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Mar 3, 2020

Benefitfocus Announces Fourth Quarter and Full Year 2019 Financial Results

Driven by its leading AI-powered platform, Benefitfocus grew Q4 total revenue 17% year-over-year; Announces stock repurchase program

CHARLESTON, S.C., March 03, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a leading cloud-based benefits management platform and services provider, today announced its fourth quarter 2019 financial results. Recent highlights include: 

  • Grew net benefit eligible lives to 17.3 million at the end of the fourth quarter, up from 16.8 million at the end of the prior quarter and 13.3 million at the end of the prior year period.
  • Signed three seven-figure MarketPlace for Carriers transactions.
  • Meaningfully improved GAAP net loss and exceeded high-end of Q4 Adjusted EBITDA guidance by 20%.
  • Announces stock repurchase program for the potential repurchase by the Company of up to $20 million worth of its outstanding common stock.

“Benefitfocus delivered solid fourth quarter results. We continue to make meaningful progress on our platform transformation as evidenced by continued strong lives growth and BenefitsPlace traction with both employer and carrier customers,” said Ray August, President and Chief Executive Officer of Benefitfocus.

August added, “We remain focused on creating long-term shareholder value. The repurchase program demonstrates the Board of Directors’ and management’s confidence in our business and our commitment to all of our stakeholders.”  

Fourth Quarter 2019 Financial Highlights

Revenue

  • Total revenue was $87.1 million, an increase of 17% compared to the fourth quarter of 2018.
  • Software services was $68.4 million, an increase of 16% compared to the fourth quarter of 2018. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $49.4 million, an increase of 10% compared to the fourth quarter of 2018.
    • Platform revenue was $19.0 million, an increase of 34% compared to the fourth quarter of 2018.
  • Professional services revenue was $18.7 million, an increase of 19% compared to the fourth quarter of 2018.

Net Loss

  • GAAP net loss was ($3.8) million, compared to ($13.0) million in the fourth quarter of 2018. GAAP net loss per share was ($0.12), based on 32.8 million basic and diluted weighted average common shares outstanding, compared to ($0.41) for the fourth quarter of 2018, based on 32.0 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Income and Adjusted EBITDA

  • Non-GAAP net income was $1.9 million, compared to $4.7 million in the fourth quarter of 2018. Non-GAAP net income per share was $0.06, based on 33.2 million fully diluted weighted average common shares outstanding, compared to $0.14 for the fourth quarter of 2018, based on 33.0 million fully diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $12.5 million, compared to $12.0 million in the fourth quarter of 2018.

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

Full Year 2019 Financial Highlights

Revenue

  • Total revenue was $295.7 million, an increase of 14% compared to the full year 2018.
  • Software services was $228.7 million, an increase of 13% compared to the full year 2018. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $195.0 million, an increase of 9% compared to the full year 2018.
    • Platform revenue was $33.7 million, an increase of 47% compared to the full year 2018.
  • Professional services revenue was $67.0 million, an increase of 19% compared to the full year 2018.

Net Loss

  • GAAP net loss was ($45.5) million, compared to ($52.6) million in the full year 2018. GAAP net loss per share was ($1.40), based on 32.5 million basic and diluted weighted average common shares outstanding, compared to ($1.66) for the full year 2018, based on 31.8 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($22.3) million, compared to ($18.3) million in the full year 2018. Non-GAAP net loss per share was ($0.69), based on 32.5 million basic and diluted weighted average common shares outstanding, compared to ($0.57) for the full year 2018, based on 31.8 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $19.0 million, compared to $10.3 million in the full year 2018.

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

Balance Sheet

  • Cash and cash equivalents at December 31, 2019 totaled $131.0 million, compared to $130.7 million at the end of the third quarter of 2019. 

Stock Repurchase Program

The Board of Directors has approved a stock repurchase program for the potential repurchase by the Company of up to $20 million worth of its outstanding common stock.

Under the stock repurchase program, Benefitfocus is authorized to purchase shares of its common stock through various means, including open market or privately negotiated transactions. The program has no time limit and may be suspended for periods or discontinued at any time by the Board of Directors. Repurchases under the program will be funded by Benefitfocus’ existing cash and cash equivalents or future cash flow. Any shares acquired will be available for general corporate purposes.

