Benefitfocus, Inc.
Nov 3, 2016

Benefitfocus Announces Third Quarter 2016 Financial Results

Total revenue of $58.0 million grew 28% year-over-year
Employer revenue of $35.4 million grew 55% year-over-year

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

"Benefitfocus continued its positive momentum and delivered strong third quarter results with total revenue growing 28% in the quarter," said Shawn Jenkins, Chief Executive Officer of Benefitfocus. "Our employer revenue grew 55% driven by impressive demand for our platform, and once again, our software revenue retention rate was over 95%."
                                                                                                                             
Jenkins added, "We are also pleased that we achieved adjusted EBITDA profitability one quarter ahead of plan and continue to make excellent progress towards achieving our long-term goals. Throughout 2016 we have extended our leadership position within the dynamic cloud based benefits administration market as we remain focused on enabling our customers to engage employees, improve plan fit, reduce benefits expense and streamline administration." 

Third 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 and Cash Flow

Third Quarter and Recent Business Highlights

Business Outlook

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

Fourth Quarter 2016:

Full Year 2016:

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, November 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 13647185 through November 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 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;  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
September 30,
  Nine Months Ended
September 30,
 
  2016  2015  2016  2015 
Revenue $58,022  $45,426  $170,688  $130,803 
Cost of revenue (1)(2)  29,112   26,265   88,159   72,368 
Gross profit  28,910   19,161   82,529   58,435 
Operating expenses:(1)(2)                
Sales and marketing  13,607   14,218   41,942   45,497 
Research and development  14,081   12,958   43,276   38,006 
General and administrative  7,746   6,777   24,415   18,581 
Total operating expenses  35,434   33,953   109,633   102,084 
Loss from operations  (6,524)  (14,792)  (27,104)  (43,649)
Other income (expense):                
Interest income  25   56   117   130 
Interest expense on building lease financing obligations  (1,704)  (1,727)  (5,130)  (5,371)
Interest expense on other borrowings  (262)  (195)  (691)  (685)
Other (expense) income  (133)  (1)  (136)  3 
Total other expense, net  (2,074)  (1,867)  (5,840)  (5,923)
Loss before income taxes  (8,598)  (16,659)  (32,944)  (49,572)
Income tax expense  5   5   15   25 
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Comprehensive loss $(8,603) $(16,664) $(32,959) $(49,597)
                 
Net loss per common share:                
Basic and diluted $(0.29) $(0.58) $(1.12) $(1.77)
Weighted-average common shares outstanding:                
Basic and diluted  29,651,230   28,847,493   29,442,023   28,083,343 
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $754  $467  $2,072  $1,221 
Sales and marketing  886   710   2,356   1,746 
Research and development  1,011   700   3,538   1,752 
General and administrative  1,776   1,137   5,644   2,912 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $37  $52  $111  $169 
Sales and marketing  10   6   30   19 
Research and development  13   8   41   27 
General and administrative  5   2   12   6 
                 


Benefitfocus, Inc. 
Unaudited Consolidated Balance Sheets 
(in thousands, except share and per share data) 
  
  As of
September 30,
2016
  As of
December 31,
2015
 
Assets        
Current assets:        
Cash and cash equivalents $50,800  $48,074 
Marketable securities  4,510   40,448 
Accounts receivable, net  27,538   27,616 
Accounts receivable, related party  3,527   2,082 
Prepaid expenses and other current assets  5,610   5,725 
Total current assets  91,985   123,945 
Property and equipment, net  57,874   55,037 
Intangible assets, net  472   665 
Goodwill  1,634   1,634 
Other non-current assets  1,394   838 
Total assets $153,359  $182,119 
Liabilities and stockholders' deficit        
Current liabilities:        
Accounts payable $4,189  $7,953 
Accrued expenses  14,403   10,449 
Accrued compensation and benefits  17,224   20,684 
Deferred revenue, current portion  34,899   37,858 
Revolving line of credit, current portion  15,000   25,000 
Financing and capital lease obligations, current portion  2,017   3,648 
Total current liabilities  87,732   105,592 
Deferred revenue, net of current portion  44,811   55,671 
Revolving line of credit, net of current portion  20,246   5,246 
Financing and capital lease obligations, net of current portion  33,038   31,183 
Other non-current liabilities  2,974   2,436 
Total liabilities  188,801   200,128 
Commitments and contingencies        
Stockholders' deficit:        
Preferred stock, par value $0.001, 5,000,000 shares authorized,
  no shares issued and outstanding at September 30, 2016
  and December 31, 2015
      
Common stock, par value $0.001, 50,000,000 shares authorized,
  29,673,292 and 29,194,332 shares issued and outstanding
  at September 30, 2016 and December 31, 2015, respectively
  30   29 
Additional paid-in capital  325,829   310,304 
Accumulated deficit  (361,301)  (328,342)
Total stockholders' deficit  (35,442)  (18,009)
Total liabilities and stockholders' deficit $153,359  $182,119 
         


Benefitfocus, Inc. 
Unaudited Consolidated Statements of Cash Flows 
(in thousands) 
  
  Nine Months Ended
September 30,
 
  2016  2015 
Cash flows from operating activities        
Net loss $(32,959) $(49,597)
Adjustments to reconcile net loss to net cash and cash
  equivalents used in operating activities:
        
