Benefitfocus Announces Second Quarter 2018 Financial Results
“Benefitfocus had a strong second quarter, highlighted by revenue and profitability that were above expectations,” said
August added, “The market continues to show strong adoption of our BenefitsPlace platform, which provides a significant new revenue opportunity for
Second Quarter 2018 Financial Highlights
Revenue
- Total revenue was
$60.6 million , an increase of 10% compared to the second quarter of 2017. - Software services revenue was
$48.3 million , an increase of 13% compared to the second quarter of 2017. - Professional services revenue was
$12.3 million , a decrease of 2% compared to the second quarter of 2017. - Employer revenue was
$39.4 million , an increase of 17% compared to the second quarter of 2017. - Carrier revenue was
$21.2 million , a decrease of 1% compared to the second quarter of 2017.
Net Loss
- GAAP net loss was
($14.3) million , compared to($13.9) million in the second quarter of 2017. GAAP net loss per share was($0.45) , based on 31.8 million basic and diluted weighted average common shares outstanding, compared to($0.45) for the second quarter of 2017, based on 31.1 million basic and diluted weighted average common shares outstanding.
Non-GAAP Net Loss and Adjusted EBITDA
- Non-GAAP net loss was
($7.7) million , compared to($10.8) million in the second quarter of 2017. Non-GAAP net loss per share was($0.24) , based on 31.8 million basic and diluted weighted average common shares outstanding, compared to($0.35) for the second quarter of 2017, based on 31.1 million basic and diluted weighted average common shares outstanding. - Adjusted EBITDA was
($0.6) million , compared to($3.9) million in the second quarter of 2017.
See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.
Balance Sheet
- Cash and cash equivalents at
June 30, 2018 totaled$53.3 million , compared to$54.8 million at the end of the first quarter of 2018.
Second Quarter and Recent Business Highlights
- We ended the quarter with 997 large employer customers, up from 893 at the end of the prior year period, and 948 at the end of the first quarter of 2018
- We ended the quarter with 6 BenefitsPlace Carriers and 12 BenefitsPlace Specialty Product Suppliers.
- We signed agreements to expand our facilities in both
Salt Lake City, Utah andTulsa, Okla. helpingBenefitfocus add new staff to strengthen its relationships with carrier, employer and broker partners, and pursue additional organic growth opportunities. - We named
Ken Haderer as Executive Vice President, Global Operations to help accelerate our platform strategy. Prior to joiningBenefitfocus , Haderer was President ofNorth America at Mercer, a leading, global brokerage and human resources consulting firm.
Business Outlook
Based on information available as of
Third Quarter 2018:
- Total revenue is expected to be in the range of
$58.0 million to $60.0 million . - Non-GAAP net loss is expected to be in the range of
($11.0) million to($9.0) million , or($0.35) to ($0.28) per share, based on 31.9 million basic and diluted weighted average common shares outstanding. - Adjusted EBITDA is expected to be in the range of
($4.0) million to($2.0) million .
Full Year 2018:
- Total revenue is expected to be in the range of
$253.0 million to $258.0 million . - Non-GAAP net loss is expected to be in the range of
($23.0) million to($17.0) million , or($0.72) to ($0.54) per share, based on 31.7 million basic and diluted weighted average common shares outstanding. - Adjusted EBITDA is expected to be in the range of
$7.0 million to $13.0 million .
See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.
Conference Call Details:
In conjunction with this announcement,
About
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, offering cost expensed, and costs not core to our business. Beginning with the second quarter of 2018 and to align with other non-GAAP financial metrics that we report from time to time, we revised our definition of adjusted EBITDA to also exclude stock offering costs expensed, if any, and have applied this change retrospectively to all periods presented. 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; 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; cyber-security 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
