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Aug 3, 2021

Benefitfocus Announces Second Quarter 2021 Financial Results

 Delivers on second quarter financial commitments
Raising bar towards industry leadership in service excellence

CHARLESTON, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) --  Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading benefits technology platform that simplifies benefits administration for employers, health plans and brokers, today announces its second quarter 2021 financial results.  

Second quarter financial highlights:

  • Revenue of $60.9 million exceeds high end of guidance
  • GAAP EPS of ($0.50) vs. ($0.38) in second quarter 2020
  • Non-GAAP EPS of ($0.18) vs. ($0.26) in second quarter 2020
  • Adjusted EBITDA of $9.6 million, up 4% year over year
  • Operating cash flow of $9.2 million and free cash flow of $6.6 million
  • Cash and marketable securities of $193 million, up $4 million from prior quarter

Other recent highlights:

  • Announced addition of four accomplished and experienced industry leaders to Benefitfocus management team
  • Strengthened board experience, independence and diversity with addition of John Park
  • Added full suite of voluntary benefits offerings from Standard Insurance Company to Benefit Catalog
  • Delivered product enhancements for shopping and quoting functions for Health Plans to further simplify selling and distribution through an automated, insight-driven experience for brokers and groups

“Building a great business starts with building a great team,” said Matt Levin, president and chief executive officer. “I’m excited about the management announcements we made earlier today and believe we have attracted some of the best talent in the industry. My expectation is for these key additions, together with the dedicated team we have in place today, to raise the bar on service excellence in our industry. I believe delivering an exceptional customer experience is our most important priority and our biggest lever to drive higher levels of sustainable organic growth.”

“Benefitfocus again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “We are regaining momentum and seeing particularly strong traction in the public sector as we look to return to pre-pandemic levels. We continued to generate free cash flow and have a solid cash position which gives us the flexibility to invest strategically in order to advance our growth strategy.”

Second Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $60.9 million, down 2% compared to the second quarter of 2020.
  • Software services was $50.2 million, up 1% compared to the second quarter of 2020. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $44.3 million, up 1% compared to the second quarter of 2020.
    • Platform revenue was $5.9 million, down 4% compared to the second quarter of 2020.
  • Professional services revenue was $10.7 million, down 13% compared to the second quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($16.6) million, compared to ($12.3) million in the second quarter of 2020. GAAP net loss per share was ($0.50), based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.38) for the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss, Adjusted EBITDA and Free Cash Flow

  • Non-GAAP net loss available to common stockholders was ($5.9) million compared to ($8.2) million in the second quarter of 2020. Non-GAAP net loss per share was ($0.18) based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.26) in the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $9.6 million, compared to $9.3 million in the second quarter of 2020.
  • Free cash flow was $6.6 million, compared to $6.2 million in the second quarter of 2020.

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

Balance Sheet

  • Cash and cash equivalents and marketable securities at June 30, 2021 totaled $193.2 million, compared to $188.9 million at the end of the first quarter of 2021.
  • The full $50.0 million line of credit remains available to the company.

Business Outlook

Based on information available as of August 3, 2021, Benefitfocus is providing guidance for the third quarter as indicated below.

Third Quarter 2021

  • Total revenue is expected to be in the range of $58 million to $60 million.
  • Adjusted EBITDA is expected to be in the range of $5 million to $7 million.
  • Non-GAAP net loss available to common stockholders is expected to be between ($10.5) and ($8.0) million, or between ($0.31) and ($0.24) per share based on 33.1 million basic and diluted shares outstanding.

Full Year 2021

The company is reiterating guidance previously provided for Full Year 2021 as follows:

  • Total revenue is expected to be in the range of $254 million to $260 million.
  • Adjusted EBITDA is expected to be in the range of $44 million to $50 million.
  • Free cash flow is expected to be in the range of $20 million to $26 million.

Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring and impairment 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 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 Tuesday, August 3, 2021, at 5:00 p.m. ET. To access this call, dial (855) 327-6837 (domestic) or +1 (631) 891-4304 (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 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 10015779.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire benefits industry through innovative technology solutions that bring efficiency, cost savings and simplicity to employee benefits administration. Our powerful cloud-based software, data-driven insights and thoughtfully designed services help employers, insurance brokers, health plans and suppliers address the complexity of benefits enrollment and engagement, while bringing easier access to health, wealth and lifestyle products through a world-class benefits experience. Our mission is simple: to improve lives with benefits. 

