Benefitfocus, Inc.
Aug 3, 2016

Benefitfocus Announces Second Quarter 2016 Financial Results

Total revenue of $57.9 million grew 36% year-over-year
Employer revenue of $36.3 million grew 75% year-over-year

CHARLESTON, S.C., Aug. 03, 2016 (GLOBE NEWSWIRE) --  Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management software, today announced its second quarter 2016 financial results.

"Benefitfocus continued to strengthen its market leadership position and delivered a strong second quarter, with revenue and profitability that exceeded the high-end of our guidance for the twelfth consecutive quarter," said Shawn Jenkins, Chief Executive Officer of Benefitfocus. "Strong demand drove total revenue growth of 36% in the second quarter and once again, our software revenue retention rate was over 95%."

Jenkins added, "We remain on track to achieve Q4 adjusted EBITDA profitability and are making significant progress towards achieving our long-term goals.  This was exemplified in the second quarter by our strong revenue growth and nearly 8 times reduction in adjusted EBITDA loss over the year-ago period."  

Second Quarter 2016 Financial Highlights

Revenue

GAAP Net Loss

Non-GAAP Net Loss and Adjusted EBITDA

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

Balance Sheet

Second Quarter and Recent Business Highlights

Business Outlook

Based on information available as of August 3, 2016, Benefitfocus is providing guidance for the third quarter and full year 2016 as indicated below.

Third Quarter 2016:

Full Year 2016:

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

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, August 3, 2016, 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 (877) 870-5176 (domestic) or (858) 384-5517 (international) with replay passcode 13641207 through August 10, 2016.

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 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; 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 maintain our culture and recruit and retain qualified personnel; 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
June 30,
 Six Months Ended
June 30,
   2016   2015   2016   2015 
Revenue $57,874  $42,708  $112,666  $85,377 
Cost of revenue (1)(2)  29,750   23,640   59,047   46,103 
Gross profit  28,124   19,068   53,619   39,274 
Operating expenses:(1)(2)        
Sales and marketing  14,761   15,804   28,335   31,279 
Research and development  14,180   13,271   29,195   25,048 
General and administrative  8,274   6,393   16,669   11,804 
Total operating expenses  37,215   35,468   74,199   68,131 
Loss from operations  (9,091)  (16,400)  (20,580)  (28,857)
Other income (expense):        
Interest income  36   56   92   74 
Interest expense on building lease financing obligations  (1,710)  (1,730)  (3,426)  (3,644)
Interest expense on other borrowings  (231)  (210)  (429)  (490)
Other (expense) income  (3)  5   (3)  4 
Total other expense, net  (1,908)  (1,879)  (3,766)  (4,056)
Loss before income taxes  (10,999)  (18,279)  (24,346)  (32,913)
Income tax expense  5   5   10   20 
Net loss $(11,004) $(18,284) $(24,356) $(32,933)
Comprehensive loss $(11,004) $(18,284) $(24,356) $(32,933)
         
Net loss per common share:        
Basic and diluted $(0.37) $(0.64) $(0.83) $(1.19)
Weighted-average common shares outstanding:        
Basic and diluted  29,459,341   28,633,992   29,336,270   27,694,935 
         
         
(1) Stock-based compensation included in above line items:        
Cost of revenue $770  $434  $1,318  $754 
Sales and marketing  838   713   1,470   1,036 
Research and development  1,059   613   2,527   1,052 
General and administrative  1,783   1,021   3,868   1,775 
         
(2) Amortization of acquired intangible assets included in above line items:        
Cost of revenue $38  $59  $74  $117 
Sales and marketing  10   6   20   13 
Research and development  13   9   28   19 
General and administrative  4   2   7   4 
                 

 

Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
      
  As of
June 30,
2016
 As of
December 31,
2015
 
Assets     
Current assets:     
Cash and cash equivalents $56,929  $48,074  
Marketable securities  11,069   40,448  
Accounts receivable, net  28,440   27,616  
Accounts receivable, related party  2,862   2,082  
Prepaid expenses and other current assets  6,147   5,725  
Total current assets  105,447   123,945  
Property and equipment, net  55,763   55,037  
Intangible assets, net  536   665  
Goodwill  1,634   1,634  
Other non-current assets  1,377   838  
Total assets $164,757  $182,119  
Liabilities and stockholders' deficit     
Current liabilities:     
Accounts payable $7,445  $7,953  
Accrued expenses  10,269   10,449  
Accrued compensation and benefits  17,488   20,684  
Deferred revenue, current portion  33,530   37,858  
Revolving line of credit, current portion  34,000   25,000  
Financing and capital lease obligations, current portion  2,885   3,648  
Total current liabilities  105,617   105,592  
Deferred revenue, net of current portion  50,067   55,671  
Revolving line of credit, net of current portion  5,246   5,246  
Financing and capital lease obligations, net of current portion  33,095   31,183  
Other non-current liabilities  2,523   2,436  
Total liabilities  196,548   200,128  
Commitments and contingencies     
Stockholders' deficit:     
Preferred stock, par value $0.001, 5,000,000 shares authorized,
  no shares issued and outstanding at June 30, 2016
  and December 31, 2015
       
Common stock, par value $0.001, 50,000,000 shares authorized,
  29,588,841 and 29,194,332 shares issued and outstanding
  at June 30, 2016 and December 31, 2015, respectively
  30   29  
Additional paid-in capital  320,877   310,304  
Accumulated deficit  (352,698)  (328,342) 
Total stockholders' deficit  (31,791)  (18,009) 
Total liabilities and stockholders' deficit $164,757  $182,119  
 

 

Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
     
  Six Months Ended
June 30,
   2016   2015 
Cash flows from operating activities    
Net loss $(24,356) $(32,933)
Adjustments to reconcile net loss to net cash and cash
  equivalents used in operating activities:
    
Depreciation and amortization  6,310   5,726 
Stock-based compensation expense  9,183   4,617 
Interest accrual on financing obligation  3,426   3,644 
Loss on disposal or impairment of property and equipment  7   8 
Provision for doubtful accounts  (22)   
Changes in operating assets and liabilities:    
Accounts receivable, net  (1,582)  (614)
Accrued interest on short-term investments  158   88 
Prepaid expenses and other current assets  (72)  (1,523)
Other non-current assets  291   711 
Accounts payable  (1,279)  1,427 
Accrued expenses  741   648 
Accrued compensation and benefits  (3,196)  1,868 
Deferred revenue  (9,932)  (495)
Other non-current liabilities  87   189 
Net cash and cash equivalents used in operating activities  (20,236)  (16,639)
Cash flows from investing activities    
Purchases of short-term investments held to maturity  (2,004)  (51,111)
Proceeds from maturity of short-term investments held to maturity  31,225   8,067 
Purchases of property and equipment  (4,964)  (8,054)
Net cash and cash equivalents provided by (used in) investing activities  24,257   (51,098)
Cash flows from financing activities    
Draws on revolving line of credit  34,000   22,492 
Payments on revolving line of credit  (25,000)  (34,903)
Proceeds from exercises of stock options  1,593   1,318 
Proceeds from issuance of common stock and warrant, net of issuance costs     74,538 
Payment of deferred financing costs and debt issuance costs     (566)
Remittance of taxes upon vesting of restricted stock units  (202)  (874)
Payments on financing and capital lease obligations  (5,557)  (4,918)
Net cash and cash equivalents provided by financing activities  4,834   57,087 
Net increase (decrease) in cash and cash equivalents  8,855   (10,650)
Cash and cash equivalents, beginning of period  48,074   51,074 
Cash and cash equivalents, end of period $56,929  $40,424 
     
Supplemental disclosure of non-cash investing and financing activities    
Property and equipment purchases in accounts payable and accrued expenses $1,397  $1,558 
Property and equipment purchased with financing and capital lease obligations $2,099  $236 
Post contract support purchased with financing obligations $1,182  $ 
Allocation of proceeds to deferred revenue from issuance of
  common stock based on relative selling price
 $  $207 
 

 

Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)
         