Updated Business Outlook

Based on information available as of March 3, 2020, Benefitfocus is providing guidance for the first quarter and full year 2020 as indicated below. Reflected in the full year guidance is an approximate $16 million reduction of revenue from one large private exchange customer.

First Quarter 2020:

  • Total revenue is expected to be in the range of $67.5 million to $69.5 million.
  • Non-GAAP net loss is expected to be in the range of ($10.0) million to ($8.0) million, or ($0.30) to ($0.24) per share, based on 32.8 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $0.5 million to $2.5 million.

Full Year 2020:

  • Total revenue is expected to be in the range of $310.0 million to $320.0 million.
  • Non-GAAP net loss is expected to be in the range of ($23.0) million to ($18.0) million, or ($0.69) to ($0.54) per share, based on 33.2 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $22.0 million to $27.0 million.

Management has not reconciled forward-looking non-GAAP net loss/income and Adjusted EBITDA to their most directly comparable GAAP measure of GAAP net loss. This is because we cannot predict with reasonable certainty the ultimate outcome of the various necessary GAAP components of such reconciliations, including, for example, those related to compensation, acquisition transactions and integration, or others that may arise during the year, without unreasonable effort. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts. See below for additional important disclosures regarding our non-GAAP financial measures.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, March 3, 2020, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (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/. After the conference call, a replay will be available until March 10, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13699438.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire U.S. benefits industry on a single technology platform to protect consumers' health, wealth, property and lifestyle. Our powerful cloud-based software, data-driven insights and thoughtfully-designed services, enable employers, insurance brokers, carriers and suppliers to simplify the complexity of benefits administration and deliver a world-class benefits experience. Learn more at www.benefitfocus.com, LinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating loss, net loss/income, net loss/income 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/income, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related 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, transaction and acquisition-related costs expensed, 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 GAAP profitability; fluctuations in our financial results; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; cyber-security risks; the need to innovate and provide useful products and services; our ability to compete effectively; privacy, security and other risks associated with our business; volatility and uncertainty in the global economy and financial markets; 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-filings 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.

Source: Benefitfocus, Inc.

   
   
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,  
      2019       2018       2019       2018  
Revenue   $ 87,143     $ 74,771     $ 295,686     $ 258,721  
Cost of revenue (1)(2)     42,848       35,413       144,090       129,277  
Gross profit     44,295       39,358       151,596       129,444  
Operating expenses:(1)(2)                                
Sales and marketing     18,585       22,201       76,049       78,179  
Research and development     13,085       13,075       54,724       47,902  
General and administrative     10,976       13,719       45,329       43,062  
Total operating expenses     42,646       48,995       176,102       169,143  
Income (loss) from operations     1,649       (9,637 )     (24,506 )     (39,699 )
Other income (expense):                                
Interest income     518       51       2,613       250  
Interest expense     (5,947 )     (1,495 )     (23,524 )     (5,685 )
Interest expense on building lease financing obligations
(prior to adoption of ASC 842)
          (1,870 )           (7,471 )
Other (expense) income     (10 )     (9 )     (71 )     6  
Total other expense, net     (5,439 )     (3,323 )     (20,982 )     (12,900 )
Loss before income taxes     (3,790 )     (12,960 )     (45,488 )     (52,599 )
Income tax expense     1       6       27       28  
Net loss   $ (3,791 )   $ (12,966 )   $ (45,515 )   $ (52,627 )
Comprehensive loss   $ (3,791 )   $ (12,966 )   $ (45,515 )   $ (52,627 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.12 )   $ (0.41 )   $ (1.40 )   $ (1.66 )
Weighted-average common shares outstanding:                                
Basic and diluted     32,774,924       31,988,033       32,539,748       31,756,415  
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 1,181     $ 3,011     $ 3,569     $ 5,164  
Sales and marketing     1,202       3,794       3,799       6,764  
Research and development     665       3,407       3,265       5,510  
General and administrative     2,023       6,310       8,939       11,430  
                                 
(2) Amortization of acquired intangible assets included in
  above line items:
                               
Cost of revenue   $ 317     $     $ 1,029     $ 81  
Sales and marketing     91             337       31  
Research and development     111             400       27  
General and administrative     50             167       11  
                                 
                                 


Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
                 
    As of December 31,  
    2019     2018  
Assets                
Current assets:                
Cash and cash equivalents   $ 130,976     $ 190,928  
Accounts receivable, net     33,754       21,077  
Contract, prepaid and other current assets     21,523       16,667  
Total current assets     186,253       228,672  
Property and equipment, net     28,669       69,965  
Financing lease right-of-use assets     78,520        
Operating lease right-of-use assets     1,715        
Intangible assets, net     12,667        
Goodwill     12,857       1,634  
Deferred contract costs and other non-current assets     11,002       13,668  
Total assets   $ 331,683     $ 313,939  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 9,563     $ 8,687  
Accrued expenses     10,526       11,461  
Accrued compensation and benefits     15,246       17,269  
Deferred revenue, current portion     33,429       36,540  
Lease liabilities and financing obligations, current portion     6,871       4,486  
Total current liabilities     75,635       78,443  
Deferred revenue, net of current portion     5,079       9,323  
Convertible senior notes     187,949       176,692  
Lease liabilities and financing obligations, net of current portion     88,572       57,116  
Other non-current liabilities     92       2,575  
Total liabilities     357,327       324,149  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized,
  no shares issued and outstanding at December 31, 2019 and 2018
    -       -  
Common stock, par value $0.001, 50,000,000 shares authorized,
  32,788,980 and 32,017,773 shares issued and outstanding
  at December 31, 2019 and  2018, respectively
    33       32  
Additional paid-in capital     426,025       403,631  
Accumulated deficit     (451,702 )     (413,873 )
Total stockholders' deficit     (25,644 )     (10,210 )
    Total liabilities and stockholders' deficit   $ 331,683     $ 313,939  
                 


Benefitfocus, Inc.  
Consolidated Statements of Cash Flows  
(in thousands)  
                         
    Year Ended December 31,  
      2019       2018       2017  
Cash flows from operating activities                        
Net loss   $ (45,515 )   $ (52,627 )   $ (50,294 )
Adjustments to reconcile net loss to net cash and cash equivalents
  used in operating activities:
                       
Depreciation and amortization     22,351       15,815       15,906  
Stock-based compensation expense     19,572       28,868       16,137  
Accretion of interest on convertible senior notes     11,256              
Interest accrual on finance lease liabilities     33              
Interest accrual on financing obligations (prior to adoption of ASC 842)           7,521       7,500  
Rent payments in excess of expense     (16 )            
Loss on disposal or impairment of property and equipment     9       7       157  
Provision for doubtful accounts     111       364       75  
Changes in operating assets and liabilities:                        
Accounts receivable, net     (11,875 )     8,650       2,800  
Accrued interest on short-term investments                 7  
Contract, prepaid and other current assets     (3,642 )     (570 )     4,519  
Deferred costs and other non-current assets     2,893       3,137       5,538  
Accounts payable and accrued expenses     426       6,566       (3,015 )
Accrued compensation and benefits     161       649       (3,097 )
Deferred revenue     (14,047 )     (9,165 )     (1,922 )
Other non-current liabilities     (92 )     (234 )     (248 )
Net cash and cash equivalents (used in) provided by operating activities     (18,375 )     8,981       (5,937 )
Cash flows from investing activities                        
Business combination, net of cash acquired     (20,914 )            
Proceeds from short-term investments held to maturity                 2,000  
Purchases of property and equipment     (13,248 )     (8,290 )     (8,279 )
Net cash and cash equivalents used in investing activities     (34,162 )     (8,290 )     (6,279 )
Cash flows from financing activities                        
Draws on revolving line of credit           115,000       105,000  
Payments on revolving line of credit           (171,246 )     (89,000 )
Proceeds from issuance of convertible notes           240,000        
Payments of debt issuance costs     (357 )     (6,000 )      
Purchase of convertible note capped call hedge           (33,024 )      
Proceeds from exercises of stock options and ESPP     453       712       3,715  
Payments on capital lease and financing obligations     (1,627 )     (10,540 )     (9,017 )
Payments of principal on finance lease liabilities     (5,884 )            
Net cash and cash equivalents (used in) provided by financing activities     (7,415 )     134,902       10,698  
Net (decrease) increase in cash and cash equivalents     (59,952 )     135,593       (1,518 )
Cash and cash equivalents, beginning of year     190,928       55,335       56,853  
Cash and cash equivalents, end of year   $ 130,976     $ 190,928     $ 55,335  
                         