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/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 income/loss, 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, expense related to the impairment of goodwill, intangible assets and long-lived assets, gain or loss on extinguishment of debt, and costs not core to our business. 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, intangible assets and long-lived assets, transaction and acquisition-related costs expensed, restructuring costs, gain or loss on extinguishment of debt, and costs not core to our business. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate restructuring costs. 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; our ability to maintain our culture and recruit, integrate and retain qualified personnel, including our board; our ability to compete effectively and implement our growth strategy; the need to innovate and provide useful products and services; the immature and volatile nature of the market for our products and services; risks related to changing healthcare and other applicable regulations; privacy; security and other risks associated with our business; management of growth; volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic; 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
June 30,
    Six Months Ended
June 30,
 
    2021     2020     2021     2020  
Revenue   $ 60,904     $ 62,174     $ 125,967     $ 128,328  
Cost of revenue(1)(2)(3)     28,030       30,397       56,623       64,309  
Gross profit     32,874       31,777       69,344       64,019  
Operating expenses:(1)(2)(3)                                
Sales and marketing     10,921       11,828       21,812       27,458  
Research and development     11,103       11,045       21,935       22,813  
General and administrative     17,574       9,381       27,436       19,896  
Restructuring costs     2,727       5,616       4,127       5,616  
Total operating expenses     42,325       37,870       75,310       75,783  
Loss from operations     (9,451 )     (6,093 )     (5,966 )     (11,764 )
Other income (expense):                                
Interest income     54       97       111       523  
Interest expense     (5,646 )     (5,862 )     (11,201 )     (11,753 )
Other income     64       2       22       7  
Total other expense, net     (5,528 )     (5,763 )     (11,068 )     (11,223 )
Loss before income taxes     (14,979 )     (11,856 )     (17,034 )     (22,987 )
Income tax expense     41       6       83       11  
Net loss     (15,020 )     (11,862 )     (17,117 )     (22,998 )
Preferred dividends     (1,600 )     (462 )     (3,200 )     (462 )
Net loss available to common stockholders   $ (16,620 )   $ (12,324 )   $ (20,317 )   $ (23,460 )
Comprehensive loss   $ (15,020 )   $ (11,862 )   $ (17,117 )   $ (22,998 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.50 )   $ (0.38 )   $ (0.62 )   $ (0.73 )
Weighted-average common shares outstanding:                                
Basic and diluted     33,080,257       32,058,387       32,787,162       32,348,673  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 638     $ 633     $ 964     $ 1,300  
Sales and marketing     927       594       1,507       1,474  
Research and development     503       590       621       932  
General and administrative     2,308       1,506       2,807       3,294  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 336     $ 323     $ 673     $ 640  
Sales and marketing     77       83       153       174  
Research and development     113       114       226       223  
General and administrative     43       48       85       100  
                                 
(3) Transaction and acquisition-related costs expensed included in above line items:                                
General and administrative   $ 6     $ 215     $ 160     $ 407  


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

    As of
June 30,
2021
    As of
December 31,
2020
 
Assets                
Current assets:                
Cash and cash equivalents   $ 98,062     $ 90,706  
Marketable securities     95,107       95,085  
Accounts receivable, net     20,886       22,240  
Contract, prepaid and other current assets     18,838       21,354  
Total current assets     232,893       229,385  
Property and equipment, net     27,001       29,701  
Financing lease right-of-use assets     60,291       68,670  
Operating lease right-of-use assets     986       1,107  
Intangible assets, net     9,257       10,393  
Goodwill     12,857       12,857  
Deferred contract costs and other non-current assets     9,011       10,259  
Total assets   $ 352,296     $ 362,372  
Liabilities, redeemable preferred stock and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 3,639     $ 2,160  
Accrued expenses     8,177       6,262  
Accrued compensation and benefits     14,223       19,129  
Deferred revenue, current portion     28,202       27,782  
Lease liabilities and financing obligations, current portion     7,104       5,959  
Total current liabilities     61,345       61,292  
Deferred revenue, net of current portion     3,387       4,422  
Convertible senior notes     190,089       184,308  
Lease liabilities and financing obligations, net current portion     78,344       79,282  
Other non-current liabilities     2,629       2,470  
Total liabilities     335,794       331,774  
Commitments and contingencies                
Redeemable preferred stock:                
Series A preferred stock, par value $0.001, 5,000,000 shares
authorized, 1,777,778 and 1,777,778 shares issued and outstanding
at June 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of June 30, 2021 and December 31, 2020, respectively
    79,193       79,193  
Stockholders' deficit:                
Common stock, par value $0.001, 95,000,000 and 50,000,000 shares authorized,
33,234,786 and 32,327,439 issued and outstanding at June 30, 2021 and December 31, 2020, respectively
    33       32  
Additional paid-in capital     430,451       427,431  
Accumulated deficit     (493,175 )     (476,058 )
Total stockholders' deficit     (62,691 )     (48,595 )
Total liabilities, redeemable preferred stock and stockholders' deficit   $ 352,296     $ 362,372  
                 


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

    Six Months Ended
June 30,
 
    2021     2020  
Cash flows from operating activities                
Net loss   $ (17,117 )   $ (22,998 )
Adjustments to reconcile net loss to net cash and cash
equivalents provided by (used in) operating activities:
               