Source:
843-284-1052 ext. 3527
pr@benefitfocus.com
Investor Relations:
843-284-1052 ext. 6654
michael.bauer@benefitfocus.com
Benefitfocus, Inc. Unaudited Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 60,581 | $ | 55,089 | $ | 122,944 | $ | 112,712 | ||||||||
Cost of revenue (1)(2) | 30,721 | 29,696 | 62,124 | 61,898 | ||||||||||||
Gross profit | 29,860 | 25,393 | 60,820 | 50,814 | ||||||||||||
Operating expenses:(1)(2) | ||||||||||||||||
Sales and marketing | 18,400 | 17,863 | 38,317 | 35,886 | ||||||||||||
Research and development | 12,128 | 12,473 | 24,151 | 24,654 | ||||||||||||
General and administrative | 10,387 | 5,877 | 20,080 | 13,634 | ||||||||||||
Total operating expenses | 40,915 | 36,213 | 82,548 | 74,174 | ||||||||||||
Loss from operations | (11,055 | ) | (10,820 | ) | (21,728 | ) | (23,360 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income | 68 | 47 | 126 | 74 | ||||||||||||
Interest expense on building lease financing obligations | (1,867 | ) | (1,861 | ) | (3,733 | ) | (3,721 | ) | ||||||||
Interest expense on other borrowings | (1,415 | ) | (1,210 | ) | (2,732 | ) | (2,272 | ) | ||||||||
Other expense | 13 | (1 | ) | 13 | (149 | ) | ||||||||||
Total other expense, net | (3,201 | ) | (3,025 | ) | (6,326 | ) | (6,068 | ) | ||||||||
Loss before income taxes | (14,256 | ) | (13,845 | ) | (28,054 | ) | (29,428 | ) | ||||||||
Income tax expense | 5 | 5 | 9 | 5 | ||||||||||||
Net loss | $ | (14,261 | ) | $ | (13,850 | ) | $ | (28,063 | ) | $ | (29,433 | ) | ||||
Comprehensive loss | $ | (14,261 | ) | $ | (13,850 | ) | $ | (28,063 | ) | $ | (29,433 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic and diluted | $ | (0.45 | ) | $ | (0.45 | ) | $ | (0.89 | ) | $ | (0.95 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic and diluted | 31,806,972 | 31,076,995 | 31,571,468 | 30,868,888 | ||||||||||||
(1) Stock-based compensation included in above line items: | ||||||||||||||||
Cost of revenue | $ | 900 | $ | 460 | $ | 1,611 | $ | 1,121 | ||||||||
Sales and marketing | 1,257 | 925 | 2,211 | 2,257 | ||||||||||||
Research and development | 841 | 739 | 1,609 | 1,458 | ||||||||||||
General and administrative | 1,676 | 738 | 3,568 | 2,414 | ||||||||||||
(2) Amortization of acquired intangible assets included in above line items: | ||||||||||||||||
Cost of revenue | $ | 35 | $ | 35 | $ | 69 | $ | 71 | ||||||||
Sales and marketing | 13 | 13 | 27 | 26 | ||||||||||||
Research and development | 11 | 12 | 23 | 24 | ||||||||||||
General and administrative | 5 | 5 | 9 | 8 | ||||||||||||
Benefitfocus, Inc. Unaudited Consolidated Balance Sheets (in thousands, except share and per share data) |
||||||||
As of | As of | |||||||
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53,292 | $ | 55,335 | ||||
Accounts receivable, net | 26,771 | 30,091 | ||||||
Contract, prepaid and other current assets | 13,776 | 15,859 | ||||||
Total current assets | 93,839 | 101,285 | ||||||
Property and equipment, net | 71,382 | 72,681 | ||||||
Intangible assets, net | 21 | 150 | ||||||
Goodwill | 1,634 | 1,634 | ||||||
Deferred contract costs and other non-current assets | 14,426 | 16,253 | ||||||
Total assets | $ | 181,302 | $ | 192,003 | ||||
Liabilities and stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 845 | $ | 4,260 | ||||
Accrued expenses | 11,299 | 9,110 | ||||||
Accrued compensation and benefits | 14,707 | 14,250 | ||||||
Deferred revenue, current portion | 36,868 | 43,804 | ||||||
Revolving line of credit, current portion | 28,000 | 24,000 | ||||||
Financing and capital lease obligations, current portion | 4,395 | 3,423 | ||||||
Total current liabilities | 96,114 | 98,847 | ||||||
Deferred revenue, net of current portion | 14,100 | 11,223 | ||||||
Revolving line of credit, net of current portion | 39,246 | 32,246 | ||||||
Financing and capital lease obligations, net of current portion | 56,765 | 55,597 | ||||||
Other non-current liabilities | 2,589 | 2,809 | ||||||
Total liabilities | 208,814 | 200,722 | ||||||
Commitments and contingencies | ||||||||
Stockholders' deficit: | ||||||||
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017 | – | – | ||||||