  Three Months Ended
June 30,
 Six Months Ended
June 30,
   2016   2015   2016   2015 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:        
Gross profit $28,124  $19,068  $53,619  $39,274 
Amortization of acquired intangible assets  38   59   74   117 
Stock-based compensation expense  770   434   1,318   754 
Total net adjustments  808   493   1,392   871 
Non-GAAP gross profit $28,932  $19,561  $55,011  $40,145 
         
Reconciliation from Operating Loss to Non-GAAP Operating Loss:        
Operating loss $(9,091) $(16,400) $(20,580) $(28,857)
Amortization of acquired intangible assets  65   76   129   153 
Stock-based compensation expense  4,450   2,781   9,183   4,617 
Offering costs expensed     136      136 
Total net adjustments  4,515   2,993   9,312   4,906 
Non-GAAP operating loss $(4,576) $(13,407) $(11,268) $(23,951)
         
Reconciliation from Net Loss to Adjusted EBITDA:        
Net loss $(11,004) $(18,284) $(24,356) $(32,933)
Depreciation  2,509   2,156   4,862   4,226 
Amortization of software development costs  693   671   1,319   1,347 
Amortization of acquired intangible assets  65   76   129   153 
Interest income  (36)  (56)  (92)  (74)
Interest expense on building lease financing obligations  1,710   1,730   3,426   3,644 
Interest expense on other borrowings  231   210   429   490 
Income tax expense  5   5   10   20 
Stock-based compensation expense  4,450   2,781   9,183   4,617 
Total net adjustments  9,627   7,573   19,266   14,423 
Adjusted EBITDA $(1,377) $(10,711) $(5,090) $(18,510)
         
Reconciliation from Net Loss to Non-GAAP Net Loss:        
Net loss $(11,004) $(18,284) $(24,356) $(32,933)
Amortization of acquired intangible assets  65   76   129   153 
Stock-based compensation expense  4,450   2,781   9,183   4,617 
Offering costs expensed     136      136 
Total net adjustments  4,515   2,993   9,312   4,906 
Non-GAAP net loss $(6,489) $(15,291) $(15,044) $(28,027)
         
Calculation of Non-GAAP Earnings Per Share:        
Non-GAAP net loss $(6,489) $(15,291) $(15,044) $(28,027)
         
Weighted average shares outstanding - basic and diluted  29,459,341   28,633,992   29,336,270   27,694,935 
Shares used in computing non-GAAP net loss per share - basic and
  diluted
  29,459,341   28,633,992   29,336,270   27,694,935 
Non-GAAP net loss per common share - basic and diluted $(0.22) $(0.53) $(0.51) $(1.01)
                 

 

Benefitfocus, Inc.
 Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
         
  Third Quarter 2016 Full Year 2016
  Range Range
  Low  High Low  High
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:        
Net loss - Guidance range $(14.9) $(14.4) $(48.2) $(46.2)
Depreciation and amortization  4.1   4.1   14.0   14.0 
Interest income        (0.1)  (0.1)
Interest expense  2.0   2.0   7.8   7.8 
Income tax expense            
Stock-based compensation expense  4.8   4.8   19.0   19.0 
Total net adjustments  10.9   10.9   40.7   40.7 
Adjusted EBITDA - Guidance range $(4.0) $(3.5) $(7.5) $(5.5)
         
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:        
Net loss - Guidance range $(14.9) $(14.4) $(48.2) $(46.2)
Amortization of acquired intangible assets  0.1   0.1   0.2   0.2 
Stock-based compensation expense  4.8   4.8   19.0   19.0 
Total net adjustments  4.9   4.9   19.2   19.2 
Non-GAAP net loss - Guidance range $(10.0) $(9.5) $(29.0) $(27.0)
         
Calculation of Non-GAAP Earnings Per Share Guidance:        
Non-GAAP net loss - Guidance range $(10.0) $(9.5) $(29.0) $(27.0)
         
Weighted average shares outstanding - basic and diluted  29.6   29.6   29.5   29.5 
Shares used in computing non-GAAP
  net loss per share - basic and diluted
  29.6   29.6   29.5   29.5 
Non-GAAP net loss per common share - basic and diluted $(0.34) $(0.32) $(0.98) $(0.91)
                 


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

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