Investor Relations

<< Back
Aug 5, 2020

Benefitfocus Announces Second Quarter 2020 Financial Results

Financial performance exceeded high end of revenue and adjusted EBITDA guidance
Strong execution and continued innovation positions company for long-term growth and value creation

CHARLESTON, S.C., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a technology platform driving rapid innovation for employers and health plans, today announced its second quarter 2020 financial results.

“Benefitfocus delivered a strong quarter including enhanced profitability and liquidity. I am extremely proud of our team for delivering these results, particularly in the context of a challenging environment that was unthinkable just six months ago,” said Ray August, President and Chief Executive Officer of Benefitfocus. “Our team is executing well and delivering high-impact solutions for our customers and partners. As the world becomes more focused than ever on improving health outcomes, we have strengthened our resolve and commitment to our mission to transform our industry and improve lives with benefits.”

Steve Swad, Chief Financial Officer said, “We swiftly adjusted our cost base during the quarter in response to COVID-19, and at the same time substantially strengthened our cash position through an $80 million strategic investment from BuildGroup LLC. Our strong execution in the quarter allowed us to increase our profitability and cash flow outlook for the year, while also investing in automation and platform innovation to drive sustainable long-term growth.”  

Highlights include: 

  • Exceeded high end of Q2 revenue and adjusted EBITDA  guidance;

  • Increased full year 2020 adjusted EBITDA and free cash flow guidance on strength of Q2 operating performance;

  • Closed $80 million investment by BuildGroup LLC, substantially strengthening the company’s balance sheet; 

  • Won new health plan customer, Medica, to enable digital transformation and deliver a modern enrollment solution;

  • Enhanced our platform’s mobile and communication capabilities to streamline the enrollment experience, reduce administrative burden and increase customer engagement; and

  • Added insurance innovator Haven Life to Benefit Catalog, the industry’s leading marketplace for voluntary benefits.

Second Quarter 2020 Financial Highlights

Revenue

  • Total revenue was $62.2 million, a decrease of 9% compared to the second quarter of 2019.

  • Software services was $49.9 million, a decrease of 6% compared to the second quarter of 2019. Software services comprise subscription and platform revenue.

    • Subscription revenue was $43.8 million, a decrease of 8% compared to the second quarter of 2019.

    • Platform revenue was $6.1 million, an increase of 13% compared to the second quarter of 2019.

  • Professional services revenue was $12.3 million, a decrease of 21% compared to the second quarter of 2019.

Net Loss

  • GAAP net loss was ($11.9) million, compared to ($14.9) million in the second quarter of 2019. GAAP net loss per share was ($0.38), based on 32.1 million basic and diluted weighted average common shares outstanding, compared to ($0.46) for the second quarter of 2019, based on 32.6 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($7.8) million compared to ($10.0) million in the second quarter of 2019. Non-GAAP net loss per share was ($0.26) and ($0.31) in the second quarter of 2020 and 2019, respectively, based on 32.1 million and 32.6 million basic and fully diluted weighted average common shares outstanding for the second quarter of 2020 and 2019, respectively.

  • Adjusted EBITDA was $9.3 million, compared to roughly breakeven in the second quarter of 2019.

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

Balance Sheet

  • Cash and cash equivalents at June 30, 2020 totaled $183.5 million, compared to $114.7 million at the end of the first quarter of 2020. 

  • During the second quarter of 2020, the company repurchased approximately 36,000 shares of its common stock at a total cost of approximately $285,000, representing an average price per share of approximately $7.98.

  • Since initiating its share repurchase program last quarter, the company has repurchased slightly more than 1.1 million shares of its common stock for approximately $9.7 million, representing an average repurchase price of $8.71 per share.

Updated Business Outlook

Based on information available as of August 5, 2020, Benefitfocus is providing guidance for the third quarter and full year 2020 as indicated below.

Third Quarter 2020:

  • Total revenue is expected to be in the range of $59 million to $62 million.

  • Non-GAAP net loss is expected to be in the range of ($6) million to ($3) million, or ($0.21) to ($0.12) per share, based on 32.3 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $6 million to $9 million.

Full Year 2020:

  • Total revenue is expected to be in the range of $260 million to $270 million.

  • Non-GAAP net loss is expected to be in the range of ($16) million to ($11) million, or ($0.59) to ($0.44) per share, based on 32.3 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $35 million to $40 million.

  • Free cash flow is expected to be in the range of $10 million to $20 million.

Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring charges.

Management has not reconciled forward-looking non-GAAP net loss, adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of GAAP net loss or GAAP operating cash flows. 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 to discuss the company’s financial results and business outlook on Wednesday, August 5, 2020, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (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 August 12, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13706867.