Common stock, par value $0.001, 50,000,000 shares authorized, 31,825,997 and 31,307,989 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 32 | 31 | ||||||
Additional paid-in capital | 361,765 | 352,496 | ||||||
Accumulated deficit | (389,309 | ) | (361,246 | ) | ||||
Total stockholders' deficit | (27,512 | ) | (8,719 | ) | ||||
Total liabilities and stockholders' deficit | $ | 181,302 | $ | 192,003 | ||||
Benefitfocus, Inc. Unaudited Consolidated Statements of Cash Flows (in thousands) |
||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (28,063 | ) | $ | (29,433 | ) | ||
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: | ||||||||
Depreciation and amortization | 7,957 | 7,945 | ||||||
Stock-based compensation expense | 8,999 | 7,250 | ||||||
Interest accrual on financing obligation | 3,758 | 3,747 | ||||||
Loss on disposal or impairment of property and equipment | – | 149 | ||||||
Provision for doubtful accounts | 364 | 61 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 2,956 | 5,112 | ||||||
Accrued interest on short-term investments | – | 7 | ||||||
Contract, prepaid and other current assets | 2,182 | 5,017 | ||||||
Deferred contract costs and other non-current assets | 2,003 | 3,041 | ||||||
Accounts payable and accrued expenses | (1,110 | ) | (3,197 | ) | ||||
Accrued compensation and benefits | 458 | (2,669 | ) | |||||
Deferred revenue | (4,059 | ) | (2,959 | ) | ||||
Other non-current liabilities | (218 | ) | (467 | ) | ||||
Net cash and cash equivalents used in operating activities | (4,773 | ) | (6,396 | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from maturity of short-term investments held to maturity | – | 2,000 | ||||||
Purchases of property and equipment | (3,561 | ) | (3,825 | ) | ||||
Net cash and cash equivalents used in investing activities | (3,561 | ) | (1,825 | ) | ||||
Cash flows from financing activities | ||||||||
Draws on revolving line of credit | 59,000 | 53,000 | ||||||
Payments on revolving line of credit | (48,000 | ) | (41,000 | ) | ||||
Proceeds from exercises of stock options and ESPP | 270 | 3,161 | ||||||
Payments on financing and capital lease obligations | (4,979 | ) | (4,398 | ) | ||||
Net cash and cash equivalents provided by financing activities | 6,291 | 10,763 | ||||||
Net (decrease) increase in cash and cash equivalents | (2,043 | ) | 2,542 | |||||
Cash and cash equivalents, beginning of period | 55,335 | 56,853 | ||||||
Cash and cash equivalents, end of period | $ | 53,292 | $ | 59,395 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Property and equipment purchases in accounts payable and accrued expenses | $ | 272 | $ | 732 | ||||
Property and equipment purchased with financing and capital lease obligations | $ | 3,085 | $ | — | ||||
Post contract support purchased with financing obligations | $ | 275 | $ | — | ||||
Benefitfocus, Inc. Unaudited Reconciliation of GAAP to Non-GAAP Measures (in thousands, except share and per share data) |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Reconciliation from Gross Profit to Non-GAAP Gross Profit: | ||||||||||||||||
Gross profit | $ | 29,860 | $ | 25,393 | $ | 60,820 | $ | 50,814 | ||||||||
Amortization of acquired intangible assets | 35 | 35 | 69 | 71 | ||||||||||||
Stock-based compensation expense | 900 | 460 | 1,611 | 1,121 | ||||||||||||
Total net adjustments | 935 | 495 | 1,680 | 1,192 | ||||||||||||
Non-GAAP gross profit | $ | 30,795 | $ | 25,888 | $ | 62,500 | $ | 52,006 | ||||||||
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss): | ||||||||||||||||
Operating loss | $ | (11,055 | ) | $ | (10,820 | ) | $ | (21,728 | ) | $ | (23,360 | ) | ||||
Amortization of acquired intangible assets | 64 | 65 | 128 | 129 | ||||||||||||
Stock-based compensation expense | 4,674 | 2,862 | 8,999 | 7,250 | ||||||||||||
Offering costs expensed | 257 | — | 257 | — | ||||||||||||
Costs not core to our business | 1,524 | 121 | 2,895 | 121 | ||||||||||||
Total net adjustments | 6,519 | 3,048 | 12,279 | 7,500 | ||||||||||||
Non-GAAP operating income (loss) | $ | (4,536 | ) | $ | (7,772 | ) | $ | (9,449 | ) | $ | (15,860 | ) | ||||
Reconciliation from Net Loss to Adjusted EBITDA: | ||||||||||||||||
Net loss | $ | (14,261 | ) | $ | (13,850 | ) | $ | (28,063 | ) | $ | (29,433 | ) | ||||
