Benefitfocus, Inc.
Nov 2, 2017

Benefitfocus Announces Third Quarter 2017 Financial Results

Total revenue of $62.5 million grew 8% year-over-year
Employer revenue of $40.1 million grew 14% year-over-year

CHARLESTON, S.C., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management software, today announced its third quarter 2017 financial results.

"Benefitfocus outperformed our third quarter profitability targets and our revenue came in at the high-end of our expectations," said Shawn Jenkins, Co-Founder and Chief Executive Officer of Benefitfocus. "Our Q3 and year-to-date financial results demonstrate the inherent scale in our business and multi-year investment in operational excellence."

Jenkins added, "As the only platform capable of serving both the employer and carrier segments we are uniquely positioned to take advantage of this massive market as the underlying fundamentals continue to strengthen."

Third 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

Third Quarter and Recent Business Highlights

Business Outlook

Based on information available as of November 2, 2017, Benefitfocus is providing guidance for the fourth quarter and full year 2017 as indicated below.

Fourth 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, November 2, 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 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 November 9, 2017, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13672057.

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.comLinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating income (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 income (loss), net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering costs expensed, if any and costs not core to our business, 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, expense related to the impairment of goodwill and intangible assets, and costs not core to our business.  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; risks related to changing healthcare and other applicable regulations; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; general economic risks;  the immature and volatile market for our products and services; the need to innovate and provide useful products and services; 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  Nine Months Ended 
September 30,September 30,
  2017  2016  2017  2016 
Revenue $62,453  $58,022  $189,972  $170,688 
Cost of revenue (1)(2)  30,467   29,112   90,896   88,159 
Gross profit  31,986   28,910   99,076   82,529 
Operating expenses:(1)(2)                
Sales and marketing  16,180   13,607   51,103   41,942 
Research and development  12,568   14,081   37,222   43,276 
General and administrative  6,853   7,746   20,487   24,415 
Total operating expenses  35,601   35,434   108,812   109,633 
Loss from operations  (3,615)  (6,524)  (9,736)  (27,104)
Other income (expense):                
Interest income  55   25   129   117 
Interest expense on building lease financing obligations  (1,864)  (1,704)  (5,585)  (5,130)
Interest expense on other borrowings  (1,254)  (262)  (3,526)  (691)
Other expense  9   (133)  (140)  (136)
Total other expense, net  (3,054)  (2,074)  (9,122)  (5,840)
Loss before income taxes  (6,669)  (8,598)  (18,858)  (32,944)
Income tax expense  5   5   10   15 
Net loss $(6,674) $(8,603) $(18,868) $(32,959)
Comprehensive loss $(6,674) $(8,603) $(18,868) $(32,959)
                 
Net loss per common share:                
Basic and diluted $(0.21) $(0.29) $(0.61) $(1.12)
Weighted-average common shares outstanding:                
Basic and diluted  31,181,141   29,651,230   30,974,116   29,442,023 
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $682  $754  $1,803  $2,072 
Sales and marketing  1,319   886   3,575   2,356 
Research and development  743   1,011   2,200   3,538 
General and administrative  1,652   1,776   4,068   5,644 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $34  $37  $105  $111 
Sales and marketing  12   10   38   30 
Research and development  14   13   38   41 
General and administrative  5   5   13   12 
                 


       
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
       
  As of  As of 
September 30,December 31,
20172016
Assets        
Current assets:        
Cash and cash equivalents $54,573  $56,853 
Marketable securities     2,007 
Accounts receivable, net  33,332   28,340 
Accounts receivable, related party, net     4,626 
Prepaid expenses and other current assets  5,417   4,449 
Total current assets  93,322   96,275 
Property and equipment, net  75,035   80,518 
Intangible assets, net  215   408 
Goodwill  1,634   1,634 
Other non-current assets  1,014   1,575 
Total assets $171,220  $180,410 
Liabilities and stockholders' deficit        
Current liabilities:        
Accounts payable $1,401  $5,829 
Accrued expenses  8,979   10,867 
Accrued compensation and benefits  11,926   17,347 
Deferred revenue, current portion  32,649   35,426 
Revolving line of credit, current portion  28,000   20,000 
Financing and capital lease obligations, current portion  3,395   2,604 
Total current liabilities  86,350   92,073 
Deferred revenue, net of current portion  31,149   40,412 
Revolving line of credit, net of current portion  32,246   20,246 
Financing and capital lease obligations, net of current portion  56,132   57,934 
Other non-current liabilities  2,304   3,056 
Total liabilities  208,181   213,721 
Commitments and contingencies        
Stockholders' deficit:        
Preferred stock, par value $0.001, 5,000,000 shares authorized, 
  no shares issued and outstanding at September 30, 2017 and December 31, 2016
      
Common stock, par value $0.001, 50,000,000 shares authorized, 
  31,195,653 and 30,429,014 shares issued and outstanding 
  at September 30, 2017 and December 31, 2016, respectively
  31   30 
Additional paid-in capital  350,667   335,059 
Accumulated deficit  (387,659)  (368,400)
Total stockholders' deficit  (36,961)  (33,311)
Total liabilities and stockholders' deficit $171,220  $180,410 
 