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, adjusted EBITDA and free cash flow. 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, restructuring charges, 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, restructuring charges and costs not core to our business. We define free cash flow as cash used in operating activities less capital expenditures, adjusted to eliminate restructuring charges. 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: volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic; our continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; our ability to maintain our culture, retain and motivate qualified personnel; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; 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; 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.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)

  Three Months Ended     Six Months Ended  
June 30, June 30,
  2020     2019     2020     2019  
Revenue $ 62,174     $ 68,579     $ 128,328     $ 136,878  
Cost of revenue(1)(2)(3)   30,397       32,802       64,309       65,654  
Gross profit   31,777       35,777       64,019       71,224  
Operating expenses:(1)(2)(3)                              
Sales and marketing   11,828       19,318       27,458       38,937  
Research and development   11,045       14,461       22,813       27,551  
General and administrative   9,381       11,785       19,896       23,581  
Restructuring costs   5,616             5,616        
Total operating expenses   37,870       45,564       75,783       90,069  
Loss from operations   (6,093 )     (9,787 )     (11,764 )     (18,845 )
Other income (expense):                              
Interest income   97       762       523       1,422  
Interest expense   (5,862 )     (5,837 )     (11,753 )     (11,651 )
Other (expense) income   2       (73 )     7       (64 )
Total other expense, net   (5,763 )     (5,148 )     (11,223 )     (10,293 )
Loss before income taxes   (11,856 )     (14,935 )     (22,987 )     (29,138 )
Income tax expense   6       3       11       9  
Net loss   (11,862 )     (14,938 )     (22,998 )     (29,147 )
Preferred dividends   (462 )           (462 )      
Net loss available to common stockholders $ (12,324 )   $ (14,938 )   $ (23,460 )   $ (29,147 )
Comprehensive loss $ (12,324 )   $ (14,938 )   $ (23,460 )   $ (29,147 )
                               
Net loss per common share:                              
Basic and diluted $ (0.38 )   $ (0.46 )   $ (0.73 )   $ (0.90 )
Weighted-average common shares outstanding:                              
Basic and diluted   32,058,387       32,613,718       32,348,673       32,336,864  
                               
                               
(1) Stock-based compensation included in above line items:                              
Cost of revenue $ 633     $ 691     $ 1,300     $ 1,590  
Sales and marketing   594       (12 )     1,474       1,674  
Research and development   590       718       932       1,910  
General and administrative   1,506       2,322       3,294       4,912  
                               
(2) Amortization of acquired intangible assets included in above line items:                              
Cost of revenue $ 323     $ 308     $ 640     $ 407  
Sales and marketing   83       113       174       149  
Research and development   114       131       223       171  
General and administrative   48       53       100       68  
                               
(3) Transaction and acquisition-related costs expensed included in above line items:                              
General and administrative $ 215     $ 360     $ 407     $ 1,002  
                               

 

Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)

  As of     As of  
June 30, December 31,
2020 2019
Assets              
Current assets:              
Cash and cash equivalents $ 183,496     $ 130,976  
Accounts receivable, net   29,872       33,754  
Contract, prepaid and other current assets   17,851       21,523  
Total current assets   231,219       186,253  
Property and equipment, net   31,430       28,669  
Financing lease right-of-use assets   73,372       78,520  
Operating lease right-of-use assets   1,529       1,715  
Intangible assets, net   11,530       12,667  
Goodwill   12,857       12,857  
Deferred contract costs and other non-current assets   10,263       11,002  
Total assets $ 372,200     $ 331,683  
Liabilities and stockholders' deficit              
Current liabilities:              
Accounts payable $ 6,648     $ 9,563  
Accrued expenses   6,526       10,526  
Accrued compensation and benefits   11,107       15,246  
Deferred revenue, current portion   31,020       33,429  
Lease liabilities and financing obligations, current portion   6,536       6,871  
Total current liabilities   61,837       75,635  
Deferred revenue, net of current portion   4,638       5,079  
Convertible senior notes   193,843       187,949  
Lease liabilities and financing obligations, net current portion   82,294       88,572  
Other non-current liabilities   2,000       92  
Total liabilities   344,612       357,327  
Commitments and contingencies              
Redeemable preferred stock:              
Series A preferred stock, par value $0.001, 5,000,000 shares authorized,
1,777,778 and 0 shares issued and outstanding
at June 30, 2020 and December 31, 2019, respectively,
liquidation preference $45 per share as of June 30, 2020
  79,193        
Stockholders' deficit:              
Common stock, par value $0.001, 50,000,000 shares authorized,
32,175,444 and 32,788,980 shares issued and outstanding
at June 30, 2020 and December 31, 2019, respectively
  32       33  
Additional paid-in capital   423,122       426,025  
Accumulated deficit   (474,759 )     (451,702 )
Total stockholders' deficit   (51,605 )     (25,644 )
Total liabilities, redeemable preferred stock and stockholders' deficit $ 372,200     $ 331,683  
               

Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

  Six Months Ended  
June 30,
  2020     2019  
Cash flows from operating activities              
Net loss $ (22,998 )   $ (29,147 )
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:              
Depreciation and amortization   12,105       10,949  
Stock-based compensation expense   7,000       10,086  
Accretion of interest on convertible senior notes   5,894       5,541  
Interest accrual on finance lease liabilities   44        
Rent expense (less than) in excess of payments   (16 )     3  
Provision for doubtful accounts   111       265  
Changes in operating assets and liabilities:              
Accounts receivable, net   3,711       (10,671 )
Contract, prepaid and other current assets   3,672       (476 )
Deferred costs and other non-current assets   740       2,851  
Accounts payable and accrued expenses   (7,318 )     (4,085 )
Accrued compensation and benefits   (4,139 )     273  
Deferred revenue   (2,850 )     (6,004 )
Other non-current liabilities   1,910       (46 )
Net cash and cash equivalents used in operating activities   (2,134 )     (20,461 )
Cash flows from investing activities              
Business combination, net of cash acquired         (20,914 )
Purchases of property and equipment   (7,075 )     (7,401 )
Net cash and cash equivalents used in investing activities   (7,075 )     (28,315 )
Cash flows from financing activities              
Draws on revolving line of credit   10,000        
Payments on revolving line of credit   (10,000 )      
Payments of debt issuance costs   (154 )     (357 )
Proceeds from issuance of preferred stock, net of issuance costs   79,840        
Payments of preferred dividends   (462 )      
Repurchase of common stock   (9,667 )      
Proceeds from exercises of stock options and ESPP   225       134  
Payments on financing obligations   (416 )     (841 )
Payments of principal on finance lease liabilities   (7,637 )     (2,699 )
Net cash and cash equivalents provided by (used in) financing activities   61,729       (3,763 )
Net increase (decrease) in cash and cash equivalents   52,520       (52,539 )
Cash and cash equivalents, beginning of period   130,976       190,928  
Cash and cash equivalents, end of period $ 183,496     $ 138,389  
               
Supplemental disclosure of non-cash investing and financing activities              
Property and equipment purchases in accounts payable and accrued expenses $ 37     $ 437  
               

Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)

  Three Months Ended     Six Months Ended  
June 30, June 30,
  2020     2019     2020     2019  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                              
Gross profit $ 31,777     $ 35,777     $ 64,019     $ 71,224  
Amortization of acquired intangible assets   323       308       640       407  
Stock-based compensation expense   633       691       1,300       1,590  
Total net adjustments   956       999       1,940       1,997  
Non-GAAP gross profit $ 32,733     $ 36,776     $ 65,959     $ 73,221  
                               
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                              
Operating loss $ (6,093 )   $ (9,787 )   $ (11,764 )   $ (18,845 )
Amortization of acquired intangible assets   568       605       1,137       795  
Stock-based compensation expense   3,323       3,719       7,000       10,086  
Transaction and acquisition-related costs expensed   215       360       407       1,002  
Costs not core to our business         266             586  
Total net adjustments   4,106       4,950       8,544       12,469  
Non-GAAP operating loss $ (1,987 )   $ (4,837 )   $ (3,220 )   $ (6,376 )
                               
Reconciliation from Net Loss to Adjusted EBITDA:                              
Net loss $ (11,862 )   $ (14,938 )   $ (22,998 )   $ (29,147 )
Depreciation   3,926       3,690       7,722       7,657  
Amortization of software development costs   1,727       1,319       3,246       2,497  
Amortization of acquired intangible assets   568       605       1,137       795  
Interest income   (97 )     (762 )     (523 )     (1,422 )
Interest expense   5,862       5,837       11,753       11,651  
Income tax expense   6       3       11       9  
Stock-based compensation expense   3,323       3,719       7,000       10,086  
Transaction and acquisition-related costs expensed   215       360       407       1,002  
Restructuring costs   5,616             5,616        
Costs not core to our business         266             586  
Total net adjustments   21,146       15,037       36,369       32,861  
Adjusted EBITDA $ 9,284     $ 99     $ 13,371     $ 3,714  
                               
Reconciliation from Net Loss to Non-GAAP Net Loss:                              
Net loss $ (11,862 )   $ (14,938 )   $ (22,998 )   $ (29,147 )
Amortization of acquired intangible assets   568       605       1,137       795  
Stock-based compensation expense   3,323       3,719       7,000       10,086  
Transaction and acquisition-related costs expensed   215       360       407       1,002  
Costs not core to our business         266             586  
Total net adjustments   4,106       4,950       8,544       12,469  
Non-GAAP net loss $ (7,756 )   $ (9,988 )   $ (14,454 )   $ (16,678 )
                               
Calculation of Non-GAAP Earnings Per Share:                              
Non-GAAP net loss $ (7,756 )   $ (9,988 )   $ (14,454 )   $ (16,678 )
Preferred dividends   (462 )           (462 )      
Non-GAAP net loss available to common stockholders $ (8,218 )   $ (9,988 )   $ (14,916 )   $ (16,678 )
                               
Weighted average shares outstanding - basic and diluted   32,058,387       32,613,718       32,348,673       32,336,864  
Shares used in computing non-GAAP net loss per share - basic and diluted   32,058,387       32,613,718       32,348,673       32,336,864  
Non-GAAP net loss per common share - basic and diluted $ (0.26 )   $ (0.31 )   $ (0.46 )   $ (0.52 )
                               

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

Investor Relations:
Patti Leahy
843-981-8899
ir@benefitfocus.com 


Benefitfocus-logo-rgb-01.png

Source: Benefitfocus, Inc.