Depreciation and amortization  9,619   8,686 
Stock-based compensation expense  13,610   7,631 
Interest accrual on financing obligation  5,130   5,371 
Loss on disposal or impairment of property and equipment  140   10 
Provision for doubtful accounts  287    
Changes in operating assets and liabilities:        
Accounts receivable, net  (1,655)  (814)
Accrued interest on short-term investments  217   165 
Prepaid expenses and other current assets  465   (1,900)
Other non-current assets  142   1,047 
Accounts payable  (3,844)  117 
Accrued expenses  4,726   1,780 
Accrued compensation and benefits  (3,460)  3,445 
Deferred revenue  (13,819)  (1,849)
Other non-current liabilities  538   222 
Net cash and cash equivalents used in operating activities  (20,863)  (25,686)
Cash flows from investing activities        
Purchases of short-term investments held to maturity  (2,004)  (59,141)
Proceeds from maturity of short-term investments held to maturity  37,725   21,867 
Purchases of property and equipment  (10,861)  (11,018)
Net cash and cash equivalents provided by (used in) investing activities  24,860   (48,292)
Cash flows from financing activities        
Draws on revolving line of credit  64,000   32,492 
Payments on revolving line of credit  (59,000)  (34,902)
Proceeds from exercises of stock options  2,118   2,944 
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)  (1,224)
Payments on financing and capital lease obligations  (8,187)  (7,386)
Net cash and cash equivalents (used in) provided by financing activities  (1,271)  65,896 
Net increase (decrease) in cash and cash equivalents  2,726   (8,082)
Cash and cash equivalents, beginning of period  48,074   51,074 
Cash and cash equivalents, end of period $50,800  $42,992 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $856  $1,797 
Property and equipment purchased with financing and capital lease obligations $2,233  $914 
Post contract support purchased with financing obligations $1,048  $272 
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
September 30,
  Nine Months Ended
September 30,
 
  2016  2015  2016  2015 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $28,910  $19,161  $82,529  $58,435 
Amortization of acquired intangible assets  37   52   111   169 
Stock-based compensation expense  754   467   2,072   1,221 
Total net adjustments  791   519   2,183   1,390 
Non-GAAP gross profit $29,701  $19,680  $84,712  $59,825 
                 
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                
Operating loss $(6,524) $(14,792) $(27,104) $(43,649)
Amortization of acquired intangible assets  65   68   194   221 
Stock-based compensation expense  4,427   3,014   13,610   7,631 
Offering costs expensed     347      483 
Total net adjustments  4,492   3,429   13,804   8,335 
Non-GAAP operating loss $(2,032) $(11,363) $(13,300) $(35,314)
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Depreciation  2,482   2,254   7,344   6,480 
Amortization of software development costs  762   638   2,081   1,985 
Amortization of acquired intangible assets  65   68   194   221 
Interest income  (25)  (56)  (117)  (130)
Interest expense on building lease financing obligations  1,704   1,727   5,130   5,371 
Interest expense on other borrowings  262   195   691   685 
Income tax expense  5   5   15   25 
Stock-based compensation expense  4,427   3,014   13,610   7,631 
Total net adjustments  9,682   7,845   28,948   22,268 
Adjusted EBITDA $1,079  $(8,819) $(4,011) $(27,329)
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Amortization of acquired intangible assets  65   68   194   221 
Stock-based compensation expense  4,427   3,014   13,610   7,631 
Offering costs expensed     347      483 
Total net adjustments  4,492   3,429   13,804   8,335 
Non-GAAP net loss $(4,111) $(13,235) $(19,155) $(41,262)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(4,111) $(13,235) $(19,155) $(41,262)
                 
Weighted average shares outstanding - basic and diluted  29,651,230   28,847,493   29,442,023   28,083,343 
Shares used in computing non-GAAP net loss per share - basic and
  diluted
  29,651,230   28,847,493   29,442,023   28,083,343 
Non-GAAP net loss per common share - basic and diluted $(0.14) $(0.46) $(0.65) $(1.47)
                 


Benefitfocus, Inc. 
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges 
(in millions, except per share data) 
  
  Fourth Quarter 2016  Full Year 2016 
  Range  Range 
  Low  High  Low  High 
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                
Net loss - Guidance range $(9.2) $(8.2) $(42.2) $(41.2)
Depreciation and amortization  3.6   3.6   13.2   13.2 
Interest income        (0.1)  (0.1)
Interest expense  2.2   2.2   8.0   8.0 
Income tax expense            
Stock-based compensation expense  4.9   4.9   18.6   18.6 
Total net adjustments  10.7   10.7   39.7   39.7 
Adjusted EBITDA - Guidance range $1.5  $2.5  $(2.5) $(1.5)
                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                
Net loss - Guidance range $(9.2) $(8.2) $(42.2) $(41.2)
Amortization of acquired intangible assets  0.1   0.1   0.2   0.2 
Stock-based compensation expense  4.9   4.9   18.6   18.6 
Total net adjustments  5.0   5.0   18.8   18.8 
Non-GAAP net loss - Guidance range $(4.2) $(3.2) $(23.4) $(22.4)
                 
Calculation of Non-GAAP Earnings Per Share Guidance:                
Non-GAAP net loss - Guidance range $(4.2) $(3.2) $(23.4) $(22.4)
                 
Weighted average shares outstanding - basic and diluted  29.8   29.8   29.5   29.5 
Shares used in computing non-GAAP
  net loss per share - basic and diluted
  29.8   29.8   29.5   29.5 
Non-GAAP net loss per common share - basic and diluted $(0.14) $(0.11) $(0.79) $(0.76)
                 


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

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