    
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
    
  Nine Months Ended 
September 30,
  2017  2016 
Cash flows from operating activities        
Net loss $(18,868) $(32,959)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:        
Depreciation and amortization  11,848   9,619 
Stock-based compensation expense  11,646   13,610 
Interest accrual on financing obligation  5,623   5,130 
Loss on disposal or impairment of property and equipment  157   140 
Provision for doubtful accounts  142   287 
Changes in operating assets and liabilities:        
Accounts receivable, net  (508)  (1,655)
Accrued interest on short-term investments  7   217 
Prepaid expenses and other current assets  (968)  465 
Other non-current assets  561   142 
Accounts payable  (4,343)  (3,844)
Accrued expenses  (2,152)  4,726 
Accrued compensation and benefits  (5,422)  (3,460)
Deferred revenue  (12,040)  (13,819)
Other non-current liabilities  (751)  538 
Net cash and cash equivalents used in operating activities  (15,068)  (20,863)
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   37,725 
Purchases of property and equipment  (6,151)  (10,861)
Net cash and cash equivalents (used in) provided by investing activities  (4,151)  24,860 
Cash flows from financing activities        
Draws on revolving line of credit  81,000   64,000 
Payments on revolving line of credit  (61,000)  (59,000)
Proceeds from exercises of stock options and ESPP  3,572   2,118 
Remittance of taxes upon vesting of restricted stock units     (202)
Payments on financing and capital lease obligations  (6,633)  (8,187)
Net cash and cash equivalents provided by (used in) financing activities  16,939   (1,271)
Net (decrease) increase in cash and cash equivalents  (2,280)  2,726 
Cash and cash equivalents, beginning of period  56,853   48,074 
Cash and cash equivalents, end of period $54,573  $50,800 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $878  $856 
Property and equipment purchased with financing and capital lease obligations $  $2,233 
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  Nine Months Ended 
September 30,September 30,
  2017  2016  2017  2016 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $31,986  $28,910  $99,076  $82,529 
Amortization of acquired intangible assets  34   37   105   111 
Stock-based compensation expense  682   754   1,803   2,072 
Total net adjustments  716   791   1,908   2,183 
Non-GAAP gross profit $32,702  $29,701  $100,984  $84,712 
                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                
Operating loss $(3,615) $(6,524) $(9,736) $(27,104)
Amortization of acquired intangible assets  65   65   194   194 
Stock-based compensation expense  4,396   4,427   11,646   13,610 
Costs not core to our business  359      480    
Total net adjustments  4,820   4,492   12,320   13,804 
Non-GAAP operating income (loss) $1,205  $(2,032) $2,584  $(13,300)
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(6,674) $(8,603) $(18,868) $(32,959)
Depreciation  3,053   2,482   9,245   7,344 
Amortization of software development costs  785   762   2,409   2,081 
Amortization of acquired intangible assets  65   65   194   194 
Interest income  (55)  (25)  (129)  (117)
Interest expense on building lease financing obligations  1,864   1,704   5,585   5,130 
Interest expense on other borrowings  1,254   262   3,526   691 
Income tax expense  5   5   10   15 
Stock-based compensation expense  4,396   4,427   11,646   13,610 
Costs not core to our business  359      480    
Total net adjustments  11,726   9,682   32,966   28,948 
Adjusted EBITDA $5,052  $1,079  $14,098  $(4,011)
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(6,674) $(8,603) $(18,868) $(32,959)
Amortization of acquired intangible assets  65   65   194   194 
Stock-based compensation expense  4,396   4,427   11,646   13,610 
Costs not core to our business  359      480    
Total net adjustments  4,820   4,492   12,320   13,804 
Non-GAAP net loss $(1,854) $(4,111) $(6,548) $(19,155)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(1,854) $(4,111) $(6,548) $(19,155)
                 
Weighted average shares outstanding - basic and diluted  31,181,141   29,651,230   30,974,116   29,442,023 
Shares used in computing non-GAAP net loss per share - basic and diluted  31,181,141   29,651,230   30,974,116   29,442,023 
Non-GAAP net loss per common share - basic and diluted $(0.06) $(0.14) $(0.21) $(0.65)
                 


       
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
       
  Fourth Quarter 2017  Full Year 2017 
  Range  Range 
  Low  High  Low  High 
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                
Net loss - Guidance range $(8.0) $(7.0) $(26.9) $(25.9)
Depreciation and amortization  4.1   4.1   16   16 
Interest income            
Interest expense  3   3   12   12 
Income tax expense            
Stock-based compensation expense  5   5   16.7   16.7 
Costs not core to business  0.4   0.4   0.8   0.8 
Total net adjustments  12.5   12.5   45.5   45.5 
Adjusted EBITDA - Guidance range $4.5  $5.5  $18.6  $19.6 
                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                
Net loss - Guidance range $(8.0) $(7.0) $(26.9) $(25.9)
Amortization of acquired intangible assets  0.1   0.1   0.4   0.4 
Stock-based compensation expense  5   5   16.7   16.7 
Costs not core to business  0.4   0.4   0.8   0.8 
Total net adjustments  5.5   5.5   17.9   17.9 
Non-GAAP net loss - Guidance range $(2.5) $(1.5) $(9.0) $(8.0)
                 
Calculation of Non-GAAP Earnings Per Share Guidance:                
Non-GAAP net loss - Guidance range $(2.5) $(1.5) $(9.0) $(8.0)
                 
Weighted average shares outstanding - basic and diluted  31.3   31.3   31   31 
Shares used in computing non-GAAP  31.3   31.3   31   31 
net loss per share - basic and diluted
Non-GAAP net loss per common share - basic and diluted $(0.08) $(0.05) $(0.29) $(0.26)
                 

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

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