Depreciation | 2,999 | 3,081 | 5,976 | 6,192 | ||||||||||||
Amortization of software development costs | 964 | 794 | 1,853 | 1,624 | ||||||||||||
Amortization of acquired intangible assets | 64 | 65 | 128 | 129 | ||||||||||||
Interest income | (68 | ) | (47 | ) | (126 | ) | (74 | ) | ||||||||
Interest expense on building lease financing obligations | 1,867 | 1,861 | 3,733 | 3,721 | ||||||||||||
Interest expense on other borrowings | 1,415 | 1,210 | 2,732 | 2,272 | ||||||||||||
Income tax expense | 5 | 5 | 9 | 5 | ||||||||||||
Stock-based compensation expense | 4,674 | 2,862 | 8,999 | 7,250 | ||||||||||||
Offering costs expensed | 257 | — | 257 | — | ||||||||||||
Costs not core to our business | 1,524 | 121 | 2,895 | 121 | ||||||||||||
Total net adjustments | 13,701 | 9,952 | 26,456 | 21,240 | ||||||||||||
Adjusted EBITDA | $ | (560 | ) | $ | (3,898 | ) | $ | (1,607 | ) | $ | (8,193 | ) | ||||
Reconciliation from Net Loss to Non-GAAP Net Loss: | ||||||||||||||||
Net loss | $ | (14,261 | ) | $ | (13,850 | ) | $ | (28,063 | ) | $ | (29,433 | ) | ||||
Amortization of acquired intangible assets | 64 | 65 | 128 | 129 | ||||||||||||
Stock-based compensation expense | 4,674 | 2,862 | 8,999 | 7,250 | ||||||||||||
Offering costs expensed | 257 | — | 257 | — | ||||||||||||
Costs not core to our business | 1,524 | 121 | 2,895 | 121 | ||||||||||||
Total net adjustments | 6,519 | 3,048 | 12,279 | 7,500 | ||||||||||||
Non-GAAP net loss | $ | (7,742 | ) | $ | (10,802 | ) | $ | (15,784 | ) | $ | (21,933 | ) | ||||
Calculation of Non-GAAP Earnings Per Share: | ||||||||||||||||
Non-GAAP net loss | $ | (7,742 | ) | $ | (10,802 | ) | $ | (15,784 | ) | $ | (21,933 | ) | ||||
Weighted average shares outstanding - basic and diluted | 31,806,972 | 31,076,995 | 31,571,468 | 30,868,888 | ||||||||||||
Shares used in computing non-GAAP net loss per share - basic and diluted | 31,806,972 | 31,076,995 | 31,571,468 | 30,868,888 | ||||||||||||
Non-GAAP net loss per common share - basic and diluted | $ | (0.24 | ) | $ | (0.35 | ) | $ | (0.50 | ) | $ | (0.71 | ) |
Benefitfocus, Inc. Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges (in millions, except per share data) |
||||||||||||||||
Third Quarter 2018 | Full Year 2018 | |||||||||||||||
Range | Range | |||||||||||||||
Low | High | Low | High | |||||||||||||
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance: | ||||||||||||||||
Net loss - Guidance range | $ | (16.6 | ) | $ | (14.6 | ) | $ | (46.7 | ) | $ | (40.7 | ) | ||||
Depreciation and amortization | 4.1 | 4.1 | 17.7 | 17.7 | ||||||||||||
Interest income | — | — | (0.1 | ) | (0.1 | ) | ||||||||||
Interest expense | 3.0 | 3.0 | 12.7 | 12.7 | ||||||||||||
Income tax expense | — | — | — | — | ||||||||||||
Stock-based compensation expense | 4.8 | 4.8 | 18.8 | 18.8 | ||||||||||||
Offering costs expensed | — | — | 0.3 | 0.3 | ||||||||||||
Costs not core to business | 0.7 | 0.7 | 4.3 | 4.3 | ||||||||||||
Total net adjustments | 12.6 | 12.6 | 53.7 | 53.7 | ||||||||||||
Adjusted EBITDA - Guidance range | $ | (4.0 | ) | $ | (2.0 | ) | $ | 7.0 | $ | 13.0 | ||||||
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance: | ||||||||||||||||
Net loss - Guidance range | $ | (16.6 | ) | $ | (14.6 | ) | $ | (46.7 | ) | $ | (40.7 | ) | ||||
Amortization of acquired intangible assets | 0.1 | 0.1 | 0.3 | 0.3 | ||||||||||||
Stock-based compensation expense | 4.8 | 4.8 | 18.8 | 18.8 | ||||||||||||
Offering costs expensed | — | — | 0.3 | 0.3 | ||||||||||||
Costs not core to business | 0.7 | 0.7 | 4.3 | 4.3 | ||||||||||||
Total net adjustments | 5.6 | 5.6 | 23.7 | 23.7 | ||||||||||||
Non-GAAP net loss - Guidance range | $ | (11.0 | ) | $ | (9.0 | ) | $ | (23.0 | ) | $ | (17.0 | ) | ||||
Calculation of Non-GAAP Earnings Per Share Guidance: | ||||||||||||||||
Non-GAAP net loss - Guidance range | $ | (11.0 | ) | $ | (9.0 | ) | $ | (23.0 | ) | $ | (17.0 | ) | ||||
Weighted average shares outstanding - basic and diluted | 31.9 | 31.9 | 31.7 | 31.7 | ||||||||||||
Shares used in computing non-GAAP net loss per share - basic and diluted | 31.9 | 31.9 | 31.7 | 31.7 | ||||||||||||
Non-GAAP net loss per common share - basic and diluted | $ | (0.35 | ) | $ | (0.28 | ) | $ | (0.72 | ) | $ | (0.54 | ) | ||||
Source: Benefitfocus, Inc.