Source: Benefitfocus, Inc.

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