Supplemental disclosure of non-cash investing and financing activities                        
Property and equipment purchases in accounts
  payable and accrued expenses
  $ 154     $ 244     $ 389  
Property and equipment purchased with financing
  and capital lease obligations (prior to adoption of ASC 842)
  $ -     $ 4,810     $ -  
Post contract support purchased with financing obligations   $ 1,287     $ 790     $ -  
Debt issuance costs included in accounts payable and accrued expenses   $ -     $ 358     $ -  
Supplemental disclosure of cash flow information                        
Income taxes paid   $ 28     $ 28     $ 14  
Interest paid   $ 12,374     $ 11,884     $ 10,911  
                         


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,
 
    2019     2018     2019     2018  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 44,295     $ 39,358     $ 151,596     $ 129,444  
Amortization of acquired intangible assets     317             1,029       81  
Stock-based compensation expense     1,181       3,011       3,569       5,164  
Total net adjustments     1,498       3,011       4,598       5,245  
Non-GAAP gross profit   $ 45,793     $ 42,369     $ 156,194     $ 134,689  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                                
Operating loss   $ 1,649     $ (9,637 )   $ (24,506 )   $ (39,699 )
Amortization of acquired intangible assets     569             1,933       150  
Stock-based compensation expense     5,071       16,522       19,572       28,868  
Transaction and acquisition-related costs expensed     30       250       1,035       507  
Costs not core to our business           921       649       4,843  
Total net adjustments     5,670       17,693       23,189       34,368  
Non-GAAP operating income (loss)   $ 7,319     $ 8,056     $ (1,317 )   $ (5,331 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (3,791 )   $ (12,966 )   $ (45,515 )   $ (52,627 )
Depreciation     3,783       2,857       15,288       11,721  
Amortization of software development costs     1,370       1,046       5,130       3,944  
Amortization of acquired intangible assets     569             1,933       150  
Interest income     (518 )     (51 )     (2,613 )     (250 )
Interest expense     5,947       1,495       23,524       5,685  
Interest expense on building lease financing obligations (prior to adoption of ASC 842)           1,870             7,471  
Income tax expense     1       6       27       28  
Stock-based compensation expense     5,071       16,522       19,572       28,868  
Transaction and acquisition-related costs expensed     30       250       1,035       507  
Costs not core to our business           921       649       4,843  
Total net adjustments     16,253       24,916       64,545       62,967  
Adjusted EBITDA   $ 12,462     $ 11,950     $ 19,030     $ 10,340  
                                 
Reconciliation from Net Loss to Non-GAAP Net Income (Loss):                                
Net loss   $ (3,791 )   $ (12,966 )   $ (45,515 )   $ (52,627 )
Amortization of acquired intangible assets     569             1,933       150  
Stock-based compensation expense     5,071       16,522       19,572       28,868  
Transaction and acquisition-related costs expensed     30       250       1,035       507  
Costs not core to our business           921       649       4,843  
Total net adjustments     5,670       17,693       23,189       34,368  
Non-GAAP net income (loss)   $ 1,879     $ 4,727     $ (22,326 )   $ (18,259 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net income (loss)   $ 1,879     $ 4,727     $ (22,326 )   $ (18,259 )
                                 
Weighted average shares outstanding - basic and diluted     32,774,924       31,988,033       32,539,748       31,756,415  
Shares used in computing non-GAAP
  net income (loss) per share - basic
    32,774,924       31,988,033       32,539,748       31,756,415  
Shares used in computing non-GAAP
  net income (loss) per share - diluted
    33,209,220       33,002,298       32,539,748       31,756,415  
Non-GAAP net income (loss) per common share - basic   $ 0.06     $ 0.15     $ (0.69 )   $ (0.57 )
Non-GAAP net income (loss) per common share - diluted   $ 0.06     $ 0.14     $ (0.69 )   $ (0.57 )
                                 
                                 

Benefitfocus, Inc.
843-981-8898
pr@benefitfocus.com 

Investor Relations:
Michael Bauer
843-981-8899
michael.bauer@benefitfocus.com  

Benefitfocus logo.jpg

Source: Benefitfocus, Inc.