Depreciation and amortization     12,525       12,105  
Stock-based compensation expense     5,899       7,000  
Accretion of interest on convertible senior notes     5,780       5,894  
Interest accrual on finance lease liabilities     3,244       44  
Rent expense less than payments     (27 )     (16 )
Non-cash interest income on short-term investments     506        
Impairment or loss on disposal of right-of-use assets and property and equipment     4,048        
Provision for doubtful accounts           111  
Changes in operating assets and liabilities:                
Accounts receivable, net     1,354       3,711  
Accrued interest on short-term investments     (101 )      
Contract, prepaid and other current assets     2,410       3,672  
Deferred costs and other non-current assets     1,249       740  
Accounts payable and accrued expenses     3,520       (7,318 )
Accrued compensation and benefits     (4,907 )     (4,139 )
Deferred revenue     (615 )     (2,850 )
Other non-current liabilities     159       1,910  
Net cash and cash equivalents provided by (used in) operating activities     17,927       (2,134 )
Cash flows from investing activities                
Purchases of short-term investments held to maturity     (48,427 )      
Proceeds from short-term investments held to maturity     48,000        
Purchases of property and equipment     (4,483 )     (7,075 )
Net cash and cash equivalents used in investing activities     (4,910 )     (7,075 )
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 )
Proceeds from issuance of preferred stock, net of issuance costs           79,840  
Payments of preferred dividends     (3,200 )     (462 )
Repurchase of common stock           (9,667 )
Proceeds from exercises of stock options and ESPP     322       225  
Payments on financing obligations     (224 )     (416 )
Payments of principal on finance lease liabilities     (2,559 )     (7,637 )
Net cash and cash equivalents (used in) provided by financing activities     (5,661 )     61,729  
Net increase in cash and cash equivalents     7,356       52,520  
Cash and cash equivalents, beginning of period     90,706       130,976  
Cash and cash equivalents, end of period   $ 98,062     $ 183,496  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $     $ 37  
                 


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

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2021     2020     2021     2020  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 32,874     $ 31,777     $ 69,344     $ 64,019  
Amortization of acquired intangible assets     336       323       673       640  
Stock-based compensation expense     638       633       964       1,300  
Total net adjustments     974       956       1,637       1,940  
Non-GAAP gross profit   $ 33,848     $ 32,733     $ 70,981     $ 65,959  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                                
Operating loss   $ (9,451 )   $ (6,093 )   $ (5,966 )   $ (11,764 )
Amortization of acquired intangible assets     569       568       1,137       1,137  
Stock-based compensation expense     4,376       3,323       5,899       7,000  
Transaction and acquisition-related costs expensed     6       215       160       407  
Impairment of long-lived assets     4,003             4,003        
Costs not core to our business     1,717             3,598        
Total net adjustments     10,671       4,106       14,797       8,544  
Non-GAAP operating income (loss)   $ 1,220     $ (1,987 )   $ 8,831     $ (3,220 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (15,020 )   $ (11,862 )   $ (17,117 )   $ (22,998 )
Depreciation     3,444       3,926       7,067       7,722  
Amortization of software development costs     2,159       1,727       4,321       3,246  
Amortization of acquired intangible assets     569       568       1,137       1,137  
Interest income     (54 )     (97 )     (111 )     (523 )
Interest expense     5,646       5,862       11,201       11,753  
Income tax expense     41       6       83       11  
Stock-based compensation expense     4,376       3,323       5,899       7,000  
Transaction and acquisition-related costs expensed     6       215       160       407  
Restructuring costs     2,727       5,616       4,127       5,616  
Impairment of long-lived assets     4,003             4,003        
Costs not core to our business     1,717             3,598        
Total net adjustments     24,634       21,146       41,485       36,369  
Adjusted EBITDA   $ 9,614     $ 9,284     $ 24,368     $ 13,371  
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (15,020 )   $ (11,862 )   $ (17,117 )   $ (22,998 )
Amortization of acquired intangible assets     569       568       1,137       1,137  
Stock-based compensation expense     4,376       3,323       5,899       7,000  
Transaction and acquisition-related costs expensed     6       215       160       407  
Impairment of long-lived assets     4,003             4,003        
Costs not core to our business     1,717             3,598        
Total net adjustments     10,671       4,106       14,797       8,544  
Non-GAAP net loss   $ (4,349 )   $ (7,756 )   $ (2,320 )   $ (14,454 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (4,349 )   $ (7,756 )   $ (2,320 )   $ (14,454 )
Preferred dividends     (1,600 )     (462 )     (3,200 )     (462 )
Non-GAAP net loss available to common stockholders   $ (5,949 )   $ (8,218 )   $ (5,520 )   $ (14,916 )
                                 
Weighted average shares outstanding - basic and diluted     33,080,257       32,058,387       32,787,162       32,348,673  
Shares used in computing non-GAAP net loss per share - basic and diluted     33,080,257       32,058,387       32,787,162       32,348,673  
Non-GAAP net loss per common share - basic and diluted   $ (0.18 )   $ (0.26 )   $ (0.17 )   $ (0.46 )
                                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                                
Net cash and cash equivalents provided by (used in) operating activities   $ 9,163     $ 5,036     $ 17,927     $ (2,134 )
Purchases of property and equipment     (2,590 )     (3,254 )     (4,483 )     (7,075 )
Cash paid for restructuring costs     5       4,456       1,384       4,456  
Total net adjustments     (2,585 )     1,202       (3,099 )     (2,619 )
Free Cash Flow   $ 6,578     $ 6,238     $ 14,828     $ (4,753 )
                                 

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

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


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Source: Benefitfocus, Inc.